IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

REPORTABLE
CASE NO 431/03

In the matter between

SA BANK OF ATHENS LIMITED

Appellant

and

MAY VAN ZYL

Respondent

_____________________________________________________________________

CORAM:
MPATI AP, FARLAM, MTHIYANE, VAN HEERDEN
JJA et ERASMUS AJA
_____________________________________________________________________

Date Heard:
22 November 2004

Delivered:
21 February 2005

Summary:
Summary judgment – order not sustainable where facts
not fully canvassed in part due to the acceptance by both
parties and the court a quo of the correctness of a High
Court judgment subsequently found by the SCA to be
incorrect.  Parate executie not per se invalid – not in
conflict with section 34 of the Constitution.

_____________________________________________________________________

J U D G M E N T
_____________________________________________________________________

AR ERASMUS AJA

AR ERASMUS AJA

[1] The adjudication of this appeal requires consideration of the
proceedings in the court a quo viewed against the backdrop of developments
in our law regarding the right of a creditor to realise the property of its debtor
without first obtaining the sanction of the court.  This type of extra-judicial
execution is known in Roman Dutch law as parate executie.  The vehicle that
brings the question of the validity of that procedure before this court is the
appeal against an order of summary judgment issued in the Johannesburg
High Court against the appellant in favour of the respondent. (I refer to the
parties as in the action proceedings and, where convenient, to the defendant
as ‘the bank’.)

[2] In her particulars of claim, the plaintiff narrates the circumstances
which she avers gave rise to her instituting the action against the defendant.
These are briefly as follows. While in a vulnerable psychological condition
after the death of her husband, she was inveigled by Mr L C Joubert
(‘Joubert’), an insurance representative and ‘financial advisor’ in the employ of
an insurance company (‘Sanlam’), into investing money in a trust in which
members of his family had interest.  Without her knowledge, she was made a
trustee of the trust.  During October 1998 the defendant bank instituted action
in the magistrate’s court against the plaintiff for payment of R75 525,08 in
respect of amounts allegedly owing by the trust on its cheque account.  She
was cited in her representative capacity together with the other trustees, as
well as in her personal capacity, on the basis of a deed of suretyship allegedly

signed by her in favour of the bank.  The plaintiff entered appearance to
defend and, when the bank thereupon applied for summary judgment, she
filed an affidavit resisting the application.  Therein she deposed as follows.
Early in 1998 Joubert requested her to sign certain documentation in
connection with the business of the trust.  She accompanied him to the bank
where she found documents spread on a table.  She signed these without
reading their contents.  She had no idea what she was signing.  The nature of
the documents was never explained to her.  In particular, she was unaware
that she was signing a deed of suretyship.  She denied ever having the
intention of binding herself to such a contract.  Her affidavit was received by
the defendant’s attorneys on 23 November 1998.  We were informed that the
summary judgment application had not yet been finalised.

[3] After setting out the above historical background, the plaintiff
proceeded to formulate her claim.  She alleged that, while the opposed
summary judgment application was pending in the magistrate’s court, the
defendant,  acting without court sanction, called up and retained the proceeds
of four investment policies held by her with Sanlam,  as follows:

3 November 1998:

R  91 768,06

3 November 1998

41 175,38

29 December 1998

48 170,14

29 December 1998

25 793,42

Total

R206 907,00

[4] The plaintiff averred that the defendant had purported to act in terms of
parate executie clauses contained in deeds of cession (of which she had no
knowledge) whereby she had allegedly  ceded the policies to the bank as
security for the trust’s alleged indebtedness.  It was her case that those
clauses were in conflict with s 34 of the Constitution¹ and therefore invalid,
which meant that the defendant,  in effecting parate execution of the policies,
had unlawfully taken the law into its own hands.  She claimed that the
defendant was therefore obliged by law to pay her the amount of R206
907.00.

