One dilemma, amongst others, under the National Credit Act, 2005 (NCA) has been resolved!

Most banking institutions, in their standard form covering mortgage bond or credit agreements, include a clause in terms of which the mortgagor or credit receiver consents to the bank enforcing its rights under the agreement in the Magistrate’s Court having jurisdiction, with an option of instituting proceedings in any division of the High Court of South Africa which has jurisdiction, as the bank may deem fit.

Section 90(2) of the NCA prohibits, inter alia, provisions which constitute consent to the jurisdiction of the High Court, if the Magistrate’s Court has concurrent jurisdiction.

This posed a dilemma as to whether the NCA ousts the jurisdiction of the High Court, and therefore also the jurisdiction of the registrar, to deal with applications for default judgment falling under the NCA where a Magistrate’s Court has concurrent jurisdiction.

The first judgment on this section of the NCA (being the first judgment on the NCA as a whole) was delivered on 7 November 2007 in the Transvaal Provincial Division of the High Court (“TPD”) in the matter of Absa Bank Ltd v Jean Pierre Myburgh (case number 31827/2007) (“Myburgh matter”).

In this case the defendant concluded an installment sale agreement with a company known as Fred Whelpton Beleggings (Pty) Ltd (“the Seller”) in terms of which the defendant purchased a motorcycle from the Seller. The purchase price was R45 500.00, the balance of which, after payment of a deposit of R10 000.00, was to be paid by the defendant in 42 equal installments of R1 133.59 each.

Ownership of the motorcycle was reserved by the Seller until the full purchase price had been paid and the Seller’s right, title and interest was ceded to the plaintiff bank.

The defendant fell into arrears in the amount of R5 277.87 and the plaintiff issued summons out of the TPD on the agreement. After service of the summons, the defendant failed to defend the action and the plaintiff applied for default judgment via the registrar in terms of section 31 of the Court Rules. 

The Registrar refused to grant default judgment but referred the matter for argument in open Court. The Registrar indicated that he could not deal with the matter as it fell within the jurisdiction of the Magistrate’s Court. He referred to sections 90(2)(k)(vi)(aa) and 127(8) of the NCA, read with section 90(2)(k)(vi)(bb) thereof.

The Court, after dealing with these sections and analyzing in some detail the purpose, aim and the general scheme of the NCA, held that the practice of issuing summons in the High Court for a debt that could be recovered in the Magistrate’s Court runs counter to the express purpose of the Act and is expressly declared unlawful in section 90 of the NCA. The matter was therefore transferred to the Magistrate’s Court.

This issue was again placed before Court in the matters of Nedbank Ltd v Ivan and Juliana Mateman (case number 36472/2007) (“Mateman matter”) and Nedbank Ltd v Daniel Stringer and Helena Dry (case number 37792/2007) (“Stringer & Dry matter”) which matters were simultaneously heard by a full bench of the TPD which delivered its judgment on 7 December 2007.

In Mateman matter plaintiff issued summons out of the TPD against the defendants for payment of the sum of R19 353.70 together with interest and costs as well as for an order declaring an immovable property situated in Brakpan, executable.

In Stringer & Dry matter the plaintiff issued summons out of the TPD against the defendants for payment of the sum of R922 410.41 together with interest and costs as well as for an order declaring a property situated in Boksburg, executable.

After proper service of the summonses the defendants in both matters failed to defend the actions. Applications for default judgments were placed before the Registrar who refused to grant default judgment and referred both matters for hearing in open Court for reasons substantially similar to those provided in the Myburgh matter. 

The Court referred to, inter alia, the relevant sections of the Constitution of the Republic of South Africa Act, 1996 (“the Constitution”) and the Supreme Court Act, 1959 (“the Act”) dealing with the jurisdiction of the High Court.

The Court also referred to the relevant sections of the NCA and held that section 90 of the NCA does not affect the jurisdiction of the High Court and was only intended to outlaw forum shopping in credit agreements. To extend its scope and purview to the overall jurisdiction of the High Court beyond mere clauses in credit agreements is to accord the section a meaning which it neither has nor ever intended to have. The High Courts retain their jurisdiction in terms of the Act.

The Court granted default judgment against the defendants in both matters but awarded the costs against the defendants on the Magistrate’s Court scale.

In a summary, no consent to jurisdiction is required if the plaintiff prefers to institute action in the High Court for a claim enforceable in the Magistrate’s Court, albeit the plaintiff runs the risk of being awarded costs on the Magistrate’s Court scale only.

The NCA therefore oust neither the jurisdiction of the High Court nor the jurisdiction of the registrar, to deal with applications for default judgment falling under the NCA where a Magistrate’s Court has concurrent jurisdiction.

Michael Gwala
Leander Opperman