About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2017
>>
[2017] ZAWCHC 158
|
|
L.P v Vosloo and Others (A113/17) [2017] ZAWCHC 158; 2018 (5) SA 206 (WCC) (23 October 2017)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
CASE NUMBER: A113/17
In
the matter between:
L
P
Applicant
and
NICOLETTE
VOSLOO
1st
Respondent
HOMECHOICE
(PTY)
LTD
2nd
Respondent
RAINBOW
FINANCE (PTY)
LTD
3rd
Respondent
RCS
CARDS (PTY)
LTD
4th
Respondent
WOOLWORTHS
(PTY)
LTD
5th
Respondent
STANDARD
BANK OF SOUTH AFRICA
LTD
6
th
Respondent
FOSCHINI
RETAIL GROUP (PTY)
LTD
7th
Respondent
ABSA
BANK
LIMITED
8th
Respondent
AFRICAN
BANK
LIMITED
9th
Respondent
NICOL
DAVIS &
ASSOCIATES
10th
Respondent
JUDGMENT delivered on
23 October 2017
NDITA,
J
[1]
The crucial issue in this appeal is whether the Magistrate Court has
the power to make an order rearranging an over indebted
consumer’s
repayment obligations based upon the parties’ agreed amended
interest rate.
Factual
Background
[2]
The appellant brought an application to a debt counsellor for debt
review in terms of Section 86(1), 86(7)(c) and
86 (8)(b)
read together with Sections 85 and 87 of the National Credit Act 34
of 2005 (“the NCA”)_and Rule 55 of the
Magistrate’s
Court Act 32 of 1944. The Debt Counsellor, Hans Reinhard
Pettenburser-Perwald, a registered Debt Counsellor,
determined in
terms of
Section 86
(6) of the
National Credit Act that
the consumer
was over-indebted and proceeded with an application to place the
consumer under debt review. The application was set
down to be heard
on the 11
th
of
February 2016. A payment restructuring proposal was sent by the Debt
Counsellor to all the credit providers cited herein as the
respondents. Some of them accepted the proposed monthly
payments. The acceptance letters set out the outstanding
amounts,
the proposed instalments, the interest rates, monthly fees
and the concession terms. The consent letters did not only set out
the
proposed reduced instalment and adjusted concession term, but it
also amended the interest rate to a lower rate. For example, Home
Choice lowered their interest rate from 32.65% to 0%, Rainbow finance
from 19.75% to 0%, Standard Bank from 22.60% to 17.55%, ABSA
Bank
from 20.25% to 0%, African Bank from 31% to 0% and Nicol Davis &
Associates from 24% to 0%.
[3]
The matter was served before the magistrate court, Cape Town, Ms
Fredericks, but the court declined to grant the order in the
light of
the fact that various decisions have held that the magistrate’s
court, being a creature of statute, is not empowered
to alter the
contractual interest rate as that effectively changes the terms of
the original agreement. It is so that
a
Magistrate’s Court hearing a matter in terms of
s 87
(1) of the
National Credit Act, 34 of 2005
does not enjoy jurisdiction to vary
(by reduction or otherwise) a contractually agreed interest rate
determined by a credit agreement
.
Section 87(1)
provides that:
“
If
a debt counsellor makes a proposal to the Magistrate's Court in terms
of
section 86
(8)
(b)
,
or a consumer applies to the Magistrate's Court in terms of
section
86
(9), the Magistrate's Court must conduct a hearing and, having
regard to the proposal and information before it and the consumer's
financial means, prospects and obligations, may-
(a)
reject
the recommendation or application as the case may be; or
(b)
make-
(i)
an order declaring any credit agreement to be reckless, and an order
contemplated in
section 83
(2) or (3), if the Magistrate's Court
concludes that the agreement is reckless;
(ii)
an order re-arranging the consumer's obligations in any manner
contemplated in
section 86
(7)
(c)
(ii);
or
(iii)
both orders contemplated in subparagraph (i) and (ii).”
It
is clear from the provisions of
s 87(1)
that the Magistrate’s
Court’s powers to make orders in terms thereof are limited to
those specifically mentioned in
para (a) and (b). In addition to the
statutory provisions, the magistrate relied on
First Rand Bank Ltd
v Adams and Another
2012 (4) SA 14
(WCC), where Davis J held
that:
“
But
the 2% interest charge, so crucial to this proposal, falls outside of
the Act for the reasons I have indicated, namely that
there is no
legislative basis to reduce the interest rate pursuant to such a
proposal. A proposal can extend the time period for
payment or the
proposal can have a window in terms of which payments are not made,
in order to give the consumer an opportunity
to generate liquidity
which will allow payments to resume. However the proposal cannot be
based on a reduction of the contracted
interest rate. When this
factor is taken into account, there is no proposal on the table which
would alter the position from that
which was rejected after an
exchange of correspondence and, by implication, negotiations in terms
of an offer and counter offer
which took place in 2010 in terms of
the letters to which I have already made reference.”
