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[2015] ZAGPJHC 173
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Nedbank v Gossayn and Others (33795/12) [2015] ZAGPJHC 173 (18 February 2015)
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Note: Certain personal/private details of parties or witnesses
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REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 33795/12
DATE: 18 FEBRUARY 2015
In the matter between:
NEDBANK
....................................................................................................................................
Plaintiff
And
GOSSAYN
LEVINA
.........................................................................................................
1ST
Defendant
GOSSAYN STEPHAN
ANTHONY
...............................................................................
2ND
Defendant
CEDAR COUNTRY INN 2008
CC
................................................................................
3RD
Defendant
J U D G M E N T
VICTOR J:
[1] The plaintiff bank lent and
advanced money to the first defendant and it seeks payment.
Issues for determination
[2] The defendants have raised two
issues, namely, that the certificate of balance was incorrect and
that there was no compliance
with the provisions of the
National
Credit Act 34 of 2005
, in relation to the subsequent conclusion of a
consolidation agreement between the parties.
Relevant background facts
[3] The plaintiff in this matter
extended four different loans to the first defendant. The amount lent
and advanced were secured
by the registration of a mortgage bond
registered by the first defendant in favour of the plaintiff. During
2011 the loans were
consolidated to assist the first defendant and to
ensure a lower interest rate. The mortgage bonds were registered
over portion
424, a portion 1..... of the farm P............
1............ The loans were entered into on 30 August 2002, 15 May
2006, 17 July
2007 and 24 December 2007.
[4] On or about 7 June 2008 the first
defendant committed a breach of the agreements by failing to pay and
the debit orders were
reversed. The reversals of the first
defendant’s debit orders were repeated from 10 December 2008 to
4 August 2012. In order
to secure the indebtedness owing to the poor
payment record, on 29 November 2006 the second defendant executed a
written deed of
surety-ship in favour of the plaintiff and bound
himself as surety and co-principle debtor with the first defendant in
respect
of the first defendant’s liability to the plaintiff.
Due to the first defendant’s continued breaches and on or about
May 2010 the plaintiff and the first defendant began negotiations
with a view to consolidating the first defendant’s loan
agreements.
[5] The consolidation agreement was
finally signed a year later on 13 July 2011. The first defendant
breached the consolidation
agreement immediately after it was entered
into. As a result of the previous breaches of the various agreements
increased the amount
of indebtedness increased owing to the
non-payment of interest.
[6] As part of the negotiation the
first defendant was required to provide additional security and on or
about 1 July 2011 the third
defendant executed a written deed of
suretyship in favour of the plaintiff in terms of which it bound
itself as surety and co-principle
debtor with the first defendant in
the amount of
R9 675 000.00. It bears mention that
the first defendant is the sole member of the third defendant. The
third defendant is in liquidation.
[7] A certificate of balance indicates
that the first defendant is indebted to the plaintiff in the amount
of R12 012 755.21. Insofar
as it may be relevant to the defendants’
case, the requisite notice was given to the defendants in terms of
section 129
of the
National Credit Act. The
first defendant does not
live in the immovable property. She has four other properties
registered in her name in the Honeyvale
area. The plaintiff also
seeks interest at 9.25% per annum calculated from 1 January 2015 to
date of final payment.
[8] The purpose of the
National Credit
Act is
to promote responsible credit granting and use and for that
purpose to prohibit reckless credit granting and to provide for debt
reorganisation in cases of over indebtedness. In this case the
consumer is a businesswoman, who not only owns immovable properties,
but also owns the immovable property from where she conducted her
business which appears to be a hotel type business from the mortgaged
property. The plaintiff’s witnesses testified that the first
defendant is a successful businesswoman and impressed as such
in
particular when the consolidated loan was negotiated.
The consolidated loan
[9] It is the plaintiff’s case
that the consolidation agreement is not a new loan but merger of the
four loans. All the plaintiff
did over the period of one year, was
to negotiate the consolidated loan. The
first defendant was fully involved in
the process hence it took a year to conclude. If regard be had to the
consolidated agreement
of the loan it is of importance that the
plaintiff bank itself regards the loan as one being in terms of the
National Credit Act. The
agreement of loan refers to the amount
which would be registered R9 505 130.00. The interest is set out
fully. The total cost
of the agreement is set out as well as the
ultimate amount which the first defendant would pay over the 30-year
period.