[5] The defendant defended the action.  The subsequent application for
summary judgment was resisted on an affidavit of an advances manager of
the bank.  The deponent stated that on or about 26 March 1998 the plaintiff
ceded the four policies in favour of the defendant.  She averred that ‘from the
aforesaid documents of cession and as a result of the Plaintiff’s indebtedness
to the Defendant, the Defendant was entitled to obtain payment in respect of
the policies from SANLAM’.  She stated that at the time the defendant was in
possession of the relevant policies.  She intimated that full legal argument
would be presented to the court at the hearing of the application.

______________________________________________________________
1.
The Constitution of the Republic of South Africa Act 108 of 1996

[6] In his judgment, delivered on 28 February 2002, the learned judge
(Spilg AJ) set out the history of the dispute between the parties.  As to the
defendant’s dealings with the policies, he stated that the position in regard to
the first two policies was unclear, but that at the time of the realisation of the
last two investments in December 1998 the defendant was well aware of the
plaintiff’s defence as disclosed in the magistrate’s court proceedings.  He
expressed strong disapproval of the defendant’s actions:
‘At the outset I find it difficult to use restrained language in describing the
bank’s conduct, particularly as it is conduct of a financial institution.
Suffice that its conduct on the papers before me is disgraceful and for this
reason I consider it appropriate that investigations be conducted into the
matter by appropriate authorities.’

[7]   The legal argument adumbrated in the defendant’s answering affidavit
(para  [5] above) proved to be the submission that the defendant had, through
the cessions in securitatem debiti, acquired ‘out and out’ ownership of the
policies, which entitled it to deal with them at its will.  The court a quo rejected
the contention.  (The point was not pursued at the hearing of the appeal and
the merits thereof need not concern us.)  Spilg AJ pointed out that since
security is accessory to the main debt, it follows that until the existence of a
disputed underlying obligation is determined by a court, the security cannot be
realised and the cessionary who executes parate prior to such determination
takes the law into its own hands.

[8]   The plaintiff did not attach copies of the deeds of cession to her
particulars of claim.  She in fact claimed to have no knowledge of these

documents.  Copies of the four cession agreements are, however, attached to
the defendant’s answering affidavit.  They are identically worded.  The
relevant provision in each reads as follows:
‘I hereby appoint you irrevocably and in rem suam as my attorney and
agent to apply for the surrender, to realise or otherwise deal with the
policy in your absolute discretion in the event of my failure to pay any
amount which I may owe or in which I may be or become indebted to
you and to apply the proceeds of such surrender, realisation or other
dealing to my aforesaid debt …’.

[9]   Spilg AJ accepted the plaintiff’s contention that the clause was contra
bonos mores and therefore invalid in that it constituted ‘a classic parate
executie  provision’.  He stated that an agreement that allows a person to be
the arbiter of the fact whether a debt is owing by another without due process
of law and which denies access to the courts, offends the provisions of s 34 of
the Constitution (para [11] below).  He referred to Chief Lesapo v North West
Agricultural Bank 2001 (1) SA 409 (CC);  First National Bank of SA Ltd v Land
and Agricultural Bank of SA 2000 (3) SA 626 (CC) and the application of
those decisions in Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA
251 (E)).  He accordingly held that the defendant’s actions in realising the
plaintiff’s investments (para [3] above) was invalid, which meant that there
was no bona fide defence to the plaintiff’s claim recognised by law and that
she was therefore entitled to summary judgment.
[10] Parate execution has long been acceptable under the common law
(Osry v Hirsch, Loubser & Co Ltd 1922 CPD 531 at 541 – 547), provided that

the terms of the agreement authorising the procedure are not unconscionable
or incompatible with public policy (Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A)
at 13J–14A), for example (a) entitling the creditor to determine the fact of the
debtor’s default,  or (b) authorising the creditor to seize the debtor’s property
without the court’s imprimatur (Nino Bonino v De Lange 1905 TS 119 at 124).

