NewEra ordered to appear in court
Investec Bank’s attorney Blakes Maphanga delivered the rule nisi* order to appear in court to NewEra on Wednesday, 8 May. The order was granted on 3rd May, signed by Judge Spilg, who was also the judge presiding in NewEra’s application late last year to interdict the banks from foreclosing on homes of defaulting borrowers on the grounds that many of these loans were presumed to have been securitised. NewEra’s interdict application was rejected by the court.
In this case, heard in December last year, Judge Brian Spilg described NewEra’s application as “evidently not urgent” and “a gross abuse of court.” The application by NewEra sought to stop foreclosure by the banks on about 1,200 houses and other assets because of non-payment. Judge Spilg said the case should have be brought by way of ordinary legal processes (rather than an application for an urgent interdict).
The haste with which NewEra has been ordered to appear in court gave it very little time to prepare its response, says NewEra’s founder Scott Cundill, who believes this is an attempt to financially destroy NewEra and its directors and so strangle its legal challenge against the banks.
Investec and two special purpose vehicles (SPVs) are the applicants in the rule nisi, which calls on the directors of NewEra to “appear and show cause” on 14 May 2013 why an order should not be granted for “costs to include the wasted costs of such applications on 9 April 2013, which liability for such costs shall be joint and severally the one paying the other to be absolved.” This refers to the recent case brought by NewEra against the banks in the South Gauteng High Court challenging the legal standing of banks to foreclose on properties where the underlying loans had been securitised.
The NewEra directors that have been ordered to appear in court are Gideon Robbertse, Colin Sapsford, Scott Cundill and Brendan Vermaak.
We covered the nature of NewEra’s complaint against the banks in a previous article (here). Essentially, NewEra is arguing that once a loan is securitised, it has a new owner, and the bank has no legal standing to bring action to foreclose against a borrower.
Securitisation is the process of pooling and on-selling loans such as mortgages, credit cards, vehicle loans and the like.
It a statement issued on Friday, NewEra said it is clear that Investec Bank is deeply concerned about NewEra’s efforts to expose the securitisation issue to the South African public. The statement further reads:
1. Potentially tens of thousands of homes and other assets have been repossessed illegally due to the banks’ lack of legal standing in securitisation transactions.
2. The full effect of the multi-billion rand securitisation industry in the South African economy is being hidden from the people and our government.
3. By acting as an agent between the customer and a plethora of secretive securitisation corporations, the banks are in clear breach of the Banks Act that specifically requires the written permission of the customer.
4. The banks are refusing to disclose to a customer whether their loan has been securitised.
5. The audited reports of the banks may be misrepresenting their true financial position.
6. They (the banks) have not disclosed to the National Credit Regulator any change of ownership in a securitisation transaction, as required by Section 69(4) of the National Credit Act.
7. Debt counsellors are unable to perform their role effectively because they do not know who the true owner of their client’s loan is.
8. Is a Special Purpose Vehicle (SPV) used for securitisation a registered credit provider? (Securitisation transactions are being channelled through what are called Special Purpose Vehicles or SPVs, which have a different corporate and legal structure to that of the banks). And are they legally allowed to charge interest on such loans?
The entire process of securitisation is deeply questionable, says NewEra’s statement.
NewEra recently withdrew both of its cases from the High Court, not because it had given up the fight, but for specific tactical reasons, says Cundill.
This is not the first time NewEra found itself in a death struggle against the banks. Last year an attempt was made to sequestrate Scott Cundill, an attempt that was successfully defended. It is clear this time that the banks fancy their chances of asphyxiating the beast by attempting to make the directors personally liable for the court costs. However, NewEra has shown a surprising resilience in the face of these attacks and an uncanny ability to rally its 135,000 members when the chips are down.
Vexatious litigation is legal action that is brought, regardless of its merits, solely to harass or subdue an adversary, according to a comment on NewEra's Facebook page. It is considered an abuse of the judicial process and may result in sanctions against the offender.
We will keep you posted on events as they unfold next week.
*A rule nisi is an interim order granted by a court, often in the absence of the person against whom the relief is being sought, calling upon the person to give reasons on (or before) a date specified why a final order, as specified in the rule nisi, should not be granted. Rule nisis are often used in urgent applications, for example, interdicts.
National Credit Act