Parate executie clause in mortgage bond versus post-default authority to sell - Business Partners Limited v Mahamba (4568/2016) [2019] ZAECGHC 17 (26 February 2019)

Abstract

The purpose of this note is to consider a case that came before a full bench of the Eastern Cape Division of the High Court in Grahamstown – namely, Business Partners Limited v Mahamba ((4568/2016) [2019] ZAECGHC 17 (26 February 2019)). The case touched on the age-old debate surrounding the validity of parate executie (summary execution or private sale) clauses in agreements that hypothecate property as security for the payment of a debt. Even though such clauses are popular in pledge agreements pertaining to movable property (including the hypothecation of incorporeal movables via a cession in securitatem debiti), this case involved a mortgage bond pertaining to immovable property. Moreover, as explained below, the impugned clause in casu technically was not a parate executie clause but an agreement entered into after the debtor defaulted on a loan.