[11] The core principle of the common law that no person is entitled to take
the law into its own hands – now no longer inhibited by statutory exception –
is expressed as a fundamental right in s 34 of the Constitution:
‘Everyone has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before a court or, where
appropriate, another independent and impartial tribunal or forum.’

The Constitutional Court, in applying this section in  Lesapo,  declared that a
statutory provison that permitted a creditor to seize a defaulting debtor’s
property, and to sell it in defrayal of the debt, without recourse to a court of
law,²  was unconstitutional and invalid - notwithstanding the fact that there
was no dispute as to the debtor’s default.  In Findevco, the Eastern Cape High
Court relied on that decision in declaring invalid a clause in a general notarial
bond that authorised the creditor to take possession of the debtor’s movable
property and to dispose thereof in satisfaction of the debt.  The learned judge
reasoned from the general to the particular, as follows: legislation authorising
parate executie is unconstitutional, therefore the common law cannot
countenance such a stipulation in a contract;  consequently the stipulation in
2.   Section 38(2) of the North West Agricultural Bank Act 14 of 1981

the particular provision authorising parate execution was unconstitutional. The
judge, in dealing with counsel’s submission that the court should confirm the
rule in that the respondent did not oppose the application and the applicant
was not seeking to by-pass the courts, stated  (at 256H-I):
‘All these submissions, in my view, beg the question.  If the clause in the
bond which purports to allow the sale of the movable property is valid and
not disputed, there is no issue between the parties which needs to be
determined by me.  If, however, the clause in the bond is invalid (as I
consider it is), then it cannot logically be validated by asking the Court to
ignore its constitutional invalidity and give effect to it.’

[12] That then, broadly speaking, was the position in the case law when the
plaintiff on 29 November 2001 instituted the present action against the
defendant.  Counsel for the defendant informed us that the particulars of claim
(which he settled) were drafted on the basis of the law as stated in Findevco.
(This is reflected in the particulars of claim.)  He informed the court, further,
that at the hearing of the application for summary judgment, the parties – as
well as the court – accepted that the law was settled on that basis.  (This is
reflected in the defendant’s answering affidavit,  as well as in the judgment of
the court a quo in its finding in favour of the plaintiff.)  The defendant’s
application for leave to  appeal was refused, but its petition for leave to appeal
to this Court was granted.  The grounds of appeal were directed at the
rejection by the court a quo of the contention upon which the defendant had
relied at the hearing of the summary judgment application (para [7] above).
That court’s unqualified acceptance of the outright constitutional invalidity of
parate executie (as per Findevco) was not challenged in the notice of appeal.

[13] In the meantime it appeared that Findevco was not the last word on the
validity of parate executie.  Susan Scott in ‘Summary Execution Clauses in
Pledge and Perfecting Clauses in Notarial Bonds’ 2002 (65) THRHR 656- 664
was the first to question the correctness of the decision (as far as I am aware).
It is not necessary here to deal with the arguments raised by the learned
author, as the issue was thereafter addressed by this court in Bock v
Duburoro Investments (Pty) Ltd 2004 (2) SA 242 (SCA). The judgment did not
turn on the validity of parate execution clauses, but as the constitutionality of
the procedure had been the main point of argument before the court,  Harms
JA was led to state (para 13):
‘… I find it difficult to extend the proscription of these statutory provisions
by the Constitutional Court to parate executie of movables which are
lawfully in the possession of the creditor.  This procedure does not
authorise a creditor to bypass the courts and “seize and sell the debtor’s
property of which the debtor was in lawful and undisturbed possession”.
It does not entitle the creditor “to take the law into his or her hands”.  It
does not permit “the seizure of property against the will of a debtor in
possession of such property”.  And since the debtor may seek the
protection of the court if, on any just ground, he can show that, in carrying
out the agreement and effecting a sale, the creditor acted in a manner
which prejudiced him in his rights, the creditor cannot be said to be the
judge in his own cause.’  (Footnotes not included.)

