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[2010] ZAGPPHC 25
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First Rand Bank Limited v Dhlamini (50146/09) [2010] ZAGPPHC 25; 2010 (4) SA 531 (GNP) (17 March 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
CASE
NO: 50146/09
Date:
17/03/2010
In
the matter between
FIRST
RAND BANK
LIMITED
Plaintiff
and
MSAWENKOSI
ARTHUR DHLAMINI
Defendant
JUDGMENT
MURPHY
J
1.
This is an application for summary judgment. The applicant has issued
summons against the defendant for payment of the sum of
R825 056.74.
being the balance of monies due, owing and payable under a covering
mortgage bond by reason of the alleged failure
by the defendant to
pay the bond instalments. The applicant further seeks an order
declaring the mortgaged property executable
for the amounts owing.
2.
The defendant (respondent) has filed an intention to defend which led
the applicant to bring the application for summary judgment
in which
it makes the standard averments that in its opinion the defendant has
no
bona
fide
defence
to the action and appearance to defend has been entered solely for
the purpose of delay.
3.
In his affidavit, the respondent, an attorney, does not deny that he
is in default in paying the monthly instalment under the
bond.
Instead he raises one crisp defence; namely that he did not receive
notice in terms of
section 129(1)
of the
National Credit Act 34 of
2005
.
4.
As the wording of the section will assume some importance later in
this judgment it is necessary to set it out. It provides:
If
the consumer is in default under a credit agreement, the credit
provider -
(a)
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
(b)
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
(ii) meeting
any further requirements set out in
section 130
5.
Section 129(1)
must be read with
section 130(1)
, the relevant part of
which provides:
Subject
to subsection (2), a credit provider may approach the court for an
order to enforce a credit agreement only if, at that
time, the
consumer is in default and has been in default under that credit
agreement for at least 20 business days and
(a)
at least 10 business days have elapsed since the credit provider
delivered a notice to the consumer as contemplated in ...
section
129(1)...
(b)
in the case of a notice contemplated in
section 129(1)
, the consumer
has -
(I)
not responded to that notice: or
(ii)
responded to the notice by rejecting the credit
providers
proposals ...
6.
In terms of
section 130(3)
the court must be satisfied that there has
been compliance with the procedures required by
section 129.
0
cm; line-height: 200%">
7.
The respondent admits that a
section 129(1)
notice was addressed to
him and dispatched by registered post to his address. His own
investigations show that the letter was received
on 23 May 2009 at
Tembisa North post office. For reasons which he has been unable to
establish, no notification was sent to him
to inform him that the
registered letter was awaiting collection. Since the letter was not
collected it was returned to sender,
presumably the applicant.
8.
There is no dispute that the applicant is a credit provider, the
respondent a consumer, and their agreement a credit agreement.
Consequently it is common cause that
section 129(1)
is applicable.
9.
The respondent submits that because the
section 129(1)
notice never
came to his attention there was no compliance with the provision and
hence the summons issued is premature and that
summary judgment may
not be granted.
10.
The agreement between the parties, a "Home Loan Agreement",
provides in clause 4.34 thereof for
domicilia
citandi et executandi.
It
reads:
"The
parties elect the following address for all communications and
services of notices in respect of any legal proceedings
which may be
instituted by virtue hereof."
The
respondent elected his home address to which the registered letter
was addressed.
11.
The applicant's position is that provided it properly addressed and
dispatched the notice by registered post to the respondent's
chosen
domicilium
that
is sufficient, and it is irrelevant whether the notice in fact came
to the respondent's attention.
12.
Neither counsel furnished me with heads of argument. They did not
need to do so because, as they say, their respective positions
have
been argued, considered and determined in two possibly conflicting
decisions of the Durban and Coast Local Division of the
Kwa-Zulu
Natal High Court. By way of a test case they seek a determination of
which line of reasoning is to be preferred in this
division. There is
some doubt about whether the two decisions are in irreconcilable
conflict, a matter to which I will turn presently,
but the positions
of the parties are indeed so and accordingly they require a
definitive ruling.
13.
