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Banks to face R60bn class-action claim

Banks are selling the homes of defaulting debtors at prices below market value, says Advocate Douglas Shaw.
Picture: Moneyweb

NASTASSIA ARENDSE:  Some of South Africa’s banks face a R60 billion claim related to their conduct in attaching and selling the homes of defaulting debtors at prices below market value.

Read: Banks to face R60 billion class action suit

Earlier today I spoke with Advocate Douglas Shaw, who is filing the application for direct access at the Constitutional Court, and that’s on behalf of the 219 people who are also behind this class-action suit.

Here’s the interview.

DOUGLAS SHAW:  There are about 200 people [in this case], whose houses have been sold in execution – repossessed by the bank and sold for a small percentage of their value.

Now on average the banks sell these properties for 50% of their value sometimes, which is terrible, because in other countries 90-95% is normal. But, even worse, in some of these transactions the banks have sold the properties for R100 or R1 000, which happens nowhere else in the world.

NASTASSIA ARENDSE:  I see here that you are approaching the Constitutional Court – why skip the three courts?

DOUGLAS SHAW:  We’ve actually been dealing in the High Courts for many years, and also our clients are very poor and can’t afford to go through this High Court, SCA to Constitutional Court system, because they just can’t afford to fund that. They can’t even afford to fund what we are doing at the moment.

NASTASSIA ARENDSE:  Because the ConCourt ordered that some of the banks need to sell property only as a last resort, you want clarification in terms of what exactly “last resort” means.

DOUGLAS SHAW:  Right. That was in the Jaftha matter, which I think was in 2004 or 2006, somewhere around there. And to us the banks have not listened to that at all. They just kept ordering sales in execution time after time where it’s not at all necessary. And circumstances in other countries would never lead to the person’s house being sold.

NASTASSIA ARENDSE:  That R60 billion – how did you come to this particular amount?

DOUGLAS SHAW:  About 100 000 properties have been sold since the Constitution came in. So, in our view, as soon as the Constitution came in, what should have happened is the banks should have said wait, wait, our system is not working here. We are selling people’s houses for far too little. Let’s develop a better system.

Instead of doing that, the banks just decided no, no, we don’t really care about the people whose houses we are selling. We’ll continue to destroy their lives. So all these 100 000 people – maybe two or three thousand of them would have had their houses sold for their proper market value, but only maybe two or three thousand of them would have been sold in a country where the system is working properly and constitutionally, and the other 97 000 would never have been sold.

So we take all these people and we say, okay, this should never have happened, it was sold for far too little, so the banks must pay that money back. They should have said, as soon as it stopped working or at least when the Constitution came in, this isn’t working let’s fix the system, let’s develop a decent system. They shouldn’t have continued to do huge damage to people’s lives unnecessarily.

NASTASSIA ARENDSE:  You are doing this on behalf of about 219 people nationwide. How did you find these people? And legal fees are not particularly cheap. So how are they able to pay you?

DOUGLAS SHAW:  Well, we haven’t been paid anything like what we would normally have been paid for the work that we’ve done. And how did they find us? Well, we’ve got a team, we’ve got attorneys and advocates who work together and administrators, and I don’t know – I suppose it’s people’s contacts to say can you help us?

And then we had a contingent from the townships – somebody came to see us on behalf of 100 people from the townships who obviously definitely couldn’t afford to pay us. I just heard their story and I thought, this is so wrong, I’m going to take this on anyway. It’s just so wrong.

The banks are relying on the fact that nobody can afford to oppose them, so I said no, no I’m going to just oppose them anyway.

NASTASSIA ARENDSE:  One of the banks has confirmed that they’ve seen the draft version of the papers. How long do you expect this kind of matter to drag out, because generally when it comes to a lot of these class-action claims, they can drag on for some time.

DOUGLAS SHAW:  Well, some things will happen very quickly. First of all, the Constitutional Court will confirm or deny that it’s going to hear the matter by direct access. If it’s willing to confirm the direct access, and hear the matter, it could be heard by the end of the year or maybe early next year. Then it would be relatively quick. Of course, even if we get all the orders that we seek, then it will be a year after that before the Ministry of Justice produces a new Act, etc.

But at least we would have the sales in execution stopped in the meantime – because the banks are still doing it. They probably sold somebody’s property today somewhere in the country for half price or R100. It has not stopped because of this action.

But if the Constitutional Court stops that, and we have to wait another year for the new legislation to come in, that’ll be fine.

The other thing that might happen is that the Constitutional Court might not hear it directly, and then we need to go back to the High Court and start the whole matter again. And then yes, it will take about a year-and-a-half and meanwhile the banks will continue to do billions of rands worth of damage on people’s lives, and another 10 000 people’s lives will be ruined, which is one of the reasons why we think the Constitutional Court should hear it directly.

It’s a crisis. It’s a situation where people’s lives are being destroyed all the time, so there’s a reason why it should be heard now.

NASTASSIA ARENDSE:  That’s Advocate Douglas Shaw, talking to us about the case regarding the bank, where they will face a R60 billion claim.

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