Debt judgment expected in ConCourt

Johannesburg - The Constitutional Court is expected to hand down judgment on Thursday in an application by a couple seeking leave to appeal a default judgment against them by the South Gauteng High Court for not complying with the National Credit Act.

The Ferris family in 2007 took out a home loan with FirstRand bank. They soon fell into arrears and applied for debt review in 2009.

FirstRand was made a settlement offer by the debt counsellor, which the family claims the bank ignored.

The debt counsellor then applied to the Randburg Magistrate's Court to have the family declared over-indebted.

Before judgment was delivered, FirstRand sent a notice appearing to terminate the debt review.

Home loan

The magistrate in April 2010 granted a debt rearrangement order declaring the couple over-indebted.

Their obligations were rearranged and the order specified that the original home loan would be "revived and fully enforceable" if the order was breached.

Soon after this, the Ferrises breached the order.

FirstRand issued summons to enforce the loan and in November 2011 the High Court granted default judgment against the couple.

The Ferrises applied to the High Court for the default judgment to be rescinded.

Their application was denied, as there was no procedural irregularity justifying rescinding the judgment and they would not have had a defence against FirstRand's enforcement action.

The High Court and the Supreme Court of Appeal denied their applications for leave to appeal.

The couple then applied to the Constitutional Court for leave to appeal.

Debt review

They argue that the High Court should have rescinded the default judgment because they had two defences to the enforcement action.

The first was that, because the notice was not properly delivered, the rearrangement order was not terminated and that this precluded the enforcement of the loan.

Secondly, because FirstRand refused the debt counsellor's offer without making a counter-offer, it did not participate in the debt review proceedings in good faith.

FirstRand argues that the Constitutional Court should not interfere with the High Court's refusal to rescind the default judgment.

The Ferrises did not show good cause, because they did not adequately explain their default and took too long to apply for the rescinding of the order.

Furthermore, breaching the rearrangement order entitled FirstRand to enforce the loan agreement against them.