In
Munien
v BMW Financial Services (SA) (Pty) Ltd and Another
(unreported
16103/08 3 April 2009) Wallis J rejected the contention that the
section 129(1)
notice had to come to the attention of the consumer
and held that a notice is delivered if it is sent by registered post
to an
address selected by the consumer, irrespective of whether it
comes to the attention of the consumer. The learned judge's ruling
was predicated upon what he understood by the word "delivered"
in
section 130(1)(a)
of the Act. Seemingly in contrast, in
ABSA
Bank Ltd v Prochaska t/a Bianca Cara Interiors
2009
(2) SA 512
(D), Naidu AJ expressed the following view (at para 54):
"[54]
In my view the present Act, with regard to the notice contemplated in
section 129(1)(a)
thereof, represents a radical departure from its
predecessor. Whereas the Credit Agreements Act 75 of 1980 merely
requires the
credit receiver (sic - shculd be 'grantor") to post
by prepaid registered mail and, in this way, "has notified the
credit
receiver" of default, the present Act in section
129(1)(a) creates an obligation on the credit provider (when it
decides to
take such a course) to draw the default to the notice of
the consumer in writing. Section 129(1)(b) creates a bar against the
credit
provider legitimately commencing any legal proceedings to
enforce the agreement before
providing
notice
to
the consumer as contemplated in section 129(1 )(a). In terms of
section 130(1)(a) a credit provider may only approach a court
for an
order to enforce a credit agreement if, inter alia, at least ten
business days have elapsed since a credit provider
delivered
a
notice,
as
contemplated in section 129(1)(a), to the consumer.
[55]
The words 'draw the default to the notice of the consumer',
'providing notice' and 'delivered a notice' in the context in which
these appear in the previous paragraph to my mind cumulatively
reflect an intention on the part of the legislature to impose upon
the credit provider an obligation which requires much more that the
mere dispatching of the notice contemplated by section 129(1
)(a) to
the consumer in the manner prescribed in the Act and the regulations.
The credit provider is required, in my view, to bring
the default to
the attention of the consumer in a way which provides an assurance to
the court that the default has indeed been
drawn 'to the notice of
the consumer'."
14.
While the
dicta
of
Naidu AJ are in stark contradiction to the ruling of Wailis J, the
finding of Naidu AJ in that case was in fact not. For despite
having
said that the default had to be brought to the attention of the
consumer, the learned acting judge immediately restricted
the range
of the principle by holding, in contradictory fashion, that where the
consumer has chosen a
domicilium
then
"the credit provider should ensure, if the notice is sent by
mail, that the address to which the notice is posted is in
every
respect precisely the same." In other words, a properly and
precisely addressed notice dispatched to the
domicilium
will
be sufficient. Upto that point the two judgments are reconcilable.
However, in argument before me counsel submitted that the
decision of
Naidu AJ, correctly interpreted, requires in addition to delivery
that the notice and its contents actually come to
the attention of
the consumer as is evident from the learned acting judge's reliance
upon the definition of "notice"
in the
New
Oxford Dictionary
to
mean "attention, observation" and the emphasis he placed
upon the structure and design of the Act aimed at consumer
protection, thus justifying a stricter interpretation.
15.
The judgment of Wallis J in
Munien
makes
no explicit mention of the earlier
Prochaska
decision.
Nevertheless, the learned judge addresses its assumptions and policy
basis head on. In the result we are left with two
diametrically
opposing views with significantly different consequences for credit
providers and consumers in the credit market.
16.
In
Munien
the
applicant had entered into an instalment sale agreement in respect of
a motor vehicle. After falling into arrears with his repayments
summons was issued and served at his chosen
domicilium
citandi et executandi.
Default
judgment was entered against him. In the application before the court
he sought an interdict restraining the first respondent
from
executing on the judgment pending the outcome of an application for
rescission of judgment. In relation to the merits of his
proposed
rescission application the applicant maintained that the summons had
not come to his notice because he no longer lived
at his chosen
domicilium
and
he had a good defence to the claim against him on the basis that the
first respondent had not complied with the provisions of
section
129(1)(a)
of the
National Credit Act. It
was common cause that the
first respondent had addressed a notice in terms of
section 129(1)(a)
to the applicant by registered post at his chosen
domicilium.
When
it received no response, it sent a letter of cancellation and then
summons was issued.
17.
