The Supreme Court of Appeal in the case of Bafana Finance Mabopane v Makwakwa [2006] SCA 49 (RSA) has delivered its judgment.

In this case a micro-lender tried to enforce a clause in his loan agreement with a debtor which:

a) the debtor waived his right to apply for an Administration Order in terms of Section 74 of the Magistrate’s Court Act; and
b) excludes the micro-lenders loan from any Administration order the debtor may obtain.

An administration order is a legal solution in terms of Section 74 of the Magistrates Court Act for the poorer debtors with total debt under R 50 000.00 to apply to go under administration and have a legal moratorium on the legal actions against them for debts. This while they pay a fixed month payment to their court appointed administrator who must distribute it pro rata amongst all the debtor’s creditors after their basic fee. The court also pointed out that it is a “modified form of insolvency” and that “In practice” administration is the only viable statutory protection available to debtors with small estates whose finances have fallen upon hard times.

The court went onto rule that the micro-lender’s clause in contention was against public policy and not enforceable.

For what its worth I believe the court’s decision is correct. It’s the unscrupulous behaviour like this and the similar actions of certain other creditors, particularly within the micro-lending industry, that is painting all creditors as the big bad wolves, which they are not.