About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2010
>>
[2010] ZAECPEHC 55
|
|
First Rand Bank Ltd v Evans (1693/10) [2010] ZAECPEHC 55 (31 August 2010)
IN
THE HIGH COURT OF SOUTH AFRICA NOT REPORTABLE
EASTERN
CAPE, PORT ELIZABETH
Case No.: 1693/10
Date Heard: 3 August 2010
Date delivered: 31 August 2010
In
the matter between:
FIRSTRAND
BANK LIMITED
Plaintiff
and
WAYNE
THOMAS EVANS
Defendant
JUDGMENT
EKSTEEN
J:
[1] This is an application for summary
judgment. The plaintiff claims payment of the sum of R2 114 713,15
together with interest
thereon. The debt arises from a loan being a
credit agreement as contemplated in the National Credit Act 34 of
2005 (“the
Act”), which was secured by a mortgage bond
registered over certain immovable property. An order is accordingly
sought to
declare the property executable. The property in issue is
the defendant’s primary residence.
[2] The extent of the debt is not in
dispute nor is it disputed that the defendant has defaulted on the
credit agreement. The defendant
states in his opposing affidavit
that on 13 November 2009 he completed the necessary forms to commence
a debt review process in
terms of the provisions of section 86 of the
Act. The loan agreement with the plaintiff was included in the debt
review process.
At the stage when the debt review process commenced
no legal proceedings had been instituted against him.
[3] Various steps thereafter followed
in terms of the review process in accordance with section 86 of the
Act leading up to the
conclusion by the debt counsellor that the
defendant was indeed over indebted as envisaged in section 79 of the
Act. On 13 January
2010 the debt counsellor, acting in accordance
with section 86(7)(c) of the Act referred the matter together with
his proposal
to the Magistrate’s Court for Port Elizabeth
seeking an order that the defendant’s debt be rearranged in
accordance
with the proposal which he submitted.
[4] The referral, which was enrolled
for hearing on 28 April 2010 before the Magistrate’s Court was
duly served on the plaintiff
on 2 March 2010. From this time forth
the defendant started to make payments in accordance with the
proposal of the debt counsellor,
thus remaining in default of the
credit agreement. On 18 March 2010, however, the plaintiff gave
notice in terms of the provisions
of section 86(10) of the Act
terminating the debt review process. The defendant took no further
steps upon receipt of this notice.
When the matter was called before
the Magistrate’s Court for a hearing pursuant to section 87 of
the Act the matter was
opposed by the plaintiff on the strength of
the notice in terms of section 86(10), the plaintiff alleging that
the debt review
process had been terminated. The matter was
accordingly postponed. The plaintiff, however, proceeded to issue
summons in the
High Court to enforce the credit agreement alleging
that the debt review process had been terminated by the delivery of a
notice
in terms of the provisions of section 86(10) and that it was
accordingly entitled to enforce its rights and security under the
credit agreement.
[5] The defendant, upon receipt of the
summons, delivered a notice of intention to defend the action. This
in turn prompted the
application for summary judgment, which
application is opposed.
[6] The only defence raised in
opposition to the summary judgment application is set out as follows
in the opposing affidavit:
“
I am advised that the debt
review which can be terminated in accordance with the provisions of
Section 86 (10) is the debt review
in terms of section 86 of the Act.
As my debt review application was already before the Magistrate’s
Court in terms of Section
87 of the Act when the Applicant served the
Notice of Termination, I again respectfully submit that the Applicant
was not entitled
to terminate my debt review.”
[7] The narrow issue raised for
consideration in this matter is whether the plaintiff could validly
give notice to terminate the
debt review process in terms of section
86(10) after the debt counsellor had lodged an application with the
Magistrate’s
Court, and whilst such application is pending, for
an order as envisaged in section 86(7)(c). This involves an
interpretation
of the provisions of the Act and in particular of
section 86 thereof.
[8] Regrettably the formulation of the
Act is not a model of clarity and its provisions has given rise to
conflicting interpretations.