The applicant argued, as in the present case, that the requirement in
section 129(1)(a)
that the credit provider must "draw the
default to the notice of the consumer in writing " means that
the notice must
be received by the consumer or must come to the
consumer's attention. Since it was common cause that such had not
happened, the
summons had been issued prematurely in terms of
section
130.
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18.
Wailis J rejected the argument and dismissed the application for an
interdict. As mentioned, he held that provided the credit
provider
delivered the notice in the manner chosen by the consumer in the
agreement, it is irrelevant whether the notice in fact
came to the
attention of the consumer. In paragraph 22 of the judgment the
learned judge observed:
"As
the consumer has the right to choose the manner in which notice is to
be given it is for the consumer to ensure that the
method chosen will
be one that is reasonably certain to bring any notice to his or her
attention."
19.
The reasoning and finding of Wailis J was much influenced by his
interpretation of the scope and application of
section 65
of the
National Credit Act. The section deals with the rights of a consumer
to have documents delivered by prescribed methods.
It reads:
"65
Right to Receive Documents
(1)
Every document that is required to be delivered to a consumer in
terms of this Act must be delivered in the prescribed manner,
if any,
If
no method has been prescribed for the delivery of a particular
document to a consumer, the person required to deliver that
document
must (a) make the document available to the consumer through one
of
more of the following mechanism -
(I)
in person at the business premises of the credit provider,
or at
any other location designated by the consumer but
at the
consumer's expense, or by ordinary mail;
(ii) by
fax;
(iii) by
e-mail; or
(iv)
by printable web-page: and
(b)
deliver it to the consumer in the manner chosen by the consumer from
the options made available in terms of paragraph (a)."
20.
After setting out the provisions of section 65, Wallis J postulated
the following:
"As
the NCA does contain provisions dealing with the manner of delivery
of documents one must have regard to these provisions
in considering
whether the notice required by section 129(1)(a) was, for the
purposes of the NCA, delivered to the applicant."
21.
He then examined whether the definition of "delivered" in
regulation 1 of the National Credit Regulations published
in GNR 489
in the Government Gazette of 31 May 2006 applied, with such being the
manner of delivery prescribed in terms of section
65(1). For reasons
which need not detain us, he concluded that it did. The essential
difference between the method prescribed under
section 65(2) and
regulation 1 of the regulations is that the latter in addition to
allowing for hand delivery, fax and email,
requires postal delivery,
unlike section 65(2)(a)(i), to be by registered mail not ordinary
mail. He concluded in any event that
the result would be the same
whether section 65(2) or regulation 1 applied. As he saw it:
"For
the present the question is whether a notice under section 129{1)(a)
is delivered if it is sent by registered post to
an address selected
by the consumer, irrespective of whether it is capable of being
delivered at that address and whether it comes
to the attention of
the consumer"
As
already mentioned, Wailis J answered that question in the affirmative
"for the simple reason that this is what the definition
of
'delivered' says. It says the document is delivered where it has been
sent by one of the four possible methods to the proposed
recipient."
22.
With all due respect, it would seem to me that the learned judge
asked the wrong question and insofar as section 65(2) might
be
applicable it does not give the answer suggested.
23.
The correct question to ask when considering if there has been
compliance with section 129(1)(a), in terms of the wording of
the
section, is not whether the notice has been "delivered" to
the consumer, but is rather whether the credit provider
has "drawn
the default to the notice of the consumer in writing". The
reasoning of Wallis J essentially equates the requirement
of drawing
"the default to the notice of the consumer in writing" with
the concept of "delivery" defined in
section 65(2) and
regulation 1. The line of thought, to my mind, is flawed and
unsustainable when regard is had to both the language
and policy of
the Act.
24.
The learned judge's conflation of the requirement of drawing the
default to the notice of the consumers in writing with the
prescription of methods for delivering documents appears to be the
result of his focusing upon the mention of the word "delivered"
in section 130(1)(a). The latter provision provides that action may
be instituted only if "at least 10 business days have
elapsed
since the credit provider
delivered
a
notice to the consumer as contemplated in section 129(1)". But
it would seem to me to be wrong to elevate a procedural mechanism
for
determining the time period in which action may be commenced to a
standard eclipsing the primary and substantive requirement
enacted by
the provision that the default must be brought
to
the notice
of
the consumer. Bringing something to a person's notice requires that
it be brought to his or her attention. Delivering something
means
dispatching it in a manner ensuring that it will arrive at a physical
or electronic address, irrespective of whether it comes
to the notice
of the addressee. I agree therefore with Naidu AJ in
Prochaska
that
the requirement of drawing the default to the notice of the consumer
in section 129(1)(a) and the prohibition in section 129(1)(b)(i)
against commencing legal proceedings to enforce a credit agreement
before "first providing notice to the consumer"
cumulatively
reflect an intention on the part of the legislature to
impose upon the credit provider an obligation which requires more
than the
mere dispatching of the notice to the consumer in the manner
prescribed in the Act and regulations for delivery.
