Why this recent Western Cape High Court judgment was hailed a victory for consumers

June 24, 2020

If you’ve ever litigated in the South African High Court, you would know that it can be a rather expensive affair, often times prohibitively so.  The recent judgment of the Western Cape High Court in Standard Bank v Kekana & Others [2020] ZAWCHC 44 (25 May 2020) (“the Standard Bank case”) may have provided some relief for consumers.  We explain below.

The matter involved a number of cases where Standard Bank applied for default judgment for various amounts owing to the bank arising out of credit agreements related to the purchase of vehicles.  The amounts claimed in the different actions were R50 949.62, R183 035.47, R257 334.28, R270 221.96, and R329 814.33.

The cases were heard in open court after the Registrar refused to grant the default judgment applications on the basis that the High Court did not have jurisdiction to hear the matters because of the terms of the written agreement between the parties which vested jurisdiction in the Magistrates’ Courts.

The Judge agreed with the Registrar and transferred the cases to the Magistrates’ Courts with jurisdiction.  The reasons for the judgment can be summarised as follows:

  1. The choice of forum clauses in the agreements clearly provided for the jurisdiction of the Magistrates’ Courts;
  2. Standard Bank didn’t make out any case as to why the choice of forum clauses should not be enforced;
  3. The National Credit Act 34 of 2005 (“the NCA”) applied to all of these cases as they involved the enforcement of claims arising out of credit agreements; and
  4. On a proper interpretation of both the NCA and the Magistrates’ Courts Act 32 of 1944 the Magistrates’ Courts have first instance jurisdiction when it comes to enforcing credit agreements.  [We note that the same was held by the Eastern Cape High Court in Grahamstown in Nedbank v Gqirana NO 2019 JDR 1379 and by the High Court in Pretoria in Nedbank v Thobejane and related matters 92018) 4 All SA 694 (GP)]

In addition to illustrating how the courts will not easily disregard a choice of forum provision in a contract, here’s why this judgment is also important:

  1. The Magistrates’ Courts are divided into District and Regional Courts.  Currently the District Courts can hear civil claims not exceeding R200 000 and the Regional Courts can hear civil claims not exceeding R400 000.
  2. Although the High Courts exercise concurrent jurisdiction with any Magistrate’s Court in its area of jurisdiction, they are usually approached as a court of first instance for civil claims that exceed the jurisdiction of the Magistrates’ Courts or where special circumstances dictate. 
  3. A practice has developed whereby claims that can be dealt with in the Magistrates’ Courts are instituted in the High Courts.  It may have developed because the High Courts are generally more efficient than the Magistrates’ Courts, but often the practice is used by litigants in an attempt to gain a strategic advantage.  For financially constrained litigants the High Courts are less accessible than the Magistrates’ Courts.  As a result, it is more likely that the litigation will not be defended if commenced in the High Court, which gives the Plaintiff a much better chance of obtaining a quick default judgment for the claim against the Defendant.
  4. This practice has become especially popular with large financial institutions when their clients default on credit agreements such as home loans or vehicle installment sales.  In light of what we have explained above it will now be more difficult for these types of claims to be taken to the High Court as a court of first instance.  They will have to be enforced in the Magistrates’ Courts which are generally more accessible to the masses.  

It is for this reason that the judgment has been hailed as a victory for consumers.

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