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[2010] ZAECPEHC 63
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First Rand Bank Ltd v Moodaley and Another (2502/10) [2010] ZAECPEHC 63 (26 October 2010)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE, PORT ELIZABETH
Case
No.: 2502/10
Date
Heard: 19 October 2010
Date
Delivered: 26 October 2010
In
the matter between:
FIRST
RAND BANK LIMITED
…..........................................................................
Plaintiff
and
NEIL
MARTIN MOODALEY
….................................................................
First
Defendant
SORAYAH
MOODALEY
….................................................................
Second
Defendant
JUDGMENT
EKSTEEN
J:
[1] This is an application for summary
judgment. The plaintiff claims payment of R987 213,44, which
represents the principle debt
together with finance charges thereon,
which is due and owing to the plaintiff pursuant to a credit
agreement. The debt was secured
by means of a mortgage bond
registered over certain immovable property situated in Lorraine, Port
Elizabeth. The plaintiff accordingly
seeks a further order that the
said property be declared executable.
[2] In the summons the plaintiff
alleges that it has complied with the provisions of the National
Credit Act of 2005 (“the
Act”). In particular it alleges
that the defendants are in default of the credit agreements which are
being reviewed in terms
of section 86 of the Act. In addition it is
alleged that the plaintiff has given notice to terminate the debt
review as contemplated
in section 86(10) of the Act as it was
entitled to do by virtue of the lapse of more than 60 days from the
date of application
for debt review. It annexes the notices of
termination which find application from which it is apparent that the
notice of termination
was given on 18 June 2010. Summons was issued
in August 2010.
[3] It is accordingly the plaintiff’s
case that the defendants applied for debt review. After the lapse of
60 days the process
had not come to finality and the plaintiff gave
notice to terminate the process. The defendants remain in default of
the credit
agreements and accordingly the plaintiff has issued
summons.
[4] The defendants oppose the
application for summary judgment. A very brief affidavit by the debt
counsellor, one Abrahams, has
been filed in opposition. From the
opposing affidavit the following may be gleamed:
1. The defendants applied for debt
review in terms of section 86 of the Act on 21 January 2010. Abrahams
states that the defendants
only provided portion of the required
information on 21 January 2010 and thereafter compliance with section
86(1) occurred piecemeal
over the period February 2010 to 12 October
2010. It appears that notice in terms of section 86(4) was given as
and when information
was provided to the credit counsellor. From
these averments I understand that further credit agreements were
added to the process
from time to time. The affidavit does not reveal
when notice was given in respect of the credit agreements which form
the subject
of the present proceedings. It is, however, not contested
that the necessary 60 days had lapsed at the time that the plaintiff
gave notice to terminate the process.
2. On 21 January 2010 “it was
established” on the information which was then provided that
the defendants were over-indebted.
3. At some stage during the process
the defendants had no income “as a result of their business
closing down due to the severe
economic downturn”. This state
of affairs appears to have persisted for some three months and
accordingly the defendants
were “in default of their debt
re-arrangement proposal” for three successive months.
[5] The affidavit does not reveal what
the debt re-arrangement proposal contained or when that particular
proposal was made. It
is difficult to understand just how such
proposal could have been formulated when full compliance with section
86(1) and the regulations
relating thereto has not occurred. I have
referred above to the piecemeal manner in which further credit
agreements were being
added to the review process over a period from
February 2010 to October 2010. Abrahams reveals that at least seven
dates upon which
further information was received. He further reveals
that proposals were forwarded to all credit providers on at least
four different
occasions over the period March 2010 to June 2010. I
shall assume that the proposals changed on each occasion so as to
provide
for further agreements added to the process from time to time
although this is by no means clarified in the affidavit.
[6] Be that as it may, Abrahams does
state that the defendants have since found employment and have sold a
freehold property in
order to bring their arrears in terms of the
proposal up to date. Whilst the laudable objective for this sale is
recorded Abrahams
does not say whether such arrears have in fact been
brought up to date and, if not when this could be expected.
