Class action lawsuit against banks: A fight for justice in home repossession cases

After years of preparation by lawyers acting for hundreds of people who claimed that their homes were unfairly repossessed, the Gauteng High Court, Johannesburg, will on Tuesday (February 24) hear arguments to have a R60 billion class action against major banks certified.

While these claimants are pinning their hopes on the class action to be certified by Judge Leonie Windell, the major banks cited as respondents will ask the court to turn down the certification application.

The certification action was instituted six years ago against four of the country’s major banks and other bodies. Their case is that the banks sold their properties for amounts substantially less than their market value, or not as a last resort. They said that on this basis, the banks are liable for the losses they have suffered as a result.

Advocate Douglas Shaw, who is fighting for the class action, will argue that this is a case in delict primarily about damages “to the tens of thousands of people whose houses have been sold in execution for very little”. This, he said, when other alternatives were available and where the banks “have known about these injustices for decades and have not changed their mode of operation”.

According to Shaw, to deny the certification would be to deny access to justice to the class members who will not have the resources to bring their cases on their own.

The amount claimed in each case is the market value of the property minus the bond amount or the amount it was sold for. But, he said, before this calculation is made, the market value needs to be converted into today’s property values with ABSA’s index and either the sale value or bond amount (whichever is higher) converted into today’s money with an inflation calculator.

Shaw will argue that the applicants will accept 90% of the market value as the starting point, but they still maintain that 100% is the true amount due.

In his opinion, banks have done “a tremendous amount of damage to consumers since 1994”. While the claim in this class action is for more than R60 billion, Shaw said the court should not be concerned with the banks’ liquidity risk. “The banks had a duty of care which it failed to discharge to sell houses for reasonable prices and only as a last resort. It had a duty to act reasonably,” he said.

Nedbank, in opposing the class action, will argue that it would appear that the “wrong” by the banks, as claimed by the applicants, is that they sought and obtained judgments from the courts that set in motion such sales in execution processes.

But, according to Nedbank, no basis has been set out on which the applicants ask the court to hold the banks liable. According to this bank, only 0.04% of Nedbank’s home loans book ends up in sales in execution. Of that, about 60% of all scheduled sales in execution are cancelled as a result of customers making last-minute arrangements to address their default, it said.

“The application for certification is bad in law and without any merit. It should be dismissed out of hand,” the bank said in its heads of argument filed with the court.

Standard Bank, in its submissions, said the certification application suffers from a “fatal defect”. It said the founding affidavit, in which the applicants were required to establish a prima facie cause of action, contains no primary facts and no evidence. “While the founding affidavit contains an array of conclusory assertions about the conduct of banks, it contains not a single primary fact in relation to Standard Bank that could give rise to any conceivable cause of action,” it said.

zelda.venter@inl.co.za