FirstRand Bank Limited v McLachlan and Others

FirstRand Bank advanced a home loan of approximately R2.1 million to the second and third respondents, secured by a mortgage bond. After experiencing financial difficulty, the respondents applied for debt review under s 86 of the National Credit Act 34 of 2005. In November 2011, the magistrate’s court granted a debt review order which reduced the monthly instalment to an amount that did not cover even the accruing interest, while extending the repayment period. As a result, the outstanding debt increased substantially. Following later High Court authority (Nedbank Ltd v Jones), FirstRand applied in 2017 for rescission of the debt review order on the basis that it was ultra vires and void ab origine. The magistrate rescinded the order. On appeal, the High Court set aside the rescission, holding that the later case law did not apply retrospectively. FirstRand then appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The order of the High Court was set aside and replaced with an order dismissing the appeal against the magistrate’s rescission, with costs.

This case authoritatively confirms that debt review orders under the National Credit Act must be structured so that all responsible obligations, including interest, are satisfied over time. It endorses and strengthens the reasoning in Nedbank Ltd v Jones and clarifies the limits of a magistrate’s powers in debt review proceedings. It also confirms that rescission of a void debt review order is not appealable, reinforcing principles of finality and jurisdiction in magistrates’ court proceedings.