A FLAWED SYSTEM
A high court ruling has found that the National Credit Act, by not offering sufficient protection to small deceased estates, has failed to promote empowerment
Small estates — those valued at less than R250,000 — make up perhaps 75% of SA deceased estates, so you might think that all the technical difficulties would long have been rubbed smooth. But that’s not so, and a recent judgment of the Joburg high court has made some recommendations about a particular problem that it believes needs to be addressed.
MFC vs Mkhwanazi might seem a routine matter, in which a bank (Nedbank) seeks the return of a vehicle because the premiums weren’t kept up to date. But there’s a twist.
Awnini Mkhwanazi, who concluded the agreement with Nedbank, died in September 2018, before the vehicle had been paid off.
In such a case, the contract said the bank could cancel the agreement and claim the full balance outstanding, along with the arrears and damages.
But though the bank has done so, and demanded the vehicle back, it has had no success. Instead,
Ayanda Goodluck
Mkhwanazi, son of the deceased debtor, has been holding onto it.
When his father died, the son was made controller of the deceased small estate. Controllers of such estates operate under a far simpler reporting procedure than applies with an executor.
Nedbank said the son had “hijacked” the vehicle for his own use by refusing to return it and claiming he didn’t know where it was.
According to the bank, this has prejudiced
Nedbank as well as the deceased estate, as the estate now owes even more in interest, along with the difference between the depreciated value and what is still owing on the principal debt.
The son’s lawyer argued that the son ought to have the same power as an executor to sue and be sued; to be treated as if, like an executor, he has “stepped into the shoes of the deceased”. In particular, the bank should have served him with the same notice under section 129 of the National Credit Act that is typically sent to other debtors. That would have officially informed him of the total due and how the balance could be paid.
But the act doesn’t include controllers in the definition of “consumer”, and so he was excluded from the benefits and protections enjoyed by other consumers of credit.
The son conceded that he has the vehicle and uses it as a taxi. He claimed he would have been able to settle the arrears, but the bank wouldn’t allow him to: when he tried to make payments, he says, he discovered the account had been frozen.
Failing to promote empowerment
The acting judge hearing the matter, Shaida Mahomed, agreed that the bank was allowed to cancel the agreement and demand return of the vehicle, and the son was not allowed to hold onto and use it. Further, the son had told the master of the court that the vehicle was part of the estate, when it in fact belonged to the bank.
However, Mahomed also agreed that the law failed the son. The National Credit Act was supposed to help promote BEE and ownership, but in practice it has failed to promote the empowerment of “large numbers” of people by not giving small estates the same protections as other estates.
The father had access to credit, but beneficiaries of his estate were denied an opportunity to negotiate with the credit provider or approach a debt review counsellor, like other consumers of credit.
As a result, the beneficiaries had no opportunity to “salvage” any of the money paid towards the vehicle, and the estate may be liable for damages if the vehicle doesn’t realise the full outstanding value on resale.
Mahomed said the office of the National Credit Regulator “must investigate the consumer protections available” for small estates. There should be no difference between a controller and an executor, and the definition of “consumer” in the act should include a controller, appointed by the master, to manage the property of a small deceased estate.
However, none of that will help in this case, and the judge has ordered that the vehicle be returned to the bank immediately.