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[2017] ZAWCHC 12
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Wiese and Another v Absa Bank Limited (14580/2013) [2017] ZAWCHC 12; [2017] 2 All SA 322 (WCC) (24 February 2017)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
REPORTABLE
Case
No: 14580/2013
In
the matter between:
DIRK
JOHANNES
WIESE
First
Appellant
LOUISE
WIESE
Second
Appellant
and
ABSA
BANK LIMITED
Respondent
Court
:
Justice L J Bozalek,
Justice
J I Cloete
et
Justice
K M Savage
Heard
:
3 February 2017
Delivered
:
24 February 2017
JUDGMENT
CLOETE
J
:
Introduction
[1]
The central
issue in this appeal (which is with special leave of the Supreme
Court of Appeal) is whether the National Credit Act
34 of 2005 (NCA)
permits a credit provider to have regard to the projected income of a
separate commercial entity when assessing
a consumer’s ability
to afford to repay a personal loan, in circumstances where the loan
to be advanced to the customer is
for the specific purpose of
purchasing that commercial entity.
[2]
The
respondent bank has also raised a point
in
limine
,
namely whether uniform rule 49(4) in its amended form nonetheless
requires an appellant to specify grounds of appeal in its notice
of
appeal. I will deal first with the
in
limine
point.
Point
in limine
[3]
Uniform
rule 49(3) previously provided that:
‘
The notice of appeal shall
state whether the whole or part only of the judgment or order is
appealed against and if only part of
such judgment or order is
appealed against, it shall state which part and shall further specify
the finding of fact and/or ruling
of law appealed against and the
grounds upon which the appeal is founded.’
[4]
The
aforementioned subrule was substituted by GN R472 of 12 July 2013. In
its current form the equivalent is to be found in uniform
rule 49(4)
which provides that:
‘
Every notice of appeal and
cross-appeal shall state –
(a)
what part of the
judgment or order is appealed against; and
(b)
the particular respect
in which the variation of the judgment or order is sought.’
[5]
The
appellants’ notice of appeal reads as follows:
‘
TAKE NOTICE that the
Appellants hereby note their appeal to the full bench of the
abovementioned Honourable Court
against
the whole of the judgment
of His Lordship Blignault handed down on 13 May 2014.
TAKE NOTICE FURTHER that on 18
November 2014 the Supreme Court of Appeal granted leave to appeal to
the full bench of the above
Honourable Court as appears from a
certified copy of the order attached hereto marked
“
A”
.
TAKE NOTICE FURTHER that the
Appellants seek that the order of the Court a quo should be set
aside and replaced with orders
:
1.
Rescinding the judgment
granted by His Lordship Blignault on 13 May 2014.
2.
Granting leave to the
Appellants to defend the action instituted by the Respondents under
the above case number.’
[my emphasis]
[6]
The bank
contended that the notice of appeal is fatally defective in that it
failed to specify the finding of fact and/or ruling
of law appealed
against and the grounds upon which the appeal is founded. On the
other hand the appellants submitted that, given
the change in the
wording of the subrule pertaining to notices of appeal, this is no
longer a requirement.
[7]
In
Leeuw
v First National Bank Limited
2010 (3) SA 410
(SCA) at para 2 it was stated that:
‘
The appellant persisted in
this court with an argument that the respondent’s initial
notice of appeal was fatally defective
as it did not comply with
Magistrates’ Courts Rule 51(7)(b), which requires an appellant
to state
“
the grounds
of appeal, specifying the findings of fact or rulings of law appealed
against”
. The rule is
peremptory and non-compliance has been held to render the notice
invalid. The object of rule 51(7) is to enable the
magistrate to
frame his reasons for judgment under rule 51(8) and, insofar as this
had not already been done, to inform the respondent
of the case he
has to meet and to notify the appeal court of the points to be
raised. In 1987 the Uniform Rules of the High Court
were amended to
provide, for the first time, for the delivery, prior to the hearing,
of
“a concise and
succinct statement of the main points…which [a party] intends
to argue on appeal” –
so-called
heads of argument.
