FirstRand Bank Ltd v Maleke and Three Similar Cases

• Jurisdiction: South Africa

FirstRand Bank Ltd v Maleke and Three Similar Cases
2010 (1) SA 143 (GSJ)

2010 (1) SA p143

Citation	2010 (1) SA 143 (GSJ)
Case No	637/2009, 638/09, 09/8830 and 09/8941
Court	South Gauteng High Court, Johannesburg
Judge	Claassen J
Heard	May 26, 2009
Judgment	August 20, 2009
Counsel	V Fine for the applicant.; Respondents in person.

Flynote : Sleutelwoorde F

Credit agreement — Consumer credit agreement — Judicial debt enforcement by credit provider — Application for order declaring immovable property G executable — Whether to be granted — General considerations set out — Respondents poor and debts relatively trifling — Prejudice caused to defendants by sale (loss of home, denial of constitutional right of access to adequate housing) disproportionately large — Application for order declaring property executable refused and matter referred back to magistrate for recovery of debts under National Credit Act 34 of 2005. H

Headnote : Kopnota

In each of four matters in the High Court, the applicant, a banking institution and registered credit provider pursuant to the provisions of the National Credit Act 34 of 2005 (NCA), applied for default judgment on a mortgage bond, plus an order declaring the immovable property to be specially I executable and attorney and client costs, against an 'historically disadvantaged' private individual. In each case the banking institution had complied with the provisions of ss 129 and 130 of NCA and service had been affected at the chosen domicilium. Further, in each case, the homeowner was resident on the property and the arrears were relatively small amounts, varying between R2000 and R5000, except in the third matter where an amount of R76 036,91 was alleged to be in arrears. The registrar accordingly referred J

2010 (1) SA p144

A each of the matters to open court for consideration in terms of rule 31(5)(b)(vi) of the Uniform Rules of Court since the amount claimed fell within the jurisdiction of the magistrates' court. Lastly, in each case, the summons had advised the homeowners that s 26(1) of the Constitution afforded everyone the right of access to adequate housing and that if the homeowner claimed that the order for execution would infringe that right, B he or she was to place information supporting such claim before the court. In none of the cases had any of the homeowners placed any such information before the court.

Held, that the court was concerned that an injustice might be done to the absent homeowners if the orders declaring their immovable properties executable were granted. That concern arose from the following facts and circumstances C which appeared from the banking institutions' own papers: (1) all of the homeowners were historically disadvantaged individuals; (2) they had been paying instalments in reduction of their bonds, respectively, for periods of 17 years, 14 years, 19 years and 13 years, prior to falling into arrears; (3) the properties must have been significantly more valuable than the outstanding balances; (4) the arrears were trifling in their amounts and D significance to the banking institutions. The prejudice which would be suffered by the homeowners in potentially losing their properties would be disproportionately large compared to the minor prejudice to the banking institutions in being denied immediate payment of the outstanding balances on the bonds. A delay in the payment of the full outstanding balances due to a refusal to grant the execution orders would not harm them in any way, E whereas such execution would constitute a permanent setback to the relatively indigent and historically disadvantaged homeowners; (5) the homeowners all fell within the category of 'low income persons' as contemplated in s 13(a)(ii) of the NCA; and (6) the letters of demand that had been sent to them in terms of s 129 of the NCA did not expressly warn them that their homes would be sold in execution, potentially leading to the F loss thereof due to their eviction, if they failed to respond to such letters. (Paragraph [5] at 149F - 151D.)

Held, further, that further general considerations, which did not necessarily appear from the banking institutions' papers, were the following: (7) the homeowners might have failed to respond to the letters of demand out of ignorance of the protection afforded them by the NCA; and/or (8) ignorance G of the fact that their right to respond to the invitation to approach an alternative dispute resolution agent, the consumer court, the ombud with jurisdiction or a debt counsellor lapsed once the credit provider took steps to enforce the agreement; and/or (9) a lack of funds to enable them to obtain legal advice; and/or (10) disqualification from obtaining free legal advice on the applicable 'means test'; (11) they might have failed to defend H the banking institutions' claims out of fear of incurring High Court legal costs; and/or (12) ignorance of the implications of the claims for attorney and client costs; and (13) granting the execution orders in such cases would, in effect, bedevil or terminate the homeowners' access to credit, thus placing them in a position where they were in future denied adequate housing. (Paragraph [6] at 151E - 153A.)

