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[2010] ZAECPEHC 84
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First Rand Bank Ltd v Meier (1321/2010) [2010] ZAECPEHC 84 (5 October 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN CAPE
DIVISION, PORT ELIZABETH
CASE NO: 1321/2010
DATE HEARD: 27/07/10
DATE DELIVERED:
05/10/10
In
the matter between:
FIRST
NATIONAL BANK LTD
…..........................................................
PLAINTIFF
And
QUINTON
PAUL MEIER
….................................................................
DEFENDANT
JUDGMENT
TSHIKI J:-
A)
INTRODUCTION
[1] For the sake of
convenience I shall refer to the parties as Plaintiff and Defendant
respectively. This is an application for
Summary Judgment. Plaintiff
has instituted action against Defendant for payment of a sum of R298
411,01, together with other
ancillary relief, which amount is due
and owing by Defendant to Plaintiff pursuant to a credit agreement
between the parties.
The debt is secured by four mortgage bonds
passed by Defendant in favour of Plaintiff whose bonds numbers are
B23821/1999, B42146/2002,
B 32235/2004, B 2211/2009 respectively.
[2] Defendant
having filed a notice to defend, Plaintiff sought a request for
judgment which Defendant has opposed.
[3]
In his affidavit in terms of rule 32(3)(b) Defendant has raised
defences all of which are based on the provisions of the National
Credit Act 34 of 2005 (herein referred to as the NCA). According to
him, due to over indebtedness, he fell into arrears with
his monthly
repayments of the bond. Before receiving any notices or demands and
on or about 27 November 2009 he approached a
debt counsellor in
terms of section 86(1) of the NCA for the latter to process his debt
review application. He, therefore, completed
all the necessary
documents in that regard which he furnished to the debt counsellor
as specified in Regulation 24(1 )(c) of
the NCA. Indeed the debt
counsellor processed the debt review up to the stage when he made
the application to the magistrate's
Court to have the Defendant
declared over indebted and at that stage the process was interrupted
by the Plaintiff who, purportedly
acting in terms of section 86(10)
of the NCA, terminated the Defendant's debt review application by a
letter to the Defendant
sent by registered mail. The debt
counsellor, on 17 February 2010, filed a notice to the Port
Elizabeth magistrate's Court in
terms of section 86(7)(c) of the
NCA. The case was then set down for the 21 April 2010 under case no.
4634/2010, on which date
the Plaintiff opposed the Defendant's
application in terms of 86(8)(b) which was filed on 7 February 2010
and the matter was,
therefore, postponed to 12 May 2010. On 12 May
2010 the case was further postponed to 2
nd
June
2010 for the reason that the Plaintiff wanted to take instructions
on the Defendant's allegations that he was making payments
which
were processed by the Payment Distribution Agent. On 5 May 2010 the
Plaintiff issued summons against Defendant.
B)
ISSUES
[4] The crisp
issues involved herein are as follows:
4.1. whether the
Plaintiff had legally terminated the debt review process; and if so,
4.2. whether the
enforcement of the debt, pursuant to the termination of the debt
review process, applies to the present agreement
in light of;
4.2.1 the
Defendant's contention that the agreement is subject to the Court
proceedings which could result in the Court ordering
the
restructuring of the debt and therefore not terminable in terms of
section 129(2) of the NCA. [5]
[5] Lastly the
Defendant contends that the termination notice in terms of section
86(10) of the NCA was not sent to the Defendant's
debt counsellors
and, therefore, there was no compliance with section 86(10) of the
NCA.
[6] Mr N.J Muliins
appears for the Plaintiff and Mrs Zietsman represents the Defendant.
[7] Defendant does
not dispute that he and the National Credit Regulator received the
notice of termination of the debt review
process. The debt
counsellor also confirms not to have received the notice by e-mail.
The question to decide, if necessary, on
this point is whether the
failure by the credit provider to send the notice of termination of
the review process to the debt
counsellor renders the whole process
of termination defective to the extent that it is invalid.
C) WHETHER
PLAINTIFF HAS VALIDLY TERMINATED THE DEBT REVIEW PROCESS.
[8] The decision of
this issue encompasses a consideration of two issues which are-
8.1. whether the
debt review process was terminated before the debt review of
Defendant had been processed up to and including
the stage covered
by section 86(8) of the NCA; and
8.2. whether
failure by the Plaintiff to inform the Defendant's debt counsellor
of the termination of the debt review, renders
the whole process of
termination invalid.
8.3. if the answer
to 8.1 above is decided in favour of the Defendant it will not be
necessary for me to decide 8.2.
[93
In terms of the NCA termination of the debt review process can take
place in terms of section 86(10) of the NCA only in situations
where
the debt review process is terminated prior to the process filed in
the magistrate's Court in terms of section 86(8) of
the NCA. It
cannot be terminated when the debt review process is at the stage
contemplated in section 87 of th
e
NC
A.
This is so because at that stage the debt review process is already
before the magistrate's Court which has to make a decision
on the
matter.
