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The days of banks suing you in the high court are over

National Credit Act matters must go through the much cheaper – and more accessible – magistrates’ courts.

A recent judgment by a full bench of the Grahamstown High Court makes it unlawful for banks to bring National Credit Act matters before the high court instead of the much cheaper magistrates’ courts.

Lawyers have complained for years that banks were attempting to financially ruin their customers by forcing them into the high courts in an effort to collect on outstanding debts. They also argue that forcing customers into high courts – often far from where they live, a practice known as ‘forum shopping’ – is a further prejudice intended to stack the deck against a customer in default.

Apart from being financially ruinous for customers, it is also a denial of access to justice.

This recent judgment means lenders no longer have that luxury of suing in high courts. Though the judgment is confined to credit agreements falling under the National Credit Act (NCA), a minority ruling by Judge Mbulelo Jolwana called for all civil actions and applications to be instituted in the magistrates’ courts to give effect to the constitutional right of access to justice.

Easier and less costly to mount a defence

Disputes over credit agreements must now be argued in magistrates’ courts, where the allowable scale of legal costs are a fraction of that in the high court. Customers being sued by the banks can argue their own cases without legal representation in magistrates’ courts and will not get lumbered with huge legal bills from the opposing side should they lose the case.

The full bench was asked by the Judge President of the Eastern Cape High Court in Grahamstown to deliberate on several cases involving Nedbank, Standard Bank, Ford Credit and Wesbank. All of the cases involved unopposed matters brought by the lenders seeking default judgment against clients. The Judge President asked the full bench to consider why the high court should entertain matters that properly belong in the magistrates’ courts.

The banks argued – without success – that in matters where the magistrates and high courts had “concurrent jurisdiction”, forcing them to bring matters to the magistrates’ courts would infringe their right of access to justice. The judges did not agree.

The Black Lawyers Association and the minister of justice and correctional services were admitted as friends of the court.

‘Major victory’

Consumer lawyer Leonard Benjamin says the judgment is a major victory for consumers and tilts the scales of justice in their direction. “A majority of foreclosures and repossessions are unopposed, which allows banks to get judgments which could be based on defective cases and incorrect information.

“I believe that the main reasons why consumers do not oppose the banks are because of their use of the high court. They are inaccessible because they have unfamiliar procedures, are intimidating and located far away.”

Most consumers do not put up a fight against the banks, believing they do not have a defence. But this is incorrect. 

Benjamin says when it comes to foreclosures, not opposing a claim by the bank is a waiver of your constitutional rights. “Where your primary residence is under threat, even if you are in default, the court must consider relevant circumstances before granting the bank an order that will allow it to sell your home to recover its debt. The court must give special consideration to how granting the judgment will impact on children, the aged, the sick and disabled, and women-headed households.

“The court does not know what your circumstances are unless you tell the court. Hopefully, for consumers who defend themselves it will be easier and less intimidating to appear in the magistrates’ courts.”  

The NCA came into effect in 2007 with the clear intention that all NCA matters (credit agreements) should be dealt with in the magistrates’ courts. The Magistrates’ Court Act was amended to allow all NCA matters, regardless of the amount claimed, to be heard in the lower rather than the higher courts.

However, some of the banks argued successfully that nothing in the NCA amounted to an express ousting of the high courts’ jurisdiction.

Although they could easily have brought foreclosures and repossessions in the magistrates’ courts, for more than a decade the banks sued consumers in the high courts. There is little doubt that this was a strategy employed to make it as intimidating and expensive for consumers to oppose the litigation.

The reason is not difficult to fathom: the banks’ lawyers make little or no money arguing cases in the lower court.

They avoid it like the plague. They are, as we previously reported, fighting for their lunch.

Read: Lawyers fight for their lunch in abusive lending case

Indicative of this is the banks’ favourite ploy of suing consumers living in Johannesburg in the Pretoria High Court. For those defending themselves, this adds a layer of unnecessary and unwelcome expense: a round trip just to serve and file court proceedings costs between R200 and R300 each time. This is quite apart from the costs of hiring lawyers, which left consumers in a dilemma: pay the lawyers’ fees or try to catch up on the bond and forestall legal proceedings?

Benjamin says the high costs of mounting a legal defence means most cases involving the banks go undefended. After this recent judgment, that should no longer be an issue.