It
can be said that since then the object of the notice of appeal to
inform the respondent and the court was also achieved by the
heads of
argument
, and it has
almost become the rule that a full judgment is given after a trial in
the magistrates’ courts, which is rarely
added to in terms of
rule 51(8), as also occurred in this case.’
[my emphasis]
[8]
In para 5
of the judgment the court continued:
‘
In this court it is not
required that grounds of appeal be stated in the notice of appeal
.
The nature of the proceedings is such that this court is entitled to
make findings in relation to
“
any
matter flowing fairly from the record”
.
The parties in their written and oral arguments have dealt with all
the issues relevant to the appeal and the appellant has not
pointed
to anything that has been overlooked. The point, apart from being
bad, had long lost its significance.’
[my emphasis]
[9]
The rule of
the Supreme Court of Appeal to which reference was obliquely made is
rule 7(3) which states that:
‘
Every notice of appeal and
cross-appeal shall –
(a)
State what part of the
judgment or order is appealed against;
(b)
State the particular
respect in which the variation of the judgment or order is sought;
and
(c)
Be accompanied by a
certified copy of the order (if any) granting leave to appeal or to
cross-appeal.’
[10]
Despite
rule 7 having been substituted by GN R191 of 11 March 2011, rule 7(3)
itself is still couched in identical terms.
[11]
A
comparison between Supreme Court of Appeal rule 7(3) and uniform rule
49(4) indicates that what the Rules Board intended was that
uniform
rule 49(4) should mirror Supreme Court of Appeal rule 7(3) to the
required extent.
[12]
The
following is stated in the commentary on Supreme Court of Appeal rule
7(3) in Erasmus: Superior Court Practice (2
nd
ed) Vol 1 at C1-9:
‘
This subrule requires a
notice of appeal to state two things: (a) the part of the judgment or
order appealed against; and (b) the
particular respect in which the
variation of the judgment or order is sought. In older cases it was
held that the object of the
requirement that the part of the judgment
or order appealed against must be set out is to avoid embarrassment
or ambiguity and
where the only issue involved is apparent on the
record, strict compliance with the subrule may be waived. In view of
the second
requirement of the subrule, viz that the particular
respect in which the variation of the judgment or order is sought,
must be
stated, it would seem that compliance with the first is now
essential.’
[13]
In their
notice of appeal the appellants stated: (a) that the whole of the
judgment was appealed against; and (b) the particular
respects in
which variation of the judgment or order was sought.
[14]
Moreover in
its current form Practice Note 46(5) of the Consolidated Practice
Notes of this Division (effective as from 1 July 2012)
reads that:
‘
(5) The heads of argument of
each party must be accompanied by a Practice Note indicating –
…
(b) the issues on appeal succinctly
stated:…’
[15]
In the
present matter the appellants not only complied with Practice Note
46(5) but also filed comprehensive heads of argument dealing
with the
issues in the appeal. Counsel for the bank accepted that the latter
was neither prejudiced in preparing for the appeal,
nor taken by
surprise as to what case it was called upon to meet. In addition it
was clear to us from both the Practice Note and
heads of argument
filed by the appellants what the issues were.
[16]
What is
also relevant is that the powers of a court on appeal are identical
in the High Courts and Supreme Court of Appeal (see
s 19
of the
Superior Courts Act 10 of 2013
, which bears the same wording as its
predecessor, namely s 22 of the Supreme Court Act 59 of 1959).
[17]
In
Thompson
v South African Broadcasting Corporation
[2000] ZASCA 76
;
2001 (3) SA 746
(SCA) at para
[4]
it was stated that:
‘
Although the finding of the
Court
a quo
was
attacked by the applicant when applying for leave to appeal, it is
noteworthy that in the heads of argument filed on his behalf
it was
not alluded to at all. Instead, the argument focused on legal issues.
This Court was therefore justified in assuming that
the applicant
accepted these findings…’
[18]
To sum up
therefore, it would appear that, to the extent that the older cases
took the approach that the previous uniform rule 49(3)
was peremptory
in nature (at least in the context of appeals from the magistrates’
courts), the decision in
Leeuw
(
supra
)
has made it clear that this is no longer the position in the Supreme
Court of Appeal. Moreover, to the extent that there was a
dichotomy
between Supreme Court of Appeal rule 7 and the old uniform rule
49(3), this is no longer the case. Further, and at least
in this
Division, Practice Note 46(5) caters for any apparent deficiency in a
notice of appeal which might give cause for complaint.
