By Ciresh Singh

The foreclosure against a home involves a delicate balancing of homeowner and creditor rights, in particular, the creditor’s contractual security rights and the homeowner’s constitutional rights. Foreclosure against a home has the potential to infringe on several constitutional rights of a homeowner, inter alia –

• s 26 of the Constitution, which provides that ‘[e]veryone has the right to have access to adequate housing’; and
• s 34 of the Constitution, which provides for the right of access to courts.

In the context of foreclosure, s 34 entitles a homeowner with the right to have their foreclosure dispute heard in an open and accessible court. The Universal Declaration of Human Rights and several other international charters and conventions recognise the right of access to courts as a fundamental human right, which is a vital element in the protection and enforcement of other human rights. Over the decades, the right of access to courts have evolved into a basic human right under international law and is protected by most constitutions of democratic countries across the world. Due to the intricate and sensitive nature of foreclosure disputes, namely the balancing of the homeowner’s constitutional rights versus the creditor’s contractual rights, foreclosure proceedings in South Africa (SA) have historically always been heard in the High Court. However, the question has recently been raised as to whether or not foreclosure proceedings should be heard in the magistrate’s court, which is generally more accessible to disadvantaged homeowners, in order to promote the right of access to justice in s 34 of the Constitution.

Nedbank v Thobejane

On 26 September 2018, the Gauteng Division of the High Court in Pretoria delivered judgment in In re: Nedbank Limited v Thobejane and related matters [2018] 4 All SA 694 (GP), which found, inter alia, that foreclosure proceedings falling within the monetary jurisdiction of the magistrate’s court (ie, below R 400 000) must be referred to the magistrate’s court. In this case, Nedbank and several other creditors were questioned over the practice of initiating foreclosure proceedings at the High Court, as opposed to the magistrate’s court, which was geographically located closer to the defendants. It was argued that such a practice of proceeding out of the High Court as opposed to the magistrate’s courts, which were generally more accessible and more financially viable, denied homeowners of their right of access to justice and amounted to an abuse of process.

The creditors, however, argued that it was a long-established principle that where more than one court had jurisdiction to hear a matter, the plaintiff was entitled to choose in which court to institute action. Furthermore, the creditors argued that the magistrate’s court lacked the efficiency and uniformity to adjudicate complicated foreclosure issues, and it was, therefore, to the benefit of both homeowners and creditors that such cases be heard before the High Court.

The Full Bench of the Gauteng Division of the High Court found that the advent of the Constitution introduced access to justice as a primary consideration during court proceedings and this approach required the High Court to regulate their own processes with regard to access to justice. The right of access to justice, must be in accordance with constitutional imperatives, in a broader context and the rights of the plaintiff, as well as that of the defendants must be taken into consideration, as well as the roles and functions of the different courts. In principle, a plaintiff has the right to choose any court, which has jurisdiction in the dispute, but this choice should not be at the expense of access to justice. If impecunious litigants are denied proper access to justice and the High Court is unnecessarily overburdened, it would constitute an abuse of process.

Hence, it was an abuse of process to allow a matter, which could be decided in the magistrate’s court to be heard in the Provincial Division simply because it had concurrent jurisdiction. If a party is of the view that a matter, which falls within the jurisdiction of the magistrate’s court, should be more appropriately heard in the High Court, an application must be made setting out reasonable grounds why the matter should be heard in the High Court. The inefficiency of other courts, whether real or perceived, and the convenience of the plaintiff, will not constitute such reasonable grounds. The Full Bench further held that there is an obligation on all litigants, not only financial institutions, to consider the question of access to justice when actions are issued, and the courts have a duty to ensure that access to justice is ensured, by exercising the appropriate judicial oversight.

The effect of the Thobejane case meant that foreclosure proceedings below R 400 000 had to be brought before the magistrate’s court. A Practice Directive was accordingly adopted to the effect that all civil applications, within the monetary jurisdiction of the magistrate’s courts should be instituted in the magistrate’s court. Many academics and legal practitioners have criticised the Thobejane decision arguing that the Full Bench based its findings on the over clogging of the High Court rolls and the concurrent jurisdiction of the Gauteng Courts. The court failed to take into account the complexity of foreclosure matters and the competing constitutional rights and issues that may arise. Accordingly, at the time of writing this article, the Thobejane judgment was brought on appeal before the Supreme Court of Appeal, and the effect of the Practice Directive was suspended.

Nedbank v Gqirana

The issue of whether or not foreclosure proceedings should be heard before the magistrate’s court was recently heard again by the Eastern Cape Division of the High Court in Grahamstown in Nedbank Limited v Gqirana NO and Another; First Rand Bank Limited v Cornellisson and Another; Standard Bank of South Africa Limited v Msutu and Another; Nedbank Limited v Gcina; Firstrand Bank Limited t/a Wesbank v Twynham; FFS Finance SA (Pty) Limited t/a Ford Credit v Jabanga; FFS Finance SA (Pty) Limited t/a Ford Credit v Rolomane (ECG) (unreported case no 1203/2018; 1298/2018; 1777/2018; 3434/2018; 3706/2018; 49/2019; 264/2019, 31-7-2019) (Lowe J and Hartle J concurring) (Jolwana dissenting). The Eastern Cape Division considered the Full Bench decision in Thobejane, which had found that all civil applications falling within the monetary jurisdiction of the magistrate’s court should be instituted in the magistrate’s court, and not the High Court.

