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[2010] ZAGPPHC 10
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Absa Technology Finance Solutions (Pty) Ltd v Viljoen t/a Wonderhoek Enterprises (2008/28978) [2010] ZAGPPHC 10; 2012 (3) SA 149 (GNP) (2 March 2010)
IN
THE NORTH GAUTENG HIGH COURT
(REPUBLIC
OF SOUTH AFRICA)
CASE
NO: 2008/28978
Date:02/03/2010
In
the matter between:
ABSA
TECHNOLOGY FINANCE SOLUTIONS (PTY) LIMITED
Plaintiff
and
JACOBUS
SCHALK VILJOEN
t
/a
WONDERHOEK
ENTERPRISES
Defendant
JUDGMENT
1.
In this action the plaintiff claims under a written agreement
described in the body of the document as a Master Rental Agreement,
which I shall call in this judgment the Agreement. The Agreement is a
common law lease,
locatio
conductio ret,
in
terms of which the plaintiff leased to the defendant a digital
display board for 60 months at an agreed invariable monthly rental.
2.
The plaintiff alleges that the defendant defaulted in his payments
and seeks judgment in respect of arrear rentals, damages and
return
of the goods together with the usual ancillary relief.
3.
A number of defences have been raised on the pleadings, of which I
need mention only two.; In response to the allegation that
the
parties entered into the Agreement, the defendant pleaded that he was
misled and coerced into signing the Agreement in circumstances
in
which the defendant would never have done so if he had full knowledge
of the documentation he signed and its implications and
that "[i]n
the premises the defendant denies any valid master rental agreement
as alleged by the plaintiff'.
4.
A further defence raised is that the Agreement is subject to the
National Credit Act, 34 of 2005 ("the NCA") and that
the
plaintiff is barred from proceeding with the action because of the
provisions of s 129 read with s 130 of the NCA. The enquiry
is
therefore whether the Agreement is a credit agreement as contemplated
by the NCA.
5.
It is common cause that the plaintiff has not complied with s
129(1)(a) of the NCA which empowers a credit provider to draw to
the
attention of a consumer the default of the consumer and to propose
that the consumer take one or more of the steps identified
in the
section to resolve any dispute under the agreement between them or
develop and agree on a plan to bring the payments under
the agreement
up to date.
6.
Subject to an exception not presently relevant, it is only where a
credit provider has given the consumer a notice under s 129(1)(a)
and
certain other requirements have been met that a credit provider is
entitled to approach a court to enforce a credit agreement.
Section
130(4)(b) provides that unless there has been such compliance, a
court asked to enforce a credit agreement
must
adjourn
the matter before it and make an appropriate order setting out the
steps the credit provider must complete before the court
case may be
resumed.
7.
So it is very important to determine whether the NCA applies to the
agreement relied upon by the plaintiff because if it does,
then the
matter cannot proceed. For this reason, after hearing the parties, I
ruled under Rule 33(4) that this question be decided
first and
separately from all other issues arising in the action.
8.
A credit agreement is defined in s 1 of the NCA to mean (unless the
context indicates otherwise) an agreement that meets all
the criteria
set out in s 8. Section 8 is contained within Part C of Chapter 1 of
the NCA. The rubric is headed
Classification
and categories of credit agreements.
Subject
to certain exceptions not presently relevant, an agreement will
constitute a credit agreement if it is a credit facility,
a credit
transaction or a credit guarantee (or a combination of one or more of
them) as described in subss (3), (4) or (5) of s
8.
9.
During the course of argument for the plaintiff, counsel subjected
the Agreement to an analysis in relation to each of these
subspecies
of credit agreements but I need not deal with all of them because
counsel for the defendant contended only that the
Agreement
constituted a credit transaction as contemplated by s 8(4)(f), which
reads as follows:
(4)
An agreement, irrespective of its form but not including an agreement
contemplated in subsection (2), constitutes a credit transaction
if
it is-
(a)
a pawn transaction or discount transaction;
(b)
an incidental credit agreement, subject to section 5 (2);
(
c) an instalment agreement;
(d)
a mortgage agreement or secured loan;
(e)
a lease; or
(f)
any other agreement, other than a credit facility or credit
guarantee, in terms of which payment of an amount owed by one person
to another is deferred, and any charge, fee or interest is payable to
the credit provider in respect of-
(i)
the
agreement; or
(ii)
the
amount that has been deferred.
