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Great read by Carmel Rickard.

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That urban legend about a series of property deals in which each depends on the one that went before, with the potential for it all to collapse like dominoes? It might not be so much of a legend after all.

A new judgment from the high court in North West deals with such a situation, but with a sharp twist in the tale — the court ordered each transaction and registration scrapped, with interest and costs against the original seller.

Makubalo vs Nedcor Bank is not just a good story, however, and the case deals with far more than whether urban legends about consecutive, contingent property deals have any truth. Rather, it spotlights the often avaricious nature and practices of banks and offers something to cheer about because, for once, the bank fails to triumph over the ordinary account holder.

Joel Makubalo, the account holder in question and the target of the bank, bought property in Rustenburg financed by Nedcor. He had some problems at work and was dismissed, sparking legal action in the labour court that had not been completed by the time the bank case was heard.

Not surprisingly, he had some financial difficulties because of his dismissal, including some missed mortgage payments on his property, and in September 2012 the bank obtained judgment against him for almost R31,000. As a result, the bank had his property slated for sale by auction on December 5 2014.

To indicate the court’s disapproval of this behaviour, a special punitive costs order was made

That very day, with the outstanding amount escalated to R39,250, Makubalo pulled a financial rabbit out of the hat, and transferred R43,000 to Nedcor. The money was to cover the outstanding balance and “reasonable costs”. The bank disputes the exact time the funds arrived in the account, but the sheriff’s return states that the sale was concluded at 10am, the auction’s scheduled start time, and that the property was sold to Pieter Hoffman Properties for R271,000. That buyer in turn sold the property to another purchaser for R450,000 in a deal financed by Absa.

Despite a situation in which his property had twice been bought and sold, Makubalo was determined to get it back. He applied for a court order declaring that the first sale and registration was invalid as he had settled his debt to Nedcor Bank in full “together with interest and costs on December 5 2014, prior to 12h00, as was agreed with [the bank’s] attorneys”.

He also asked for an order that the second sale and registration be set aside because the buyer at the auction “was not the registered owner” and did not have the legal right to sell it. Makubalo further asked that the registrar of deeds be ordered to cancel the deeds of transfer to both buyers and that the Absa mortgage over the property be cancelled.

Naturally, Nedcor’s legal team objected to the application and argued that at 10am on the auction day, when the hammer fell, “it was all over” for Makubalo. But Judge Rodney Hendricks disagreed. For one thing, the National Credit Act makes it clear that a consumer may reinstate an agreement “at any time before the credit provider has cancelled the agreement”. In this case the bank did not close Makubalo’s account and, as stipulated by the act, he also paid “all overdue amounts, including reasonable default charges and reasonable costs of enforcing the agreement”. There was nothing else due by Makubalo to the bank.

The bank’s legal team argued that “time is of the essence in this matter” and that “much depends on the time of concluding the sale” in auction.

However, as far as the judge was concerned, though time might have been “of the essence”, it was debatable whether the sale was in fact concluded “at exactly 10am” as the bank argued. For that to be so would have meant that the sale in execution took just a matter of seconds, “which is doubtful”. For one thing, the 10% deposit was paid to the sheriff that day and not to Nedcor. The balance was only paid in January 2015 and the transfer registered in March 2015.

The judge said it was a “very disturbing factor” that, after Makubalo paid more than the outstanding balance and though Nedcor’s attorneys were informed of this, they went ahead with the sale and registration. The attorneys should have informed Nedcor “and advised them not to proceed”, he said.

Makubalo’s account reflected nearly R4,000 in credit, which Nedcor must have seen. It was “furthermore very disturbing to note” that, given the “meagre” outstanding balance of just over R39,000, the property — valued at R450,000 — was sold on for R271,000 and then bought by yet another buyer for R490,000 a mere 13 days after the sale in execution.

Reversing the process

The judge said the “clock should be turned back”. He sharply rejected Nedcor’s argument that Makubalo should have to pay 80% of the costs and blamed Nedcor’s approach for the complex knot that has to be undone.

Once Nedcor knew that Makubalo’s account was fully paid up on December 5 2014, it should have informed the sheriff and the buyer at the auction, and the sale ought to have been cancelled. Nedcor should have acted “reasonably” and not pushed ahead with the sale. To indicate the court’s disapproval of this behaviour, a special punitive costs order was made against the bank.

Reversing the domino process, the judge set aside both the sale at auction and the subsequent sale; the registration of the property in the names of those buyers was also set aside, and the property must again be registered in Makubalo’s name. Nedcor must repay the funds from the auction sale plus interest, and Absa must be repaid for its purchase on behalf of the second buyer.

It is rare to feel justice has been done in a case involving banks and ordinary account holders: Makubalo’s fight is one for the record books — one to store carefully in your little black book of information that could prove lifesaving if ever things go badly wrong and you need some urgent help to save your home.

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