It follows
that the point
in
limine
must fail.
The
merits
[19]
On
5 September 2013 the bank issued summons against the appellants
jointly and severally for payment of sums totalling R4 715 242.68
in respect of monies loaned and advanced together with interest and
costs. The bank also sought an order declaring the appellants’
jointly owned immovable property in Onrus Rivier specially
executable, given that it serves as security for the loans in the
form
of mortgage bonds registered over the immovable property. The
appellants failed to enter appearance to defend and default judgment
was granted against them in the terms sought on 6 November 2013.
[20]
On 20
December 2013 the appellants applied for rescission of the default
judgment. It was accepted by the parties for purposes of
the appeal
that the appellants provided a reasonable explanation for their
default. What is in issue is whether they set out a
bona
fide
defence to the bank’s claim which,
prima
facie
,
carries some prospect of success should rescission be granted and the
matter referred to trial.
[21]
The first
appellant deposed to the founding and replying affidavits and the
second appellant filed confirmatory affidavits in support
thereof.
For convenience I will refer to them either as ‘
the
appellants’
or ‘
Mr
Wiese’
,
who is the first appellant and who, it is now common cause, was the
individual involved in negotiations with the bank at all relevant
times.
[22]
The defence
raised by the appellants was that of reckless credit as provided in
Part D of Chapter 4 of the NCA, and more particularly
sections 80
to 83 thereof. Mr Wiese claimed that the bank granted the appellants
reckless credit by approving the fourth and
fifth loans (the subject
of the default judgment) during October 2008 in circumstances where
it had failed to conduct the required
assessment in terms of section
81(2), alternatively where it knew that the loans would render the
appellants over-indebted.
[23]
He
maintained that, to the knowledge of the bank (by whom he was
employed at the time) the total monthly instalment due and payable
in
respect of the loans was more than double the appellants’
combined monthly income, which income was derived solely from
their
fixed employment.
[24]
He stated
that:
‘
33. Before the fourth and
fifth loans were approved by the Respondent, Mr Andre Jooste (at the
Respondent’s Private Bank Credit
Centre in Bellville) indicated
to me that the Respondent, in terms of the Act, could not even
consider affording further credit
to the Applicants, based on our
financial position and monthly income at the time.
34. I was in the process of buying
a business at the time and desperately needed money and decided to
proceed with a formal loan
application through the Respondent’s
Home Loan Department through a consultant in Strand. I am not sure
what procedures and
processes were followed by the Respondent
thereafter, but the next thing I knew the Respondent, through Mr Jan
Crafford, confirmed
that the loan applications were approved.
35. In hindsight, I believe that I
should not have applied for further credit, as I knew there was no
possibility that the Applicants
could satisfy all the repayments in
respect of the credit agreements entered into.
36. I am advised that the Act
prohibits the practice of reckless credit.
37. I submit that the Respondent
did not conduct the necessary assessment as required by section 81(2)
of the Act, alternatively,
I submit that the Respondent entered into
the credit agreements on which its claim is based knowing that the
said agreements would
make the Applicants over indebted.’
[25]
Mr Heinrich
Valentine deposed to the bank’s answering affidavit. He is
employed as a Senior Legal Counsel (Operations Enterprise
Services)
in its Group Litigation team. He stated that he had personal
knowledge of the facts set out therein as a result of his
consideration of all relevant documents and data pertaining to the
claim which had been electronically captured and stored by the
bank.
The appellants did not take issue with this allegation and it thus
stands uncontested. In addition both Messrs Jooste and
Crafford filed
confirmatory affidavits in support of Mr Valentine’s
affidavit.
[26]
The latter
stated that Mr Wiese commenced his employment with the bank in March
1981 and, in his last capacity, was a so-called
relationship
executive at its Hermanus branch (according to Mr Wiese he was
employed by the bank for even longer; as previously
mentioned, Mr
Wiese was still so employed when the loans were approved in 2008).