10.It
will be noted that the legislature has identified the agreements hit
by s 8(4)(f) by reference to their terms ("...
in
tenns of
..."),
something to which I shall return later. I therefore turn to
summarise those terms of the agreement I regard as relevant
to the
enquiry.
11.
In the section of the Agreement described as the Schedule, provision
is made for 60 monthly rentals, all of the same amount,
to be paid by
the defendant "monthly in advance from the commencement date".
12.
Clause 2: Ownership of the goods vests in the plaintiff. The
defendant never acquires ownership of the goods. I pause to mention
that this means that the Agreement is not a "lease" for the
purposes of s 8(4)(e) because a
lease
as
defined in s 1 of the NCA is an agreement in terms of which, amongst
other things, ownership of the goods passes to the consumer
at the
end of the term of the agreement. As has been observed, the
lease
contemplated
by the NCA is not a lease at all (Guide to the
National Credit Act,
Scholtz
et al,
8-9
per
JM
Otto)
but
the old hire purchase agreement.
13.
Clauses 5.1 and 5.2: By signing the Agreement, the defendant
acknowledges that he has inspected the goods and is satisfied with
them. The defendant must at his own cost procure (from someone other
than the plaintiff and described in the Agreement as the
supplier)
and
take delivery of the goods, accepting them on the plaintiffs behalf
and holding them on behalf of the plaintiff for the duration
of the
Agreement.
14.
Clause 5.3: The defendant is deemed to accept the goods on behalf of
the plaintiff when they are delivered to him by the supplier
and he
acknowledges such delivery.
15.
Clause 5.4: The defendant has no claim against the plaintiff if,
after having signed the "schedule and acceptance certificate",
it subsequently transpires that the goods are unacceptable to the
defendant.
16.
Clause 6: The question of maintenance of the goods is not dealt with
in the Agreement and the monthly payments do not include
any payment
in respect of maintenance which, if dealt with at all, must be dealt
with in a maintenance agreement, separate and
distinct from the
agreement.
17.
Clause 9.1: If the defendant defaults in his obligation to pay, the
plaintiff may terminate the Agreement, take possession of
the goods,
retain all amounts paid by the defendant and claim all amounts which
are in arrears together with, as pre-estimated
liquidated damages,
the future rentals which would have fallen due during the currency of
the agreement.
18.
Clause 9.3: If the defendant defaults in his obligation to pay, he
must pay interest at the rate of 6% above the publicly quoted
prime
interest rate of the plaintiff's bankers at the nominal annual rate
compounded annually.
Discussion
19.
It seems to me essential that for an agreement to be brought within
the reach of
s 8(4)(f)
, it must provide for payment of an amount
which
19.1
is
owed
by
one person to another; and
19.2
is
deferred.
20.
The Agreement is simply not one in terms of which any payment of an
amount owed is deferred. The defendant was obliged to pay
the monthly
rentals
in
advance.
There
can in my view be no question of the deferral of an obligation to pay
in this context because there could be no deferral unless
there was a
prior obligation to pay which for monetary consideration was
postponed to a later date.
21.
Furthermore, in my view, to qualify under
s 8(4)
(f), there must in
terms of the relevant agreement be a fee, charge or interest payable
to the plaintiff in respect of the agreement
or the amount that has
been deferred. There is no such fee, charge or interest payable under
the Agreement.
22.
Counsel for the defendant submitted that the monthly rentals were in
fact deferred because, so it was argued, the obligation
to pay the
rentals for months 2 to 60 were deferred until those months arrived.
Counsel's submission is supported by Professor
Otto.
See
Guide to the
National Credit Act,
op
cit,
at
8-10.
23.
But that is not what the Agreement provides. The defendant is neither
obliged nor entitled under the terms of the Agreement
to defer any
such payment (or to put it another way, he does not owe any amount
for eg month 2 until the last day of month 1) and
incurs no
obligation to pay any fee, charge or interest if he chooses to wait
until the day before the month in question before
he pays the
instalment for that month.
24.