[7] On the basis of this rather terse
factual scenario Abrahams raises one defence only. It is stated as
follows:
“
According to
the Eastern Cape case of
First
National Bank Ltd v Quinton Paul Meier
under case number 1321/2010 and the matter of
Standard
Bank of South Africa Limited v Kruger, Standard Bank of South Africa
Limited v Pretorius
the Applicants termination of the debt review process is not in
order, as the matter is before Court in terms of
Section 86(8)(b)
of
the
National Credit Act and
that once it reaches this stage the
process cannot be terminated in terms of
Section 86(10)
of the
National Credit Act.”
[8
] In addition to the defence raised
Abrahams asks this court to exercise a discretion in favour of the
defendant. In paragraph 7
of the opposing affidavit Abrahams states
as follows:
“
I humbly
request this Honourable Court to consider re-instating the
respondents credit agreements under the debt review in terms
of
section 86(11)
….”
[9] In the alternative hereto he
requests in paragraph 10 of the opposing affidavit as follows:
“
Should the
above Honourable Court find that the Respondents process was
terminated by the issuing of a Notice in accordance with
Rule 86(10)
,
it is my humble and respectively submission and request that the
Respondents be afforded the opportunity to bring an Application
in
terms of
Section 86(11)
to remedy the situation, for the matter to be
postponed
sine
die
and for the costs to be costs in the cause.”
[10] I shall deal firstly with the
defence raised. Rule 32 of the Uniform Rules of Court provides for
two possible responses for
a defendant who seeks to oppose an
application for summary judgment. He may either provide security for
the debt (rule 32(3)(a))
or he may satisfy the court by affidavit or
oral evidence that he has a
bona fide
defence to the claim
(rule 32(3)(b)). If the defendant chooses the latter course, as the
defendants have in this matter, he must,
in his affidavit or
evidence, disclose “fully” the nature and the grounds of
his defence and the material facts relied
upon therefore.
[11] What the rule requires in order
to satisfy the court that a defendant has a
bona fide
defence
is that he must allege in his affidavit facts which, if proved at the
trial, will constitute an answer to the plaintiff’s
claim (see
for example
Breitenbach v Fiat (SA) Edms Beperk
1976
(2) SA 226
(T);
Marsh v Standard Bank of South Africa Limited
2000 (4) SA 947
(W)). The rule requires further that he must disclose
“fully” the nature and the grounds of his defence and the
material
facts relied upon. The grounds for the defence referred to
in the rule is the factual basis for the defence (see for example
Chairperson Independent Electoral Commission v Die Krans
Ontspanningsoord (Edms) Beperk
1997 (1) SA 244).
It has been
held that “while the defendant need not deal exhaustively with
the facts and the evidence relied upon to substantiate
them, he must
at least disclose his defence and the material facts upon which it is
based with sufficient particularity and completeness
to enable the
court to decide whether the affidavit discloses a
bona fide
defence”. (See
Maharaj v Barclays National Bank Limited
1976 (1) SA 418
at 426C-D.)
[12] The defence relied upon in this
case is founded upon the judgment in
Standard Bank of South
Africa Limited v Kruger; Standard Bank of South Africa Limited v
Pretorius
2010 (4) SA 635
(the
Standard Bank
judgment), which was allegedly followed in
First National Bank
Limited v Meier
(EC case number 1321/10).
[13] In the
Standard Bank
judgment it was held that it was not competent for a credit provider
to give notice to terminate the debt review process in terms
of
section 86(10) of the Act after the debt counsellor has referred his
recommendation/proposal to the Magistrate’s Court
in terms of
section 86(7)(c) (read with
National Credit Regulator v Nedbank
2009 (6) SA 295
at 310G-H) or section 86(8)(b)). The effect thereof
is that where a credit provider attempts to terminate the debt review
process
by notice in terms of section 86(10) after an application has
been launched in the Magistrate’s Court for an order in terms
of section 87 of the Act the notice in terms of section 86(10) is
ineffectual and the moratorium imposed upon the enforcement of
the
credit agreement by section 88 of the Act remains undisturbed.