“Late last year a bench of the Pretoria High Court seemed to have brought an end to the practice of banks suing in the high courts rather than the magistrates’ courts,” says Benjamin. “Holding that it was an abuse of the courts and denied consumers access to justice, the court gave a directive that after February 2, 2019, all NCA matters should be brought in the magistrates’ courts unless the bank had been granted leave to sue in the high court, for instance, if the issues were complex.”

This proved to be a pyrrhic victory as banks continued suing their customers in the higher courts, but without the courts’ leave. It was business as usual, with Johannesburg customers being sued in the Pretoria High Court instead of the Johannesburg Magistrates’ Court.

The Grahamstown judgment will make this more difficult.

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COMMENTS   13

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The Banks ARE NOT YOUR FRIEND!!!!!Your home is not your best investment!! You will pay 2.4 million for a 1 million home!! A 15% car loan is 42.7% car loan. They lie and you believe….As I teach– Don’t take financial advice from people behind bulletproof glass! “-) Dr. Debt

Also not from people trying to pimp their wares while driving far better cars than yourself.

Those cars are paid for by fees off your money.

So very true. if you go into overdraft due to their error they still charge interest. I disputed this and 2 months later i am still trying to get the 2.35 O/D interest refunded. No luck so i have given up let them keep it.

This is mind boggling. Are we going to hear anything from the banks?

This is the ugly face of capitalism; it’s all about greed and intimidation. If South Africa moves inexorably towards socialism we have only ourselves to blame.

I love you the narrative is always about the big nasty corporate with their greedy lawyers against the poor defenseless victim.

1. Lets not forget, when a customer defaults on a loan, they are in breach of a contract which they willingly entered into.
2. In most cases, such defaulters have NO defense whatsoever against the action.
3. It’s extremely hard to recoup legitimate debt through our civil justice system. The High Courts at least function somewhat, the magistrate courts are complete shambles. But in essence, it’s almost not worth the money to litigate for less than R500 000 debt.
4. Defendants use every possible angle to duck and dive the repayment that they are liable for. Throwing this into only the Mag Courts will lead to more and more ducking and diving.
5. Banks and their lawyers sued out of the High Court to get results.
6. Lastly, and importantly, THE RULES OF COURT allowed banks to sue out of the High Court. This is Civil Procedure 101. So why did all these smart commentators not previously petition the correct channels – Department of Justice and Parliament – to amend the Rules.

We have amnesty for debtors, now this. And we wonder why our citizens fall further and further into debt.

Fact is, many people are over indebted. This will make it more difficult for them to get credit from “legitimate” (if there is such a thing) credit providers duly registered under the NCA and thus they will just flock to informal, illegal lenders that retain their ID’s, bank cards etc and who charge fees so exorbitant that it will lead to certain financial ruin. But we rejoice at this “revolutionary” judgment…

So you are saying it’s ok for the banks to “arrange” a summons in a district you dont live in with the sole purpose to get a default judgement without your knowledge. If the banks were not doing this perhaps no one would of challenged it you have no idea how rife it was.

The summons is served on you exactly the same manner, whether its High Court or Mag Court. So if you “don’t know about it” in the High Court, you also won’t know about it in Mag Court.

Look, it’s always been frowned upon to issue summons for R40k in the High Court and the banks would then not get a sufficient cost order to recoup the fees. So all in all I don’t have an issue with this judgment.

All I’m saying is to portray the defaulters as poor victims of the system is a bit rich.

Yes StephanG, High Courts get results, because, as in article, nobody can afford to defend
I can not think that how “in Mag courts will lead to more duck and diving.”
Most cases debtors are being summoned for the capital plus finance charges to be earned eg cost of vehicle R1m plus finance charges R400,000 Installment say R24,000,00 He defaults from day one and after three months he is in arrear of R72,000 and this is the amount in question. Why to High Court for an amount of R72,000.00 and for debtor must spend about R500,000 to defend R72,000? However, debtor will only defend the amount in arrear for reasons eg illegal charges included in the arear amount which will escalate as banks never adjust these illegal charges. This is for debtor a proposition to go to Mag court. However the debtor gets such a fright when receiving the summons for misleading figure of R1,400,000.00 plus cost.Going to High Court to summons for R1,400,000.00, in my opinion, is misleading court and consumer, and from what I have seen, about 30% of the summonses include future earnings and about 80% are loaded will illegal cost, of which 99.9% of consumers are not aware of. Yes I support the poor defenseless victim against the nasty corporate and greedy lawyers. In conclusion, I shall appreciate you to elaborate on your comment in your last paragraph.

