Home Loan Defaulting Home Owners In Future Saved From High Court Legal Cost

When you default on your home loan, you become liable not only for the outstanding loan, but also for the legal costs that the bank has to incur to recover this loan from you. Depending upon which court, these legal fees can run in the hundreds of thousands of Rands. To ensure that all have equal access to the law and courts and to ensure fair and equitable treatment, the National Credit Act specifically allows for disputes over credit agreements to be brought before a magistrate rather than a High Court judge. One of the reasons being that it is cheaper for the defaulting party. 

In the matters of Standard Bank of SA Ltd v Kekana; Standard Bank of SA Ltd v Mbedu; Standard Bank of SA Ltd v Mayaphi; Standard Bank of SA Ltd v Mbha; Standard Bank of SA Ltd v Van Zyl; Standard Bank of SA Ltd v Rodgers, all heard simultaneously, the acting judge derided the bank and its attorneys for, amongst others, violating its own written agreement which stated that such matters are to be brought before a magistrates court. The court further confirmed the judgement in the Eastern Cape High Court heard in Grahamstown of Nedbank v Gqirana, which stated that the Magistrates Court is the proper forum and has the competency to hear such disputes. An excerpt of the Gqirana judgment stated the following: 

"[37.8]
The provisions of Section 29(1)(e) of the Magistrates' Court Act, as read with Section 172(2) of the NCA, provides that the Magistrates' Courts have jurisdiction over all NCA matters whatever monetary sum.

[37.9]
It was held by Bertelsmann J in Myburgh (supra) 33 (in my view correctly) that (generally) issuing summons in the High Court for a debt that could be recovered in the Magistrates' Court runs counter to the express purpose of the NCA. 

[75.6]
The provisions of the NCA however, properly interpreted through the prism of the Constitution, creates a specific set of structures and procedures relating to NCA matters which, read in context and on a generous interpretation by necessary implication, provides for the Magistrate Courts to be the Court of first adjudication of all NCA matters to the exclusion of the High Court as a Court of first adjudication save only in the event that there are unusual or extraordinary factual or legal issues raised which in the opinion of the High Court warrant them being heard first heard in the High Court."

The Judge stated that it creates undue financial hardship on the respondent who is saddled with enormous legal bills that are in some cases more than the outstanding amount of the bond. The bank as "Dominus Litus" is entitled to determine out of which court to sue and in the court had this to say:

"[16] 
As in these matters, Standard Bank understood that there would be instances where more than one court had jurisdiction.  It made its election as part of the terms of the agreement, exercising its freedom of choice.  The defendants entered into the agreements, amongst others informed by the term, with its benefits as to costs and accessibility.  The parties agreed to protect the defendant against the unnecessary use of the more expensive forum, that is, the hardship of being subjected to unnecessary and expensive proceedings often far out of town.  The parties did not by an express choice of forum evade any mandatory provision of the law.  There is no public policy to the contrary.  The clause was not exculpatory and did not provide the defendant with any advantage to which in law they would not be entitled.  It did not deny Standard Bank of its day in court, including in the High Court if the need arose.  It did not present any grave difficulty and inconvenience for Standard Bank, the defendants or the courts.  The agreement should be conclusive and enforceable.

[17]
The derogation of a choice of forum is not explained by Standard Bank in the papers.  Standard Bank issued papers in the High Court in violation of an agreement between the parties.  There was no reason why Standard Bank should not be held to its bargain.  In my view, it is the fair and right thing to do.  There was no reason why enforcement of this term of the agreement would be inequitable and unjust.  It will not be in the interest of justice that an indigent defendant be hauled to the High Court when the matter can be resolved by the Magistrates court, in circumstances where parties have specifically agreed that such matters should start in the Magistrates' Courts."

It should be noted that the Judge here terminated the case in the Western Cape High Court and transferred it to the Magistrates Court for hearing. It would seem that, by the court's reasoning, cases such as this should not have been brought to the High Court but should have been dealt with at Magistrate Court level.