[4]
The approach of the courts to a unilateral reduction of interest by a
debt counsellor in order to alleviate over indebtedness
has been
consistent throughout the various divisions. For example, Van Zyl J
in
SA
Taxi Securitization (Pty) Ltd v Lennard
(an
unreported decision of the Eastern Cape High Court, Grahamstown,
delivered on 21 October 2010) explained thus
:
“
[10]
I
agree with the respondent’s submission that in doing so the
Magistrate acted outside his powers. An order envisaged by section
86
(7)(c)(ii) constitutes a variation of the terms of the credit
agreement. Sub-paragraph (aa) of the said section in terms of
which
both the recommendation and the order was clearly made authorises the
Court to extend the period of payment and reduce the
amounts of each
payment due “accordingly”. It makes no reference to
any other terms of the credit agreement. What
sub-paragraph (aa)
provides for is debt relief to an over-indebted consumer by extending
the period of payment thereby resulting
in a reduction of the
payments without reducing the actual amount owing by him or her in
terms of the relevant agreement. The wording
thereof is clear and
unambiguous and is in my view not capable of any other
interpretation. It accordingly does not permit the
Magistrates’
Court to reduce the interest rate applicable to an agreement in order
to provide debt relief to a consumer.
(See Van Heerden Guide
to the
National
Credit Act
(Lexis
Nexis)
at para 11.3.3.2). It also follows that as the debt counsellor’s
scope for making a proposal as envisaged in
section
86
(6)(c)
is inextricably linked to the powers of the Magistrates’ Court
in section 87 of the Act, he or she cannot recommend
what the said
Court is not empowered to order.
"
In
this court on 12 October 2016 in the matter of
Nedbank
Limited v Jones and Others
2017
(2) SA 473
, Gamble J stated that:
“
[18] As I have
attempted to demonstrate, in this matter the magistrate did not
reduce the interest rate to zero but he permanently
fixed it at a
level which will render the debt incapable of ever being settled by
the Jones’. Adopting the reasoning in Norris,
with which I
fully agree, it follows that the order of the magistrate of 8 June
2010 was ultra vires and accordingly of no force
and effect.”
[5]
Notwithstanding
the clear statutory provisions, and the several dicta affirming the
limitation of the magistrate’s court,
counsel for the appellant
contended that where the parties have agreed to the lowered interest
rate, there is no reason why the
magistrate should not be empowered
to make such agreements orders of the court. According to the
argument, the NCA has not made
specific provisions for when the
parties have negotiated and agreed to a reduced interest rate, and as
such there is a lacuna which
must be filled by the interpretation of
the relevant section in line with the purpose of the NCA.
Furthermore,
so goes the argument, the matter at hand is distinguishable from the
above matters, as in
casu
,
the magistrate was not requested to act
ultra
vires
,
the reduction of the interest rate came through as a result of
bona
fide
negotiations
between the credit providers and the debt counsellor. In short,
both parties consented to the reduction of the
interest rates.
[6]
When asked to provide authority for the contention advanced, Counsel
stated that there are only two High Court orders that specifically
dealt with the Magistrate Courts’ power to make declaratory
orders rearranging the Consumer’s repayment obligations
based
upon the agreed amended interest rates. However, no reasons for the
orders were given. Both orders emanate from the Gauteng
Division of
the High Court, and these are in
Van
der Hoven Attorneys v NCR and Others,
Gauteng
Division Case No.10981/15: and
M.C
Rijkheer t/a Rijkheer & Partners and the National Credit
Regulator
.
In the latter matter, Jansen J gave an order to the following effect:
"It is declared
that:
7.1 In an application to
the Magistrates Court in terms of
section 86
of the
National Credit
Act, Act
34 of 2005 (as amended) and in circumstances where the
parties reached an agreement in terms of which a credit provider
respondent
consents to an amended interest rate other than that
provided to in the credit agreement concerned, the Magistrate may
make an
order rearranging the consumer’s payment obligations
based upon the agreed amended interest rates to give effect to the
agreement
between the parties”.
