Home-loan defaulters take plea to top court

A Johannesburg couple's "substantial compliance" in paying off their home loan meant they should not lose their R1.5-million home, the Constitutional Court heard yesterday.

Pieter Pauw SC, acting pro bono for Destri and Soraya Ferris, argued that despite the couple having fallen into arrears on their home loan shortly after being granted a debt rearrangement order in 2010, they had largely complied with the order and were not "serial defaulters" because they owed about R25000 on the original amount.

The couple approached the top court after failing to convince the magistrate's court, high court and the Supreme Court of Appeal that a default judgment against them should be withdrawn.

The crux of Pauw's argument related to two procedural points.

In 2007 the Ferrises obtained a R1.5-million home loan from FirstRand Bank but soon fell into arrears, prompting them to apply for debt review in 2009.

They claimed the bank had ignored a settlement offer made by a debt counsellor, who then applied to the Randburg Magistrate's Court to have them declared over-indebted.

But, before judgment was delivered, the bank gave notice to terminate the review in terms of the National Credit Act, even though the notice wasn't properly delivered.

In 2010, the magistrate's court granted a debt rearrangement order declaring the Ferrises over-indebted and rearranging their payment schedule. It ordered that the loan would be "revived and fully enforceable" if the two breached the order.

When they later breached the order, the bank issued summons and, in 2011, the Johannesburg High Court granted a default judgment against them.

In court papers, the couple accuse FirstRand of acting in bad faith by not making a counter-offer after refusing the initial settlement offer.

Andre Gautschi SC, for FirstRand, argued that the bank was entitled to enforce the loan agreement in terms of the National Credit Act. He said the Ferrises had taken too long to apply for a rescission order and had not given adequate reasons for their default.

Judgment was reserved.