[10] In paragraph 4 of the consolidated
loan reference is made to the fact that no money would be advanced to
the first defendant
or on her behalf. Notwithstanding the heading of
the consolidated agreement it is the plaintiff’s case that in
the absence
of advancing further monies the loan is not governed by
the National Credit Act. It was argued on behalf of the defendants
that
the fact that an additional amount of R1 million described as
security was included in the consolidated agreement this meant,
therefore,
that there was an additional amount and, therefore, the
plaintiff failed to comply with the provisions of the
National Credit
Act.
[11
] In RMB Private Bank, a division of
the First Rand Bank v Kaydeez Therapies CC, (in liquidation), case
number 2012/00793 the Court
held that:
“Only parliament can determine
whether or not the
National Credit Act of 2005
in its entirety or in
part is applicable to an agreement between creditor and debtor.”
[12] In other words, the mere fact that
this consolidated agreement is framed with reference to the
National
Credit Act in
my view, does not bring it within the ambit of the
National Credit Act despite
the heading at the top of the agreement.
[13] Of further importance is the fact
that in clause 21 the defendants were not precluded from applying to
a debt counsellor in
the prescribed manner to have the defendants
declared over indebted. The case as currently argued for the
defendants is that the
bank should never have consolidated the loans
because at the time she was over indebted. The date of the loan
agreement is 13
July 2011. At no stage during the negotiations did
the first defendant claim to be over indebted. If regard be had to
the annual
financial statements it is clear that the first defendant
anticipated very fully that she could pay the indebtedness. I will
refer
to the figures shortly.
Defence of over-indebtedness
[14] In the declaration made by the
first defendant to the plaintiff she showed her assets as being
substantial. Both Mr Vos and
Mr Golden of the plaintiff testified
very clearly how they very carefully considered the financial status
of the first defendant
and her ability to repay same. This
negotiation took place over a year and they covered every aspect of
her finances. They could
see there was nothing that she could hide
nor could she introduce any subterfuge because her banking account
and that of the third
defendant was held by the plaintiff and they
analysed the accounts very carefully.
[15] At that stage, at the time of
making the application, that application agreement was signed already
5 April 2011 well before
the consolidation agreement and she
reflected her expenses as R77 000.00 per month and the amount that
she wished to secure in
the consolidated agreement was R9 675 000.00.
[16] In my view, the first defendant is
a well-informed business person. She is not the kind of person which
the
National Credit Act intends
to protect. If regard be had to the
annual financial statements of the business (third defendant), in
particular, for the year
ending 28 February 2011 the first defendant
received rentals in the amount of R1 048 735.00. She had retained
income of R1 120
793.00 and there was a net profit of R1 473 740.00
and she had drawings of R199 760.00 and her retained income as at
2011 was R1
274 220.00. In other words, at the time that the bank
did the financial assessment it was clear that the first defendant
had ample
income to pay the indebtedness which was R76 000.00 per
month in respect of the consolidated loan.
[17] If that was not sufficient, the
further interim financial statement was called for by the plaintiff.
The statement is dated
15 May 2011. The statement showed receipts of
rental and municipal costs amounting to R218 486.00 which reflected a
period of less
than three months. She had her retained profit, she
had drawings and, in my view, the bank very carefully considered her
repayment
ability. It is clear that the first defendant could afford
the repayment amount.
[18] Prior to the consolidation
agreement being approved it went through two senior committees of the
plaintiff. The consolidation
agreement covered the capital balance
outstanding and the arrears.
[19] Taking into account the loans, the
capital balance outstanding on the Corsa bakkie of R28 000.00, her
two credit cards (which
were settled) meant that her exposure to the
plaintiff was R9 675 742.03 and this was the amount that formed the
basis of the consolidation
agreement.
S8
(4) of the
National Credit Act [20
]
In terms of
section 8
(4) of the
National Credit Act, it
is necessary
to consider whether the consolidation agreement was governed by
section 8
of the
National Credit Act. In
terms of
section 8
(4) an
agreement, irrespective of its form, but not including an agreement
contemplated in subsection (2) constitutes a credit
transaction if it
is an incidental credit agreement, an instalment agreement, a
mortgage agreement or secured loan, a lease or
any other agreement
other than a credit facility. In my view, the final agreement that
the defendant concluded with the plaintiff
was a consolidation
agreement and, therefore, is not the type of agreement which is
defined in terms of
section 8
(4) of the Act. I accept the submission
by the plaintiff that this agreement did not fall within the purview
of the
National Credit Act.
