This blog was co-authored by Hannah Howell, Candidate Attorney.
The High Court handed down a judgment on 7 October 2024 which spotlighted that an instalment sale credit provider under the National Credit Act (NCA) must prove that the repossessed goods have been sold at the best reasonably obtainable price and may not just get summary judgment if a section 127(4)(b) defence is raised under the NCA.
The claimant bank sold the defendant a high-end motor vehicle under an instalment sale agreement. The repayment mechanism required an initial cash instalment, the gross purchase price to be paid in instalments over 71 months, and a balloon payment at the end of the 6-year period.
Just over a year after the credit agreement was concluded, the defendant fell into arrears with his monthly instalments and was placed in breach of the credit agreement. As provided for in the credit agreement, the claimant repossessed the vehicle and, after the agreement was cancelled, sold the vehicle a month later.
The amount that the claimant received from selling the vehicle (as well as the input VAT credit received) was credited to the defendant. The claimant sold the vehicle for an amount that was less than half of what it was initially sold to the defendant for.
The claimant applied for summary judgment against the defendant. The rules of court required the defendant to satisfy the court that he had a bona fide defence to the claimant’s claim, and that the legal issues before the court can be decided on the evidence before it. The court emphasised that being satisfied of someone’s defence does not mean that it has to be proven.
One of the defences raised by the defendant was that the claimant had failed to comply with section 127(4)(b) of the NCA to sell the vehicle at the best price reasonably obtainable and, accordingly, that the quantum of the damages claimed was wholly unreasonable and unrealistic. The court noted that the claimant had not put forth any evidence to dispute this allegation, meaning that further evidence would be required.
The claimant bank alleged that the amount claimed was calculated based on the provisions of the credit agreement and was therefore final and binding. This argument was not successful as the court found that section 127(4)(b) of the NCA nonetheless applied. The claimant was obliged to produce evidence to show that the price that it sold the vehicle for was the best price reasonably obtainable in the circumstances.
The court ultimately held that the defendant had satisfied the requirement of raising the existence of a bona fide defence to the application for summary judgment, and the court granted the defendant leave to defend the action. The full judgment can be accessed here: Firstrand Bank ta Wesbank v McCallum (2020/5463) [2024] ZAGPJHC 1004 (7 October 2024) (saflii.org)