[10] Section 86(10)
provides:
'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-
(a)
the consumer
(b)
the debt counsellor; and
(c)
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] The wording of
section 86(10) clearly suggest, and can only be interpreted to mean,
that a credit provider who wishes to
terminate the debt review
process in terms of section 86(10) may give notice of termination to
the consumer, the debt counsellor
and the National Credit Regulator.
The important question to decide here is whether it is obligatory
for the Credit provider
to give the notice to ail the three persons
mentioned and if so, whether failure to inform any of them renders
the whole termination
process invalid and of no force and effect.
[12]
I must say though, that the wording of some of the sections of the
NCA is so confusing and that it is sometimes not easy
to reconcile
them. For instance section 130(1)(a) which I will deal with in
detail later in this judgment, refers to a notice
which the credit
provider
'delivered
to the consumer as contemplated in section 86(9)'
yet
section 86(9) refers to a situation where the
'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)\
It
follows from the wording of section 86(9) that no action should be
taken by the credit provider and that only the consumer
is required
to take action if the debt counsellor rejects his application that
he or she be declared over indebted. The reference
I make to this
particular section, which is confusing, is important because in this
judgment I have to frequently refer to sections
86, 129(1) and 130
of the NCA, which sections are read correspondingly thus making
their correct understanding important when
dealing with the new NCA.
[13]
Reverting back to the issues and without having to waste time by
making unnecessary analysis of the section it is clear from
the
evidence presented in the Defendant's opposing affidavit that when
the Plaintiff terminated the debt review the debt counsellor
had
already processed the debt review to the extent that it no longer
fell within debt review termination in terms of section
86(10) of
the NCA but had reached a stage to be dealt with in terms of section
87 of the NCA because it was now in the hands
of the magistrate's
Court. Therefore, section 86(10), which applies to debt review
termination before the debt review has been
referred to the Court in
terms of section 86(8)(b), does not apply in the present scenario.
It is clear from the Defendant's
opposing affidavit that when the
plaintiff wrote the notice to the Defendant purportedly acting in
terms of section 86(10) of
the NCA his debt counsellor had already
processed the debt review to the stage where the magistrate's court
was already seized
with the matter. Consequently section 86(10) of
the NCA is of no application herein and, therefore, the Plaintiff,
at that stage,
could not act in terms of section 86(10) when
terminating the debt review process,
[vide
Standard Bank of SA Ltd v Kruger - Standard Bank of SA Ltd v
Pretorius
2010 (4) SA 635
(GSJ)].
[14]
Having said that, notwithstanding the Plaintiff's letter of
termination of the Defendant's debt review stating that Plaintiff
was acting in accordance with section 86(10) of the NCA, at the
stage the Plaintiff's debt review was no longer terminable in
terms
of that section. This is so because the debt review under section
86(10) can only be terminated if it was still handled
by the debt
counsellor and had not yet been forwarded to the magistrate's Court
in terms of section 86(8)(b) of the NCA. The
question therefore is
whether at that stage the Defendant's debt review could still be
terminated. The answer to this question
lies with the correct
interpretation of section 129(2) and section 130(1)(c) of the NCA.
It would make sense if I quote
verbatim
section
129(1) and (2) and 130(1 )(c):
'129
Required procedure before dept enforcement -
(1)
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 as set out in section 130.
(2)
Subsection
(1) doesn't apply to a credit agreement that is subject to a debt
restructuring order, or to proceedings in
a
court
that coufd result in such an order. [My emphasis]
[15] The parties'
debt review process has been referred to court by the debt
counsellor in terms of section 86(8} of the NCA with
recommendations, inter alia, that the defendant be declared over
indebted and that he be dealt with in terms of section 86 (c)
of the
NCA. The court has not yet made a decision on the above matter and
that the purported termination of the debt review by
the plaintiff
is invalid because of reasons stated in the preceding paragraphs in
particular paragraph 12. It, therefore, follows
that at the
finalisation of the application currently before Court, one of the
orders which the magistrate's court may grant
is that the credit
agreement be subject to a debt restructuring. For the above reasons
in terms of section 129(2) of the NCA
subsection (1) of section 129,
therefore, does not apply to the parties' credit agreement.
[15.2] The relevant
provisions of section 130 of the NCA are:
'130.
DEBT PROCEDURES IN A COURT.
(1)
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 lease 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 86 (10) or
section 129(1) as the case may be;
(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 provider's proposals; and
[16] However, the
question whether the Plaintiff can still enforce the credit
agreement is still begging. Subsection 130(3) of
the NCA provides:
"Despite
any provision of law or contract to the contrary, in any proceedings
commenced in a court in respect of a credit
agreement to which this
Act applies, the court may determine the matter only if the court is
satisfied that -
(a)
in the case of proceedings to which section 127, 129 or 131 apply,
the procedure required by those sections have been complied
with;
(b)
there is no matter arising under that credit agreement, and pending
before the Tribunal, that could result in an order affecting
the
issue to be determined by the court; and
(c)
that the credit provider has not approached the court -
(i)
during
the time that the matter was before a debt counsellor, alternative
dispute
resolution agent, consumer court or the ombud with
jurisdiction or
(ii)
(aa)
(bb)
(cc)
(dd)
[17]
As already alluded to
supra
section
86(9) is confusing and does not appear to be relevant to the giving
or delivery of notices in terms of section 130 of
the NCA. As for
section129 (1), in view of the fact that the agreement under
discussion is subject to proceedings in a Court
that could result in
a order for the restructuring of the debt, section 129(1) therefore
does not apply herein.
