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[2010] ZAGPJHC 28
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Standard Bank of South Africa Limited v Kruger; Standard Bank of South Africa Limited v Pretorius (2009/45438, 2009/39057) [2010] ZAGPJHC 28; 2010 (4) SA 635 (GSJ) (23 April 2010)
REPUBLIC OF SOUTH AFRICA
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO: 2009/45438
In the matter between:
STANDARD
BANK OF SOUTH AFRICA LIMITED
Applicant
and
KRUGER,
WERNER HUGO
Respondent
AND
CASE NO:
2009/39057
In the matter between:
STANDARD
BANK OF SOUTH AFRICA LIMITED
Applicant
and
PRETORIUS,
THERESA LYNN
Respondent
J U D G M E N T
KATHREE-SETILOANE, AJ
:
[1]
This
judgment concerns two applications for summary judgment by Standard
Bank of South Africa Limited (“
the
applicant
”)
against:
1.1
Werner Hugo Kruger (“Kruger”), for the outstanding amount
of a loan granted by the applicant in favour of Kruger and
secured by
a mortgage bond registered over immovable property, Erf 1700,
Rynfield Township, Registration Division IQ, Province
of Gauteng, and
held by Deed of Transfer 049672/07; and
1.2 Theresa
Lyn Pretorius (“Pretorius”), for the outstanding amount
of a loan granted by the applicant in favour of
Pretorius and secured
by a mortgage bond registered over immovable property
,
Erf 2395, North Riding Extension 38 Township, Registration Division
IQ, Province of Gauteng, and held by Deed of Transfer 155307/07
(“
the
properties
”).
[2] The
applications were heard together for the sake of convenience. The
two applications turn upon the proper interpretation
of section
86(10) of the National Credit Act, No. 34 of 2005 (“
the
Act
”),
and in particular, whether it empowers a credit provider, as defined
in the Act, to terminate a debt review process once
it has been
referred, by a debt counsellor with recommendations, to a
Magistrate’s Court for consideration.
[3] The two
the applications for summary judgment were brought by the applicant
on the basis that it had terminated the debt reviews
of Kruger and
Pretorius (“the respondents”) respectively, in terms of
section 86(10) of the Act, due to their default
in terms of the
respective mortgage bonds.
[4] The
respondents
admit their indebtedness to the applicant as claimed in the
respective summons issued against each of them, and raise similar
defences, namely that they are each over-indebted as envisaged in the
Act, and had approached a debt counsellor prior the institution
of
the respective actions by the applicant. It is common cause that each
of the respondents applied for a debt review, in terms
of section 86
of the Act, prior to the institution of the respective actions,
against them, by the applicant.
[5
]
The applicant terminated the respondents’ respective debt
reviews in accordance with section 86(10) of the Act due to their
default in terms of the respective mortgage bonds. The applicant
gave notice of termination to each of the respondents and their
debt
counsellors respectively, and to the National Credit Regulator, in
accordance with the provisions of section 86(10) of the
Act, more
than 60 days after the date on which each of the respondents applied
for debt review.
[6
]
It is not in dispute that the Act applies to each of respondents’
loan agreements in question, or that they are consumers
as defined in
the Act, or that the applicant is a credit provider as defined
therein.
[7
]
The respondents, however, deny that their respective debt reviews
were terminated lawfully. Mr Kruger alleges, in his affidavit
resisting summary judgment, that the termination of his debt review
was prematurely executed as his debt review application was
brought
within the 60 business days of the time period contemplated in
section 86(10) of the Act, and that the matter is
sub-judice
as the debt review proceedings before the Benoni Magistrate’s
Court have not been finalised. He, therefore, contends that
the
summary judgment application against him should be dismissed.
[8
]
Ms Pretorius likewise alleges, in her affidavit resisting summary
judgment, that the applicant’s summons in respect of
the action
against her is premature, in violation of section 130 of the Act; and
should for this reason be dismissed. In addition,
she alleges that
the applicant has not complied with section 129 of the Act, and that
the credit agreement constitutes reckless
credit.