[14] The
Standard Bank
judgment was considered at length in the Eastern Cape High Court in
First Rand Bank v Collett
(case number 1819/10
(Grahamstown) and in
First Rand Bank v Evans
(case
number 1693/10 (Port Elizabeth)). In both these matters I concluded
that the
Standard Bank
judgment was incorrectly
decided. If that is correct then the defence raised in the present
matter would not avail the defendants.
The matter of
First Rand
Bank v Collett
is, however, currently pending appeal in the
Supreme Court of Appeal and accordingly I shall assume, for purposes
of this judgment,
in the defendants’ favour, that the
Standard
Bank
judgment is correct.
[15] The defence founded on the
reasoning in the
Standard Bank
judgment requires that
the necessary factual basis must be laid in the affidavit in
opposition to the summary judgment. The facts
alleged in this
affidavit must be such as to establish, if proved at the trial, that
an application had been launched in the Magistrate’s
Court in
terms of section 86(7)(c) (read with
National Credit Regulator
v Nedbank
(
supra
) or section 86(8)(b) prior to 18 June
2010, the date upon which the plaintiff gave notice in terms of
section 86(10).
[16] The high-water mark of the
averment in paragraph 9 of the affidavit is that the matter is
currently “before Court”.
Firstly, there are no facts set
out from which it may be determined whether this conclusion is
correct or not. It is not alleged
that the debt counsellor has
referred the matter to the Magistrate’s Court and it is not
alleged that the debt counsellor
has forwarded his proposals to the
Magistrate’s Court. This failure strikes both at the validity
of the defence and at the
bona fides
thereof. Secondly, it is
irrelevant whether the matter is now before court. What would have to
be established to make out this
defence is that it was “before
Court” prior to 18 June 2010. Third, it seems to me from all
the facts set out, not
only that it cannot be inferred that the
proposal of the debt counsellor was before court, but that it is
indeed improbable. I
have set out above the content of the affidavit
of Abrahams. It reveals that various proposals were forwarded to
credit providers,
the last on 15 June 2010, just three days before
the section 86(10) notice. There is no suggestion that any of the
proposals had
been forwarded to the Magistrate’s Court. It
appears further that even on 15 June 2010 the debt counsellor was
still not
in possession of all the information which he required in
order to proceed with an application. This is apparent from his
assertion
that notice in terms of section 86(1) was complied with in
a piecemeal manner. He then sets out the dates upon which he received
further information, the last being 12 October 2010. In the result I
am constrained to hold that the defendants have not made out
any
valid defence to the summary judgment application.
[17] In the alternative, however,
Abrahams urges this court to order, in terms of section 86(11), that
the debt review process resume,
alternatively to postpone the matter
so as to enable the defendants to approach the Magistrate’s
Court for such relief.
[18] In the matters of
First
Rand Bank v Collett
and
First Rand Bank v Evans
I held that the clear wording of section 86(11) showed that the High
Court did not have the power to order the process to resume,
this was
reserved for the “Magistrate’s Court hearing the matter”.
This view accords, I think, with that adopted
by Binns-Ward J in the
Western Cape High Court in
Wesbank v NA Martin
(case
number 13564/10, delivered on 13 August 2010) at paragraph [11]
thereof.
[19] In a subsequent unreported
judgment in the Western Cape High Court, however, Blignaut J came to
a different conclusion. He
considered that section 86(11) contained
an obvious
omisus
and that the words “or High Court”
should be read into section 86(11). See
Mercedes-Benz Financial
Services, South Africa (Pty) Limited v PG Dunga
, case number
9222/10 delivered on 20 September 2010.