I Held, further, that it was incumbent on the courts to determine whether one or more of those considerations were relevant to any applications for default judgment, in addition to such facts as appeared from the banking institutions' papers. If one or more of those circumstances applied, a grave injustice could be perpetrated by disregarding those considerations. They flowed from a consideration and application of the purposes and spirit of J the NCA. (Paragraph [7] at 153B - C.)

2010 (1) SA p145

Held, further, that the circumstances in each of the present matters called for A some form of intervention to protect the interests of the historically disadvantaged homeowners. (Paragraph [9] at 154B - D.)

Held, further, that the courts were also duty-bound to consider the constitutional implications of s 26 of the Constitution when applying the provisions of the NCA. If execution were ordered in the present applications, the homeowners might very likely be deprived of obtaining other adequate housing if they were B subsequently evicted. (Paragraphs [10] and [12] at 154D and 154H - 155B.)

Held, further, that a final consideration which militated against the exercise of the court's judicial discretion in favour of the banking institutions was that the present economic climate had to have been a contributing factor to the homeowners falling into arrears, something which might very well have been beyond their control. (Paragraph [15] at 156G - H.) C

Held, further, that the peculiar circumstances of the present four cases required the court to exercise its discretion against the banking institutions by disallowing the orders declaring the encumbered properties executable. (Paragraph [16] at 156I.)

Held, further, that the court had a discretion to terminate the proceedings and refer the matter to the magistrates' court with jurisdiction. In certain D circumstances it might be very appropriate to refer a matter to the magistrates' court. That was particularly so where the amount claimed was within the jurisdiction of the magistrates' court, unless difficult principles of law and/or fact required decision, in which case a hearing in the High Court would be more appropriate. (Paragraph [23] at 159B - D.)

Held, further, that a special order was required to apprise the homeowners of E their rights regarding participation in the proceedings, so that they could benefit from the protective measures in the NCA. (Paragraph [24] at 159E - F.)

Held, accordingly, that, in each matter, the homeowner was absolved from the instance and the application was dismissed, the banking institution was interdicted from instituting action against the homeowner arising out of the F mortgage bond for the recovery of the debt and obtaining an execution order in the High Court; and, in the event of the banking institution's recommencing proceedings against the homeowner for the recovery of the outstanding balance, personal service of a copy of the court's judgment upon the homeowner was ordered simultaneously with the issue of a letter of demand contemplated in s 129 of the NCA. (Paragraph [25] at 159H - 160B.) G

Cases Considered

Annotations

Reported cases

Absa Bank Ltd v Myburgh 2009 (3) SA 340 (T): approved

Absa Bank Ltd v Prochaska t/a Bianca Cara Interiors 2009 (2) SA 512 (D): H referred to

BMW Financial Services (South Africa) (Pty) Ltd v Dr MB Mulaudzi Inc 2009 (3) SA 348 (B): referred to

Ex parte Ford and Two Similar Cases 2009 (3) SA 376 (WCC): referred to

FirstRand Bank Ltd v Carl Beck Estates (Pty) Ltd and Another 2009 (3) SA 384 (T): referred to I

FirstRand Bank Ltd v Olivier 2009 (3) SA 353 (SE): referred to

Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others 2005 (2) SA 140 (CC) (2005 (1) BCLR 78): dicta in paras [43] and [56] - [60] applied

Nedbank Ltd v Mateman and Others; Nedbank Ltd v Stringer and Another 2008 (4) SA 276 (T): considered and applied J

2010 (1) SA p146

Nedbank Ltd v Mortinson 2005 (6) SA 462 (W) ([2006] 2 All SA 506): referred to A

Standard Bank of South Africa Ltd v Hales and Another 2009 (3) SA 315 (D) ([2009] 2 All SA 416): distinguished

Standard Bank of South Africa Ltd v Panayiotts 2009 (3) SA 363 (W): dictum in para [24] approved.

Statutes Considered

Statutes B

The Constitution of the Republic of South Africa Act, 1996, ss 26 and 26(1): see Juta's Statutes of South Africa 2008/9 vol 5 at 1-26

The National Credit Act 34 of 2005, ss 13(a)(ii), 85(a), 129 and 130: see Juta's Statutes of South Africa 2008/9 vol 2 at 1-457, 1-475 and 1-487.

Rules Considered

Rules of Court C

The...