- Nedbank obtained a judgment for more than R310,000 against two Soweto homeowners.
- The homeowners asked the bank to restructure their payments, but Nedbank could not show that it properly considered their proposal.
- Judge SDJ Wilson rescinded the judgment and ordered Nedbank to pay the costs.
Two Soweto homeowners have had a more than R310,000 judgment against them set aside after the High Court in Johannesburg found that Nedbank had failed to properly consider their request to restructure their mortgage payments.
Karabo Nobuhle Modibedi and Cecilia Mamoabi Modibedi had fallen into financial difficulty and asked Nedbank to agree to a payment plan that would allow them to bring their mortgage payments up to date. Instead, the bank proceeded with legal action and obtained a default judgment against them in October 2021.
The judgment also declared their home in Mofolo, Soweto, specially executable for the debt. Judge SDJ Wilson found that Nedbank was not entitled to approach the court when it did because the homeowners had responded to the bank’s Section 129 notice under the National Credit Act.
Homeowners asked to restructure their payments
The applicants borrowed just over R270,000 from Nedbank in 2008, with their home used as security for the loan. Their monthly instalments were initially just over R2,000, and they made regular payments for about 10 years before their financial position deteriorated in 2018.
Nedbank then began the steps required before enforcing the mortgage bond and sent the homeowners a notice under Section 129 of the National Credit Act 34 of 2005. The homeowners responded on 5 October 2020 through a local paralegal organisation, asking to develop and agree on a plan to bring their payments up to date.
The bank could not produce evidence showing that anyone acting on its behalf had dealt with that proposal before it issued summons and obtained default judgment. Nedbank was given two months to consult its former attorneys and search its records, but still could not show what had happened to the homeowners’ letter.
Call records did not show genuine engagement
When the matter came before Judge Wilson, he questioned whether Nedbank had been entitled to approach the court after the homeowners responded to the Section 129 notice. The National Credit Act allows a credit provider to approach court in certain circumstances, including where a consumer has not responded to the notice or has rejected the credit provider’s proposals.
The homeowners had not ignored the notice. They had responded by asking to develop a plan to bring their payments up to date. Nedbank therefore had to show that it had properly engaged with what they were proposing before proceeding with the court case.
Nedbank relied on a call log recording conversations between the homeowners and its call centre agents. The bank argued that the calls showed that it had engaged with the homeowners’ response, but Judge Wilson found that the record did not establish this.
The judge described the call log as difficult to read because it contained jargon, shorthand and unexplained abbreviations. It also did not identify the person who had spoken to the homeowners, and it was possible that different people had dealt with them at different times.
More importantly, the call log did not show that Nedbank had genuinely considered the payment plan the homeowners were asking for. The homeowners had explained that, although they were unemployed, they could afford reduced payments because tenants lived on the property and their rent could be used towards the bond.
Nedbank did not appear to have properly considered that possibility. Instead, its main focus appeared to have been getting the homeowners to sell the property on the open market.
Judge Wilson said Nedbank should have produced a reasoned response explaining what, if anything, could be done about the homeowners’ request. The call log did not meet that standard.
Judgment was wrongly obtained
The judge found that Nedbank was not entitled to approach the court when it did and was therefore not entitled to the judgment it obtained. The default judgment was consequently erroneously sought and granted and could be rescinded under Rule 42 of the Uniform Rules of Court.
Judge Wilson also found that the homeowners had a defence to the foreclosure application that had prima facie prospects of success. He therefore rescinded the judgment without needing to decide whether the homeowners had deliberately failed to defend the original case.
The judge noted that the summons had also not been personally served, contrary to the court’s practice directives. The homeowners said they believed judgment would not be sought until their attempts to secure a restructured payment plan had been exhausted, and Nedbank did little to dispute this.
Judge questions execution against home
Judge Wilson also expressed serious concern about whether execution against the homeowners’ property would be proportionate to Nedbank’s interest in recovering the debt.
He described the applicants as an elderly woman and her daughter who were “obviously impecunious” and lived in a presumably modest home in Soweto. He also noted that they had made substantial payments towards the mortgage over a period of about 10 years.
The judge said he had “grave doubts” about whether execution against their home could be proportionate to Nedbank’s interest in collecting the debt. He said there was a decent prospect that execution would be disproportionate and suggested that an appropriately empowered Nedbank official might reconsider whether proceeding with execution was ethically or commercially justified.
Judge Wilson ultimately rescinded and set aside the default judgment granted on 6 October 2021. Nedbank was ordered to pay the costs of the rescission application, including counsel’s costs on scale B.
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