He added (para 15) that it followed that the judgment in Findevco, finding that
the law relating to parate executie of movables is unconstitutional, was wrong.

[14] In Juglal NO v Shoprite Checkers (Pty) Ltd 2004 (5) SA 248 (SCA) this
court upheld the validity of a notarial covering bond which entitled the creditor,
in the event of default on the part of the debtor, to take possession of the
debtor’s business and assets as security for the debt, to sell the assets and to
apply the proceeds in settlement of the debt.  The court a quo had granted the
creditor an order perfecting its security.  The judge (Hurt J) had expressly
declined to follow Findevco. Heher JA (speaking in this court in the
subsequent appeal) commented (para 9) that the refusal was justified by the
decision in Bock.  Hurt J had further stated:
‘In summary, the common law, insofar as stipulations for parate execution
are concerned, is that stipulations, which are not so far-reaching as to be
contrary to public policy, are valid and enforceable; that, as a matter of
practice, creditors seeking to enforce such stipulations take the
precaution of applying for judicial sanction before doing so;  and that the
debtor can avail himself of the court’s assistance in order to protect
himself against prejudice at the hands of the creditor.’

Heher JA commented that this exposition seemed to him to be a correct
summary of the present state of the common law, with the one qualification
that the ‘matter of practice’ referred to by the judge was in fact a constitutional
requirement.  He declared (para 11) that the common law (as stated above)
does not limit the right of access to the courts.  ‘Nor’, he added, ‘does it fall
short of the spirit, purport or the objects of the Bill of Rights’.  He  continued
thus (para 12):

‘Because the courts will conclude that contractual provisions are contrary
to public policy only when that is their clear effect (see the authorities
cited in Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 8C-9G) it follows
that the tendency of a proposed transaction towards such a conflict
(Eastwood v Shepstone 1902 TS 294 at 302) can only be found to exist if
there is a probability that unconscionable, immoral or illegal conduct will
result from the implementation of the provisions according to their tenor.
(It may be that the cumulative effect of implementation of provisions not
individually objectionable may disclose such a tendency.)  If, however, a
contractual provision is capable of implementation in a manner that is
against public policy but the tenor of the provision is neutral then the
offending tendency is absent.  In such event the creditor who implements
the contract in a manner which is unconscionable, illegal or immoral will
find that a court refuses to give effect to his conduct but the contract itself
will stand. ‘

The court considered the facts of the matter in the light of this statement of the
law and dismissed the appeal.

[15] Notwithstanding what was said in the Bock and Juglal judgments,
counsel for the plaintiff bravely contended that Findevco was correctly decided
and should be upheld.  He submitted that the dictum of Harms JA to the
contrary was clearly wrong, and was in any event delivered obiter.  I am,
however, unpersuaded that parate execution is per se unconstitutional or
offensive to public policy.  I find that the court a quo erred in holding that the
deeds of cession allowed the bank to be the arbiter of the fact whether the
debt was owing (compare:  Senwes Ltd v Muller 2002 (4) SA 134 (T)).  The

cession agreements do not expressly authorise such action on the part of the
bank, nor is this objectionable feature of parate execution implicit in the
stipulations. Nor do the particular clauses purport to allow the bank to by-pass
the courts in a dispute regarding the existence or validity of the cession
agreements.

[16]   It does not follow, however, that because the provisions in the cession
agreements allowing for parate execution are valid,  the defendant’s actions in
purported reliance thereon were lawful.  The severe censure by Spilg AJ of
the bank’s conduct (para [6] above) may well prove to be justified.  Counsel
for the defendant submitted, however, that the judge was not entitled to make
those findings on the papers before the court.  She pointed out that the court
based its judgment on factual averments in the plaintiff’s particulars of claim,
not on evidence.  It is true that the averments were not challenged in the
defendant’s answering affidavit and that usually in summary judgment
proceedings that would be taken as admission of those allegations.  The
present matter is however not usual.  The proceedings in the court a quo were
from their commencement  to their conclusion misdirected by the mistaken
acceptance by the parties and the court  of the correctness of the judgment in
Findevco.  On that decision, the plaintiff’s averment that parate executie is
invalid per se, could not be gainsaid on any grounds of law or fact. Perhaps
the defendant should have answered the averments in the particulars of claim
relating to its conduct. Counsel for the defendant was constrained to concede
that the affidavit  resisting summary judgment ‘is unfortunately  not as
comprehensive as it should have been’.  The affidavit, however,  was not

