What happens when an auction reserve price (for immovable property) has not been reached in terms of Uniform Rule 46A? Rule 46A of the Uniform Rules of Court aims to regulate the manner in which a property is declared executable, and the process that needs to be followed when applying to the court to declare the defendant's primary residence executable.
In a recent decision by the High Court of the Western Cape – Standard Bank of South Africa Ltd v Tchibamba and Another– it had to clarify the procedure that needed to be followed when the reserve price had not been reached in an auction of an immovable property.
In the matter, the debtors had fallen significantly into arrears with their monthly payments of their mortgage bond. So, an order was granted declaring the mortgaged property executable to satisfy the judgment debt.
Rule 46A(8)(e) empowers a court granting such an order to determine a reserve price for the sale in execution.
In terms of the conditions of sale prepared by the judgement creditor, the judgment creditor included the following provision "If the sale is subject to a reserve price, then should the highest bid be less than the reserve price, the highest bid will be provisionally accepted on condition that the purchaser complies with the following:
- The purchaser will sign the conditions of sale as soon as possible after the sale and immediately upon request by the Sheriff;
- The purchaser will make immediate payment to the Sheriff of a deposit equating to 10% of the selling price and;
- Payment on demand of the Sheriff's commission.
However, in this case, the reserve price was not achieved during the sale in execution.
When a reserve price was not achieved Rule 46A(9)(d) dictates the next step.
Rule 46A(9)(d) states that the sheriff must submit a report to the court, within 5 days of the date of the auction. The learned judge in the present case highlighted the importance of the 5-day time limit for the submission of the report, as it underlines the urgency of the matter.
Furthermore, Rule 46A (9) (d) provides: "If the reserve price is not achieved at a sale in execution, the court must, after reconsidering the factors in paragraph (b) and using its discretion and make an order as to how execution is to proceed.
Notwithstanding, Rule 46A(9)(e) when read together with Rule 46A(9)(c) states the following: "The court may, after considering the relevant factors, order that the property be sold to the person who made the highest offer or bid."
The court then turned its attention to Van Loggerenburg, Erasmus, Superior Court Practice Vol 2 where the author observed that paragraphs (c), (d) and (e) of subrule (9) – when read together – fail to provide a clear procedural framework when a reserve price has not been achieved.
The judge also took into consideration, the Changing Tides 17 (Proprietary) Limited N.O. v Kubheka and Another matter where; "The learned judge recorded that in her own experience practitioners dealt with the means of obtaining the prescribed reconsideration of a reserve price under rule 46A(9)(c) in a variety of ways that showed up an undesirable lack of uniformity." The judge noted that the inconsistencies of Rule 46A(9)(c) should enjoy the early attention of the Rules Board.
He then discussed the purpose of the Uniform Rules, and pointed out that the purpose of Uniform Rules "...is to promote a desirable degree of uniformity in the practices and procedures of the various divisions and local divisions of the High Court nationally."
So, how does Rule 46a apply when the reserve price has not been achieved?
Where the reserve price set is not achieved, it would be the sole discretion of the Judge to fix the initial price to order that he or she will retain the matter, and this must be reflected in the Judge's order. The application for reconsideration, which is to be instituted by the party in whose favour a judgment has initially been granted, should ideally be heard in open court.
If the judge is not available, the Judge President must be approached to allocate a judge to give appropriate directives.
The reconsideration application must be served on all the parties. Personal service on the judgment debtor is required by the Rule as well.
According to the judge's assessment, when properly interpreted, Rule 46A (9) plainly implies that a court that fixes a reserve price in its order is relevant until the contemplated sale has been concluded at or above the determined reserve price.
Even though, directive 33A of the Western Cape Practice Directives was brought about as an attempt to assist in matters whereby a reserve price had to be reconsidered in terms of Rule 46A. The judge still found fault in the current Rule 46A of the Uniform Rules of Court and made the following recommendations:
- The registrar should determine to which judge the Sheriff's report should be referred to;
- The application for reconsideration of the reserve price in terms of Rule 46A(9)(c) should be heard in an in open court;
- The registrar should determine the date(s) by which the interested parties would be required to file supplementary affidavits and heads of argument.
Although the current matter was decided in the Cape Town High Court, it has been the experience of legal practitioners that there remains great uncertainty in many jurisdictions within the country regarding the proper procedures to follow when a reserve price is not met at auction.
Legal certainty and clarity of Rule 46A are needed, the recommendations made by A.G Binnis- Ward of registrars playing a key role in the reconsideration of a reserve price would assist in bringing such clarity and certainty to litigants, presiding officers, and judicial administrative officers.
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.