[27]
According
to Mr Valentine, in his position as relationship executive Mr Wiese
dealt with a growth portfolio of about 60 to 70 “groups”
of what he termed “medium business clients”. Mr Wiese
was a very experienced and knowledgeable relationship executive
who
was well trained in all required credit, compliance and regulatory
aspects pertaining to medium business, including the relevant
provisions of the NCA.
[28]
These
included dealing with credit applications on an almost daily basis,
ensuring that they had been correctly completed and that
all
requirements were met before submitting them to the bank’s
credit department. Mr Valentine stated that:
‘
17. Since his employment in
1981 the First Applicant has had extensive training on credit
applications. He was well aware of the
issue of affordability and
ability to make payment of instalments.
18. In view of the aforesaid and
what is stated hereunder, it is quite astonishing that the First
Applicant brought an application
for rescission of judgment, with
specific reference to the defence of reckless credit, on the basis
that he does. He knew what
the processes of the Respondent were and
that those processes were in place specifically to be sure that
applicants for credit
are able to afford the credit applied for and
that reckless credit is not issued.’
[29]
Mr
Valentine explained that Mr Crafford dealt with the appellant’s
credit application. Mr Crafford was employed by the
bank for 39
years. He had considerable experience in the management of credit
facilities, analysis of financial statements and
liaising with
clients and the bank’s credit assessment department. During the
last 9 years of his employment (he resigned
in June 2012) Mr Crafford
was employed as a credit assessor in the bank’s Cape Town home
loans department:
‘
20. …As such he was
responsible for the presentation and recommendations of applications
to head office of those applications
that fell outside the mandate of
the regional office in as far as rand value was concerned. Here too
the analysis and interpretation
of financial statements and
projections of businesses formed part of his responsibility. It would
be fair to say that Mr Crafford
was considered to be someone
with wide ranging knowledge regarding the interpretation and
assessment of financial statements by
his seniors and colleagues.
21. Due to Mr Crafford’s
experience and good judgement he was often asked by his colleagues to
assist in more difficult applications.
I must add that he was
regarded as a more conservative assessor that
[sic]
would not take unnecessary
risks. This means that he would rather have declined an application
for credit if he was not sure that
a case was made out for the
ability to repay the instalments required for that application. Mr
Crafford says that the Respondent
placed a very high premium on
compliance with the provisions of the
National Credit Act and
he
strictly adhered to this approach.’
[30]
Mr Crafford
recalled the appellants’ credit application. He stated that the
application pertained to the purchase of a going
concern, a Seven
Eleven convenience store franchise (“the business”),
which was upgraded shortly before submission
of the credit
application. As part of the upgrade, arrangements were made with
suppliers for the provision of suitable stock.
[31]
The
business was purchased in the name of a shelf close corporation,
Castle Hill Trading 281 CC (“Castle Hill”) of which
Mr
Wiese was a member from 22 October 2008. (According to the
Search Works printout annexed to Mr Valentine’s affidavit,
Mr Wiese was in fact the sole member of Castle Hill, which was
deregistered on 19 October 2010 due to annual return
non-compliance; according to Mr Wiese, it was eventually placed in
liquidation on 18 March 2011).
[32]
Mr Crafford
stated that as part of the credit assessment the ability of the
business to repay the loans was considered. This
is also the reason
why Castle Hill ultimately bound itself as surety and co-principal
debtor with the appellants to a maximum of
R3.6 million in
respect of the loan indebtedness on 16 October 2008. Both the
suretyship agreement and relevant resolution
are annexed to the
answering affidavit, and reflect that it was Mr Wiese who signed
the suretyship as Castle Hill’s
duly authorised representative.
[33]
The bank
was able to retrieve from its system three entries made by
Mr Crafford on about 25 September 2008. These are
also
annexed to the answering affidavit. Two are virtually illegible but
the other reads as follows:
‘
PURCHASING A GOING CONCERN
(GORDONSBAAI FRIENDLY 711) UNDER SHELF CO (CASTLEHILL TRADING 281
CC). P/PRICE R3M PLUS STOCK OF R1,5M.