25.
Section 65 itself does not provide for a presumption of service. It
simply regulates the
right
of
a consumer to have documents delivered in a certain manner. There is
no presumption in section 65 such as that contained in section
7 of
the Interpretation Act 33 of 1957 that if dispatch occurs by one of
the methods, service is then rebuttably presumed to have
been
effected. On the other hand, section 168 of the Act does indeed
provide for a presumption of service, which is irrebuttable.
It
provides that
unless
otherwise provided
in
the Act, a notice, order or other document that, in terms of the Act,
must be
served
on
a person will have been properly served when it has been either
delivered
to
that person, or sent by registered mail to that person's last known
address. The term
"serve"
is
not defined in the Act. In accordance with accepted legal parlance it
means to deliver a document to a person in the legally
required
manner. The difference between the terms "deliver" and
"serve" as used in the Act is that the latter
includes the
former but in addition allows for dispatch by registered post.
Service in terms of the Act is the equivalent of "delivery"
under the regulations. Considering the serious inroads that section
168 makes on procedural fairness, by enacting an irrebuttable
presumption of service, the provision must be construed
restrictively. In my opinion "serving a notice" should not
be
seen as the same as "drawing the default to the notice of the
consumer in writing". Section 129(1)(a) requires communication
going beyond and otherwise than by non-personal service. To make the
point again: "drawing to the notice" is not the
same as
"serving a notice".
26.
In other words, in my respectful opinion, Wallis J has erred by
equating the requirement of bringing the default to the notice
of the
consumer with delivery. He has mistakenly elevated the right of a
consumer to receive documents by a certain method to an
irrebuttable
presumption of notice of the default arising on dispatch by one of
the methods.
27.
The learned judge's observation in paragraph 12 of his judgment that
"it would have been relatively easy to formulate a
rule that
made it clear that the notice had to be received and come to the
attention of the consumer", misses the fact that
the legislature
has indeed done so. The legislature, it must be assumed, consciously
did not use either of the words "deliver"
or "serve"
in section 129(1)(a). It used the expression "draw the default
to the notice of the consumer in writing".
It speaks also of
"providing notice". There are numerous provisions in the
Act where the term "deliver" is
in fact used - see section
96(1) and (2); 108; 110: 111; 118(3); 121(2)(a); and 168. In various
other provisions different modalities
of communication are envisaged,
such as: "give written notice" (section 104(2)); "provide
written directions"
(section 106(6)); "provide a written
statement" (section 110(4)); and "advise in writing"
(section 62). There
is no basis for holding that substantive
requirements of this order will necessarily be met should "delivery"
take place
as contemplated in section 65 or regulation 1. Section
129(1)(a) does not require a letter to be "delivered" to
the consumer,
or a notice to be served, it requires that the
consumer's default be brought to his or her notice (attention) in
writing. While
of necessity some form of delivery or service will be
needed to draw notice to the default, such alone is not enough. There
must
be delivery (or service) as well as notice or attention being
drawn to the default.
28.
What is more, and perhaps most importantly, an irrebuttable
presumption of service or notice on mere dispatch would defeat the
purpose of section 129(1)(a). The object of the provision, in keeping
with the objects stipulated in section 3(h) and (i) of the
Act, is to
provide for a consistent and accessible system of consensual
resolution of disputes arising from credit agreements,
by means of 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. Section
129(1)(a) deliberately aims at tailoring
default disputes to the more
appropriate processes of counseling, mediation, conciliation and
other forms of contextually sensitive
dispute resolution. It hopes
that by deploying more imaginative methods, less rigid than the
adjudication methods of the ordinary
courts, it will achieve the
other statutory objectives of promoting equity and correcting
imbalances in negotiating power between
consumers and credit
providers in the interests of avoiding consumer over-indebtedness and
reckless credit granting. The mechanism
of an irrebuttable
presumption of notice on dispatch would take insufficient heed of
those objectives, being, as it would be, more
in line with the
conventional or orthodox methods of litigation which the Act seeks to
escape.