The issue raised in this matter too,
has been the subject of differing views. In the matter of
Standard
Bank of South Africa Limited v Kruger; Standard Bank of South Africa
Limited v Pretorius
,
2010 (4) SA 635
(to which I shall refer
as the Kruger: Pretorius case) Kathree-Setiloane AJ held that it
was not competent for a credit provider
to give notice in terms of
section 86(10) of the Act where the debt counsellor has already
referred the debt review to the Magistrate’s
Court.
Kathree-Setiloane AJ states as follows at para [13] on p. 640:
‘
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.’
[9] She found further support for this
interpretation of section 86 of the Act in the provisions of section
129 of the Act. Section
129(1)(a) requires of a credit provider to
give notice to the consumer who is in default drawing his attention
to his various rights
before the credit provider may take steps to
enforce the agreement. Section 129(1)(b) provides that a credit
provider may not,
“subject to section 130(2), … 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.” Section 129(2) then
provides as follows:
“
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.”
[10] Kathree-Setiloane AJ, in the
Kruger: Pretorius
case, concluded as follows at para
[26] on p. 644:
“
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 129(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 section 87
of the Act, may result in a restructuring or re-arranging order in
terms of subsection
(b)(i) or (ii) of the Act. It therefore follows
that in terms of section 129(2) of the 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.”
[11] Subsequent to the delivery of the
judgment in the
Kruger: Pretorius
case the same issue
came before Kemp AJ for decision in the matter of
SA Taxi
Securitisation (Pty) Limited v Nako and Others
(an unreported
judgment in case no’s 19/10; 21/10; 22/10; 77/10; 89/10;
104/10 and 842/10 (ECB)) I shall refer to this
matter as the
SA
Taxi
case. Kemp AJ was referred to the judgment in the
Kruger: Pretorius
case and had the benefit of the
reasoning of Kathree-Setiloane AJ in exercising his judgment. He
found himself unable to agree
with her interpretation and came to the
opposite conclusion, namely, that the credit provider remained
entitled to give notice
in terms of section 86(10) even after the
debt counsellor has referred the debt review, together with his/her
proposal to the Magistrate’s
Court. He found support for his
view in the provisions of section 86(11) of the Act, which
Kathree-Setiloane AJ did not consider.
He responded to the reasoning
of Kathree-Setiloane AJ in the
Kruger: Pretorius
case
as follows at para [40] and following of his judgment:
“
[40] Once a debt review has
been submitted to a Magistrate’s Court in terms of section 87
then the relief afforded under section
86(10), she held, is no longer
available. The learned Judge found that any other interpretation
would lead to an absurdity, as
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. Any other view, the learned Judge held,
would not be
consistent with the core objective of the Act, which as
the learned Judge put it, is the promotion and protection of
consumers.
[41] …
[42] What the learned Judge appears,
with respect, to have lost sight of, are the provisions of section
86(11) of the Act, which
provides: ‘If a credit provider who
has given notice to terminate the review as contemplated in
subsection 86(10) proceeds
to enforce that agreement in terms of Part
C of Chapter 6, the Magistrate’s Court hearing the matter may
order that the debt
review resume on any conditions the Court
considers to be just in the circumstances.
[43] Section 87 is itself dependant on
a proposal made in terms of section 86. To argue that because
section 86(10) is qualified
by the words “that is being
reviewed in terms of the section” that the review considered in
the subsection is only
the review of a debt counsellor, loses sight
of the fact that section 87 procedure is based on the proposal made
in terms of section
86 and also loses sight of the protection
expressly afforded the credit receiver in terms of section 86(11).
It would otherwise
appear to have been unnecessary to use the words
“hearing the matter”, which clearly appeared to apply to
a matter
pending before it. If the learned Judge’s
interpretation is correct then there would have been no matter before
the magistrate
in terms of section 86(10) and no need to use the
words “hearing that matter”.”
[12] Subsequently the matter of
SA
Securitisation (Pty) Limited v Matlala, Gideon
(an unreported
judgment in case no. 6359/10 (SGJ) dated 29 July 2010)(to which I
shall refer as the
SA Securitisation
case) came, again,
before Kathree-Setiloane AJ. The same issue arose again.