The
effect of debt review,
re-arrangement order or agreement
[21] The first defendant contends that
because the consolidation agreement provided for additional security
of one million rand
there had been a contravention of the provisions
of
s88
of the
National Credit Act and
this invalidated the
consolidation agreement. The preamble of
s 88
(1) of the
National
Credit Act provides
that a consumer who alleges that he or she is
over indebted may incur no further charges under the credit facility
other than a
consolidation agreement. More specifically in terms of
section 88
(1) (a), (b) and (c), the Act provides that a further
credit agreement cannot be entered into or further charges incurred:
(a)
where the debt counsellor rejects the application or (b) where
the Court has determined that the consumer is not over indebted and
(c) a Court having made an order or the consumer and credit providers
having made an agreement unless the consumer fulfilled the
obligations by way of a consolidation agreement.
[22] None of the events contemplated in
terms of
s88
were pending when the first defendant entered into the
consolidation agreement. There were no matters pending before a debt
counsellor
nor did the question of over indebtedness pend before a
court at the time of the consolidation agreement. On a proper reading
of
S88
of the
National Credit Act the
defendants cannot escape their
indebtedness when none of the events envisaged were pending and
moreover a consolidation agreement
is one of the agreements, which
falls outside of the definition. The defendants reliance on
s88
must
fail.
Other defences
[23] There was a further issue of
non-compliance raised by the first defendant regarding a
pre-quotation agreement. Mr Vos testified
that he could not remember
providing the defendants with a pre-quotation agreement prior to the
conclusion of this consolidation
agreement. Mr Golden disagreed with
that and his recollection was that such an agreement was in the
security section of the bank.
It is also common cause that the
defendants did not bring any application in terms of
rule 35
(3) to
obtain copies of these additional documents on which they wished to
rely in this trial.
[24] The defendants also relied on
section 119
of the Act which provides that a credit limit under a
credit facility may be increased and it is the defendant’s case
that
the credit assessment was not done in accordance with this
section. The defence was that the plaintiff should have known that
the first defendant was already over indebted at that stage and,
therefore, despite the fact that she agreed to this additional
R1
million this was invalid as she was already over indebted. I cannot
accept that submission. The increase in security did not
mean an
increase in the loan per se. The Act does distinguish between small
and intermediate or large loans. See Ex Parte Ford
and two similar
cases
2009 (3) SA 376
(WC) para 20 referring to BMW Financial
Services SA [Pty] Ltd v Mudaly
2010 (5) SA 618
(KZN).
[25] The purposes of the Act are set
out in s(3) of the
National Credit Act. The
provisions are directed
at providing protection to the consumer and redressing the imbalance
that will usually exist between credit
provider and consumer. They
aim to prevent exploitation of the consumer by reckless lending and
to facilitate the resolution of
the difficulties that afflict
consumers to become over indebted. In so doing, a balance is to be
struck between the interest of
the consumer and those of the credit
provider. However, what is very clear is that each agreement has to
be determined in terms
of
section 8
in terms of the nature of the
agreement, the subject matter of the agreement, the substance, the
purpose and the function of a
particular agreement as well as the
intention of the parties gathered from the conduct.
[26] All this should be taken into
account and should form the basis of prime considerations in this
regard. See Voltex [Pty] Ltd
v Chenleza CC and others 2010 (5) 267
(KZP) and Bridgeway Ltd v Markham
[2008] ZAGPHC 251
;
2008 (6) SA 123
(WLD).
[27] The defendant also relied on s117
and s119 of the National Credit Agreement Act. S117 provides for
changes by agreement. S
117 is subject to s119 which provides for
increases in credit limits, in particular, section 119 (6):
“If when increasing the credit
limit under a credit facility the credit provider alters any form of
the credit agreement,
the credit provider must comply with the
requirements set out in section 93 and 117.”
[28] Section 93 provides as follows:
“The credit provider must deliver
to the consumer without charge a copy of the document that records
their credit agreement
and the credit provider must comply with the
various requirements.”
[29] The defendants did not testify.
The witnesses for the plaintiff testified and were adamant that
copies of documents were given
to them and also at the time of
concluding the consolidation agreement.
