foreclosure applications - amicus curiae - South Gauteng High Court

SERI was invited by the South Gauteng High Court to make a submission as amicus curiae in a case to be heard on 29 August 2014 by a Full Bench. The main issue in the case is whether a requirement in the Gauteng Local Division Practice Manual, that personal service of foreclosure applications against property that might be used as a home be attempted and required possible, is lawful.

This case was initially a foreclosure application by ABSA against Mr and Mrs Lekuku’s home after they defaulted on their mortgage bond, but has since evolved into a challenge of the Johannesburg High Court’s practice directive regarding foreclosures in general.

ABSA’s takes issue with the requirement that there must be personal service of the foreclosure application on the debtor. The bank argues that this requirement departs from the substantive law of service, that it interferes with the debtor’s freedom to choose an address where they will receive legal documents and, as a consequence, the requirement elevates the practice directive to a status above legislation and case law on the issue. ABSA is also concerned with the discretion the court has to postpone a case if it feels that the arrears are too low, arguing that this creates legal uncertainty as to whether and when a creditor such as ABSA can obtain judgment against a debtor, even after making out its case. The bank further argues that this discretion relies on “nebulous concepts of fairness and equity” which make it difficult for itself and other creditors in a similar position. ABSA therefore requests guidance from the court on how to proceed in further foreclosure cases.

SERI argues, in response to the bank's first argument, that the practice directive does not require that personal service must be effected in all cases, only where it is possible. Personal service is the preferred method of service because of the risk of the debtor losing their house, and the importance of them being at court in case they can persuade the judge not to declare it executable. SERI further submits that courts must be satisfied as to what constitutes adequate service and they should not be limited by standard-form contracts containing domicilium (address at which to accept service) clauses such as that ABSA requires every debtor to sign. Responding to ABSA's second argument, SERI submits that the low arrears requirement is only a discretionary tool that a court may use to determine the proportionality of awarding judgment against the debtor and declaring their home executable.

On 14 October judgment was handed down in the case. The effect of the judgment is that banks in the Gauteng Local Division must now make “every reasonable effort” to draw foreclosure proceedings to a debtor’s attention, including by personal service where possible.

• Judgment (14 October 2014) here.
• ABSA's list of issues (27 June 2014) here and heads of argument (11 July 2014) here.
• Amicus curiae's heads of argument (1 August 2014) here.