[7]
It is clear from the aforegoing, that in order to determine whether
it is indeed permissible for the magistrate to make an order
rearranging the consumer’s debt based upon an agreed
amended interest rate reached by the parties, the NCA must be
examined. Counsel for the Appellant argued that a purposive
interpretation of the NCA, read with the Debt Review Task Team
Agreements,
National Credit Regulator Guidelines, Proposed Debt
Review Assessment Guidelines, Debt Review Court Application
Guidelines unequivocally
gives powers to the magistrate to make
orders altering the interest rate where the parties have agreed
thereto.
The approach to
statutory interpretation
[8]
The approach to statutory interpretation is restated
in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
SCA at 603 - 604 as follows:
“
[18] The present
state of the law can be expressed as follows: Interpretation is the
process of attributing meaning to the words
used in a document, be it
legislation, some other statutory instrument, or contract, having
regard to the context provided by reading
the particular provision or
provisions in the light of the document as a whole and the
circumstances attendant upon its coming
into existence. Whatever the
nature of the document, consideration must be given to the language
used in the light of the ordinary
rules of grammar and syntax; the
context in which the provision appears; the apparent purpose for
which it is directed and the
material known to those responsible for
its production. Where more than one meaning is possible each
possibility must be weighed
in the light of these factors. The
process is objective, not subjective. A sensible meaning is to be
preferred to one that leads
insensible businesslike results or
undermines the apparent purpose of the document. Judges must be alert
to, and guard against,
the temptation to substitute what they regard
as reasonable, or businesslike for the words actually used. To do so
in regard to
a statute or statutory instrument is to cross the divide
between interpretation and legislation; in a contractual context, it
is
to make a contract for the parties than the one they in fact made.
‘The inevitable point of departure is the language of the
provision itself’, read in context and having regard to the
purpose of the provision and the background to the preparation
and
production of the document.”
[9]
I start by examining the purpose of the NCA.
Section
2
provides that, the Act must be interpreted in a manner that gives
effect to the purpose set out in section 3. Section 3 of the NCA
provides thus:
"
3.
Purpose of Act.
—
The
purposes of this Act are to promote and advance the social and
economic welfare of South Africans, promote a fair, transparent,
competitive, sustainable, responsible, efficient, effective and
accessible credit market and industry, and to protect consumers,
by—
(a)
promoting the development of a credit market that is accessible to
all South Africans, and in particular to those who have historically
been unable to access credit under sustainable market conditions;
(b)
ensuring consistent treatment of different credit products and
different credit providers;
(c)
promoting responsibility in the credit market by—
(i)
encouraging responsible borrowing, avoidance of over- indebtedness
and fulfillment of financial obligations by consumers; and
(ii)
discouraging reckless credit granting by credit providers and
contractual default by consumers;
(d)
promoting equity in the credit market by balancing the respective
rights and responsibilities of credit providers and consumers;
(e)
addressing and correcting imbalances in negotiating power between
consumers and credit providers by
(i)
providing consumers with education about credit and consumer rights;
(ii)
providing consumers with adequate disclosure of standardized
information in order to make informed choices; and
(iii)
providing consumers with protection from deception, and from unfair
or fraudulent conduct by credit providers and credit bureau;
( f )
improving
consumer credit information and reporting and regulation of credit
bureau;
(g)
addressing
and preventing over-indebtedness of consumers, and providing
mechanisms for resolving over-indebtedness based on the
principle of
satisfaction by the consumer of all responsible financial
obligations
;
(h)
providing
for a consistent and accessible system of consensual resolution of
disputes arising from credit agreements; and
(i)
providing for a consistent and harmonized system of debt
restructuring, enforcement and judgment, which places priority on the
eventual satisfaction of all responsible consumer obligations under
credit
agreements
."
T
he
Supreme Court of Appeal in
Nedbank
v The National Credit Regulator
2011 (3) SA 581
explained
the approach that must be adopted when interpreting the NCA in the
following manner:
"[2]
The NCA must be interpreted in a manner that gives effect to these
objects.
Appropriate
foreign and international law may be considered in construing the
NCA.
Unfortunately,
the NCA cannot be described as the ‘best drafted Act of
Parliament which was ever passed, nor can the draftsman
be said to
have been blessed with the ‘draftsmanship of a
Chalmers’.
Numerous
drafting errors, untidy expressions and inconsistencies make its
interpretation a particularly trying exercise.