[9] This
Court is therefore called upon to determine:
9
.1
Whether section 86(10) of the Act empowers a credit provider to
terminate the debt review process where a debt counsellor has
referred the review, with recommendations, to a Magistrate’s
Court for consideration;
9.2
Whether
section 130(4)(b) of the Act is applicable where the applicant has
failed to comply with section 86(10) of the Act.
[10] The
interpretation of section 86(10) of the Act must be viewed against
the purpose and objectives of section 86 of the Act,
and the Act as a
whole. Section 2(1) of the Act provides:
“
2(1) This
Act must be interpreted in a manner that gives effect to the purpose
set out in section 3.
”
[11
]
Section 3 of the NCA provides:
“
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 –
…
promoting equity in the credit market by balancing the respective
rights and responsibilities of credit providers and consumers;
…
(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;
providing for a consistent and accessible system of consensual
resolution of disputes arising from credit agreements; and
(i)
providing for a consistent and harmonised system of debt
restructuring, enforcement and judgment, which places priority on
the
eventual satisfaction of all responsible consumer obligations under
credit agreements.
”
The purpose of the Act is clearly to promote and protect consumers.
The Act must accordingly be interpreted to give effect to this
core
purpose.
[1
2]
Section 86 describes the process that a consumer is required to
follow when applying for a debt review. The section provides
as
follows:
“
86.
Application for debt review. –
(1)
A consumer may apply to a debt counsellor in the prescribed manner
and form to have the consumer declared over-indebted.
(2)
An
application in terms of this section may not be made in respect of,
and does not apply to, a particular credit agreement if,
at the time
of that application, the credit provider under that credit agreement
has proceeded to take the steps contemplated in
section 129 to
enforce that agreement.
(3) A
debt counsellor -
may require the consumer to pay an application fee, not exceeding
the prescribed amount, before accepting an application in terms
of
subsection (1); and
may not require or accept a fee from a credit provider in respect
of an application in terms of this section.
(4) On
receipt of an application in terms of subsection (1), a debt
counsellor must -
provide the consumer with proof of receipt of the application;
notify, in the prescribed manner and form –
(i) all credit providers that are listed in the application; and
(ii) every registered credit bureau.
(5) A
consumer who applies to a debt counsellor, and each credit provider
contemplated in subsection (4)(b), must -
comply with any reasonable requests by the debt counsellor to
facilitate the evaluation of the consumer’s state of
indebtedness
and the prospects for responsible debt re-arrangement;
and
participate in good faith in the review and in any negotiations
designed to result in responsible debt re-arrangement.
(6) A
debt counsellor who has accepted an application in terms of this
section must determine, in the prescribed manner and within
the
prescribed time -
whether the consumer appears to be over-indebted; and
if the consumer seeks a declaration of reckless credit, whether
any of the consumer’s credit agreements appear to be reckless.
(7) If,
as a result of an assessment conducted in terms of subsection (6), a
debt counsellor reasonably concludes that –
the consumer is not over-indebted, the debt counsellor must
reject the application, even if the debt counsellor has concluded
that a particular credit agreement was reckless at the time it was
entered into;
the consumer is not over-indebted, but is nevertheless
experiencing, or likely to experience, difficulty satisfying all the
consumer’s
obligations under credit agreements in a timely
manner, the debt counsellor may recommend that the consumer and the
respective
credit providers voluntarily consider and agree on a plan
of debt-arrangement; or
the consumer is over-indebted, the debt counsellor may issue a
proposal recommending that the Magistrate’s Court make either
or both of the following orders –
(i) that one or more of the consumer’s credit agreements
be declared to be reckless credit, if the debt counsellor has
concluded
that those agreements appear to be reckless; and
that one or more of the consumer’s obligations be
re-arranged by –
(aa) extending the period of the agreement and reducing the
amount of each payment due accordingly;
(bb) postponing during a specified period the dates on which
payments are due under the agreement;
(cc) extending the period of the agreement and postponing
during a specified period the dates on which payments are due under
the
agreement; or
(dd) recalculating the consumer’s obligations because of
contraventions of Part A or B of Chapter 5, or Part A of Chapter
6.