Kathree-Setiloane AJ was referred to the judgment
in the
SA
Taxi
case. She remained unmoved by the reasoning of Kemp AJ
and again came to the same conclusion as she had previously done. In
addressing
the judgment in the
SA Taxi
case she held as
follows at para [9]:
“
According to Kemp AJ in
SA
Taxi Securitisation v Nako
, the Magistrate’s Court referred
to in section 86(11) is the Magistrate’s Court to whom the debt
review has been referred
in terms of section 86(7) or (8) of the Act,
and the phrase “hearing the matter” refers to the review
before it in
terms of section 87 of the Act. With all due respect to
Kemp AJ, I am of the view that his interpretation of section 86(11)
is
misconceived for the following reasons. It is clear from a proper
reading of section 86(11) of the Act that the Magistrate’s
Court referred to in that section is not the Magistrate’s Court
to which the review has been referred in terms of section
86(7) or
(8) of the Act, but rather the Magistrate’s Court before which
the credit provider seeks to enforce the agreement
in terms of Part C
of Chapter 6. Hence, the phrase
‘the Magistrate’s
Court hearing the matter’
refers to the Magistrate’s
Court hearing the matter which concerns the enforcement of the
agreement in terms of Part C, Chapter
6 of the Act, and not the debt
review itself. …”
[13] She proceeded at para [12] and
[13] of her judgment as follows:
“
[12] Kemp AJ clearly fails to
give proper consideration to section 129 in
SA Taxi Securitisation
v Nako
. In fact, in response to the submission by the fifth
respondent that the (applicant) did not have the right to institute
legal
proceedings against him as the debt owed to the applicant was
subject to proceedings in the East London Magistrate’s Court
that could result in a restructuring order, Kemp AJ stated that he
did not agree as:
‘
All section 129(2) provides
is that the credit provider does not have to give notice proposing
that the credit receiver refers the
credit agreement to a debt
counsellor, etc. if the credit receiver has already done so. The
contention that section 129(2) prohibits
the credit provider from
taking action appears to be clearly incorrect.’ …
[13] Again with all due respect to
Kemp (A)J, he appears to have misread section 129(1) of the Act, and
in particular has failed
to give proper consideration to s129(2) of
the Act, which when read together with s29(1)(b)(i) of the Act,
expressly provides that
legal proceedings to enforce an agreement may
not be commenced, by first providing notice to the consumer in terms
of section 129(a)
or section 86(10) of the Act, where the credit
agreement is subject to a debt restructuring order, or proceedings in
a court that
could result in such an order. …”
[14] Thus the debate stood when this
matter was called before me. The issue turns on the interpretation
of section 86 of the Act.
Given the sharply divergent and critical
views previously expressed it is with some measure of trepidation
that I venture to enter
the fray.
[15] In seeking to interpret the
provisions of section 86 it is, of course, trite that regard should
be had to the context in which
the words are used in the Act as a
whole and the surrounding circumstances relating to the apparent
scope, purpose and limits of
the Act as well as its background.
(Compare, for example,
Jaja v Dönges NO and Another
1950
(4) SA 653
(A) 662H.) It is perhaps appropriate to take heed of the
caveat expressed by Diemont JA in
List v Jungers
1979
(3) SA 106
(A) where at p. 118D he said:
“
It is, in my view, an
unrewarding and misleading exercise to seize on one word in a
document, determine its more usual or ordinary
meaning, and then,
having done so, to seek to interpret the document in the light of the
meaning so ascribed to that word. Apart
from the fact that to decide
on the more usual or ordinary meaning of a word may be a delicate
task … it is clear that
the context in which the word is used
is of prime importance.”
(Compare also
Swart v Cape
Fabrics (Pty) Limited
1979 (1) SA 195
(A) 202C in respect of
the interpretation of contracts.) I consider that the same caution
should be exercised in respect of any
phrase in a document.
