Credit providers may not use settlement or “acknowledgment of debt” agreements to enforce loans governed by the National Credit Act (NCA) in a way that bypasses the Act’s procedural and substantive protections, the Supreme Court of Appeal (SCA) has confirmed.
In a unanimous judgment delivered on 14 October, the SCA declared two settlement agreements between Standard Bank and a trust unlawful and void, even though they had been made orders of court.
The SCA found that the agreements, which restructured existing debts and authorised the bank to sell the trust’s immovable properties, were supplementary agreements prohibited by the NCA. They contained terms that would have been unlawful in a credit agreement.
As a result, the SCA rescinded High Court orders that had made the settlements orders of court, dismissed the bank’s claims based on those agreements, and ordered it to pay most of the appellants’ legal costs.
The ruling confirms that a suretyship linked to an NCA-regulated facility is itself subject to the Act, and any post-default restructuring or enforcement must adhere strictly to its provisions.
Factual background
Between 1999 and 2004, Christoffel Wolmarans, Emerentia Wolmarans, and the Wolmarans Kinder Trust concluded various credit and suretyship agreements with Standard Bank.
In 2013, the trust obtained two medium-term loan facilities of R2 million and R3.5m respectively. In November 2017, Mr Wolmarans concluded an overdraft agreement, which was a credit transaction as defined in the NCA.
Upon default, the parties entered a settlement agreement, signed in December 2018 and made an order of court in February 2019. When the agreement was later breached, Standard Bank required the appellants to sign a further settlement agreement and power of attorney. The second agreement was signed in September 2020 and made an order of court in November 2020.
Standard Bank brought application proceedings to enforce the second settlement agreement and have the trust’s properties declared executable.
The appellants sought a declaration that both settlement agreements were void under sections 89, 90, and 91 of the Act, alternatively on the basis of reckless credit (section 83), and applied to rescind the earlier court orders.
In 2023, the High Court in Bloemfontein found that:
- The trust was a juristic person whose turnover exceeded R1m, thus excluded from the Act under section 4(1)(a)(i).
- The settlement agreements were not supplementary agreements and hence not subject to the Act.
- They were valid, and there was no basis for rescission.
Judgment was entered against the trust for more than R12m, and 12 properties were declared executable.
On appeal, the SCA addressed the following six principal legal questions:
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Did the NCA apply to the trust’s suretyship?
The first issue was whether the suretyship executed by the trust in 2004 for Mr Wolmarans’ debts fell within the ambit of the NCA. Standard Bank argued the trust was excluded from the Act because it was a juristic person with a turnover exceeding R1m a year.
The SCA rejected this view. It held that the suretyship qualified as a “credit guarantee” under section 8(5), and thus as a credit agreement for the purposes of the Act.
Referring to section 4(2)(c), the Court stated that the Act applies to a credit guarantee “to the extent that the Act applies to the credit facility or credit transaction in respect of which the guarantee is granted”. Because the underlying overdraft facility used by Mr Wolmarans was a credit transaction regulated by the Act, the suretyship in respect of that facility was also subject to it.
The Court drew support from Mostert and Others v Firstrand Bank t/a RMB Private Bank (2018), where the SCA held that a surety is a “consumer” under the Act in relation to the suretyship, and the Act’s protections apply to the same extent as they apply to the principal debtor’s credit agreement.
Thus, although the trust was a juristic person above the turnover threshold, its suretyship remained governed by the NCA, because it was ancillary to a regulated consumer credit agreement.
Judge Piet Koen, who wrote the judgment, said the accessory nature of a suretyship means that the surety’s obligations cannot stand independently of the principal debt – if the principal credit agreement is regulated (and its enforcement restricted) by the NCA, so too is the suretyship.
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Were the settlement agreements unlawful supplementary agreements?
The SCA then turned to whether the two settlement agreements constituted “supplementary agreements” as contemplated in sections 89(2)(c), 90(2)(f), and 91(2) of the Act.
Under section 91(2), a credit provider may not require or induce a consumer to sign a supplementary agreement containing a provision that would be unlawful if included in a credit agreement.
The Court relied on National Credit Regulator v Lewis Stores (Pty) Ltd (2019), where the SCA held that an agreement is “supplementary” if it deals with the same subject matter as the principal credit agreement, namely the regulation of the credit, its terms, and its repayment.
The Court also referred to Absa Bank Limited v Johan Serfontein and Another (2025), where an acknowledgment of debt, coupled with a power of attorney – similar to those in this matter – was found to be a supplementary agreement because it changed the repayment structure, interest rate, and enforcement process.
Applying that reasoning, the SCA found that the Wolmarans settlement agreements modified core credit terms. They:
- extended the period of repayment;
- changed interest rates from variable to fixed;
- added mechanisms for execution without judicial oversight; and
- replaced statutory enforcement with private remedies.
These features meant the agreements supplemented and altered the original credit relationship, rather than merely resolved a dispute or recorded a compromise. They were therefore supplementary agreements within the meaning of section 89(2)(c) and consequently unlawful and void from inception.
However, the Court limited this finding: it applied only to the suretyship-linked overdraft facility, which was subject to the NCA. The trust’s own loan accounts, being outside the Act’s scope because of its juristic-person status, were unaffected.