(8) If a debt counsellor makes a recommendation in terms of
subsection (7)(b) and –
the
consumer and each credit provider concerned accept that proposal,
the debt counsellor must record the proposal in the form
of an
order, and if it is consented to by the consumer and each credit
provider concerned, file it as a consent order in terms
of section
138; or
if paragraph (a) does not apply, the debt counsellor must
refer the matter to the Magistrate’s Court with the
recommendation.
(9) If a debt counsellor rejects an application as contemplated
in subsection (7)(a), the consumer, with leave of the Magistrate’s
Court, may apply directly to the Magistrate’s Court, in the
prescribed manner and form, for an order contemplated in subsection
(7)(c).
(10) If a consumer is in default under a credit agreement that
is being reviewed in terms of this section, the credit provider in
respect of that credit agreement may give notice to terminate the
review in the prescribed manner to -
the consumer;
the debt counsellor; and
the
National Credit Regulator, at any time at least 60 business days
after the date on which the consumer applied for the debt
review.
(11)
If
a credit provider who has given notice to terminate a review as
contemplated in subsection (10) proceeds to enforce that agreement
in
terms of Part C of Chapter 6, the Magistrate’s Court hearing
that matter may order that the debt review resumes on any
conditions
the court considers to be just in the circumstances.”
(own emphasis)
[13
]
It is clear from a reading of section 86(10) that the termination of
a debt review process, referred to in the sub-section, is
expressly
qualified by the words “
that
is being reviewed in terms of this section
”.
A credit provider’s right to terminate in terms of section
86(10) of the Act would, consequently, apply only to a
debt review to
which section 86 applies. Therefore, once a debt review has been
referred to the Magistrate’s Court in terms
of section 86(8)(b)
of the Act, then section 87 finds application. It reads as follows:
“
87.
Magistrate’s Court may re-arrange consumer’s
obligations.
– (1) 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 –
reject the recommendation or application as the case may be; or
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;
an order re-arranging the consumer’s obligations in any
manner contemplated in section 86(7)(c)(ii); or
both orders contemplated in subparagraph (i) and (ii).
The
National Credit Regulator may not intervene before the Magistrate’s
Court in a matter referred to it in terms of this
section.
”
[14
]
I accordingly agree with the respondents that once a debt review is
referred, by a debt counsellor with recommendations, to the
Magistrate’s Court for consideration, in terms of section
86(8)(b) of the Act, it falls within the ambit of section 87 of
the
Act and not section 86 of the Act. Accordingly, any termination of
the debt review, in terms of 86(10), would be unlawful.
[15
]
I therefore agree with Mr Feldgate, who appeared on behalf of Ms
Pretorius, that once a debt review has been referred to the
Magistrate’s Court for consideration, the “
debt
review
”
process, as conducted in terms of section 86 of the Act ends, and the
matter becomes, simply put, a review before the Magistrate’s
Court. The Magistrate’s Court is empowered, in a review before
it, in terms of section 87 of the Act, to
inter
alia
re-arrange a consumer’s obligations or take similar steps to
relieve a consumer of his or her over-indebtedness.
[16
]
It is clear from a proper reading of section 86 of the Act, that the
only review process that may be terminated, in terms of
section
86(10) of the Act, is the one which is undertaken by a debt
counsellor. In other words, any of the review steps taken by
the debt
counsellor, in terms of sections 86(6) to 86(8)(a) of the Act, prior
to a referral to the Magistrate’s Court. I
am of the view that
any contrary interpretation in terms of which a credit provider would
be entitled to terminate the debt review
process after a period of 60
days, despite it having been referred to a Magistrate’s Court,
would lead to an absurdity in
that any delay by any party to such
application, any delay occasioned at the instance of the court or
even any delay due to unforeseen
circumstances would deprive the
consumer of the opportunity to have the matter properly determined by
that court.