[18]
The only consideration now is whether section 130(3) can assist the
plaintiff herein. Evidence in this case clearly shows
that the
credit provider approached this Court for debt review cancellation
during the time when this matter was before the magistrate's
Court
in Port Elizabeth. At the time the Plaintiff
terminated
the
debt review purportedly acting in terms of section 86(10) of the
NCA. the debt counsellor had complied with all the requirements
of
the NCA and had already referred the defendant's debt review process
to the magistrate's Court in terms of section 86(8) of
the NCA. I
have already ruled that such termination is invalid and of no force
and effect by reason of the fact that in terms
of section 86(10) of
the NCA it is not procedurally competent to terminate a debt review
process which is before the Court. There
is no provision in the NCA
which entitled the credit provider to simply, unilaterally and/or
without leave of the Court, terminate
a debt review process which is
dealt with by the magistrate's court in terms of section 87 of the
NCA. No party can willy-nilly
terminate proceedings in progress in a
court without leave of that court. Such conduct, in my view, would
result in chaos and,
therefore, should be discouraged.
(See
STANDARD BANK OF SOUTH AFRICA LTD v KRUGER - STANDARD BANK OF SOUTH
AFRICA LTD v PRETORIUS
2010 (4) SA 635
(GSJ) where at 642 para 29
KATHREE -SETILOANE AJ
held:
'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'.
[19]
I agree with the above conclusion reached by the learned judge. The
introduction of the provisions of the NCA does not have
the effect
of displacing the rules applicable in the magistrate's Court nor
have the provisions of the magistrate's Court Act
32 of 1944 been
replaced by those of the NCA in any manner whatsoever. When a matter
has been referred to the magistrate's Court
the purpose is for the
magistrate to exercise his or her judicial functions in that matter
and at the end make an appropriate
order which would be enforceable
and/or appealable in terms of the relevant Rules of that court. Any
notice to withdraw or terminate
any proceedings in the magistrate's
Court has to comply with the requirements of the Rules of that Court
in that it has to be
referred, served and filed in that Court. If
the matter is contested the magistrate has a duty to listen to the
parties and/or
their legal representatives, where applicable, and,
thereafter, make the appropriate order. There is no short cut which
would
simply entitle the credit provider to cancel the debt review
notwithstanding the fact that the matter is now before the
magistrate's
Court for the tatter's adjudication. In a recent
unreported judgment, Kemp AJ does not agree in
[SA
TAXI SECURITISATION (PTY) LTD v NAKO and 6 Others. Case no's
19,21,22,77,89, 104 and 842/2010 delivered on 8 June 2010 in
EASTERN
CAPE, BHISHO].
[20]
I do not agree with the submissions by Mr Muliins that the
termination of the debt review process by the Plaintiff was in
order
in herein. Mr Muliins contends that section 86(10) read with section
130 of the NCA have been complied with and that as
the debt review
process had not been finalised the Plaintiff was entitled to
terminate it I disagree and as already alluded to
supra
the
Defendant's debt counsellor had processed the debt review up to the
stage when the matter was before Court in terms of section
86(8)(b)
of the NCA. Once it reaches that stage the process cannot be
terminated in terms of section 86(10) of the NCA. I agree
with Mrs
Zietsman for the Defendant that the Plaintiff had no legal
justification for terminating the debt review process.
[21] Defendant has
shown that he has a bona fide defence to the Plaintiff's action and
that Plaintiff should never have applied
for Summary Judgement
herein.
[22] In view of the
fact that the debt review process has not been finalised
and that it may
also be decided in favour of the Plaintiff, for instance if the
finding is that the
Defendant is not over-indebted. An order dismissing the
application for
summary judgment will not be proper in the circumstances, so
is
the order of costs. The proceedings have to be postponed
sine
die
in
terms
of the provisions
of section 130(4)(c) of the NCA which provides:
'in
any proceedings contemplated in this section if the Court determines
that-
(c)
the credit agreement is subject to a pending debt review in terms of
Part D of Chapter 4, The Court may-
(i)
adjourn the matter, pending a final determination of the debt review
proceedings
(ii)
(iii)
'.
[23] I the result I
make the following order:-
23.1.
The application for Summary Judgment is hereby stayed pending the
finalization of the Defendant's debt review application.
23.2. The costs
occasioned by the application for Summary Judgment a are hereby
reserved.
P.W TSHIKI
JUDGE
OF THE HIGH COURT
Appearances:
For the Plaintiff -
Adv N.J Mullins instructed by Spilkins Attorneys
Port Elizabeth
For the Defendants-
Adv T. Zietsman instructed by Burmeister De
Lange Soni inc
Attorneys - Port Elizabeth