Firstrand Bank Limited v Kona and Another

Firstrand Bank Limited, a credit provider under the National Credit Act 34 of 2005 (NCA), had a liquidated claim of approximately R953 903 against Raymond and Amie Kona, married in community of property, arising from an overdraft facility secured by mortgage bonds over their home. In 2008 the respondents applied for debt review under s 86 of the NCA and were declared over-indebted. In 2009 the Magistrates’ Court made a debt re-arrangement order restructuring their obligations. The respondents defaulted on the re-arrangement order. Firstrand instituted action to enforce the debt and later applied for sequestration of the respondents’ joint estate. A provisional sequestration order was granted, but the High Court later discharged it, holding that the debt re-arrangement order barred sequestration under s 88(3) of the NCA. Firstrand appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court order was set aside and replaced with an order placing the respondents’ joint estate under final sequestration.

The case authoritatively confirms that debt re-arrangement orders under the NCA do not bar sequestration proceedings by credit providers and clarifies the interpretation of s 88(3) of the NCA. It reinforces the distinction between enforcement of credit agreements and insolvency proceedings, and underscores the mandatory nature of stare decisis in South African courts.