Lastly, counsel for the defendant submitted that if one had regard to
the relationship between the parties and the fact that
the goods are
supplied not by the plaintiff but by a supplier, the true nature of
the agreement was a credit transaction in terms
of which, in effect,
the plaintiff provided the defendant with finance to enable it to
acquire the use of the goods. Counsel referred
me to the following
passage from Guide to the
National Credit Act where
Professor
Otto
says
the following at 8-10:
A
lease in terms of which the lessee pays rent which does not include a
fee, charge or interest, and in terms of which ownership
remains with
the lessor throughout, is not subject to the
National Credit Act at
all. A warning should be sounded here, however. One of the oldest
tricks in the book is a contract of lease in terms of which the
lessor charges a "flat rental" which, on the face of it,
does not include any interest. However, if the financial realities
of
the contract are analysed, it will often become clear that the total
rental represents full amortisation of the purchase price
of the
object the lessor himself paid to a third party to obtain the object
in order to let it, and includes his profit as well.
This profit is
nothing other than disguised interest. In fact, such a contract often
provides for a variable rental during the
term of the contract which
rental is determined by a particular reference rate, such as the
prime rate of a certain bank. That
is in itself a dead give-away.
Courts will always look at the substance of an agreement and not be
misled by its form. These so-called
"interest-free" leases
may well end up being subject to the
National Credit Act, either
as
leases in terms of the Act or as credit agreements in the broad
sense, [footnotes omitted]
25.
In addition, I was referred during argument to an unreported judgment
of Kruger J in the Free State High Court delivered on
22 October 2009
in the matter of
Absa
Technology Finance Solutions Ltd
i/
Pabi's
Guest House CC and Others
under
case no 2169/2008. This was an application for default judgment upon
an agreement very similar to that with which I am dealing.
The
learned judge came to the conclusion with reference to
Tucker
v Ginsberg
1962
2 SA 58
W at 62F-H (at p15 of the typewritten judgment) that when a
financial institution leases goods which are to be supplied by a
trader,
the likely inference is that interest will be payable, but
that in the absence of such provisions in the contract, evidence will
be required to show that interest has been stipulated and charges are
included.
26.
However, as the case before the learned judge was one in which
default judgment was sought, he came to the conclusion that as
he was
bound to accept the allegations on the papers before him, he was
bound to grant default judgment.
27.
In
Tucker
v Ginsberg
at
62F, the following was stated:
As
each party has given the transactions a different label, I think that
it is appropriate to add here that the label used is not
decisive.
Despite the label, the Court must look at the nature of the
transaction and not its object because, as stated above,
the object
is the same in both cases - see
Olds
Discount
Co. Ltd v John Playfair Ltd
1938
(3) AER 275
at p277, and in ascertaining its nature the Court must
have regard mainly to its substance and not merely its form.
28.
Tucker
v Ginsberg
was
decided under the Usury Act, 37 of 1926. Unders 14(1) ofthe Usury
Act, the provisions of the Usury Act applied to:
...
any transaction which, whatever its form may be and whether or not it
forms part of another transaction, is substantially one
of money
lending and whether or not the transaction forms part of any other
transaction, and includes any arrangement under which
goods are
purchased under a condition of re-purchase at a higher price In any
such arrangement for re-purchase the transaction
shall be regarded as
a loan ofthe amount ofthe power price, and the excess of the higher
price over the lower price shall be deemed
to be interest on the
lower price and subject to the provisions of the Act.
In
those circumstances it was of course entirely appropriate to look to
see whether the transaction was substantially one of money
lending.
29.
But there is no equivalent provision under the NCA. Section 8(4)(f)
requires, as I have pointed out, that the transaction be
examined by
reference to the terms ofthe agreement under consideration.
30
The situation would be different if the case were made that the
agreement under scrutiny is a simulated transaction or a transaction
in fraud of the NCA. As Innes CJ said in
Dadoo
Ltd v Krugersdorp Municipality
1920
AD 530
at 543:
That
a transaction
in
fraudem legis
is
of no effect is an undoubted principle of our law. But the extent and
fimits of the doctrine are not easy to determine. Speaking
generally,
every statute embodies some policy or is designed to carry out some
object. When the language employed admits of doubt,
it falls to be
interpreted by the Court according to recognized rules of
construction, paying regard, in the first place, to the
ordinary
meaning of the words used, but departing from such meaning under
certain circumstances, if satisfied that such departure
would give
effect to the policy and object contemplated. I do not pause to
discuss the question of the extent to which a departure
from the
ordinary meaning of the language is justified, because the
construction of the statutory clauses before us is not in
controversy. They are plain and unambiguous. But there must, of
course, be a limit to such departure. A Judge has authority to
interpret, but not to legislate, and he cannot do violence to the
language of the lawgiver by placing upon it a meaning of which
it is
not reasonably capable, in order to give effect to what he may think
to be the policy or object of the particular measure.