TAKEOVER DATE IS 03/11/2008.
TAKEOVER STOCK REPAYABLE OVER 6 MNTHS. CASH FLOW PROJECTION
REFLECTED THAT THE TOTAL AMOUNT WILL
BE PAID IN DEC 2008. BUSINESS
RECENTLY REVAMPED. APPLICANTS WILL ALSO TAKE OUT RENTAL AND STOCK
GUARANTEES.
GOOD ABSA RECORD. NO NEGATIVES PER
CREDIT BUREAU ENQS.’
[34]
Mr Crafford
stated that the cash flow projection of the business (supplied by
Mr Wiese as part of the credit application) confirmed
its
ability to service the loan repayments due. However in order to
satisfy himself independently that the business would indeed
be able
to do so, Mr Crafford consulted with the relevant franchisor, as well
as Mr Wiese, the latter on a regular basis during
the
application process. Having carried out a detailed assessment, and
having consulted with all relevant parties, Mr Crafford
came to
the conclusion that the business would be able to service the
repayments and he accordingly approved the credit application.
Unfortunately it transpired that the business did not succeed.
[35]
Also
annexed to the answering affidavit was a document signed by the
appellants on 29 September 2008 in which they confirmed
that the
bank had complied with the provisions of the NCA. Mr Valentine stated
that a detailed application would have been submitted
for the kind of
credit that the appellants sought, and annexed an example of a
checklist similar to the one used at the time of
their application.
It is apparent from this checklist that a detailed assessment is
carried out on a whole range of aspects and
that a number of
documents would have to have been submitted by the appellants,
including a detailed cash flow forecast at the
discretion of the
credit official assessing the ‘
valuation’.
[36]
Mr Jooste
was unable to recall discussing the application with Mr Wiese
but stated that he may have done so. However, as Mr Valentine
pointed out:
‘
34. In any event, on the
First Applicant’s own version he was informed by Mr Andre
Jooste of the Respondent, prior to
their application for credit, that
the Respondent would not even consider affording credit to them,
based on their financial position
and monthly income at the time. Of
course this corresponds with everything that is stated above
regarding Mr Crafford’s
assessment and the Respondent’s
approach to matters of credit. It also corresponds with Mr Crafford’s
recollection
that the application was not to provide credit to the
Applicants as such but that it was for the purchase of a business and
that
the business would have serviced the payment of the instalments
on the loan agreement.’
[37]
In his
replying affidavit Mr Wiese made the following allegations:
37.1 His training and
experience were limited to medium to large corporate or business
clients whose turnover exceeded the annual
threshold in
s 7(1)
of the NCA (and thus those clients who did not fall under the
provisions of the NCA);
37.2 He had never dealt
with personal or individual credit transactions or applications;
37.3 He knew what the
banks “processes” were but only with reference to
commercial or business dealings and transactions;
37.4 The loan agreements
in issue are personal home loan agreements and not loan agreements
for the purchase of a business;
37.5 From his experience
as set out in the bank’s answering affidavits he could confirm
that the ‘
terms of and procedures for a loan in order to buy
a going concern differ from that of a personal loan’
;
37.6 The bank had failed
to conduct a ‘
detailed assessment’
; and
38.7 Mr Jooste had
informed him that his application for credit would not be successful
as he would be required to show that the
business had been
successfully operating for at least six months, which he was not able
to do given that Castle Hill only commenced
trading in November 2008.
[38]
Relying on
the fact that personal home loan agreements were concluded between
the parties, Mr Wiese maintained that:
‘
11. …It is therefore
clear that the applications for credit were not granted for the
purchase of a going concern (business)
in the name of Castle Hill…
12. At the time the said
applications were brought and approved, Castle Hill was merely an
empty shell that intended to buy a business.
The applications were
signed during September 2008 and the business was only acquired
during November 2008.
13. I initially applied for a loan
from the Respondent in order to buy a going concern, which
application was refused by the Respondent’s
Private Bank
division. I was advised that Castle Hill would have to show audited
financial statements in order for such a loan
to be granted.
