On the 6th February 2009 Judge Masipa handed down judgment in the Witwatersrand Local Division in the matter of Standard Bank of SA LTD vs Salalidis Kismas Panayiotts (case 08/00146).

This case was a summary judgment application brought by the bank against the defendant in a mortgage bond foreclosure where the defendant raised a defence of over-indebtedness in terms of the National Credit Act.

A brief summary of the important issues the court ruled on are:

1. A Consumer can not make an application for debt relief if the a S 129 letter period has expired or legal action pursuant to such notice has been instituted

2. However a consumer who is a defendant to an action can raise a defence  of “over- indebtedness” in an action  (Section 79 of the NCA) BUT must prove it in their defence

3. If the issue of over-indebtedness is raised in a defence, the court has right to either:

3.1 refer matter to debt counsellor for report; or

3.2 order that debtor is over-indebted.

4. That the High Court and not only Magistrates court can refer to debt counsellers and make orders relating to over-indebtedness, if the matter is raised as a defence but the High Court will not hear applications for “over-indebtedness” orders brought by the consumer, the correct forum for that is the magistrates court.

5. Consumer can not make an application for debt relief if the a S 129 notice has been complied with and the period has expired or legal action pursuant to such notice has been instituted. But such a consumer can however raise “over-indebtedness” as a defence and apply for condonation for not failing to take advantage of S129.

6. The NCA does not envisage that a consumer may claim to be over-indebted whilst at the same time retaining possession of the goods which form the subject matter of the agreement. Such goods should be sold to reduce the defendant’s indebtedness.

It is submitted that the same rationale relating to leased goods (under the convoluted and strange definition of lease given in Section 1 of the NCA) would apply as to goods sold in terms of an instalment sale agreement and such goods should be returned to the creditor to reduce the consumers indebtedness.