[20] For purposes of this application,
and in view of the differing interpretations that have been given to
section 86(11), I do
not consider it appropriate for this court to
make an order in terms of subsection (11).
[21] I do nevertheless have a
discretion to postpone the matter so as to permit the defendants to
approach the Magistrate’s
Court for an order in terms of
section 86(10). Indeed I have a general discretion to refuse summary
judgment in an appropriate
case, although I have not been asked to
exercise such a discretion.
[22] A discretion
in summary judgment proceedings should not be exercised capriciously
or the basis of mere conjecture or speculation
so as to deprive the
plaintiff of a remedy to which he is entitled, but upon material
before the court from which it appears that
a reasonable possibility
exists that an injustice may be done if judgment is granted.
Compare
Breitenbach v Fiat (SA) Edms Beperk
supra
at 229F-G.
[23] It seems to me, therefore, that a
defendant who wishes to ask the court to exercise its discretion in
his or her favour, on
the basis that the
Magistrate’s
Court may order that the debt review process resume, must at least
place sufficient information before the court
to enable it to assess
whether a reasonable prospect exists that the Magistrate’s
Court may make such a finding.
[24] In the present matter no such
information has been placed before me. Information which would
clearly be important to the exercise
of my discretion would include
information relating to the total liabilities of the defendants, the
current monthly commitments
of the defendants in respect of such
liabilities; the defendants income, if any; the required living
expenses of the defendants;
whether the property hypothecated is a
primary residence of the defendants or an investment asset; what the
extent of the arrears
is; and the proposal which the debt counsellor
has made in respect of the re-arrangement of debts. None of this
information has
been placed before this court. In the circumstances
there is nothing before the court which could lead me to conclude
that there
is any reasonable prospect that a Magistrate’s Court
may order the debt review to be resumed. In the circumstances I am of
the view that the plaintiff is entitled to summary judgment in
respect of the capital sum.
[25] In addition to
the claim sounding in money, however, the plaintiff seeks an order
declaring the property hypothecated to secure
the loan to be
executable. In the matter of
Jaftha
and Schoeman and Others; Van Rooyen v Stoltz and Others
[2004] ZACC 25
;
2005 (2) SA 140
(CC), Mokgoro J concluded that in
order to ensure the prevention of unjustified execution against
immovable property, judicial
oversight prior to such execution was
appropriate. I consider accordingly whether this is justified on the
papers.
[26] I have already stated that in
this matter there is no evidence to show whether the immovable
property is a primary residence
or an investment asset. The
defendants, who are represented in this court, have not placed any
information before me to indicate
any other possible means whereby
the debt may be paid. They have not placed before me the proposal
made by the debt counsellor
or put forward any other proposal which
may result in the repayment of the loan. The debt which the plaintiff
seeks to recover
is not insignificant. In all the circumstances I
consider that a proper case has been made for the order declaring the
property
to be executable.
[27] In the result:
1. There will be summary judgment
against the defendants, jointly and severally, the one paying the
other to be absolved, in the
amount of
R987 213,44.
2. The defendants are ordered to pay
interest on the aforestated amount at a rate of 8,7% per annum,
calculated and compounded monthly
with effect from 1 August 2010 to
the date of payment, both dates inclusive.
3. Erf 2266 Lorraine, in the Nelson
Mandela Bay Metropolitan Municipality and Division of Port Elizabeth,
Province of the Eastern
Cape, in extent 1292 square metres held under
deed of transfer no. T58315/1997 is declared to be executable.
4. The defendants are ordered to pay
the plaintiff’s costs on a scale as between attorney and
client.
_____________________
J W EKSTEEN
JUDGE OF THE HIGH COURT
Appearances:
For Plaintiff:
Adv P Scott
instructed by Spilkins, Port Elizabeth
For Defendants:
Mr W Tee
instructed by Van Niekerk Huisamen & Tee,
Port Elizabeth