14. Only after the abovementioned
loan was refused, I was referred back to the Respondent’s home
loans division.
15. I again submit that the
evidence to be led during a trial would support the above and show
that the personal home loan agreements
on which the Respondent’s
claim is based constitute reckless credit as envisaged in the Act.’
[39]
Also
relevant are the following paragraphs in the replying affidavit:
‘
18. I again reiterate that
the Respondent granted me personal home loans, and not a loan to buy
a going concern. The monies were
paid out to me more than 2 (two)
months before Castle Hill acquired the business and I was free to use
it for any purpose
whatsoever….
21. I reiterate that the
“
cash
flow projection”
was
an informal projection, nothing more than a guess with no real
accounting value. As stated above, my original application for
a loan
to buy a going concern was refused based on the lack of audited
financial statements and I was informed that the
“cash
flow projection”
was
insufficient.’
Findings
of the court a quo
[40]
In its
reasons for judgment the court
a
quo
found that although the appellants had mentioned their
over-indebtedness as envisaged in s 79 of the NCA, it was clear
that
their real defence was founded on those provisions pertaining to
reckless credit. Indeed, in heads of argument filed in this appeal,
it was submitted on behalf of the appellants that ‘
it
is common cause that the crux of
[their
defence]
is
founded on Sections 80 to 83
[of the NCA]’
.
[41]
The judge
stated that the defence of reckless credit raised was largely based
on two considerations, the first being that certain
documents
described the loans in question as home loans and not business loans,
and the second, that the loans were processed in
the bank’s
home loans division and not its business loans division.
[42]
The judge
found that both considerations were irrelevant:
‘
The real issue is not the
name or label that was placed on the loan or which division of
respondent it emanated from. The question
to be considered is simply
whether respondent has complied with the provisions of s 80(2)
[sic]
of
the NCA.’
[43]
Having
regard to the evidence, the judge concluded that there was nothing
before him to support the appellants’ allegation
that the bank
had failed in any of its duties under s 81 of the NCA. He thus
found that the appellants had failed to show
a
bona
fide
defence and dismissed the application.
Grounds
of appeal
[44]
In the
document attached to the appellants’ Practice Note to which I
have already referred, the grounds of appeal were essentially
that
the trial court erred:
44.1 In finding that it
was irrelevant whether the loans were business or personal (in heads
of argument it was contended that the
bank cannot be permitted to
change the ‘
very nature’
of the loan agreements);
44.2 In failing to
consider that at rescission stage the court is not seized with the
duty to evaluate the merits of the defence
advanced, and that doubt
as to its merits is not a good reason for refusal, provided that it
prima facie
is more than a delaying tactic (relying on
RGS
Properties v Ethekwini Municipality
2010 (6) SA 572
(KZD) para
12); and
44.3 In failing to apply
the test set out in
Standard Bank of South Africa Ltd v Kelly and
Another
(23427/2010) [2011] ZAWCHC1 (25 January 2011) para 9,
namely that in summary judgment proceedings it is inappropriate to
grant
the relief sought by the plaintiff where there is a prospect
that the consumer defendant, having set out the pertinent facts,
would
be able to obtain a declaration of reckless credit in its
favour.
Discussion
[45]
The
requirement of a
bona
fide
defence which
prima
facie
carries some prospect of success is comprised of two elements. First,
the defence must be raised in good faith. Second, on the
face of it,
the defence must have some prospect of success at trial.
[46]
In the
appellants’ founding affidavit the defence of reckless credit
was based squarely on the bank having failed to conduct
any
assessment at all in terms of s 81(2) of the NCA. After being
confronted with the bank’s version, the appellants
changed
tack. Being unable to deny that an assessment had in fact been
conducted, they claimed that the assessment had not been
‘
detailed’
and that the loans granted were personal rather than business in
nature.
[47]
The
appellants must have realised that they had painted themselves into a
corner by failing to disclose the pertinent facts in the
first
instance. In the founding affidavit Mr Wiese did not mention
that he provided Mr Crafford with a cash flow projection
for the
business. That he was purchasing a going concern would self-evidently
have made the production of a cash flow projection
not only possible
but something which the bank would no doubt have wished to consider.
