Johannesburg - Immoveable property that is
security for a loan rather than the subject of a loan agreement is not
subject to the sections of the National Credit Act that govern the
review of the sale of goods, according to a recent judgment of the
National Consumer Tribunal.
In a judgment handed down on December 1, 2011, the tribunal
dismissed an application by two consumers, Vanie Cattigan and Selveraj
Cattigan, against Firstrand Bank Ltd for a review of sale of their
immoveable property at a public auction on February 2, 2011.
The Cattigans had purchased the property in August 2007. In
order to finance the purchase, they had passed a mortgage bond in favour
of Firstrand Bank as security for a loan. They then passed another
mortgage bond in favour of the bank as security for a further loan.
The Cattigans subsequently breached the terms of the mortgage
bond agreement, as a result of which the bank instituted legal
proceedings for the recovery of the full outstanding balance.
In April 2010, judgment by default was granted against them,
and the property was seized and sold by the Sheriff on public auction
for less than the outstanding balance due.
The Cattigans then approached the tribunal to review the sale
of goods as provided for in section 128(2) of the National Credit Act.
In terms of this section, a consumer who is dissatisfied with the amount
raised through the sale of repossessed or surrendered goods may ask the
tribunal to order the credit provider to pay an additional amount to
In its judgment, the tribunal considered the applicability of
Section 127 and Section 131 of the National Credit Act when reviewing
the sale of goods in terms of Section 128(2). Section 127 sets out the
obligations of a credit provider when a consumer surrenders goods under
an instalment agreement, secured loan or lease.
Section 131 deals with an attachment order with respect to property that is the subject of a credit agreement.
The tribunal found that the property in question was security
for a loan, rather than "the subject of a loan agreement" and was
attached so that the sale proceeds could be used to pay off the judgment
The tribunal added: "Section 131 refers to the repossession of
goods that are the subject of a credit agreement. The mortgaged
property was not the subject of a credit agreement.
"Rather, the respondent had granted the applicants a loan of
money and against this loan of money, the applicants had granted the
respondent a mortgage bond over the property which they had purchased in
order to secure this loan.
"The heading of section 131 refers to the repossession of
goods. Repossession is defined as the retaking of possession when a
buyer defaults on payments. In this instance, the respondent has never
been in possession of the immoveable property and was merely the grantor
of a loan which was secured by way of a mortgage bond," according to
The tribunal found that sections 127 and 128 applied to the
sale of moveable property only and that section 131 did not govern the
process in the circumstances of this case. It therefore dismissed the
application by the Cattigans for a review of the sale of their property.