Courts tell banks to ‘ad­just their think­ing’ on home fore­clo­sures

Sunday Times - - Money - An­gelique Ardé

It’s en­cour­ag­ing to see the courts hand­ing down judg­ments up­hold­ing the con­sti­tu­tional rights of debtors, specif­i­cally the rights of ac­cess to hous­ing and jus­tice when these are threat­ened by banks tak­ing le­gal ac­tion against those who have de­faulted on their home loans.

Two re­cent high court judg­ments have high­lighted the un­fair tac­tics used by the banks and their dis­re­gard for con­sti­tu­tional prin­ci­ples when deal­ing with con­sumers who are strug­gling to keep their homes.

One com­mon tac­tic is the ten­dency of banks to en­rol fore­clo­sure ap­pli­ca­tions in the high court in cases where the amounts fall within the mone­tary ju­ris­dic­tion of mag­is­trate’s courts. Dis­trict mag­is­trates can hear mat­ters in which the claim is up to R200,000, and re­gional mag­is­trates can hear mat­ters in­volv­ing claims of be­tween R200,000 and R400,000.

Last month, a full bench of three judges in the Pre­to­ria high court or­dered that “to pro­mote ac­cess to jus­tice”, as from Fe­bru­ary next year civil ac­tions and ap­pli­ca­tions in which the mone­tary value claimed is within the ju­ris­dic­tion of the mag­is­trate’s courts must be in­sti­tuted in mag­is­trate’s courts that have ju­ris­dic­tion, un­less the high court has granted leave to hear the mat­ter in that court.

As the judg­ment, de­liv­ered by judge Ronel Tol­may, says, even if a debtor can af­ford le­gal rep­re­sen­ta­tion to de­fend pro­ceed­ings ini­ti­ated by a bank, the costs will be sig­nif­i­cantly higher if the mat­ter is heard in the high court rather than the clos­est mag­is­trate’s court. “If the debtor en­gages a lo­cal at­tor­ney, he or she will be re­quired to pay for a cor­re­spon­dent at­tor­ney to file pa­pers and op­pose the mat­ter in the high court. Un­less the at­tor­ney has a right of ap­pear­ance in the high court, the debtor will also have to pay for an ad­vo­cate to ap­pear for him or her.” These costs can be pro­hib­i­tive and it’s not as if the banks don’t know it.

Ac­cord­ing to the judg­ment, the min­is­ter of jus­tice, act­ing as a friend of the court, sub­mit­ted that there are no des­ig­nated in­ter­preters in the high court and warned that this, too, may have the ef­fect of deny­ing de­fen­dants the right to a fair hear­ing. “By con­trast, there are 450 se­nior court in­ter­preters, 79 prin­ci­pal court in­ter­preters and 1,125 court in­ter­preters des­ig­nated for as­sist­ing the re­gional and dis­trict courts across the prov­inces,” the min­is­ter said in pa­pers.

One of the rea­sons cited by the banks for choos­ing to in­sti­tute ac­tions in the high court, even for pal­try amounts, was the in­ef­fi­ciency of ad­min­is­tra­tion and staff at mag­is­trate’s courts.

But the judges said the “per­ceived in­ef­fi­ciency” of mag­is­trate’s courts does not con­sti­tute a valid rea­son to ap­proach the high court as the court of first in­stance. “The in­ef­fi­ciency, if it ex­ists, must be ad­dressed on an­other level. The banks must also ad­just their think­ing. Are panel at­tor­neys the only way to go? Should smaller firms in smaller towns not be given the op­por­tu­nity to work for the banks? No cor­re­spon­dents need be ap­pointed if this hap­pens … A paradigm shift is re­quired for all con­cerned as we go about giv­ing life to the prin­ci­ples in the con­sti­tu­tion.”

Given SA’s high lev­els of poverty and inequal­ity, there is an even greater obli­ga­tion on our courts to en­sure ac­cess to jus­tice to every­one, the judg­ment says.

“Le­gal costs are to­tally un­af­ford­able even to the mid­dle class. What is the point of hav­ing a pro­gres­sive con­sti­tu­tion when it is im­pos­si­ble for cit­i­zens to ap­proach the courts due to fi­nan­cial con­straints? Pay­ing only lip ser­vice to the rule of law is mean­ing­less when it is im­pos­si­ble to ef­fec­tively ap­ply it to the ad­van­tage of lit­i­gants seek­ing ac­cess to jus­tice.”

Also last month, a full bench of the Johannesburg high court ruled that the set­ting of a re­serve price by the courts should be the de­fault po­si­tion when pri­mary res­i­dences are auc­tioned by banks. This should put a stop to the auc­tion­ing of homes for a pit­tance, only for them to be resold for huge prof­its.

The court heard the ex­am­ple of Ma­pule Molokomme, whose home was sold on auc­tion for R10 af­ter the death of her hus­band. She was evicted from the prop­erty when she was eight months’ preg­nant.

The banks had ar­gued that by set­ting a re­serve price there would be less in­ter­est from prospec­tive buy­ers and it would there­fore make it less likely that a buyer would be found. The judges said this con­tention ap­peared to be without foun­da­tion, “but even if it is so, we can see no rea­son why the court can­not be ap­proached for a vari­a­tion of an ex­ist­ing or­der, mak­ing it more likely to find a buyer should the per­ceived dif­fi­cul­ties arise”.

The sale of prop­er­ties for nom­i­nal amounts is to the detri­ment of de­fault­ing home­own­ers who lose not only their homes but re­main in­debted to the bank for a sub­stan­tial amount — even in cases in which the prop­erty is resold for sub­stan­tially more than the price re­alised dur­ing the sale in ex­e­cu­tion. The courts’ power and duty to im­pose a re­serve price is founded in the con­sti­tu­tion, the judg­ment says.

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