[16] Part D of Chapter 4 of the Act
deals with reckless credit and over indebtedness. It provides for
the rearrangement of a consumer’s
debts by an order of court (a
restructuring order) in section 83, section 85 and section 86, read
in each case together with section
87. Both section 83 and section
85 provide that, despite any provisions of law or agreement to the
contrary, in any court proceedings
in which a credit agreement is
being considered, the court may, if it concludes that the consumers
is over indebted, make a restructuring
order in accordance with
section 87. (See section 83(1) and (3)(b)(ii) and section 85.) Both
these sections apply to “any
court proceedings in which a
credit agreement is being considered” in any court. In each
case the credit agreement is
the subject of the litigation.
[17] In contrast to the provisions of
section 83 and 85 section 86 provides for a mechanism whereby
particular debts of a consumer
may be reviewed at the instance of the
consumer, prior to the institution of any court proceedings, and
under the exclusive judicial
oversight of the Magistrate’s
Court.
[18] Section 86 provides for a process
whereby the consumer may apply in accordance with section 86(1) of
the Act to be declared
to be over indebted and to have his debts
rearranged. The debt counsellor is then required to carry out a debt
review in accordance
with the provisions of section 86. The debt
review process is subject, as I have said, to the judicial oversight
of the Magistrate’s
Court. When a debt counsellor makes a
finding that a consumer is over indebted, as he did in the present
matter, the debt counsellor
is required “to refer the matter to
the Magistrate’s Court”. (See section 86(8)(b) and
section 86(7)(c) as read
with
National Credit Regulator v
Nedbank Limited
2009 (6) SA 295
at 310G-H.) The “matter”
which is referred to the Magistrate’s Court is the information
gathered in the debt
review which is provided for in section 86, the
debt counsellor’s proposal and the consumer’s financial
means and obligations
(compare section 87(1)). The role of the debt
counsellor conducting the debt review in terms of section 86 is,
however, not completed
by the mere reference of the matter to the
Magistrate’s Court. The reference referred to in section
86(8)(b) takes the form
of an application governed by the ordinary
rules of the Magistrate’s Court in which the debt counsellor is
a pro forma applicant.
The procedure is however an extraordinary one
which is created by the Act. (See
National Credit Regulator
case
(supra)
at 309 in respect of the procedure.) The
Magistrate’s Court is required to conduct a hearing and to make
an appropriate
order in terms of the Act. The debt counsellor
conducting the debt review in terms of section 86 is required to be
present at
the hearing and to participate in the hearing assisting
the Magistrate’s Court by way of furnishing evidence or making
submissions
as to his/her proposal or answering queries which the
Magistrate’s Court may raise. (See
National Credit
Regulato
r
(supra)
at 313C.)
[19] The draftmanship of section 86,
leaves much to be desired. This is clearly apparent from the
difficulties raised in the National
Credit Regulator case. What,
however, emerges from the findings in the National Credit Regulator
case, in my view, is that the
credit review process which is
regulated by section 86 of the Act continues until the Magistrate’s
Court makes an order in
terms of section 87. There is no other
section in the Act which places the aforesaid duties on the debt
counsellor.
[20] I turn to consider the
terminology of section 86 of the Act. In terms of section 86(10),
where a consumer is in default of
a credit agreement that is being
reviewed “in terms of section 86(10)” the credit provider
may, subject to the conditions
set out in the subsection, give notice
to terminate the review. I am not convinced that a simplistic
linguistic approach to the
words “… that is being
reviewed in terms of this section …” contained in
section 86(10), in isolation,
brings any clarity to the debate. I
consider that the more plausible interpretation to be attached to
these words, in the context
of the Act, is that they are used to
distinguish the process in section 86 from that in sections 83 and
85. I am unable to find
anything in the structure of section 86 or
of the Act in its entirety which is indicative of an intention on the
part of the legislature
to limit the right of a credit provider under
section 86(10) to the process prior to the reference to the
Magistrate’s Court.
On the contrary for the reasons which
follow I consider that the credit provider’s rights to give
notice in terms of section
86(10) and to legitimately terminate the
debt review process continues until the Magistrate’s Court has
made an order as
envisaged in section 87.
[21] The learned Judge in the
Kruger:
Pretorius
case expressed the view that such an interpretation
would lead to an absurdity in that any delay by any party to such an
application,
or 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
before that court.
