Navigating the ins and outs of credit agreements under the National Credit Act (NCA) can feel like walking through legal quicksand. One wrong clause or overlooked procedure, and your entire case could come undone. A recent SCA judgment shows just how critical it is to tread carefully. Before enforcing your rights, make sure you’re not stepping into a sticky situation of your own making.

When dealing with credit agreements and the National Credit Act 34 of 2005 (NCA), what should litigants look out for when seeking to enforce their rights under a credit agreement?

The case in focus 
The SCA recently handed down a judgment concerning this type of question in Absa Bank Limited v Johan Serfontein and Another (740/2023) [2025] ZASCA 11. The appeal related to an acknowledgement of debt (“AOD”), which also incorporated a power of attorney entered between ABSA and the Serfonteins (the respondents in the SCA). 

NCA compliance
The question that had to be determined by the SCA was whether the AOD contravened the NCA. If that were the case, the agreement would have to be declared invalid. Before the appeal, the Free State High Court had found that the agreement was a supplementary agreement which contained unlawful provisions in contravention of Sections 89, 90, and 91, read together with s164(1) of the NCA. The High Court found the AOD to be void, as well as a subsequent deed of sale which had been concluded as having no legal effect from the outset. 

Summary of the facts
The facts of the case can be briefly summarised as follows:  ABSA had granted Mr Serfontein an overdraft facility. As security, ABSA had registered covering mortgage bonds over Mr Serfontein’s immovable property. As additional security, Mr Serfontein senior, signed a deed of suretyship to be jointly and severally liable for his son’s (Serfontein Jnr) obligations to ABSA. ABSA also registered two covering bonds over Mr Serfontein Senior’s immovable property. 

Mr Serfontein had undertaken to repay an amount to ABSA on or before 25 July 2015, however, he defaulted. When Mr Serfontein defaulted, ABSA initiated negotiations to resolve the matter. ABSA presented an Acknowledgement of Debt, which included a Power of Attorney. One clause in the AOD stated that the Serfonteins’ acknowledged that the agreement was not subject to the NCA. ABSA eventually, through the Power of Attorney, sold the immovable property and requested Mr Serfontein to vacate the immovable property. 

High Court findings
In the High Court, the Serfonteins contended that the agreement was a supplementary agreement which was prohibited by s89 of the NCA and was accordingly unlawful and void. In the alternative, the Serfonteins argued that it was void in that it was a credit agreement but contained several provisions which were prohibited under s90(2). They also contended that it would not be reasonable to sever the unlawful provisions from the remainder to render it lawful. The High Court found in favour of the Serfonteins. 

ABSA’s appeal to the SCA
In the SCA, ABSA contended that the High Court was incorrect. The SCA found that the AOD dealt with the same subject matter as the original overdraft agreement and that the overdraft agreement and the AOD were intrinsically intertwined, with the AOD supplementing the overdraft agreement. As a result, the AOD was a supplementary agreement. ABSA further argued that even if it were to be found to be a supplementary agreement, its provisions were not unlawful under s90(2) of the NCA.

SCA’s rulings and key findings
The SCA, however, found that the first fundamental contravention was the fact that the AOD included a clause whereby the Serfonteins’ had to agree that the NCA did not apply to their agreement. 

A further issue that the SCA found was that by virtue of the power of attorney, there was no judicial supervision which is required in all matters involving execution against a debtor’s immovable property and which can occur when judgment has been granted by a court. This is the subject matter of Rule 46 and 46A of the Uniform Rules of Court. Consequently, ABSA’s execution was unlawful. 

The SCA also had to look at whether the Serfonteins were possibly induced to sign the AOD. It found that since the Serfonteins had been warned of imminent legal proceedings, the Serfonteins were directly or indirectly induced to sign the AOD. 

Final judgment
The last issue the SCA had to decide on was whether the High Court was incorrect in declaring the AOD and the consequent agreement of sale void ab initio since ABSA had argued that certain provisions of the AOD could be severed, thus rendering the agreement valid. The SCA found that it was impossible to render the AOD lawful through severance of certain provisions. Thus, finding that the High Court was correct in declaring both the AOD and the deed of sale void ab initio. Consequently, the appeal was dismissed.

The point to note for all litigants, is that wherever the NCA is applicable, the procedures as set out in the NCA need to be strictly followed. Furthermore, in the event that a settlement is reached, and such a settlement includes a Power of Attorney to pass transfer, such an agreement should always be made an order of court with an additional application for the executability of the property to ensure that the element of judicial oversight in relation to such executability is maintained.


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