By Zelna Jansen
In 2019, it was said that 30% of South Africans used credit to purchase food. This should not have come as a surprise, as the average South African is over-indebted. In 2021, it was noted that the number of South Africans using credit to purchase food was growing. The reasons given for this were rising unemployment and the high cost of food. Trading Economics noted on its website that the prices of food and non-alcoholic beverages in South Africa increased by 12.5% year on year in November 2022.
Using credit is perilous, as defaulting on payments can lead to a debtor’s home being sold to pay a debt owed to a creditor. This occurs irrespective of whether there is a mortgage bond over the property.
In the 2005 case of Jaftha v Schoeman, the Constitutional Court deliberated on the right to housing, which is protected by section 26 of the Constitution, and considered whether it was constitutional to sell a home to pay a debt.
Section 26 provides that no one may be evicted from their home without a court order, and that arbitrary evictions are illegal.
The Jaftha case involved a debtor who purchased food on credit (or loaned money) to purchase food. As the debtor could not pay, the then legislation allowed for their home to be sold in order to pay the debt. Attorneys for the creditors argued that the procedure to recover money was reasonable, and that it was not possible for there to be judicial oversight in every order against immovable property. The Constitutional Court disagreed with this argument and declared the relevant laws unconstitutional.
This case was followed by the amendment of the laws and rules of court pertaining to the process for when immovable property can be sold to settle a debt.
Rule 43 applies to the magistrate’s court and Rule 46A applies to the high court. A creditor applying to court for an order against immovable property can do so in either the high court or the magistrate’s court. The magistrate’s court can only hear matters that fall within its jurisdiction. This means it can only hear matters involving sums of money below R200 000.
Complaints have arisen that creditors apply to high court for court orders to have immovable property sold to cover debts of as little as R7 000. It is argued that it is expedient and cost-effective to litigate these matters in the high court. However, others have argued that doing so impedes the right of access to justice, as debtors do not always have access to the high court.
Magistrate’s courts are more accessible.
The Gauteng High Court heard an application by debtors about creditors abusing this process. The court declared that it was automatically an abuse of court process to litigate in the high court matters that fall within the monetary jurisdiction of the magistrate’s court. This decision was reversed on appeal, on the basis that the creditor applicant has the right to decide where to institute process, and it is obligatory for the high court to entertain matters in respect of which it has concurrent jurisdiction with the magistrate’s court. This is known as the “mandatory jurisdiction principle”.
The SA Human Rights Commission in May 2022 applied to the Constitutional Court to reverse the appeal court ruling on mandatory jurisdiction. The SAHRC submitted that the right of access to court dictates that there be a default rule that matters in respect of which the high court and the magistrate’s court have concurrent jurisdiction must be litigated in the latter court. The SAHRC emphasised that there were only 14 high courts in South Africa, which were mainly located in large urban areas. However, there were 82 regional magistrate’s courts and 468 district magistrate’s courts. The SAHRC submitted that distressed debtors who had defaulted on their loan agreements generally had limited financial means to travel, and requested that a default rule be made through the Judges Presidents Practice Directives.
Standard Bank, Nedbank, FNB and others opposed the arguments made by the SAHRC, and stated that the cost is lower in the high court than it is in the magistrate’s court. It was further argued that litigating in the high court advances efficiency, consistency, and cost savings in the administration of justice, and that this promotes, rather than impedes, the right of access to court.
The issue of the high court rolls becoming clogged with matters falling within the jurisdiction of the magistrate’s court was raised in the judgment. It seems this is becoming a serious problem and is causing inordinate delays in the hearing and finalisation of matters in the high court.
The Constitutional Court looked at how a default rule could be implemented in a high court if a debtor did not attend court. In such instances, how could the court undertake such an assessment? This is especially important, as for most people their home is their most valuable asset. Despite this, there are indications that geography and money do prevent some defendants from attending court. The court noted that the fight for the retention of the debtor’s home was an unfortunate reality in South Africa.
The Constitutional Court in December last year dismissed the application brought by the SAHRC on the basis that the jurisdiction of the high court is prescribed by section 173 of the Constitution, and that the Judge President Practice Directives could not be used to curtail the high court’s jurisdiction. One could say that the Constitutional Court could have done more than simply dismissing the application, as it has the power to develop the law.
The Constitutional Court referred to the Lower Courts Bill that was published by the Department of Justice last year. A clause in this bill seemingly makes provision for what the SAHRC has proposed about having a default provision where in certain circumstances a high court must refer a matter to the magistrate’s court.
South Africa has a wonderful constitution that protects rights and dignity. However, Roman-Dutch law heavily influences laws, and courts will interpret contractual, corporate, and commercial issues based on this law. Inevitably, debtors will lose their homes if they cannot pay their debts.
Over-indebtedness and using credit to purchase food is a sad reality for many South Africans.
Political representatives should do all they can to ease this burden. Perhaps acting with haste to finalise the Lower Courts Bill and ensuring the right to housing is protected is one measure that could ease this burden. Such an intervention would certainly allow any political party to score brownie points in the coming 2024 elections.
*Zelna Jansen is a lawyer. She is CEO of Zelna Jansen Consultancy.