A creditor under the National Credit Act 34 of 2005 (the Act) is not necessarily entitled to an order declaring the immovable property of a defaulting debtor executable. This was the crisp decision by Claassen J in Firstrand Bank Ltd v Maleke and Three Similar Cases 2010 (1) SA 143 (GSJ).
In each of four matters before the court, the applicant (the bank), a banking institution and registered credit provider, pursuant to the provisions of the Act applied for default judgment on a mortgage bond, plus an order declaring the immovable property to be specially executable and attorney and client costs, against an 'historically disadvantaged' private individual.
In each case the bank had complied with the provisions of ss 129 and 130 of the Act and service had been effected at the chosen domicilium. Further, in each case, the homeowner was resident on the property and the arrears were relatively small amounts, varying between R2 000 and R5 000, except in the third matter where an amount of R76 036,91 was alleged to be in arrears.
In deciding the matter the court pointed out that it was concerned that an injustice might be done to the absent homeowners if the orders declaring their immovable properties executable were granted. The court's concern arose from the following facts and circumstances that appeared from the banking institutions' own papers:
- All of the homeowners were historically disadvantaged individuals.
- 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.
- The properties were significantly more valuable than the outstanding balances.
- The arrears were trifling in their amounts and significance to the banking institutions. The court held that the prejudice that 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, whereas such execution would constitute a permanent setback to the relatively indigent and historically disadvantaged homeowners.
- The homeowners all fell within the category of 'low income persons' as contemplated in s 13(a)(ii) of the Act.
- The letters of demand that had been sent to them in terms of s 129 of the Act did not expressly warn them that their homes would be sold in execution, potentially leading to the loss thereof due to their eviction, if they failed to respond to such letters.
Claassen J held that it was incumbent on the court to determine whether one or more of the considerations listed above were relevant to the application for default judgment. 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 purpose and spirit of the Act.
Applied to the facts of the present case the court held that the circumstances in each of the present matters called for some form of intervention to protect the interests of the historically disadvantaged homeowners.
Finally, the court held that the present economic climate could have been a contributing factor to the homeowners falling into arrears, and that militated against the granting of the order applied for by the bank.