Indeed,
these appeals demonstrate the numerous disputes that have arisen
around the construction of the NCA. The interpretation
of the NCA
calls for a careful balancing of the competing interests sought to be
protected, and not for a consideration of only
the interests of
either the consumer or the credit provider."
I
have earlier indicated that it is clear from the provisions of s 87
(1) of the NCA that the magistrate court does not enjoy jurisdiction
to vary (by reduction or otherwise) a contractually agreed interest
rate determined by a credit agreement
.
However,
the scheme of the NCA, and more specifically, s
3(h),
in my view, amply demonstrates that the legislature intended for the
consensual resolution of disputes. In my reasoning, even
though no
specific provision is made for the magistrate’s court to make
the orders such as in the matter at hand, it could
not have been the
intention of the legislature to prevent them from doing so. If it
were, that would give rise to insensible results.
This is so because
it is not unbusinesslike for parties to agree on the terms that will
regulate future business relations and
be able to execute on such
intentions.
After
all, s 86(5)(b) requires the parties to engage in meaningful,
responsible and
bona
fide
negotiations.
It follows, as correctly submitted by counsel for the appellant, that
where parties have entered into responsible
negotiations within the
debt review process and reach agreements amending the contractual
interest rates, in a manner that is not
only satisfactory, but also
to the benefit of all concerned parties, Magistrates do have the
authority to confirm these agreements.
In such circumstances,
Magistrates are not acting ultra vires, but within the scope of their
jurisdiction by giving effect to the
agreements reached in the debt
review process which falls within the ambit, spirit and purpose of
the NCA.
[10]
Counsel for the appellant referred to various tools of interpretation
such as the National Credit Regulator Rules and Debt
Review
Guidelines. Although strictly speaking, such interpretive tools
cannot
ex
post facto
speak
to the background for the purpose of the NCA and the background to
its preparation and production; they do inform the court
of the
understanding of the Act at an operational level. I refer to same for
the sake of completeness as I have already held that
there is nothing
ultra
vires
with
the magistrate’s endorsement of the parties’ agreement to
amend the contractual interest rate applicable in pursuance
of a debt
review arrangement that is satisfactory to all parties.
[11]
The National Credit Regulator (NCR) has put in place measures whereby
debt counsellors and credit providers, in a responsible
and
consensual manner can in the process of the debt review negotiate the
consumers’ contractual obligations. To this
end, NCR
CIRCULAR 15 of 2014 reads thus;
"Debt rearrangement
proposals may be submitted to the credit providers via the Debt
Counselling Rules System (DCRS) or outside
of DCRS. The DCRS is based
upon industry agreed rules and principles.
The DCRS is a set of
standard rules agreed upon by credit providers that provide voluntary
concessions by adjusting the contractual
fees, interest rates and
repayment terms on credit agreements that are restructured under debt
counselling.
The NCR has noted that
the system is not utilised optimally by the industry and would like
to inform you that it recognizes the
DCRS and encourages all credit
providers and debt counsellors to apply these standard rules.
The NCR believes that
application of the DCRS by all industry participants will positively
impact the debt counselling landscape
as more consensual agreements
will be reached and consumers will save money on legal fees as
matters will be referred to the National
Consumer Tribunal for
consent orders."
[12]
In addition to the aforegoing, the NCR CIRCULAR 2 of 2015 of the Debt
Review Task Team Manual outlines the Minimum Debt
Counselling
System Requirements and Principles of Debt Restructuring and
recognises the voluntary concessions that may be made
by creditors
and provides that:
“
Rules
applied in the restructuring of consumer debt obligations are a
critical success factor in the debt review process.
Such rules,
in order to succeed in the process have to:
1.
Resolve
the over-indebtedness situation within the parameters of the Act and
any voluntary concessions agreed to by the credit providers;
2.
Treat
all credit providers and categories of credit agreements fairly and
consistently in accordance with the Act;
3.
Be
applied in a manner that would guarantee the integrity of application
and calculations in order to gain the trust and acceptance
of credit
providers; and
4.
Generate
proposals that are:
a.
Standardized
to enable efficient and consistent processing; and
b.
Contain
standardized data/information that allows efficient and consistent
consideration of and responses to debt re-arrangement
proposals by
credit providers.
3.1.2
All credit providers must receive consistent treatment per credit
agreement category under the rules in terms of the proposed
restructuring of each agreement, in that:
a)
the amount allocated to each credit agreement must be applied
consistently to all credit agreements per credit agreement category
and in accordance with the rules as defined in the proposal…..
b)
any extension in the payment period must be applied proportionately
to contractual repayment term…..
c)
any payment interruption should equally and proportionately apply to
all credit agreement in that category;
d)
interest rate and fee reductions (if consented to by the credit
providers) are to be applied consistently to all credit
agreements……..”
