Constitutional Court Dismisses Direct Access To Court For Home Loans Class Action Against Banks
An application for direct access to the Constitutional Court (ConCourt) on behalf of some 200 people, objecting to the conduct of the nation’s largest banks and home loan providers in attaching and selling the homes of defaulting debtors at prices below market value, has been dismissed.
The application – filed in August – sought to bypass the Magistrates Court, High Court and Supreme Court of Appeal and go directly to the Constitutional Court on the basis that a case was being made on behalf of the country as a whole and as the case was being brought by people who are “exceptionally poor” and have been made “even poorer by the unconstitutional action of banks”.
The ConCourt has, however, dismissed the application for direct access. “The Constitutional Court has considered this application for direct access. It has concluded that the application should be dismissed with no order as to costs as it is not in the interests of justice to hear it at this stage,” it said in an order.
The application for ConCourt action also received support from Parliament’s Standing Committee of Finance and the Portfolio Committee on Trade and Industry on the Transformation of the Financial Sector, as noted in an interim report.
Moneyweb previously reported that institutions cited in the application – Nedbank, Absa, FirstRand, Standard Bank, Changing Tides 12 (a trustee of the SA Home Loans Guarantee Trust) and Investec – stood to face a R60 billion class action suit related to the actions in attaching and selling properties at prices below market value.
This, as the application – filed by Advocate Douglas Shaw – also sought to establish whether the country’s current law of sale in execution is constitutional. A sale in execution refers to a process by which properties are sold at a public auction held by a Sheriff of the Court in order to recover home loan repayments that are in arrears.
The application claimed the process is unconstitutional in that it allows properties to be sold for less than their market value “which is against the rights to property and housing”, as defined by the Constitution.
At the time, the applicants also termed a previous ConCourt order that stated banks must only sell properties as a last resort, “a dead letter”, and called for an explanation of what is meant by last resort.
The applicants also wanted the court to order that no debt shall be reclaimable from a creditor when a property is sold for less than the value of the bond. They also wanted the court to determine that attached properties may be sold by estate agents rather than Sheriffs of the Court to maximise sales prices for the benefit of debtors and creditors.