The court found that the defendants in matters involving credit transactions (applicable to the National Credit Act 34 of 2005 (NCA)) were usually historically disadvantaged individuals. Given the category of these defendants the right of access to court has become important, as generally the magistrate’s courts would be the most appropriate forum for such individuals to access justice. Accordingly, the common law practice that a plaintiff as dominus litis was entitled to choose which court to litigate from must be reconsidered in light of fundamental constitutional principles and the right of access to justice. Section 34 of the Constitution and NCA affords equality and access to justice to financially and previously disadvantaged persons, thus proper access to justice in all NCA matters (including foreclosures) falling within the monetary jurisdiction of the magistrate’s court, must be brought in the magistrate’s court save only if there are exceptional circumstances justifying otherwise. In other words, the court found that the NCA, properly interpreted through the prism of the Constitution, provided that the magistrate’s courts be the court of first adjudication of all NCA matters to the exclusion of the High Court. The Gqirana judgment can thus be interpreted to have extended the jurisdiction of the magistrate’s court in all matters falling within the ambit of the NCA, regardless of the amount involved.

A need for clarity and consideration of a specialised ‘Foreclosure Court’

The decisions in Thobejane and Gqirana can be applauded for being progressive in developing the common law and acknowledging the deep-seated inequalities in our society by recognising that access to justice is better served when courts are made accessible to the majority of society. Nevertheless, it is important to acknowledge that the foreclosure against a home requires strict judicial scrutiny. This fact has been emphasised by several Constitutional Court (CC) judgments and court rules (see Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others 2005 (2) SA 140 (CC); Gundwana v Steko Development and Others 2011 (3) SA 608 (CC); r 46A of the Uniform Rules of Court; and C Singh A critical analysis of the home mortgage foreclosure requirements and procedure in South Africa and proposals for legislative reform (unpublished PhD thesis, UKZN, 2018)). The involvement of the court is paramount in the foreclosure process and this was emphasised by the CC in Gundwana where the court confirmed that judicial oversight is ‘a must’ during foreclosure proceedings. The foreclosure against a home involves a complex analysis of legal, financial and factual circumstances coupled with the interaction of competing constitutional rights of homeowners and creditors. Accordingly, such complex issues justify these cases being heard before specialised courts and judges. It is thus questionable whether or not our current magistrate’s courts have the capability and capacity to adjudicate such matters. Foreclosure jurisprudence has recently become uncertain due to several recent conflicting judgments and rules and there is need for certainty to be established (see Nkata v FirstRand Bank Ltd 2016 (4) SA 257 (CC) and ABSA Bank Ltd v Mokebe and related cases 2018 (6) SA 492 (GJ)). Unfortunately, South African law has not provided clarity on the balancing of homeowner and creditor rights during the foreclosure process, nor has it provided a structured or uniform framework for foreclosure practice. This lacuna has resulted in much inconsistency and opened the door for abuse of process.

Accordingly, I submit that the time has come for government and the legislature to consider the implementation of specialised courts to adjudicate foreclosure matters, namely ‘Foreclosure Courts’. The implementation of specialised foreclosure courts and judges to hear foreclosure applications will be advantageous to both homeowners and creditors. Although foreclosures are generally negatively perceived as being the process of executing against one’s home, the foreclosure process in a country also plays an important role of promoting foreign mortgage investment and capital growth in the economy (see Standard Bank of South Africa Ltd v Saunderson and Others 2006 (2) SA 264 (SCA), and Niall Ferguson The Ascent of Money: A financial history of the world (The Penguin Press HC 2008)). Thus, the foreclosure process of a country has deeply rooted socio-economic traits that require specialised analysis and should not be trivialised. Consequently, it is recommended that every regional and district High Court and/or magistrate’s court establish a ‘Foreclosure Court’ (ie, specialised and separate court rooms) specifically for foreclosure applications. This will create a specialised court structure for foreclosure applications and would provide the necessary priority, uniformity and expertise for adjudicating these important matters. Such a structure will further reduce the time delays and litigious costs attached to foreclosure proceedings. Most importantly, a specialised Foreclosure Court structure will provide ordinary South Africans with the ability to achieve their constitutional right of access to justice and endeavour to ensure that homeowners are on an equal legal footing with creditors during the foreclosure process (see Singh (op cit) for a detailed review of the proposal for a specialised Foreclosure Court structure).

Ciresh Singh LLB LLM (UKZN) is a PhD Candidate at the University of KwaZulu-Natal.

This article was first published in De Rebus in 2019 (Oct) DR 31.