Similarly,
the National Credit Regulator in its guidelines in the Task Team
Agreement states that
.
. .
1.
…
.
2.
To
make provisions for fee and interest rate concessions by Credit
Providers for qualifying Consumers. Although Courts do
not have
the discretion to reduce fees or interest rates these concessions
indicate that the agreement between parties with regards
to the
repayment plan submitted to Court in line with the provisions of the
Act in this regard. It is important to note that
although a
Court has no authority to amend interest rates and fees; this is not
applicable when an agreement in writing is in place
to amend the
interest rate and fees. Where an agreement is in place, proof
of agreement should be included in the Debt Review
application and
this agreement should be accepted by the Court. The reason for
this is that, that agreement concluded between
the parties should be
confirmed by the Court.
Although
the above provision unequivocally acknowledges the limitation of the
magistrate’s court with regard to amending the
contractual
interest rate, it adds a rider to the effect that where parties have
agreed on an amended interest rate, the court
should accept the
agreement. It seems to me that these guidelines were developed
because of the
lacuna
in the NCR.
In
the
NCR
CIRCULAR 1 OF 2017 – DEBT COUNSELLING RULES SYSTEM
:
"The DCRS is a set
of standard rules agreed upon by the industry that provide
voluntary
concessions
by
exclusion of certain charges, adjusting the contractual fees,
interest rates and repayment terms on credit agreements that are
restructured under debt counselling. The objective of the DCRS is
to
enable the smooth negotiation and acceptance, thus improving the
solve rate of proposals whilst addressing inconsistencies in
debt
review.
The NCR is in negotiation
with several parties to manage and operate the DCRS on behalf of the
NCR. Whilst this process is underway,
the
NCR expects the credit provider industry to continue to adhere to the
Task Team guidelines and offer concessions to consumers
under debt
review."
[13]
It remains to be said that the NCR Guidelines and or Circulars or the
Rules set out in the Task Team, are in line with the
provisions of s
3(i) of the NCA which call for a consistent and harmonised system of
debt restructuring.
Conclusion
[14]
I have in this judgment held that a purposive interpretation of the
NCA leads to the conclusion that the magistrate’s
court has
jurisdiction to make orders re-arranging a consumer’s debt
based upon an agreed amended interest rate reached by
the parties.
It follows that the appellant’s appeal must succeed. I am
also inclined to grant the orders that
had been declined by the
magistrate.
[15]
In the result, the following order will issue.
1. The appeal is upheld.
2. No order as to costs
is made.
3. It is further declared
that the First Respondent is over indebted as envisaged in
section 79 of the NCA.
3.1
In terms of section 86 (11) of the NCA, all Credit Providers who have
sent notices of termination of the debt review process
in terms of
section 86 (10) are directed to resume with the Debt Review.
3. Her obligations in
terms of the credit agreements towards her credit providers must be
rearranged in line with the parties’
agreement as follows:
Credit
Reference
New
Annual
Interest
New
Monthly
Instalment
Balance
as at date of COB
Estimated
Period of Repayment
Rainbow
Finance (Pty) Ltd
[...]
0.00%
R400.00
R15498.20
90
RCS
Cards (Pty) Ltd
[...]
22.65%
R110.80
R
7 739.09
95
Woolworths
(Pty) Ltd
[...]
22.65%
R290.00
R26 624.43
127
Standard
of South Africa Ltd
[...]
17.55%
R190.00
R9199.13
89
Woolworths
(Pty) Ltd
[...]
21.55%
R250.00
R22 800.51
121
Foschini
Retail group (Pty) Ltd
[...]
26.00%
R180.00
RR16815.53
112
Absa
Bank Ltd
[...]
0.
00%
R192.21
R14 971.
85
86
Woolworths
(Pty) Ltd
[...]
22.65%
R160.00
R14 999.52
109
African
Bank Ltd
[...]
0.00%
R1110.00
R100 870.60
90
RCS
Cards (Pty) Ltd
[...]
21.00%
R130.00
R11 996.76
101
Nicol,
Davis & Associates
[...]
0.00%
R120.00
R11 125.04
87
__________________
Ndita,J
I
agree
_________________
Holderness,
AJ
For
Appellant : Adv. Q Zimmermann
Instructing
Attorney: K Armfield