The High Court in Johannesburg has reinforced the principle that a consumer’s reinstatement of a credit agreement cannot be obstructed by a credit provider’s failure to quantify its enforcement costs.
Section 129(3) of the National Credit Act (NCA) enables a consumer to reinstate a credit agreement on which they have fallen into arrears by paying to the credit provider all the overdue amounts, together with the provider’s prescribed default administration charges and the reasonable costs of enforcing the agreement up to the time the default was remedied.
Martin and Leeann Koorbanally fell behind with the repayments on their mortgage bond taken out with Standard Bank. The bank initiated legal proceedings in February 2020, seeking to obtain the full outstanding loan balance and an order declaring the Koorbanallys’ home specially executable.
The Koorbanallys defended the proceedings, apparently to buy time so they could settle the arrears. The case advanced through the trial process until the application to declare the home specially executable was set down for hearing on 25 November 2024.
The Koorbanallys settled their arrears in full in July or early August 2024, but they did not pay the costs incurred by Standard Bank in seeking to enforce the loan agreement. It was up to the bank to quantify the reasonable costs of enforcing the loan agreement up to the time the default was remedied, and to demand them from the Koorbanallys.
Judge Stuart Wilson said that “for reasons I cannot fathom”, Standard Bank refused to do this. Instead, it insisted on proceeding to a hearing, not to recover enforcement costs directly, but to secure a costs order on an attorney-and-client scale. The bank’s counsel argued that the taxed bill of costs would constitute the reasonable enforcement costs.
Judge Wilson said this was the wrong approach. Standard Bank is entitled only to the reasonable costs of enforcing the agreement up to the time the default was remedied, per section 129(3) of the NCA (his emphasis). “Those costs obviously do not include the attorney and client costs associated with a hearing before me, which was held well after the Koorbanallys remedied their default by paying their arrears.”
He said that by the time of the hearing on 25 November, Standard Bank had not quantified its reasonable enforcement costs, nor had it made any effort to communicate the amount to the Koorbanallys. This omission persisted despite an offer from the Koorbanallys on 2 October to pay about R57 000 in three monthly instalments towards enforcement costs. Standard Bank ignored this proposal for weeks and ultimately rejected it on 20 November, without providing a counter-offer or clarifying its position on the actual costs.
Judge Wilson reaffirmed the principles established in Nkata v FirstRand Bank Ltd and Others (2016), where the Constitutional Court held it is the credit provider’s duty to quantify and demand enforcement costs at the time the consumer remedies their default by paying arrears. If the credit provider fails to do so, the agreement is reinstated under section 129(3) of the NCA. The fact that enforcement costs remain unpaid because of the credit provider’s inaction does not preclude reinstatement.
Instead of fulfilling its statutory duties, Standard Bank chose to avoid meaningful engagement with the Koorbanallys. Judge Wilson said the bank opted to “keep the litigation hobbling along” to secure a costs order, rather than quantifying and demanding its reasonable enforcement costs.
He described Standard Bank’s behaviour as “high-handed”, saying it was not only inconsistent with the law but also a “waste of the court’s time”.
Counsel for the Koorbanallys submitted that Standard Bank should pay the wasted costs of the hearing. “That is the least that should happen,” Judge Wilson said.
He ordered the removal of the application from the roll and Standard Bank to pay the costs of the hearing.