The Evidence
[30] It is common cause that none of
the problems raised in relation to non-compliance with procedure in
relation to the earlier
four loans was raised. Those loans seem to
have met the requirements of the
National Credit Act. It
is only the
consolidation agreement that is challenged. In order to finally
assess the question of the two defences raised by the
defendants, who
did not testify, the evidence needs to be analysed. Ms Moagi
testified that the figures in the certificate of
balance were
correct. The computers were in order, her boss, Mr Drosky also
signed off the certificate as correct. In cross-examination,
she very
properly conceded that if incorrect figures were given to her then
the balance in the certificate would be incorrect but
that the
certificate was prima facie correct. On behalf of the defendants,
however, no figure was put to her as to its alleged
incorrectness.
Instead, a mere generalised allegation was put to her that her
figures were wrong. This cavalier off the cuff approach
about alleged
incorrect figures by the defendant has no merit. One cannot simply
attack a prima facie balance in a certificate
without having any
figures to attack the facts in the certificate of balance.
[31] Mr Vos testified that he was the
plaintiff’s relationship manager and had a lot of dealings with
the defendants in order
to try and assist them with their cash flow
problems. They had enough assets to cover the indebtedness. It does
seem that at the
time when she defaulted on the consolidation
agreement in respect of the debit orders there was a cash flow
problem.
[32] It was put to him that he was not
present when the consolidation agreement was signed and that the
first defendant was also
not present. He denied this and stated that
he would not have witnessed the agreement if he was not present. I
am of the view
that Mr Vos is an honest witness. In particular, it
was put to him that he did not prepare a pre-agreement quotation. He
could
not remember it and conceded that he had not prepared one.
[33] Mr Golden testified. He was a
senior manager at the time the consolidation agreement was concluded
and he confirmed that indeed
there was the pre-quotation and that the
defendants had simply not asked for a copy of that for purposes of
trial. It was in the
security section. Mr Golden testified that from
the moment the defendants defaulted they were placed in the legal
department.
Negotiations commenced to try and arrange more
favourable terms for the defendant. I got the impression that the
consolidation
agreement was not an agreement that was imposed on the
first defendant. She clearly wanted to conclude the consolidation
agreement.
At various times she had to provide throughout that year
of negotiation different figures and different documents in order to
assist
the bank to assess her credit worthiness and her ability to
repay the loan.
[34] As already indicated, there were
term loans and mortgage loans that were merged in order for her to
obtain a more favourable
interest rate. He described in detail how
the defendant’s financial profile was analysed and considered.
Affordability was
one of the key issues in the exercise. The credit
committee, of which he was a member, carefully considered all the
figures. They
did a due diligence and they came to the conclusion
that the repayment of R76 480.40 per month was affordable for her and
I have
already referred to the context of the annual financial
statement and the interim financial statement. The bank was in a
position
to verify the figures in the annual financial statements
since all her banking was done with the plaintiff.
[35] The third defendant rented the
property from the first defendant from which to run the business and
I have already referred
to the rental that she received, her drawings
and also her loan account and the money that was owed to her. It was
submitted on
behalf of the defendants that the rental was in fact not
a true figure because that included disbursement for water and
lights.
However, the defendants failed to testify when they were in a
position to do so on the question of the water and lights accounts
since they themselves were running the business. The defendants did
not testify, they closed their case before testifying. In the
absence
of contrary evidence I, therefore, accept that the assessments done
by the bank were in accordance with good and best practice.
[36] Mr Golden also testified that
there was consistency in her financial profile and all these factors
went into considering her
ability to afford this loan. She had a
contract with Goldfields of
R500 000.00 per month. She also had to
waive benefits, which included use rights over the mortgage property.
She had income of
R2 million to service the debt of 12 instalments
at R67 000.00 totalling R918 000.00 per annum. The net profit
reflected on the
balance sheet was good amounting to a couple of
hundred thousand per annum.
[37] A further feature in assessing her
affordability is a document filled in by the first defendant’s
husband, the second
defendant, which showed assets of R15.5 million
and liabilities of R9.2 million. There were supporting vouchers. The
fact that
the first defendant continued to pay off her credit cards
and car loan does reflect that all this was affordable. The first
defendant
did not testify and would have had her own motive not to
repay the instalment, particularly immediately after the
consolidation
agreement. She never bothered to testify to explain
why she no longer paid. She either failed, or could not, or refused
to pay
the consolidated loan instalment. It is not for the court to
speculate.
