Seizing property in lieu of a debt
Sale in Execution
Reproduced with permission from Readers Digest
Once judgment has been obtained against a debtor, the creditor (who then becomes known as the ‘judgment creditor’) can immediately apply for a writ of execution against the debtor’s property in order to cover the amount of the debt. This can be done in both the Supreme Court or a magistrate’s court. Although the procedure is substantially the same for both, the forms are different:
- In the Supreme Court, the writ is issued by the registrar (see registrar of the supreme court) to authorise the sheriff to seize enough of the debtor’s property to raise the amount of the judgment and costs at a public auction;
- In a magistrate’s court, the writ is issued by the clerk of the court and executed by the sheriff.
The writ must be obtained within three years from the date on which judgment is pronounced. If not, it becomes superannuated – that is, it is no longer in force. A writ can be issued after this period only:
- With the consent of the debtor; or
- If the judgment is revived by the court, in which case no new evidence is required because the case has already been proved.
Time to pay
Although not obliged to do so, the creditor might allow the debtor ‘a reasonable time’ to pay the debts according to the judgment. However, if the question of non-payment was serious enough to have been taken to the courts, the judgment debtor would be most unlikely to be able to raise the money. It may be possible, though, for the debtor to make arrangements with the judgment creditor’s attorney for the payment by instalments of debt and costs.
In such a case, a writ of execution – a form of order of the court – is not usually issued.
Once the writ has been issued, its terms must be carried out immediately or as soon as possible. The sheriff of the relevant court, in the absence of specific instructions from the judgment creditor, goes to the home, place of employment or place of business of the debtor. After providing proof of identity, the sheriff will ask the debtor to meet the terms of the writ. If unable to do so, the debtor will be obliged to point out any moveable property that can be sold to meet the judgment debt and costs. If the debtor fails to point out such property, the sheriff may conduct a search for it, make an inventory of it and take it into custody.
Fixed property is attached by notice served on the debtor personally or by registered letter. Other officials concerned with the property, such as the Registrar of Deeds, are also advised of the attachment, as are occupiers other than the owner, who is the debtor.
What may be attached
The judgment creditor, who has the basic right to claim that anything of value should be attached, need not accept what the debtor decides to offer. However, an unnecessarily extensive attachment must be avoided; only enough of the debtor’s goods should be attached to cover the debt and judgment costs. If, after the sale, there is an excess amount after debt and costs have been paid, the debtor is entitled to this money.
Moveable property that is attached must be the property of the judgment debtor. If the debtor is a married man, and he and his wife are married out of community of property, his wife’s property cannot be attached, nor may the creditor garnishee money due to the wife. (See garnishee order.)
Debts owed to the debtor by a third party or wages and salary owing, or which may become owing, may be attached by a garnishee order. Cash other than wages may be attached without a garnishee order, as may bills of exchange, promissory notes or other securities for payment. Incorpo-real property or rights – that is, rights involving something that has no material existence – may also be attached. These include copyright, rights in terms of a will, rights to trust moneys, book debts, a trading licence and rights to land not yet transferred to the debtor.
Return of the creditor’s property
If, as a creditor with a judgment in your favour, you call for the return of your own goods, such as a television set sold on instalment sale, these goods may be attached even if they are no longer with the debtor, but in the possession of a third party. If, however, the goods have been sold by the debtor, they may be attached only if they are still in the possession of the debtor. Once ownership and possession have passed to the third party, they may not be attached.
Fixed property may be attached and sold, especially where bondholders are unable to meet monthly payments to the financial institution that granted the bond over the property.
Property that is not attached
In terms of the Magistrates’ Courts Act, 1944, certain items that are the property of the judgment debtor may not be attached.
- Necessary beds, bedding and clothing of the debtor and his or her family;
- Other furniture and household utensils to the value of R2000;
- A farmer’s stock, tools and agricultural implements to the value of R2000;
- Tools and implements of trade to the value of R2000;
- Professional books, documents or instruments to the value of R2000 that are used by the debtor in the practice of his or her profession;
- Arms and ammunition that the debtor, by law or regulation, is required to have;
- Food and drink in the house to meet the needs of the debtor and his or her family for one month.
These sums may be increased at the discretion of the court.
Incorporeal property that may not be attached includes pension payments, the right to receive a pension and contributions made to a pension fund.
Sales in execution are usually held at the sheriff’s store when moveables are being sold and in front of the courthouse in which the writ of execution was issued or at the property itself when immoveables are being sold. The conditions of sale are read out immediately before the start of the sale and may be examined beforehand at the office of the sheriff. The official conducting the auction is not obliged to set minimum reserve prices, except where there is a bond over immoveable property – but even then the bondholder may waive the requirement for a reserve price.
At the end of the sale, the costs and charges of execution are deducted from the proceeds, after which whatever remains of the proceeds are distributed according to the order set out in the Rules of Court. Any remainder is then paid to the judgment debtor. (See insolvency.)