It's encouraging to see the courts handing down judgments upholding the constitutional rights of debtors, specifically the rights of access to housing and justice when these are threatened by banks taking legal action against those who have defaulted on their home loans.

Two recent high court judgments have highlighted the unfair tactics used by the banks and their disregard for constitutional principles when dealing with consumers who are struggling to keep their homes.

One common tactic is the tendency of banks to enrol foreclosure applications in the high court in cases where the amounts fall within the monetary jurisdiction of magistrate's courts. District magistrates can hear matters in which the claim is up to R200,000, and regional magistrates can hear matters involving claims of between R200,000 and R400,000.

Last month, a full bench of three judges in the Pretoria high court ordered that "to promote access to justice", as from February next year civil actions and applications in which the monetary value claimed is within the jurisdiction of the magistrate's courts must be instituted in magistrate's courts that have jurisdiction, unless the high court has granted leave to hear the matter in that court.

As the judgment, delivered by judge Ronel Tolmay, says, even if a debtor can afford legal representation to defend proceedings initiated by a bank, the costs will be significantly higher if the matter is heard in the high court rather than the closest magistrate's court. "If the debtor engages a local attorney, he or she will be required to pay for a correspondent attorney to file papers and oppose the matter in the high court. Unless the attorney has a right of appearance in the high court, the debtor will also have to pay for an advocate to appear for him or her." These costs can be prohibitive and it's not as if the banks don't know it.


The amount a widow's home sold for on auction after she got into difficulty paying her home loan 

According to the judgment, the minister of justice, acting as a friend of the court, submitted that there are no designated interpreters in the high court and warned that this, too, may have the effect of denying defendants the right to a fair hearing. "By contrast, there are 450 senior court interpreters, 79 principal court interpreters and 1,125 court interpreters designated for assisting the regional and district courts across the provinces," the minister said in papers.

One of the reasons cited by the banks for choosing to institute actions in the high court, even for paltry amounts, was the inefficiency of administration and staff at magistrate's courts.

But the judges said the "perceived inefficiency" of magistrate's courts does not constitute a valid reason to approach the high court as the court of first instance. "The inefficiency, if it exists, must be addressed on another level. The banks must also adjust their thinking. Are panel attorneys the only way to go? Should smaller firms in smaller towns not be given the opportunity to work for the banks? No correspondents need be appointed if this happens . A paradigm shift is required for all concerned as we go about giving life to the principles in the constitution."

Given SA's high levels of poverty and inequality, there is an even greater obligation on our courts to ensure access to justice to everyone, the judgment says.

"Legal costs are totally unaffordable even to the middle class. What is the point of having a progressive constitution when it is impossible for citizens to approach the courts due to financial constraints? Paying only lip service to the rule of law is meaningless when it is impossible to effectively apply it to the advantage of litigants seeking access to justice."

Also last month, a full bench of the Johannesburg high court ruled that the setting of a reserve price by the courts should be the default position when primary residences are auctioned by banks. This should put a stop to the auctioning of homes for a pittance, only for them to be resold for huge profits.

The court heard the example of Mapule Molokomme, whose home was sold on auction for R10 after the death of her husband. She was evicted from the property when she was eight months' pregnant.

The banks had argued that by setting a reserve price there would be less interest from prospective buyers and it would therefore make it less likely that a buyer would be found. The judges said this contention appeared to be without foundation, "but even if it is so, we can see no reason why the court cannot be approached for a variation of an existing order, making it more likely to find a buyer should the perceived difficulties arise".

The sale of properties for nominal amounts is to the detriment of defaulting homeowners who lose not only their homes but remain indebted to the bank for a substantial amount - even in cases in which the property is resold for substantially more than the price realised during the sale in execution. The courts' power and duty to impose a reserve price is founded in the constitution, the judgment says.