Articles

The JAFTHA Judgement: an update

SA Banker March 2008
By Selwyn Cohen

One of the results of the judgment in the "Jaftha" case (which I dealt with in a previous edition of SA Banker) was that many sales in execution carried out pursuant to warrants of execution issued in the Magistrates Court were invalid. This was because the officers (Clerks of the Court) issuing them had not exercised the required judicial supervision required by section 66 of the Magistrates Courts Act as interpreted by the Supreme Court of Appeal in the Jaftha case.

As I said, this poses a serious threat not only to those who bought property at a sale in execution conducted pursuant to an improperly issued warrant of execution but also to their successors.

Prima facie Section 70 of the Magistrates Court Act, which is entitled "Sale in execution gives good title" seems to protect a buyer who bought at a sale held pursuant to an invalid warrant of execution. The successors of that buyer would also be protected.

The section reads as follows:

 "70.    Sale in execution gives good title
 
A sale in execution by the messenger shall not, in the case of movable property after delivery thereof or in the case of immovable property after registration of transfer, be liable to be impeached as against a purchaser in good faith and without notice of any defect."

The Supreme Court of Appeal (SCA) heard argument on this apparent conflict last year.

It decided that because a warrant of execution issued without the judicial oversight required by the Jaftha judgment is invalid, so too is the sale which takes place pursuant to it. If that were not so, said Judges van Heerden, Scott, Jafta, Kgomo and Cloete (the latter with somewhat different reasoning but coming to the same conclusion) the effect of the Jaftha judgment would be nullified. The result was that Section 70 cannot result in the "saving" of an invalid sale.

Transfer of property sold at a judicial sale pursuant to a warrant of execution is effected in terms of a power of attorney signed by the sheriff who derives the power to transfer ownership from the rules of the Magistrates Court. If the sale in execution is null and void because it violates the principle of legality, the sheriff has no authority to transfer ownership. The result is that, despite registration of transfer of the property into the name of the purchaser, ownership does not pass to him.

From a practical point of view the only sales affected are likely to be those which took place between the date of coming into operation of the Constitution and 10 October 2005 which is the date on which the judgment in the case of Reshat Schloss v Gordhan Taramathi and Others was delivered in Cape Town by Judge Davis. From that date, having been alerted to the danger, it is probable that issuing officers have applied the "judicial oversight" as required by Section 70.

Judge Davis dealt only with Section 66 and decided that the warrant of execution he was considering was invalid. He did not consider the effect of Section 70. That was done by Acting Judge Zondi in the case of Markom v Menqa which was the matter to which the judgment of the SCA related.

The SCA was of the view that, despite coming to the conclusion that the sale was invalid and that ownership did not pass to the current owner (Menqa) it would not be fair simply to make an order for the property to be transferred back to Markom (the original judgment debtor) - because that would not take into account the fact that Menqa (who had purchased from Markom) had paid a substantial amount for the property as well as rates and taxes since transfer to him in November 2005 nor that Markom's bond debt to Nedbank had been extinguished.

These issues would have to be determined in future litigation. As far as I can ascertain this has not yet been done.

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