directed at justifying the defendant’s parate execution of the plaintiff’s
property, but was designed to accommodate the legal argument which was
presented on behalf of the defendant in the court a quo, but which was not
persisted with at the hearing of the appeal (para [7] above).  In the
circumstances, the defendant’s failure to present its case fully and properly in
the answering affidavit is to some extent understandable.  The determination
of the lawfulness of the defendant’s conduct requires a value judgement which
can properly be made only upon consideration of all the relevant facts and
attendant circumstances.  These were not before the court a quo.  Summary
judgment is a drastic remedy granted only where the defendant has no bona
fide defence.  It would be unfair and therefore improper to leave standing a
summary judgment which was given without consideration of all the relevant
facts and circumstances,  where those facts were not placed before the court
by the defendant due to its misunderstanding of the law (a misunderstanding
shared by the plaintiff and the court) apparently occasioned by its acceptance
of the correctness of a judgment of the High Court subsequently held by this
court to be incorrect.

[17] Counsel for the defendant contended, further, that the particulars of
claim are excipiable in that the plaintiff failed to make out a case for the
damages which she claimed from the defendant.  (This point was not raised in
the court a quo, nor is it covered by the grounds of appeal.)  Counsel for the
plaintiff countered by contending that the action was not one for damages, but
was based on the actio ad exhibendum.  He advanced the contention for the
first time while on his feet in this court.  It was not dealt with by the court a

quo.  It was not canvassed in the heads of argument and was certainly not
fully argued in this court.  I am therefore reluctant to make a finding on the
question.  It is, moreover, not necessary for me to do so in view of my earlier
conclusions (para [16] above).

[18] The court’s reasons for allowing the appeal, viewed in the historical
context of the proceedings, materially affect the question of the costs of the
appeal.  The proceedings,  from their inception in the court a quo and up to
the portals of this court,  turned on the legal effect of the parate executie
clauses in the cession agreements (para [7] above).  The real issues were
identified only during the argument of the appeal in this court.  It appears that
the focus of the dispute is not the constitutional validity of  parate executie
clauses (which has been settled in Bock and Juglal), but the lawfulness of the
appellant’s actions in the purported execution of those provisions of the deeds
of cession.  However, the appeal succeeds not because of the appellant’s
explanation of its actions, but despite its failure to set out the relevant facts
and circumstances in its affidavit opposing summary judgment (para [16]
above).  In these special circumstances, it is fair and therefore proper that the
court depart from the usual practice of ordering that costs follow the event.
The parties share the blame for the misdirection of the proceedings and the
costs order should reflect that circumstance.

[19] After judgment was reserved in this appeal, the appellant brought an
application for an order that two documents contained in the papers be struck
from the record.  Although these documents were referred to at the hearing of

the appeal, they have had no effect on my decision.  There is therefore no
need to delay further the delivery of the judgment pending the outcome of the
application.

[20] In the result, the appeal succeeds, with no order being made as to
costs of appeal.  The order of the court a quo is set aside and the following
order is substituted therefore:
‘1.
The application for summary judgment is refused.
2.
The defendant is granted leave to defend.
3.
The costs of the application for summary judgment are to be
costs in the action.’

AR ERASMUS
ACTING JUDGE OF APPEAL

CONCUR:

MPATI AP
FARLAM JA
MTHIYANE JA
VAN HEERDEN JA