[17
]
Furthermore, section 86(10) clearly contemplates that the debt
review process before a debt counsellor will be completed at least
60
business days after the date on which the consumer applied for the
debt review, failing which the credit provider may terminate
the
review in the prescribed manner. Therefore, having regard to
lengthy delays when attempting to obtain a date for a hearing
in the
Magistrate’s Court, the likelihood of multiple postponements in
a review, which has a multitude of credit providers
and other similar
factors, I am of the view that an unqualified entitlement to
terminate proceedings, where a court has been seized
with the review
therein, without reference to that court is clearly not consistent
with a core objective of the Act, which is
the promotion and
protection of consumers.
[18
]
In the recent unreported judgment of
Firstrand
Bank v B L Smith
Case No. 24205/08, 31 October 2008, Witwatersrand Local Division,
Lamont J had occasion to deal with the issue of the consequences
that
may arise from the failure of a debt counsellor to refer a debt
review to a magistrate in terms of section 86(8)(b) of the
Act. He
held as follows at page 10, paragraph 13:
“
It
is immediately apparent that the debt counsellor not having taken the
next step as provided for in Section 86 that the Defendants
are able
to frustrate and have frustrated the fulfilment of the events set out
in Section 88(3) which otherwise would occur. This
has resulted in
the credit provider being unable to take steps to institute
proceedings to recover the debt. The inactivity of
the counsellor
and/or consumer resulted in the creation of a moratorium.
…
If the
notice is seen in isolation there appears to be a lacuna in the Act,
in that the consumer is able to prevent the credit provider
from ever
instituting action against it. A dishonest debtor could frustrate
the rights of legitimate creditors by starting the
process and then
stopping at mid-stride as happened in this matter. There would then
be a permanent moratorium. The credit provider
would never be able
to obtain relief and is forever unable to exercise or enforce by
litigation his rights to payment.
”
[
19]
Although I share Lamont J’s concerns that there appears to be
a
lacuna
in the Act, in that the consumer is able to prevent the credit
provider from ever instituting action against it and could
accordingly
frustrate the rights of legitimate creditors, it is
important to distinguish the facts in that case from the two
applications before
this Court. The facts in the
Firstrand
Bank
v
B L Smith
related to an instance where the debt review process commenced, in
terms of section 86(1) read with section 86(4) of the Act, after
which no further steps were taken, i.e. the debt review was not
referred to the Magistrate’s Court in terms of section 86(8)(b)
of the Act. Lamont J’s concerns accordingly have no
application in the two matters at hand, as the debt counsellor, in
each of these matters, has in fact referred the debt review with his
recommendations to the Magistrate’s Court for consideration.
[2
0]
Accordingly I am of the view that once the debt review process has
been initiated, which thereafter results in the referral
of the debt
review to the Magistrate’s Court, the credit provider is not
entitled to institute court proceedings to enforce
its claim, until
the Magistrate’s Court has made a determination in terms of
section 87 of the Act.
[21
]
In contending for an interpretation of section 86(10) of the Act
that would allow a creditor to terminate a debt review process
once a
debt counsellor has referred it to a Magistrate’s Court for
consideration, the applicant relies on the procedural
inability of
the Magistrate’s Court, to deal with section 87 proceedings
within 60 days from the date on which it was referred
to it. I am of
the view that that such an interpretation will lead to an absurdity,
in that the whole purpose of the Act would
be circumvented, due to
the Magistrate’s Court’s inability to process section 87
applications within 60 business days
from the referral date, being
the referral to the credit provider, and not the referral to the
Magistrate’s Court. Such
an interpretation would be contrary
to the intention of the legislature as set out in section 2(1) read
with
section 3
of the
National Credit Act. In
S
v Tom
and
S
v Bruce
[1990] ZASCA 38
;
1990 (2) SA 802
(A), the Appellate Division held as follows at page
807-809:
“
The
primary rule in construction of statutory provisions is to ascertain
the intention of the legislature. One does so by attributing
to the
words of a statute their ordinary, literal, grammatical meaning.
