- The pensioner’s home was at risk of being sold in execution.
- The court found the guarantee company’s indemnity structure operated separately from the mortgage agreement.
- The judge ruled the enforcement model bypassed key protections in the National Credit Act.
A pensioner has stopped an Absa-linked guarantee company from selling her home after the High Court in the North West refused an application to declare her property specially executable.
The case involved Tsenolo Joyce Phillips, who took out a R795,000 home loan with Absa Bank in 2019. Instead of registering a conventional mortgage bond in the bank’s favour, the property was secured through an indemnity mortgage bond held by ABSA Home Loans Guarantee Company (RF) (Pty) Ltd.
After Phillips fell into arrears, the guarantee company sought default judgment and an order allowing her home to be sold in execution.
Judge questions the guarantee structure
Acting Judge M Wessels said the case was not simply about missed home loan repayments. The central issue was whether the guarantee company could enforce the debt independently of the mortgage agreement governed by the National Credit Act (NCA).
The court found that the indemnity signed by Phillips created “a separate and independent primary obligation”, allowing the guarantee company to demand payment directly from the homeowner rather than through the credit agreement itself.
Judge Wessels found that, because the company relied on the indemnity instead of the mortgage agreement, it was attempting to recover Absa’s debt through a legal structure that fell outside the ordinary consumer protections of the NCA.
National Credit Act protections
The judgment examined the remedies available to homeowners after receiving a Section 129 notice, including debt counselling, mediation, approaching an ombud and bringing arrears up to date.
Judge Wessels said those protections became meaningless if the guarantee company could pursue execution through the indemnity. He wrote, “By the time Ms Phillips could even consider her options under Section 129, ABSA Home Loans Guarantee Company’s claim to the property was already ripe, regardless of the remedies the NCA provide.”
He further concluded that “every remedy Section 129 offers has no effect on the envisaged execution process in relation to the property”, finding that the enforcement model bypassed the protections Parliament intended consumers to have.
Constitutional rights
The court also linked the dispute to the constitutional protection against arbitrary eviction, holding that judicial oversight over the sale of a person’s primary residence would be undermined if execution could proceed through the guarantee company’s separate indemnity structure.
Judge Wessels ruled that ABSA Home Loans Guarantee Company had not established the legal standing it claimed to enforce the debt through the indemnity bond.
The application for default judgment and the request to have Phillips’ home declared specially executable were both refused, with no order as to costs.
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