[22] This brings me to section 86(11)
which led the learned Judge in the
SA Taxi
case to a
different conclusion. Section 86(10) of the Act provides as follows:
“
(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 ….
at any time at least
60 business days after the date on which the
consumer applied for the debt review.”
[23] Section 86(11) provides as
follows:
“
(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 the matter may order that the
debt review resume
on any conditions the court considers to be just
in the circumstances”.
[24] It has frequently being held that
where the legislature uses the same word in the same enactment, it
may reasonably be supposed
that out of a proper concern for the
intelligibility of its language, it would intend the word to be
understood, where no clear
indication to the contrary is given, in
the same sense throughout the enactment. See
Minister of
Interior v Mashadodorp Investments (Pty) Limited and Another
1957
(2) SA 395
(A) 404;
Makoka v Germinston City Council
1961 (3) SA 573
(A) at 580G-581A;
Kommisaris van Binnelandse
Inkomste v Sive Se Boedel
1963 (3) SA 847
(A) at 854;
Mphosi
v Central Board for Co-operative Insurance Limited
1974 (4)
SA 633
(A) at 643. I have referred above to the provisions of
section 86(8)(b) which requires of the debt counsellor to refer “the
matter to the Magistrate’s Court”. The matter which is
referred to the Magistrate’s Court is the recommendation
of the
debt counsellor and the consumer’s financial means, prospects
and obligations. Whilst the terminology does not appear
in section
86(7)(c) it has been held that the proposal of the debt counsellor
referred to in this subsection similarly requires
a referral to the
Magistrate’s Court. (See
National Credit Regulator
(
supra
) at 310H and 313G-H.) It was further held in the
National Credit Regulator
case that where “the
matter” is referred to the “Magistrate’s Court”
a hearing is to be held. (See
National Credit Regulator
(
supra)
p. 302D-E and section 87(1).)
[25] Where section 86(11) refers to
the Magistrate’s Court “hearing the matter” it
appears to me to be a reference
to the Magistrate’s Court to
which “the matter” referred to in section 86(8)(b) has
been referred for hearing.
[26] The jurisdiction provided for in
section 86(11) is specifically restricted to the Magistrate’s
Court. This is in stark
contrast to the other portions of the Act,
for example section 83, 85, 129(2) and 130, where reference is made
to “the Court”
or “a Court”. I consider that
this is so because section 86(11) forms part of the debt review
proceedings provided
for in section 86. The debt review process
provided for in section 86 falls under the exclusive judicial
oversight of the Magistrate’s
Court. (See
National
Credit Regulator
case at p. 314D.)
[27] The process envisaged in the Act
seems to me to be as follows. When an application is received by a
debt counsellor in terms
of section 86 he is then required to
evaluate the consumer’s state of indebtedness and the prospects
for responsible debt
rearrangement (section 86(5)(a)). Any credit
provider referred to by such consumer in his application is required
to participate,
in good faith, in the debt review process and in any
negotiation designed to result in a responsible debt rearrangement
(section
86(5)(b)).
[28] On the completion of this process
the debt counsellor is required to reach a conclusion in terms of
section 86(7)(a) or (b)
or (c). If he concludes, as he did in this
case, that the consumer is over indebted, then, in terms of section
86(7)(c) he must
formulate a proposal recommending that the
Magistrate’s Court make one or both of the orders contemplated
in section 86(7)(c)(i)
and (ii).
[29] It is only after this process
that the matter is referred to the Magistrate’s Court for a
hearing. The purpose of the
entire process is for the Magistrate’s
Court to provide judicial oversight of the debt review process.
Where a notice in
terms of section 86(10) terminating the process is
then issued the consumer is afforded a remedy in section 86(11). The
“Magistrate’s
Court hearing the matter” is required
in terms of section 86(11) to exercise a discretion both in respect
of whether to order
the resumption of the process and in respect of
the conditions to be attached to such further process. In my view it
is only the
Magistrate’s Court providing the judicial oversight
to the process that would have before it all the information which
the
consumer was required to provide in terms of regulation 24 under
the Act and which is required in order to exercise such discretion.