Where the language of a statute so viewed, is clear and
unambiguous,
effect must be given thereto, unless to do so ‘would lead to
absurdity to glaring that it could never have been
contemplated by
the legislature, or where it would lead to a result contrary to the
intention of the legislature, as shown by the
context or by such
other considerations as the Court is justified in taking into account
…
(Per
Innes CJ in R v Venter
1907 TS 910
at 915.) See also
Shenker
v The Master and Another 1936 (AD) 136 at 142
.
”
[2
2]
It is clear from a reading of section 86(10) of the Act, that only
debt reviews conducted by debt counsellors, in terms of sections
86(6) to 86(8)(a) of the Act, maybe terminated in terms of that
sub-section, at any time at least 60 business after which the
consumer applied, to the debt counsellor, for a debt review in terms
of section 86(1) of the Act. Section 86(10) clearly contemplates
that
the sixty days referred to therein, will run at least 60 days from
the date on which the consumer first applied, to a debt
counsellor,
for a debt review, and not that it will run at least 60 days from the
date of referral, by the debt counsellor, to
a Magistrate’s
Court.
[23
]
It is furthermore clear from a proper reading of section 86(10) that
it is not the magistrate that is required to make a determination
at
least 60 days from the date on which the consumer applied for the
debt review, in terms of section 86(1) of the Act, but rather
the
debt counsellor. In other words, should he fail to conclude the
review process, within 60 days from the date on which the consumer
applied for the debt review, in terms of section 86(1) of the Act,
then a credit provider would be entitled, in terms of section
86(10)
of the Act, to give notice to terminate the review, in the prescribed
manner, to the consumer, the debt counsellor, and
the National Credit
Regulator. Any contrary interpretation would not have been
contemplated by the legislature, as it would be
to the detriment of
the consumer.
[24
]
In summary, I am of the view that notice in terms of section 86(10)
of the Act is not competent where a debt counsellor has already
referred the debt review to the Magistrate’s Court. Any
contrary interpretation would render the entire debt review process
ineffectual, as all credit providers will simply wait for 60 working
days, knowing that no Magistrate’s Court will be able
to
adjudicate the debt review, in terms of section 87 of the Act, to
finality within 60 business days from referral to it. Such
an
interpretation would circumvent the protection afforded by the Act,
and would be in conflict with the intention of the legislature.
It is
vital, in this regard, that the provisions of the Act and, in
particular, the provisions of section 86(10) be viewed in their
proper context and not to the detriment of the consumer, which the
Act so clearly seeks to protect.
[2
5]
Mr Van der Merwe, appearing on behalf of Mr Kruger, submitted that
section 129 of the Act also supports an interpretation that
once a
debt review process has been referred to the Magistrate’s
Court, termination thereof in terms of section 86(10) is
incompetent.
Section 129 provides:
“
129.
Required procedures before debt enforcement.
– (1) If the consumer is in default under a credit agreement,
the credit provider –
may draw the default to the notice of the consumer in writing and
propose that the consumer refer the credit agreement to a debt
counsellor, alternative dispute resolution agent, consumer court or
ombud with jurisdiction, with the intent that the parties
resolve
any dispute under the agreement or develop and agree on a plan to
bring the payments under the agreement up to date;
and
subject to section 130(2), may not commence any legal proceedings
to enforce the agreement before –
(i) first providing notice to the consumer, as contemplated in
paragraph (a), or in section 86(10), as the case may be; and
meeting any further requirements set out in section 130.
(2)
Subsection (1) does not apply to a credit agreement that is subject
to a debt restructuring order, or to proceedings in a court
that
could result in such an order.
”
[2
6] It
is clear from a reading of section 129(2) of the Act, that neither
section 129(1)(a) nor 129(1)(b) of the Act applies to
instances
where a matter has been referred to a court for determination. The
provisions of section 129(1) of the Act are, in this
regard,
expressly qualified by the provisions of section 129(2); the latter
specifically excluding the application of section 29(1)
of the Act to
a credit agreement that is subject to a debt restructuring order, or
to proceedings in a court that could result
in such an order. A
referral of a debt review by a debt counsellor, in terms of section
86(8) of the Act, to a Magistrate’s
Court for determination, in
terms of 87 of the Act, may result in a restructuring or
re-arranging order in terms of sub-sections
(b)(i) or (ii) Act. It
therefore follows that in terms of section 129(2) Act, notice to
terminate a review, in terms of section
86(10) of the Act, would be
incompetent, once the debt review is referred, by a debt counsellor,
to a Magistrate’s Court
for determination.