[38] It was put to the plaintiff’s
witnesses on affordability, viz that if the first defendant called up
her loan account
the third defendant would have been insolvent. Even
if her loan account was factored out of the situation there was still
sufficient
income for her at the time to repay the amount of R67
000.00 per month. The defendants referred to her drawings, amounting
to
some R16 000.00 a month and submitted that she would never have
been able to repay a loan of R76 000.00 per month. This is a
simplistic
and opportunistic analysis of the actual situation and I
reject it. The first and second defendant were selective in choosing
which creditors to pay. They elected not to have the third defendant
pay a rental figure of R67 000 per month. There is ample other
evidence and context to show that she did not have an income of R16
000.00 per month. She had four other homes. Presumably as
a
businesswoman, she did not leave them to stand empty without a rental
stream.
[39] There was also criticism that the
plaintiff had not ceded the book debts of the third defendant to the
plaintiff. There was
a further
criticism in relation to affordability
and over
indebtedness. It was submitted that the plaintiff should not have
given a 55-year-old woman a 30-year loan. Mr Golden
testified that
the first defendant herself was optimistic and had she properly
managed her financial affairs she could have repaid
the 30 year loan
with ease even if it meant she would be 85 years old at the time of
the final instalment. However, in the absence
of the first defendant
testifying, there were a lot of possibilities such as the sale of the
business or the sale of the property
if the time came for her not to
be able to manage. This was not canvassed before me in order to
disprove the plaintiff’s
allegation that the consolidated loan
was affordable.
[40] I accepted the evidence of the
plaintiff’s witnesses. I accept the evidence of Ms Moagi
regarding the accuracy of the
certificate of balance. I also accept
the evidence of Messrs Vos and Golden on the aspect relating to best
practice in relation
to the requirements of the
National Credit Act
even
if there was no need to do so. The first defendant is a
businesswoman. She is not a person who needs the protection of the
National Credit Act, its
purpose being really to protect a vulnerable
consumer.
[41] In addition, I also have regard of
the case of Voltex already referred to and looking at the
consolidation agreement it is
merely a merger of the agreements.
Those agreements were properly negotiated in terms of best practice
but do fall outside the
ambit of the
National Credit Act. I
also have
regard to the subject matter, the substance, the purpose and function
of the particular agreement as well as the intention
of the parties
gathered from their conduct, which forms a prime consideration in
this matter.
[41] In the result, I find that the
plaintiff succeeds in this action.
The order I would make is:
1. judgment is granted against the
first and second defendants jointly and severally the one paying the
other to be absolved as
follows:
1.1. Payment of the sum of R12 012
755.21.
1.2. Interest on the aforesaid amount
at the rate of 9.25% per annum calculated from 1 January 2015 to date
of final payment.
1.3. Cost of suit.
2. An order declaring the following
immovable property specially executable:
2.1. Holding 4......... a portion of
1.......... of the farm P............. 1..........., previously known
as holding 1..........
C............ A..............
H................. registration division IQ Province of Gauteng
situated stand 4........., a portion
of 1......... of the farm
P.......... mortgaged under mortgage bond number B5...........,
B0........... and B0............ measuring
1755 square metres held by
deed of transfer T1......... subject to the terms and conditions
therein.
2.2. Holding 4........... a portion of
portion 1....... of the farm P........... 1................
previously known as
2........ C........... A..........
Holdings, registration division IQ Province of Transvaal situated at
stand 4....... a portion
of 1............. of the farm
P.............. 1............. mortgaged under mortgage bond number
B5............. and B..............
measuring 1754 square metres held
by deed of transfer T............... subject to the conditions
contained therein.
M. VICTOR
JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION
FOR THE PLAINTIFF : Adv. HJ Smith
INSTRUCTED BY : Mahomeds Inc.
Unihold House, Illovo
Tel: 011 343 9100
Docex: 57, Johannesburg
FOR THE DEFENDANT : Adv. N Riley
INSTRUCTED BY : Michael Saltz
Attorneys
Framework House, Rouxville
Tel: 011 027 2055
Johannesburg
Date of Hearing: 13th of February
Date of Judgment: 18th of February
2015