29.
Thus, I disagree with the view expressed by Wailis J that the
injunctions in section 3 should not operate to alter the meaning
of
the wording in the section (paragraph 14 of the judgment). The
injunctions in section 3 are central to and critical in giving
proper
meaning to what is envisaged by section 129(1)(a). As Naidu AJ
correctly pointed out, the Act is consciously structured
and designed
for the protection of the consumer. The directive principles in
section 3 reflect the intention of the legislature
to allow for a
more contextual and purposive interpretation of the Act to give
effect to the ethos of consumer protection, as opposed
to the arid
literalism that has characterised statutory interpretation in the
past. In any event, the wording of section 129(1)(a)
need not be
altered, it points unambiguously to a requirement that the consumer
must be made aware of the default and the possible
alternatives for
dispute resolution.
30.
Wailis J raises the legitimate concern that the costs involved in
credit providers having to ensure that notices actually reach
the
consumer would be substantial and these costs would then have to be
borne by the particular consumer or consumers as a body
(paragraph
14). So be it. The legislature, with the aim of discouraging reckless
credit and consumer over-indebtedness, is clearly
ready to up the
cost of credit to achieve that purpose. But one ought not to lose
sight of the interests at stake in the breach
and possible
cancellation of credit agreements. In many instances, if not most,
the
merx
of
the agreement will be a home or a motor vehicle. The loss of either
of these assets invariably will have a significant deleterious
effect
on the life of a consumer. That harm, one hopes, can be avoided
through the prior application of alternative dispute resolution
in
particular cases. Proper notice involving personal service, in the
view of the legislature, is an indispensable element in that
process.
On a prudential assessment, or a cost-benefit analysis, the
legislature perceives any additional cost as worthwhile in
the
advancement of its purpose. If personal service is a legitimate
requirement in divorce actions, there can be no objection in
principle or policy to the extension of such a procedural
pre-requisite to credit agreement disputes.
31.
In the result, therefore, and for the reasons stated. I am of the
opinion that compliance with
section 129(1)(a)
of the
National Credit
Act requires
that notice of any default by the consumer be brought to
his or her actual attention; and that failure on the part of the
credit
provider to do so will bar the institution of legal
proceedings with the result that any action instituted before then
will be
premature.
32.
When action has been instituted precipitately that may well be a
bona
fide
defence
sufficient to avoid summary judgment. However, in appropriate cases,
the court should avoid dismissing the application on
such grounds
alone.
Section 130(4)(b)
provides that if it is determined that the
credit provider has not complied with
section 129(1)(a)
, and has
instituted action prematurely, the court may adjourn the matter and
make an appropriate order setting out the steps the
credit provider
must complete before the matter may resume. The respondent in the
present case has failed to put up a defence on
the merits. It may be
that if the processes contemplated in
section 129
are followed
without success, summary judgment should be granted. It would be
unfair to the credit provider to deny it that possibility
on the
grounds of a procedural defect. Accordingly, the orders that follow
are appropriate in a case such as this.
33.
The following order is issued:
I)
The application for summary judgment is postponed
sine
die.
ii)
The applicant is directed to comply with
sections 129
and
130
of
the
National Credit Act 34 of 2005
.
iii)
In the event of the circumstances contemplated in
section 130(1)
arising, the applicant may continue with the action for an order to
enforce the credit agreement, if need be, by amending its particulars
of claim and by setting down the application for summary judgment on
5 days notice to the respondent.
Iv)
Costs are r-eserved for determination
by
the
court hearing the summary judgment application, or the action, as the
case may be.
JR
MURPHY
JUDGE
OF THE HIGH COURT
Date
Heard: 18 November 2009
For
the Plaintiff: Adv FR van den Heever, Pretoria
Instructed
By:Hack Stupel and Ross, Pretoria
For
the Defendant: Adv Dockratt
Instructed
By: MF Jassat Dhlamini Inc.