Standard Bank concluded a home loan agreement with the Van Rooyens in September 2002, secured by a mortgage bond over their property in Retreat, Cape Town. The defendants serviced the loan faithfully for over 15 years but fell into arrears around May 2018 after the first defendant lost his employment in 2015. Summons was issued in October 2021. Over a period of more than two years, the defendants were afforded multiple postponements and opportunities to enter into repayment arrangements, but these were unsuccessful. The defendants continued making monthly payments averaging approximately R3 500, representing roughly 85% of the current instalment of R4 117.59. The plaintiff applied for summary judgment for payment of R234 196.28 and an order declaring the property specially executable.
The application for summary judgment and the Rule 46A application were postponed to 7 October 2024. The matter was referred directly to a debt counsellor to evaluate the defendants' circumstances and make a recommendation to the court in terms of section 86(7) of the NCA by 29 July 2024. Directions were given for any amendments to the plea and further affidavits. Costs stood over.
In summary judgment proceedings where a consumer alleges over-indebtedness under a credit agreement, the court may exercise its discretion under section 85 of the National Credit Act to refer the matter to a debt counsellor if there is a reasonable prospect that the debt can be successfully re-scheduled, even where the consumer failed to utilise section 86 prior to enforcement proceedings. The court must weigh factors including the circumstances of the debt, the consumer's payment history, the degree of prejudice to the credit provider, and the consumer's reasons for not earlier approaching a debt counsellor.
The court noted that three new aspects raised in defendants' supplementary written submissions (res judicata based on a 2017 judgment, breach of the in duplum rule, and that the claim was not liquidated) were not properly before the court but made brief comments indicating these defences appeared unlikely to succeed. The court observed that a debt counsellor cannot unilaterally extend a bond term beyond what is legally permissible under the agreement, but the court is empowered to do so under section 86(7). The court also noted that while section 86(7) refers to 'the Magistrate's Court', High Court authority holds that this must be read to include the High Court.
The case illustrates the High Court's willingness to exercise its discretion under section 85 of the NCA to refer over-indebted consumers to debt counsellors even at the summary judgment stage, where there is a realistic prospect of debt re-scheduling. It confirms that the trigger for section 85 is simply an allegation of over-indebtedness and that a formal application is not required. The judgment also demonstrates that a court may extend a bond period beyond the original term under section 86(7) and clarifies that the running of prescription does not prevent such extension where liability has been acknowledged.