A recent judgment by the North West High Court in Mahikeng has set aside the sale in execution of property, citing fundamental unfairness in the process. The ruling follows an application by Mr Makgothu Rudolph Mosothoane, who challenged the sale of his property at an auction for ZAR1,000 - an amount drastically below its market value of over ZAR1.5 million.
Background
Mr and Ms Moela Flora Mosothoane, previously married in community of property, divorced in July 2022. As part of their divorce settlement, they agreed that their jointly owned property, located in Mahikeng, would either be sold to a third party with the proceeds split equally or bought out by one party from the other at an agreed value.
Mr Mosothoane sought buyers for the property, but his efforts were hindered when Ms Mosothoane expressed disinterest in proceeding with the sale. In March 2023, a writ of attachment was issued, initiating the sale in the execution process. By October 2023, Mr Mosothoane discovered that the property had been auctioned for a mere ZAR1,000. This shockingly low amount, especially for a property independently valued at ZAR1.52 million, prompted him to approach the court to challenge the sale.
Legal Arguments
Mr Mosothoane argued that the sale was grossly unfair for two main reasons:
- The auction price was a small fraction of the property's actual market value.
- The attorney representing Ms Mosothoane purchased the property on her behalf for ZAR1,000, despite previously valuing her share at ZAR700,000 in the divorce settlement negotiations.
Ms Mosothoane and her attorney defended the sale, asserting that all legal requirements were met, including advertising the auction in local newspapers and placing public notices. While conceding that procedural formalities were followed, Mr Mosothoane maintained that the sale was fundamentally inequitable and that the price achieved did not reflect the property's true worth.
The Court's Reasoning
In his judgment, Judge Hendricks acknowledged that while the sale adhered to legal formalities, the fairness of the process left much to be desired. The court emphasised that sales in execution must achieve a price that reasonably reflects the value of the property and that the interests of the debtor must be safeguarded.
The judge noted several troubling aspects:
The attorney acting for Ms Mosothoane purchased the property on her instructions for an unreasonably low price, raising questions about the fairness of the process.
The price of ZAR1,000 bore no reasonable relation to the independently verified market value of over ZAR1.5 million.
The court found it particularly unjust that, despite initially valuing her half-share at ZAR700,000, Ms Mosothoane sought to acquire the entire property for just ZAR1,000.
Judge Hendricks concluded that the sale was neither fair nor equitable, as it resulted in a significant financial disadvantage to Mr Mosothoane. The court set aside the sale in execution and directed that the sale of the property held on 5 October 2023 be declared invalid. This meant that Ms Mosothoane was prohibited from transferring the property into her name.
Implications of the ruling
This judgment underscores the principle that while adherence to procedural rules is essential, fairness and equity must prevail in the sale of property through judicial processes. It serves as a reminder that the courts will intervene where the outcomes of such sales are grossly disproportionate or unjust, as was the case here.
The ruling reinforces the obligation to protect the interests of all parties in execution sales, ensuring that neither party suffers undue prejudice. It is an important decision in safeguarding fairness and equity in judicial processes.
*Reviewed by James Haydock, an Executive in ENS' Dispute Resolution Department
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
