Alberton couple kick Standard Bank to touch
A couple from Alberton recently blew Standard Bank out of the water with a defence which really ought to be used more frequently by people whose homes are under threat of repossession by the banks.
Using this defence, it is my contention that 90% of repossession cases would simply vanish. The banks are sloppy and lazy in their legal presentation, and – worse – are wilfully ignoring the law in their effort to recover loans.
The facts of the case are simply stated: the couple (let’s call them the Smiths) ran into financial difficulties and fell behind on their mortgage payments.
On 26 January 2017 the bank issued a Section 129 notice claiming arrears of just short of R29,000. In terms of the National Credit Act (NCA), the bank is required to wait at least 10 business days before issuing a summons after issue of the Section 129 notice, which notifies the client of the default, and gives them a window of opportunity to settle the arrears.
By law, no legal action can commence for recovery of outstanding loans without the creditor issuing a Section 129 notice. In March 2017, the Smiths were served with a summons, this time claiming an arrears amount of R34,000. The bank also “accelerated” the debt – that is, it called up the full amount of the loan outstanding, being R450,000.
In the Section 129 notice, the bank claimed an arrears of about R29,000, but in the summons issued two months later, it claimed R34,000.
By law, the Smiths need only settle the arrears on the Section 129 notice. The bank cannot have it both ways. (As an aside, the banks get away with this in courts because people do not understand their rights. The banks try to keep the interest clock ticking after the issue of the Section 129 notice, when they are not allowed to do so).
Most people fold and give up when served with a summons claiming the full amount of the debt outstanding. They simply do not have the money to rescue themselves from this kind of predicament.
Well, the Smiths proved otherwise, and sent the bank packing.
On receipt of the Section 129 notice in January last year, the Smiths did what most people in this situation would do – they scrambled to find money to settle the arrears. In fact, between April and September 2017, they paid a total of R53,000 into their account, more than sufficient to extinguish the arrears.
In terms of the National Credit Act, once you have settled the arrears, your mortgage bond is automatically reinstated and the bank has no further cause of action. Here’s the beauty of this: you don’t have to ask the bank to reinstate your bond, it is automatic, yet the banks don’t really want to acknowledge this, nor do they want too many people knowing about this. But that’s what the law says.
Yet the geniuses at the bank (actually their attorneys) decided to press on with the case, claiming in their summons that the Smiths had no hope of catching up on the arrears, that they had not responded to the Section 129 notice, that they were mounting a defence purely to delay matters, blah, blah, blah – the usual tripe affixed to any summons for repayment of debt.
The geniuses at the bank (actually their attorneys) decided to press on with the case, despite their terrible prospects of success
It was at this point that the Smiths contacted their attorneys for help.
The Smiths put up a defence based on three simple points:
- They had settled the arrears as depicted on the Section 129 notice, with a little more on top to cover reasonable legal fees (another nasty little trick the banks pull, but more about this below). Hence, the mortgage bond was automatically reinstated, and the bank’s cause of action has disappeared. If it wants to have another crack at the Smiths, it must issue a fresh Section 129 notice and start the whole process again (should they do this, the bank will have even more problems in Round 2, and I will discuss why in a minute). Reinstating the mortgage bond on settlement of the arrears is not a matter for the court to decide – it is clearly spelled out in the NCA Section 130(3)(ii)(dd).
- The bank’s deponent in the case claimed he had acquainted himself with the case. He then went on to claim certain verifiable untruths: that the Smiths had not responded to the Section 129 notice (they had – by catching up on the arrears); the Smiths had no cause of action (not true – settling the arrears is clearly sufficient defence against home repossession); that the Smiths were just trying to delay the inevitable (also demonstrably untrue, for the same reasons spelled out above). In any event, all of these defences were clearly spelled out to the bank’s attorneys beforehand, yet they decided to saddle their nag of a case and carry on to the races regardless.
- Why would the bank bring the case before the Pretoria High Court when the Smiths live in Alberton, south of Joburg? This is a clear abuse of the court process, since the Smiths have to traipse to Pretoria every time they need to interact with the court. Secondly, why is the bank brining the case before the High Court (which is supposed to deliberate on debts of R500,000 or more) when this is clearly a matter for the Magistrates courts? The answer is simple: attorneys earn much lower fees in the Magistrates Courts than they do in the High Courts. It’s all about money. The Smiths rightly claimed this was a denial of their Constitutional right to justice, and asked for a costs award against the bank’s attorneys.
I have argued ad nauseum – you should defend every summons, on the grounds the banks are so brazen in side-stepping the law, that there is usually always a valid defence. Some people do not want to tangle with the banks, and they would rather bow their heads in shame and move on. But had the Smiths adopted this attitude, they would have been waiving their rights and allowing the bank to break the law. Yes, break the law!
I suspect the Smiths will receive a fresh Section 129 notice and when they do, their attorneys will have a new defence lined up which does not involve the court. I will, however, keep you updated in this and other similar cases that are being worked on.
My next article is going to cover a killer defence: no documents. The banks are bringing summonses that refer to documents that are claimed no longer to exist. That’s unlawful and you can kill the banks’ cases on that one alone. Remember the 2009 Midrand fire that destroyed millions of documents? Stand by for that one.
The applicable cases and statutes to reference in such a defence (as outlined in the Smith’s case above) are:
Absa Bank v Le Roux and Others, where the court ruled that the bank’s deponent did not have sufficient knowledge of the case to “swear positively to them and verify the cause of the action” and on that basis threw out the case.
Section 130 of the National Credit Act, which specifically states that a creditor may not bring an action before court if the claimed arrears have been brought up to date.
Starita (aka Van Jaarsfeld) v ABSA Bank Ltd & another, which further elaborates on how to interpret Sections 129 and 130 of the NCA.
BMW Financial Services (South Africa) (Pty) Ltd v Dr MB Mulaudzi Inc 2009, which ruled that once a Section 129 notice has been issued and the debtor catches up on the arrears and then later again defaults, a new Section 129 notice must be issued.
Nkata v First Rand bank Limited 2016: a landmark Concourt case that ruled the bank was only entitled to the arrears amount, and not the full “accelerated” debt. Nkatha’s property had been sold in execution at the sheriff’s auction. The Concourt ruled this was nullified by the fact that she had settled the arrears plus reasonable legal costs before the date of transfer (and not, as the bank had claimed, on the fall of the hammer at auction).
Standard Bank of South Africa Ltd v Miracle Mile Investments 67 (Pty) Ltd and another: this case determines that once the bank claims the full “accelerated” debt, no further instalments can be added on top. The judgment reads: ““The creditor’s election to enforce the acceleration clause has the effect of transforming the existing instalment debts, into a single debt for the full amount outstanding under the contract”.
Nedbank Ltd V Mateman And Others; Nedbank Ltd V Stringer And Another: the case deals with the risks of a bank bringing a case before the High Court when it should be heard I the Magistrates courts: “It is, however, also settled law that a plaintiff runs a risk if he/she sues in the High Court on a claim justiciable in the magistrates' court of only being allowed to recover costs on the magistrates' court scale.”
Section 3 of the NCA deals with the purpose of the Act: to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market…, and to promote equity in the credit market by balance the rights and responsibilities of credit providers and consumers; and by addressing and correcting imbalances in negotiating power between consumers and creditors…” This is a valid defence against any creditor attempting to drag you into a distant court, or into the High Court when the Magistrates court is the correct forum.