In the circumstances I consider, for this reason too, that it is only
the Magistrate’s Court exercising the judicial oversight
over
the debt review process that may order the process to resume as
envisaged in section 86(11). This conclusion is supportive
of the
interpretation that the credit provider is entitled to terminate the
debt review process after the matter has been referred
to the
Magistrate’s Court. Section 86(11) is in my view designed to
protect the interests of the consumer in such circumstances.
[30] It follows from the aforegoing
that the consumer is not prejudiced by the right of the credit
provider to terminate the debt
review process. The rights of the
consumer are fully protected in section 86(11). The credit provider,
in my view, does not have
carte blanche to terminate the process
without good reason. Where a referral to the Magistrate’s
Court is being prosecuted
with due efficacy it would appear to me
that, more often than not, it would be inappropriate for the credit
provider to serve
a notice in terms of section 86(11). There may
however be circumstances where the debt counsellor and the consumer
may intentionally
delay the hearing in terms of section 87 to the
prejudice of the credit provider whilst the consumer might cease all
payments under
the credit agreement. In such circumstances the
credit provider might be justified in terminating the debt review
process. Where,
however, the credit provider attempts to enforce
the credit agreement pursuant to such notice the consumer is entitled
urgently
to approach the magistrate hearing the matter to exercise
his judicial oversight. Where justice requires the process will be
ordered
to resume.
[31] It follows that I am in
respectful disagreement with the conclusion reached in the
SA
Securitisation
matter that the phrase “the Magistrate’s
Court hearing the matter” in section 86(11) refers to the
Magistrate’s
Court hearing the matter which concerns the
enforcement of the agreement in terms of Part C of Chapter 6 of the
Act. Such an interpretation
leads to an absurdity which I do not
consider that the legislature could have intended. The jurisdiction
conferred in section
86(11) is very specifically limited to the
Magistrate’s Court. Thus, adopting the interpretation in the
SA Securitisation
matter, if the credit provider
chooses to enforce his agreement in the Magistrate’s Court the
magistrate may order the process
to resume, however, if he chooses to
enforce his rights in the High Court the process cannot resume. In
my view this would not
be a feasible interpretation of the section.
[32] The conclusion to which I have
come above appears to me to accord with the provisions of section 88
of the Act. Section 88(3)
of the Act provides as follows:
“
(3) Subject to section 86(9)
and (10), a credit provider who receives notice of court proceedings
contemplated in section 83 or
85, or notice in terms of section
86(4)(b)(i) may not exercise or enforce by litigation or any other
judicial process any right
of security under the credit agreement
until-
(a) the consumer is in default under
the agreement and
(b) one of the following has
occurred:
(i) an event contemplated in
subsection (1)(a) through (c); or
(ii) the consumer defaults on any
obligation in terms of a re-arrangement agreed between the
consumer and the credit
providers or ordered by a court or
tribunal.”
[33] Accordingly, where once a
restructuring order has been issued a credit provider may not enforce
his credit agreement until
the consumer defaults on the order. If
the consumer defaults on the order and he is simultaneously also in
default under the credit
agreement, which usually will be inevitable,
the credit provider may then enforce his right by litigation or other
judicial process,
without any further notice.
[34] Where the credit provider has
received notice of “court proceedings”, which are
proceedings contemplated in section
83 or 85, and no restructuring
order has been made, it is similarly restrained from enforcing its
rights by litigation or other
judicial means until one of the events
set out in section 88(1) occurs and, he is simultaneously in default
under the credit agreement.
[35] Section 88(1) postulates the
occurrence of three categories of events as follows:
“
(a) The debt counsellor rejects
the application and the prescribed time period for direct filing in
terms of section 86(9) has expired
without the consumer having so
applied;
(b) the court has determined that the
consumer is not over indebted, or has rejected a debt counsellor’s
proposal or the
consumer’s application; or
(c) a court having made an order or
the consumer and credit provider having made an agreement rearranging
the consumer’s
obligations, or the consumer’s obligations
under the credit agreements as rearranged are fulfilled, unless the
consumer fulfils
the obligations by way of a consolidation
agreement.”
