Can a bank sell a repossessed vehicle for a ridiculous amount?

FirstRand Bank Limited t/a Wesbank v Davel (1229/2018) [2019] ZASCA 168 (29 November 2019).

FirstRand Bank Limited t/a Wesbank (Wesbank), concluded a written instalment sale agreement with Davel, in terms of which he purchased a 2010 Volkswagen Polo, payable over 59 months with a balloon payment in the 60^th month. Davel fell behind on the payment of his instalments.

Wesbank sent him a notice in terms of s 129(1)(a) of the National Credit Act 34 of 2005 drawing his attention to the options available to him in terms of the Act, but also stating that, in the event of him not choosing any of them, legal action would be instituted against him claiming, inter alia, cancellation of the agreement and return of the vehicle. Mr Davel did not respond to the notice, prompting Wesbank to issue summons claiming the relief it had threatened. This was followed by an application for summary judgment by Wesbank, in terms of which it claimed, inter alia, the cancellation of the agreement, the return of the motor vehicle and that the entire damages component of its claim be postponed sine die. It also sought forfeiture of all monies paid by Mr Davel.

The court had to decide what relief to grant. It had to balance the interests of the credit provider (Wesbank) and the credit receiver (Davel). the Credit Act provides protection for consumers and for the enforcement of the rights of credit providers - an "equality of arms".

The court was concerned that there was a tendency to recover vehicles and then sell them at a ridiculous price. It ordered Wesbank (the plaintiff) to give Davel (the defendant) notice:

a)    setting out the estimated value of the vehicle;

b)    informing the defendant that it intends to sell the returned vehicle as soon as practicable for the best price reasonably obtainable; and

c)    informing the defendant that the price obtained for the returned vehicle upon its sale may be higher or lower than the estimated value;

Thereafter, the plaintiff shall sell the returned vehicle as soon as practicable for the best price reasonably obtainable. After selling the returned vehicle, the plaintiff shall:

a)    credit or debit the defendant with a payment or charge equivalent to the proceeds of the sale less any expenses reasonably incurred by the plaintiff in connection with the sale of the goods; and

b)    give the defendant a written notice stating the following:

                      i.        the settlement value of the agreement immediately before the sale;

                     ii.        the gross amount realised on the sale;

                    iii.        the net proceeds of the sale after deducting the plaintiff’s permitted default charges, if applicable, and reasonable costs allowed under paragraph (a); and

                    iv.        the amount credited or debited to the defendant’s account.

The notice shall state that:

a)    If the defendant disputes the amount of the proceeds of the sale or any other charges or expenses incurred, he or she may engage directly with the credit provider in relation thereto.

b)    If the engagement referred to in (a) does not yield, from the defendant’s perspective, the desired result, he or she may, refer the dispute to the Tribunal or submit a complaint in terms of s 136 of Credit Act 34 of 2005 to the National Credit Regulator.

If an amount falls to be credited to the defendant’s account which exceeds the settlement value immediately before the sale of the returned vehicle, the plaintiff must remit such excess amount to the defendant.

If an amount is credited to the defendant’s account which is less than the settlement value before the sale, or an amount is debited to the defendant’s account, the plaintiff may demand payment from the defendant of the remaining settlement value. If the defendant fails to pay the amount demanded within 10 business days of receiving such demand, the plaintiff may commence proceedings against the defendant for any outstanding damages.