31.
And in
Commissioner
of Customs and Excise v Randies, Brothers & Hudson Ltd
1941
AD 369
, Watermeyer JA said at 395-396:
A
transaction is not necessarily a disguised one because it is devised
for the purpose of evading the prohibition in the Act or
avoiding
liability for the tax imposed by it. A transaction devised for that
purpose, if the parties honestly intend it to have
effect according
to its tenor, is interpreted by the Courts according to its tenor,
and then the only question is whether, so interpreted,
it falls
within or without the prohibition or tax. A disguised transaction in
the sense in which the words are used above is something
different.
In essence it is a dishonest transaction: dishonest, in as much as
the parties to it do not really intend it to have,
inter
partes,
the
legal effect which its terms convey to the outside world. The purpose
of the disguise is to deceive by concealing what is the
real
agreement or transaction between the parties. The parties wish to
hide the fact that their real agreement or transaction falls
within
the prohibition or is subject to the tax, and so they dress it up in
a guise which conveys the impression that it is outside
of the
prohibition or not subject to the tax. Such a transaction is said to
be
in
fraudem legis,
and
is interpreted by the Courts in accordance with what is found to be
the real agreement or transaction between the parties.
32.
The legislature was at pains to exclude both the common law lease of
goods
simpliciter
and
the lease of immovable property, irrespective of its form - as to
which see s 8(2){b) - from the ambit of the NCA. The type
of lease
under discussion, where the lessor acquires the goods for the purpose
of leasing them to the lessee, has been part of
our commercial life
for generations. If the legislature had wished to bring such a lease
within the NCA as a credit transaction
it could easily have done so
by the use of plain and unambiguous language to that effect. After
pointedly excluding the common
law lease
simpliciter
from
the reach of the statute in s 8(4)(e), it is most unlikely that the
legislature intended to bring a subset of the common law
lease within
the statute under s 8(4)(f>.
33.
Amongst the purposes of the NCA as stated in its long title are the
intention to promote access to consumer credit and generally
to
regulate consumercredit. "Credit" as defined in the NCA
means, when used as a noun, (a) the deferral of payment of
money owed
to a person, or a promise to defer such a payment; or (b) a promise
to advance or pay money to or at the direction of
another person. A
common law lease such as the Agreement does not involve the provision
of credit either as defined in the NCA
or as the term is generally
understood in commerce. A lessor who buys goods for the purpose of
leasing them to a specific lessee
does not extend credit to such a
lessee, regardless of how the lessor calculates the rentals he wishes
to receive, any more than
does a landlord who buys a building not for
his own use but for the purpose of accommodating tenants.
34.
The Agreement is therefore not one which is calculated to thwart the
objects ofthe NCA. Even if one assumes that its terms were
carefully
drafted to keep it outside the reach ofthe NCA, this would make no
difference. The legislature has decided that common
law leases not
providing for the deferral of an amount owed should not be hit by the
NCA. Persons of business are fully entitled
to regulate their affairs
to take advantage of this legislative decision.
35.
The defendant has not raised a defence that the Agreement is a
simulation and that the true inwardness ofthe contractual
relationship
between the parties is that it is a credit transaction.
There is therefore no reason to consider this aspect.
36.
The parties were agreed on the form of the order I should make. Costs
were however not argued and I shall therefore rule that
the costs of
the argument before me are to be reserved for later determination.
Order
37
I
make the following order.
37.1
The agreement pleaded by the plaintiff in paragraph 3 of the
particulars of claim and reproduced at pages 13-14 of the paginated
pleadings is not a credit transaction as contemplated in s 8(4)(f) of
the National Credit Act, 34 of 2005 ("the NCA");
37.2
The plaintiff is not barred from proceeding with the action by reason
of the provisions of s 129 read with s 130 of the NCA;
37.3
The trial of this action is postponed sine die;
37.4
The costs of the argument before me in relation to the applicability
of the provisions of the NCA mentioned above to the agreement
pleaded
by the plaintiff are reserved for later determination. Either party
may set the matter down on the opposed motion roll
or the trial roll
for argument on the question of these costs.
NB
Tuchten
Acting
judge of the
High
Court
2
March 2010
AbsaVlljoen28978
08
Argued:
26
February 2010
For
plaintiff:
Adv
JJ Durandt, instructed by Jay Mothibi Inc,
Johannesburg
For
defendant Adv M van Rooyen, instructed by Le Grange Attorneys,
Pretoria