- The Supreme Court of Appeal has ruled that the High Court can hear claims for outstanding debt after repossessed vehicles are sold.
- Standard Bank successfully defended a challenge that tried to limit these claims to magistrates’ courts.
- Nedbank won an appeal after the Pretoria High Court declined to hear six debt-recovery applications.
Banks can continue to use the High Court to recover unpaid vehicle finance debt after repossessed vehicles have been sold, thanks to an important ruling by the Supreme Court of Appeal.
The judgment settles a dispute over Section 127(8) of the National Credit Act. This section deals with situations where a vehicle or other financed asset is sold, but the proceeds are not enough to settle the debt. The court found that this provision does not restrict such claims to magistrates’ courts and that the High Court still has the authority to hear them.
The decision came from two separate appeals involving Standard Bank and Nedbank. Although the facts in each case were different, both focused on whether banks could go to the High Court to recover shortfalls that remained after financed assets had been repossessed and sold.
Standard Bank dispute
The first case involved trustees Andries Johannes Dreyer and Erica Marcia Dreyer from the Doornfontein Trust, along with Standard Bank.
In 2017, the bank entered into three instalment sale agreements with the trust. When the trust failed to meet its obligations, Standard Bank got a High Court order for the return of the financed assets. The order also let the bank return to court if the sale of those assets did not cover the outstanding debt.
When the assets were sold at auction, there was still a shortfall. Standard Bank then approached the High Court to claim the outstanding balance. The trustees opposed this, arguing that only a magistrates’ court could hear such an application.
The North West High Court rejected their argument and ordered the Trust to pay the shortfall. The trustees then appealed to the Supreme Court of Appeal.
Nedbank applications
The second case involved Nedbank and six consumers who had voluntarily handed back vehicles financed through instalment sale agreements.
After the vehicles were sold, there were still outstanding balances on the accounts. Nedbank went to the High Court in Pretoria to recover the shortfalls, along with interest and costs.
None of the consumers opposed these applications. However, the High Court raised the issue of jurisdiction on its own and decided that only a magistrates’ court could hear claims under Section 127(8) of the National Credit Act. The applications were then struck from the roll.
Nedbank appealed that decision, with support from the Banking Association of South Africa.
Court rejects exclusive jurisdiction argument
Writing for a unanimous court, Judge of Appeal T Makgoka found that the National Credit Act does not specifically remove the High Court’s jurisdiction.
Makgoka noted that Section 127(8) does not specifically take away the High Court’s authority to hear such cases.
The court explained that when Parliament wanted magistrates’ courts to have exclusive jurisdiction under the National Credit Act, it used clear language. Section 127(8) does not include any such restriction.
The judgment also rejected the idea that the phrase in terms of the Magistrates Court Act means only magistrates’ courts can hear shortfall claims.
According to Judge Makgoka, these words were not meant to be restrictive. Instead, they allow magistrates’ courts to hear these claims without taking away the High Court’s authority.
The court warned that forcing banks to use different courts for related proceedings would create unnecessary complications and inefficiencies. Judge Makgoka described this interpretation as self-evidently absurd.
Appeals decided
The Supreme Court of Appeal dismissed the appeal by the Doornfontein Trust trustees and confirmed the order requiring payment of the shortfall to Standard Bank. The trustees were ordered to pay the appeal costs.
In the Nedbank case, the appeal succeeded. The decision of the High Court in Pretoria was set aside, and the six applications were sent back to that court to be decided on their merits.
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