The Court held that Standard Bank remained free to pursue remedies based on the original credit agreements, but not on the unlawful supplementary settlements.
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Did the bank follow the correct enforcement procedure?
The Court reaffirmed that compliance with sections 129 and 130 of the NCA – which set out the mandatory debt enforcement process – is a jurisdictional prerequisite to litigation.
These provisions require a credit provider to notify consumers of default, inform them of their rights to debt review or alternative resolution, and allow time to remedy the breach before approaching a court. The SCA held that Standard Bank’s applications to make the settlement agreements orders of court were, in substance, enforcement actions governed by those provisions.
By providing that judgment could be obtained after only seven days’ written notice, the settlement agreements circumvented the statutory procedures and therefore contravened the Act.
Judge Koen noted that compliance with sections 129 and 130 cannot be waived or excluded by contract. A term purporting to allow enforcement without following these steps defeats the purpose of the Act and is consequently unlawful and void.
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Did the settlement agreements contain unlawful provisions?
After classifying the settlements as supplementary agreements, the Court examined their substantive terms to determine whether they contained provisions unlawful under section 90(2).
It found multiple violations that, taken together, rendered the agreements void under section 90(3). The Court listed the following examples:
- Costs clauses requiring payment on an attorney-and-own-client basis contravened section 101(1)(g) and the Regulations.
- Waivers of statutory rights, including rights to notice under sections 129 and 130, and allowing judgment after seven days, infringed section 90(2)(b).
- Renunciation of common-law defences such as non causa debiti (“no cause of debt”) and errore calculi (“error in calculation”) breached regulation 32(5) read with section 90(2)(c).
- Exemption clauses releasing the bank from liability for acts or omissions by its agents contravened section 90(2)(g).
- Power of attorney provisions granting the bank advance authority to sell the trust’s properties without judicial process breached section 90(2)(j).
- Clauses allowing unrestricted sale discretion without ensuring market-related prices violated section 90(2)(k).
The Court found that these provisions permeated the settlement agreements, making it impossible to sever the unlawful from the lawful portions. Because the offending terms went to the core of the agreements, they were void in their entirety rather than partially unenforceable.
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Should the court orders should be rescinded and set aside?
The SCA reaffirmed that consent orders – orders of court made by agreement between the parties – carry binding force and finality. Once granted, they have the same status as any other judgment and are valid until set aside by a court of competent jurisdiction. However, the Court emphasised that public policy and legality impose clear limits: a court cannot give judicial sanction to an agreement that is unlawful, incompetent, or contrary to statute.
Relying on the Constitutional Court’s judgment in Eke v Parsons (2015), the SCA reiterated that a court must not “mechanically rubber-stamp” a settlement agreement. For a consent order to be competent:
- It must relate directly or indirectly to an issue between the parties;
- The agreement must not be objectionable in law or public policy; and
- Its terms must be capable, both legally and practically, of being incorporated into a court order.
The Court held that the settlement agreements in question failed these requirements. Because they were unlawful supplementary agreements containing provisions prohibited by the NCA, the High Court had no authority to transform them into orders of court. Doing so conferred judicial status on agreements that contravened national legislation, effectively legitimising conduct the Act prohibits.
Judge Koen explained that, at common law and under the constitutional principle of legality, a court order based on an unlawful agreement cannot stand. Even though the settlements were presented as consensual, the underlying illegality rendered them void ab initio. Their enforcement through court orders was thus invalid, and the SCA ordered that the High Court’s orders of February 2019 and November 2020 be rescinded and set aside.
The Court also noted that there was no longer any purpose in allowing the settlements, even in restricted form, to remain as court orders. Circumstances had overtaken them, and any “lawful parts” of the agreements could not survive independently once the unlawful provisions were struck down.
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Was the declaration of the properties as executable lawful?
The High Court had declared 12 of the 14 immovable properties owned by the trust specially executable, suspending execution until 31 July 2022. The SCA examined both the procedural and substantive validity of that order.
First, the Court held that no section 129 notice had been served on the trust before the bank sought to enforce the settlement agreements. Under section 130(1) of the NCA, a court may only grant an order of execution after the consumer (or guarantor) has received the prescribed notice and remained in default after the expiry of the statutory period. Because the required notice had not been given, the High Court lacked jurisdiction to authorise execution against the trust’s property.
Second, the Court found the order disproportionate and overbroad in light of the reduced judgment debt. Following the SCA’s findings, the enforceable indebtedness amounted to just over R4m, yet the trust’s properties were collectively worth about R60m.
No detailed valuation of individual properties had been provided, and it was unclear why the execution of 12 properties was necessary to satisfy a debt representing a small fraction of their aggregate value.
The SCA therefore held that the High Court had failed to conduct the required inquiry under Rule 46A of the Uniform Rules of Court, which governs judicial oversight of sales in execution of immovable property. That rule requires a court to assess whether the proposed execution is justifiable and proportionate to the debt and to consider less intrusive measures before authorising sale in execution, particularly where the property is a primary residence or significant trust asset.
Judge Koen observed that the SCA lacked sufficient information to decide which, if any, properties should properly be declared executable. Accordingly, the SCA set aside the executability order in its entirety and left the issue open for the bank to pursue afresh before the High Court, if it wished to do so.