[27
]
In the premises, I am of the view that section 86(10) of the Act does
not empower the applicant to terminate the debt reviews
of Kruger
and Pretorius as their respective debt counsellors have already
referred their respective reviews, with recommendations,
to the
Magistrate’s Court for consideration. The applicant’s
termination of the debt reviews in the two applications
before this
Court is, therefore, invalid and of no force or effect.
[28
]
Ms Pretorius raised an additional point
in
limine
that the applicant has not complied with section 86(10) of the Act,
as it has failed to provide proof that the termination notice
was
transmitted to the National Credit Regulator. The Court in
ABSA
B
ank
Limited
v Prochaka t/a Bianca Cara Interiors
2009
(2) SA 512
D
at
paragraphs 28 to 31 held as follows in respect of the provision of
notice as contemplated in section 86(10) of the Act:
“
I
am fortified in this conclusion by having regard to the scheme of the
Act, particularly pertaining to the provisions of s 86.
The credit
provider is also precluded, by the provisions of s 129(1)(b), from
commencing any legal proceedings before first providing
notice to the
consumer, as contemplated by s 86(10), to terminate the review that
has been commenced by the debt counsellor pursuant
to the provisions
of s 86.
...
The notice
to the consumer to terminate the review, as envisaged in s 86(10),
may only be given at least 60 days after the application
made by the
consumer to apply for review.
The wording
of s 86(11), in my view, renders it beyond any argument that the
notice contemplated in s 86(10) is a necessary first
step before the
credit provider proceeds to commence litigation.”
[
29]
Ms Bezuidenhout, appearing on behalf of the applicant, submitted
that in the event that this Court finds that the applicant
has not
complied with the notice requirements contemplated in Section 86(10)
of the Act, then it must make an order in terms of
s 130(4)(b) of the
Act which provides:
“
(
4)
In any proceedings contemplated in this section, if the court
determines that –
...
the credit provider has not complied with the relevant provisions
of this Act, as contemplated in subsection (3)(a), or has approached
the court in circumstances contemplated in subsection (3)(c) the
court must –
(i) adjourn the matter before it; and
make an appropriate order setting out the steps the credit
provider must complete before the matter may be resumed;
...”
[3
0]
However, in view of my conclusion that section 86(10) of the Act does
not empower the applicant to terminate the respective
debt reviews of
the respondents, as their respective debt counsellors have already
referred their reviews, with recommendations,
to the Magistrate’s
Court for consideration, there is no need for me to make a decision
on whether section 130(4)(b) of the
Act finds application where the
requisite notices contemplated in section 186(10) of the Act are not
provided. There is likewise
no need for me to decide on Ms
Pretorius’s further point that the notice which applicant had
sent to her was not in compliance
with section 96 of the Act, which
requires the party giving legal notice to deliver that notice to the
other party at the address
of the other party as set out in the
agreement, or the address most recently provided by the recipient.
[31] In the
result, I am satisfied that the respondents, in each of the
applications, have a bona fide defence that is good in law,
and
accordingly grant them:
leave to
defend the respective actions against the
m
and,
the costs in
the two summary judgment applications are to be costs in the cause
of the two main actions, respectively.
_____________________________________
F KATHREE-SETILOANE
ACTING JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
COUNSEL FOR
THE APPLICANT
ADV F BEZUIDENHOUT
IN BOTH APPLICATIONS
I
NSTRUCTED BY BLAKE BESTER INC
COUNSEL FOR MR
KRUGER ADV C VAN DER MERWE
INSTRUCTED BY C M M ATTORNEYS INC
COUNSEL FOR MS PRETORIUS ADV N FELGATE
INSTRUCTED BY TAITZ &SKIKINE INC
DATE OF HEARING 11 FEBRUARY 2010
DATE OF JUDGMENT 23 APRIL 2010