This non-disclosure is material. Furthermore,
it is highly improbable
that Mr Wiese would ever have considered purchasing the business
had he not himself been confident
of its prospects of success. This
is an individual who is well versed in medium to long term business
and the risks attendant upon
obtaining loan finance for that purpose.
It is also most unlikely that Mr Wiese would have been prepared to
agree to the appellants’
immovable property (which is their
home) being bonded as further security if he was not confident that
the business would succeed.
This gives the lie to his belated
assertion that the case flow projection he supplied to the bank was
‘
an
informal projection, nothing more than a guess with no real
accounting value’.
[48]
Perhaps his
most startling allegation (made for the first time in reply) was that
the R4.7 million “windfall” was
money that he could
do with as he pleased. He did not disclose how he spent this
windfall, nor did he mention how he otherwise
would have managed to
fund the purchase of the business. His attempt to hide behind Castle
Hill as a shelf entity is both cynical
and disingenuous. It was
clearly shown by the bank that, at all material times, it was the
common intention of the parties that
Castle Hill would merely be the
vehicle for the purchase of the asset, i.e. the business, for which
it agreed to loan the funds.
Moreover Mr Crafford’s evidence
that he also consulted the relevant franchisor as part of his
assessment (and who would have
been able to express a reliable
opinion on the cash flow projection supplied by Mr Wiese) was
not disputed. Having regard
to the aforegoing, the only reasonable
conclusion to be drawn is that the appellants did not act in good
faith in raising their
defence.
[49]
However, if
I am wrong, I am nonetheless persuaded that the defence raised has no
prima
facie
prospect
of success for the following reasons.
[50]
Section 1
of the NCA defines a consumer as including (a) the party to whom
credit is granted under a credit facility; (b) the
mortgagor
under a mortgage agreement; or (c) the borrower under a secured
loan.
[51]
Section
81(2) of the NCA stipulates that a credit provider must not enter
into a credit agreement without first taking reasonable
steps to
assess
inter
alia
(a) the proposed consumer’s existing financial means,
prospects and obligations; and (b) where a consumer applies
for
credit for a commercial purpose, whether there is a reasonable basis
to conclude that such commercial purpose may prove to
be successful.
[52]
Section
78(3) in turn defines ‘
financial
means, prospects and obligations’
for purposes of Part D of Chapter 4 of the NCA as including, in
s 78(3)(c):
‘
If the consumer has or had a
commercial purpose for applying for or entering into a particular
credit agreement, the reasonably
estimated future revenue flow from
that business purpose.’
[53]
Accordingly
therefore it was incumbent on the bank, when making its s 81(2)
assessment, to have regard to the reasonably estimated
future revenue
flow of the Seven Eleven franchise that Mr Wiese intended
purchasing through the vehicle of Castle Hill with
funds to be loaned
by it. This is precisely what it did.
[54]
The
distinction which the appellants thus seek to draw between a personal
home loan and a business loan does not assist them. It
is the purpose
of the loan that determines what needs to be considered in assessing
whether a loan may be granted to a prospective
consumer, and not the
mechanism of the loan itself. It follows that any evidence adduced at
trial in relation to the mechanism
of the loan would be irrelevant in
the context of the defence raised to defeat the bank’s claims.
The court
a
quo
was
correct in dismissing the application and the appeal must fail.
[55]
While it is
so that the respondent’s point
in
limine
was unsuccessful, little time was spent in argument before us on this
issue, and it should thus have no effect on costs, which
should
follow the result.
Conclusion
[56]
In the
result I would propose the following order:
‘
The appeal
is dismissed with costs.’
__________________
J
I CLOETE
I
agree and it is so ordered.
__________________
L
J BOZALEK
I
agree.
__________________
K
M SAVAGE
For
the Appellant:
Adv
T
Du Preez
– 4245158
Instructed by
:
Theron & Partners, JB Theron - 8877877
For the Respondent:
Adv
W
Jonker
– 4240442
Instructed by:
Marais
Muller Yekiso Attorneys