[36] Subsection (c) finds application
where a rearrangement has occurred. In the case of proceedings under
section 83 and 85 therefore,
it seems to me, unless a restructuring
order is made, that the moratorium exists until such time as the
court has determined that
the consumer is not over indebted. If at
that stage he remains in default under the credit agreement then the
credit provider
may proceed by litigation or other judicial process
without any other notice.
[37] In the case of a debt review in
terms of section 86 there is a moratorium on the enforcement by
litigation or other judicial
process of any rights or security under
a credit agreement until one of the events contemplated in section
88(1) occurs and the
consumer is also in default under the agreement.
If that occurs the credit provider may proceed to enforce its rights
by litigation
or other judicial process.
[38] The entire moratorium imposed
upon litigation or other judicial process in section 88(3) and which
persists until one of the
events in section 88(1) occurs, is however
“subject to section … 86(10)”. Section 86(10) can
find no application
after an order has been made. Similarly section
88(10) finds no application to the court proceedings contemplated in
section 83
and 85. It applies only to a re-arrangement in terms of
section 86, hence the words “… that is being reviewed in
terms of this section ...” where they appear in section 86(10).
The entire moratorium which occurs by virtue of a review
pursuant to
section 86, and which persists until one of the events in section
88(1) occurs is subjected to the credit providers
rights in terms of
section 86(10). By virtue of the provisions of section 88(3),
therefore, I am of the view that the credit provider
is entitled to
give notice under section 86(10) at any time prior to a restructuring
order in terms of section 87 being either
granted or dismissed.
[39] I turn to consider the provisions
of section 129 of the Act. Section 129 deals with certain procedures
that are required before
a credit provider may proceed to enforce a
debt. Section 129(1)(a) requires of the credit provider, where the
consumer is in default,
to draw the default to the notice of the
consumer in writing and to propose that the consumer refer the credit
agreement to a debt
counsellor, alternative dispute resolution agent,
consumer court or ombud with jurisdiction, with intent that the
parties resolving
the dispute under the agreement or develop and
agree on a plan to bring the payments under the agreement up to date.
[40] Section 129(1)(b) provides as
follows:
“
If the consumer is in default
under a credit agreement, the credit provider-
(a) …
(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.”
[41] Section 129(2) upon which the
judgments in the Kruger: Pretorius case and the SA Securitisation
case rely heavily, provides
as follows:
(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.”
[42] The provisions of section 130(2)
referred to in section 129(1)(b) find no application to the present
issue. The reason for
the exclusion contained in section 129(2)
appear to me to be found in section 88. Section 88, to which I have
referred above,
provides for three scenarios. Firstly, it provides a
moratorium where a Magistrate’s Court has already made a
restructuring
order. The second situation for which it provides a
moratorium is where notice is received of court proceedings. Those
are proceedings
in terms of the provisions of section 83 and 85. The
terminology “court proceedings” are the identical words
utilised
in both section 83 and 85. The third and separate scenario
provided for in section 88(3) is where a debt review in terms of
section
86 is in progress.
[43] In contrast to section 83 and 85
section 86 makes no reference to any court proceedings. It requires
of the debt counsellor
to refer his proposal to a Magistrate’s
Court. The subject of the hearing before the magistrate is not the
credit agreement,
but the “proposal and information before it
and the consumer’s financial means, prospects and obligations”
(see
section 87(1)).
[44] In the circumstances I consider
that the reference in section 129(2) to a credit agreement that is
subject to proceedings in
a court, constitutes a reference to
sections 83 and 85 and does not include a reference to a Magistrate’s
Court as contemplated
in section 86. To interpret section 129(2) as
a reference to proceedings before a Magistrate’s Court pursuant
to section
86 would, in my view, conflict with the express provisions
of section 88(3). I have found above that in terms of that section
the moratorium imposed upon litigation and judicial process by the
proceedings under section 86 continues until the completion of
the
process as envisaged in section 88(1), subject to the credit
provider’s right at any time to give notice in terms of
section
86(10).
