The Pretoria High Court struck another blow on behalf of distressed debtors last week. A full bench of three judges ruled that magistrates’ courts should be the first port of call for financial institutions seeking judgment against their clients, where matters fall within the lower courts’ monetary jurisdiction.
This follows the ruling two weeks ago by a full bench of the Johannesburg High Court. That court ruled that repossessed homes must be sold with reserve prices at sheriffs’ auctions. This is to stop homes from being sold for a fraction of their market value.
Banks frequently go to the high courts for judgment against defaulting clients, even when relatively small amounts of money are owed.
The Judge President of the Pretoria High Court convened a full bench to decide whether the high court should entertain cases that should be heard by the lower courts just because both courts have jurisdiction under the law. He also asked the court to consider whether there is “an obligation on financial institutions to consider the cost implication and access to justice of financially distressed people” in deciding which court to use.
Why banks prefer suing in the high courts
A key reason why banks prefer suing in the high courts is to keep up pressure on a defaulting client. Armed with a high court judgment against a client in arrears, banks are able to keep alive the threat of sale in execution order, even if the borrower catches up on arrears. If they default a second time, the bank can sell the person’s home without again having to approach the court. This is less likely to happen in a magistrates’ court, where the order expires after a year.
The Pretoria High Court ruled that if banks brought their cases to the high courts when the lower courts had proper jurisdiction, the high courts could kick the cases down to the lower court. This would save legal fees for the debtor.