A COMPARATIVE STUDY OF FORECLOSURE LAW IN NEW SOUTH WALES, AUSTRALIA AND SOUTH AFRICA

Abstract

In South Africa, there is little authority on the relationship between the credit provider (bank) and the credit receiver (debtor) after a property has been declared executable and sold at an auction by the Sheriff of the Court following the debtor’s default on a loan underlying a mortgage bond. The Uniform Rules of Court may shortly be amended in order to allow a reserve price to be set at an auction. However, the bank may still be compelled to buy the property into possession (PIP) in order to preserve the asset so that it protects the interest of both itself and the debtor should this reserve price not be met by third party purchasers. This amendment is therefore unlikely to address the underlying problems that exist when a bank elects to buy a property at an auction. The authority that does exist provides that the banks stand in a different position vis-à-vis the debtor to that of a third party purchaser. Most notably, it provides that the bank has a duty to credit the proceeds of any sale, when the property is sold from its stock of PIPs to the account of the debtor. This appears to be correct, but there should be a sound theoretical foundation for this proposition. What further duties are owed to the debtor by the bank in these circumstances? In order to address this question, certain suggestions are made based on the New South Wales legal position.