[45] To summarise, I am of the view:
1. That the credit provider is
entitled to give notice in terms of section 86(10) after the proposal
of the debt counsellor in terms
of section 86(7)(c) or 86(8)(b) has
been referred to the Magistrate’s Court;
2. If a credit provider has given
notice in terms of section 86(10) of the Act and he proceeds to
attempt to enforce his credit
agreement the consumer is entitled to
approach the Magistrate’s Court to which the matter has been
referred for hearing to
seek an urgent order that the credit review
process resume;
3. Section 129(2) does not have the
effect of preventing the delivery of such a notice.
4. In terms of section 88(3) the
moratorium placed upon the enforcement of a credit agreement by
litigation or other judicial means,
which persists until the debt
review process has been completed as envisaged in section 88(1) or
until the consumer defaults on
the order, as the case may be, is in
its entirety subject to the credit providers right in terms of
section 86(10) until a restructure
order is made.
[46] In all the circumstances I am of
the view that the defendant has not made out a defence to the
plaintiff’s claim. The
matter, however, does not end there for
the defendant urges upon me to grant him an indulgence so as to
enable him to approach
the Magistrate’s Court for relief in
terms of section 86(11) of the Act.
[47] I have stated above that in this
matter the immovable property which it is sought to declare
executable and which has been
mortgaged in order to secure the loan
constitutes the plaintiff’s primary residence. In terms of the
provisions of section
26 of the Constitution of the Republic of South
Africa, Act 108 of 1996 (“the Constitution”) every person
has the right
to adequate housing. The Constitutional Court has had
occasion to consider the effect of the sale and execution of a
person’s
home on his right under section 26 of the Constitution
in the matter of
Japhta v Schoeman; Van Rooyen v Stoltz
[2004] ZACC 25
;
2005 (2) SA 140
(CC). The judgment therein requires that a sale in
execution of a person’s home should only occur under effective
judicial
oversight.
[48] In this case it is argued on
behalf of the plaintiff that in order to succeed in an application
for postponement of the matter
the defendant is required to
demonstrate reasonable prospects of success in seeking relief under
section 86(11). This, it is argued,
has not been done and on the
documents before me I should conclude that no such reasonable
prospects exist.
[49] In the present matter a debt
counsellor did conclude in January 2010 that the
defendant
was over indebted. He/she concluded that a proposal could be made
which could result in an order in terms of section 87. He
accordingly referred the matter to the Magistrate’s Court. The
defendant
avers that since the proposal of
the debt counsellor he has made payments in accordance with the
proposal albeit that certain payments
were erroneously made to the
account of the debt counsellor as opposed to the payment distribution
agent. The error he says was
bona fide
and falls to be
rectified.
[50] In these circumstances, and
having regard to the conflicting decisions which have existed in
various Divisions in respect of
this particular matter I consider
that justice demands that in the exercise of my discretion, I afford
the defendant the opportunity
to apply to the Magistrate’s
Court for relief in terms of section 86(11).
[51] In the circumstances I consider
that it would be fair to postpone the application for summary
judgment for a period of thirty
days from the date of this judgment
so as to enable the
defendant
to approach
the Magistrate’s Court for urgent relief. It is only the
Magistrate’s Court hearing the matter that has
before it all
the information required to exercise this discretion. The
plaintiff
is given leave to re-enrol the matter on five days notice, after the
lapse of thirty days. The
defendant
is
granted leave to file a supplementary affidavit in respect of steps
taken pursuant to section 86(11).
[52] In the result:
1. The application for summary
judgment is postponed for thirty (30) days from the date of this
judgment.
2. The
defendant
is ordered to pay the costs occasioned by the postponement.
3. The plaintiff is granted leave to
re-enrol the matter for reconsideration on five (5) days notice
after the lapse of thirty
(30) days.
4. The
defendant
is granted leave to file a supplementary affidavit in respect of
steps taken by him pursuant to the provisions of section 86(11).
________________________
J W EKSTEEN
JUDGE OF THE
HIGH COURT
Appearances:
For Plaintiff:
Adv P Scott
instructed by Spilkins, Port Elizabeth
For Defendant:
Adv T Zietsman
instructed by Burmeister De Lange Soni Inc