Hi FG,

As per the contract, the moment you default on one installment (R24k in your example), the entire capital amount, interest and charges become due and payable. There is no obligation on the banks to keep allowing you to pay off the debt – the whole debt becomes due.

About ducking and diving – I’ve done collections in the Mag Court for unsecured loans in my previous life. You get judgment, then it comes to paying. Defendant rocks up in his finances BMW, sits on his new Iphone. Court then oversees the conducting of a Section 65 financial inquiry. Mr poor debtor offers to repay R1000 pm (on a debt of R250k) because it’s all he can afford. I ask, “what about your monthly spend on the Iphone” – “Oh its in the name of my sister and I need it to earn an income”. “And the BMW?” – “Oh it’s in the name of my (Pty) Ltd”. Magistrate then orders that defendant pays the R1000 pm towards the debt. He pays for one month. Then stops. We start again…

I can go on and on.

In short, people actively avoid paying debt. They are not victims.

Some sanity. To add to this: the debtor gets the money from the bank, and spends it, on a car, a house whatever. It is not as if these individuals are targeted at random.

It is because the process in the High Court runs smoothly and results are guaranteed that this process is preferred.

If they could, the banks would want to avoid these extra costs.

Hi Stephan
When I refer to debt due To clarify, I agree the whole debt becomes due. My point is what is the whole debt? In my example it is. The capital of R1m plus interest earned on due date which is included in the total outstanding amount of R72,000.00 Thus due R1,072,000 and not R1,400,000. As you can only claim the amount earned, not to be earned. CP can only debit agreement for interest once a month when due.
Whether it is running smoother or not, I cannot debate on. My point is that it is for consumer not affordable,he is already in debt, to defend himself in High Court due to legal cost.Should he be aware of illegal charges, he can defend himself in Mag Court.Surely he wont go to court unless he has a dispute with the amount being summoned and after adjustments on account, afford to honour agreement.In my example an amount of say R30,000 for illegal charges could be included in the R72,000 In Mag it is worthwhile defending but not in H C. Yes for the legal people this is a hell of a blow not to reprint a standard document, stamped by Court, and and not earning a lot of money. The same when a person having to go through after being insolvent and rehabilitated.

”He that dies pays all debts”

William Shakespeare (1564- 1616)

Certain Banks are bullies and legalized crooks. Lately big Banks around the world have been sued for billions – they all lost their corruption cases and had to pay massive fines.

Standard Chartered Bank was one of the latest big bank that had to pay US $1.1 billion for money laundering and sanctions breaching.

My views:
The second biggest fraud in sunny SA is remains ‘’un- prosecuted’’ – the so-called Investecgate – Kebblegate – Rangoldgate – JCIgate sages.
Investec’s ‘’getaway plan’’ so far worked for more than a decade – I believe that Peter Henry’s ( methinks a delinquent director) role in these sages should not be underestimated (starting with his role in Tsec and (the laundering of money) and his role at JCI and Randgold.

Investec’s single biggest exposure in this swamp (Kebblegate) was the so-called toxic Gold Hedge book at Western Areas (a naked hedge book). This was a massive asset for Investec but only as long as Western Areas and JCI, its controlling shareholder was kept out of bankruptcy.
Investec became well aware that if Randgold was left free to peruse its money laundering and theft claims in court, JCI and Western Areas would be forced into solvency and the ‘’hedge book’’ would be worthless.
It was forensic reports commissioned by Randgold , investigated and compiled by JLMC, led by John Louw, that had established that that JCI orchestrated the purloining of listed shares from Randgold that were sold on the markets for R1,9 billion in cash. Funny how, Marais Steyn CEO of Randgold ended John Louw’s (so far uncontested!) mandate to act as forensic auditor of Randgold – effectively ending his incriminating forensic reports.
That’s how they roll in ‘’corporate banking’’ in sunny SA .Investec almost completely and deeply concealed its links with Western Areas. Investec over time exploited Kebble’s weakness. All of the above has also been reported extensively on by the mainstream media – but so far Investec forced and relied on the negligence of their front men and KPMG auditors to survive!

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