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[2012] ZASCA 81
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Seyffert and Another v Firstrand Bank Ltd t/a First National Bank (577/2011) [2012] ZASCA 81; 2012 (6) SA 581 (SCA) (30 May 2012)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 577/2011
In
the matter between:
JAN GEORGE STEPHANUS
SEYFFERT
..............................................
First
Appellant
HELENA SEYFFERT
.........................................................................
Second
Appellant
and
FIRSTRAND BANK LIMITED
t/a
FIRST NATIONAL BANK
............................................................................
Respondent
Neutral
citation:
Seyffert & Seyffert v Firstrand Bank Ltd
(577/2011)
[2012] ZASCA 81
(30 May 2012)
Coram:
Cloete,
Malan, Leach, Wallis JJA and Ndita AJA
Heard:
21 May
2012
Delivered: 30 May 2012
Summary:
Section
85 of
National Credit Act 34 of 2005
– termination of debt
review under
s 86(10)
– summary judgment – discretion of
court – unrealistic proposals for restructuring repayment of
debt
___________________________________________________________________
ORDER
__________________________________________________________________
On appeal from:
the South Gauteng High Court, Johannesburg (Willis J sitting as court
of first instance):
The appeal is dismissed
with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
MALAN JA (Cloete, Leach
and Wallis JJA and Ndita AJA concurring):
[1] This is an appeal
against an order of the South Gauteng High Court (Willis J) granting
summary judgment against the two appellants
in the amount of
R219 715,69 together with interest at the rate of 9 per cent per
annum from 12 May 2010 to date
of payment. The action was
for the balance owing under a mortgage bond, but the high court
declined to both declare the mortgaged
property executable and make
an order for costs. The appeal is with the high court’s leave.
There is no cross-appeal.
[2] The mortgage bond in
favour of the respondent was registered over the appellants’
property as security for a home loan
on 1 July 2008. The loan was to
be paid over a period of 20 years, with initial monthly instalments
of R3 730,56. The appellants
fell into arrears with their
payments and, on 31 July 2009, applied for debt review in terms of s
86(1) of the National Credit
Act 34 of 2005 (the NCA). On 3 August
2009 the respondent was informed of the application for debt review.
On 21 April 2010 the
respondent terminated the debt review under s
86(10) and thereafter, on 10 June 2010, instituted action against the
appellants.
After they filed their notice of intention to defend, the
respondent applied for summary judgment which was eventually granted
against both on 11 October 2010.
[3] In resisting summary
judgment the appellants did not dispute their indebtedness to the
respondent in either of the two sets
of affidavits they filed. In the
first affidavit of 4 August 2010 the first appellant averred that
their ‘current’
instalment, as reflected in the debt
counsellor’s proposal, amounted to R2 474 and that the
debt would have been settled
within 142 months. The debt counsellor,
however, had proposed an instalment of R474,97 which, so the
appellants alleged, meant
that the debt would be discharged in 239
months. The application for debt review had been referred to the
Magistrates’ Court
in Oberholzer, but was postponed on 9
December 2009 in order to allow the first appellant to supplement his
papers (by adding a
fresh salary slip) and to enable the respondent
to file opposing papers. The first appellant did not supplement his
papers. Nor
did the respondent file opposing papers. Instead, as I
have said, it terminated the debt review on 21 April 2010.
[4] In a supplementary
set of affidavits deposed to on 7 September 2010, the first appellant
stated that he was constantly attempting
to improve his position. He
also requested the court below to make a draft order, annexed to his
affidavit, an order in terms of
s 85 of the NCA. A revised proposal
by the debt counsellor envisaged payments of R808,45 per month with
interest at a rate of 10,00
per cent per annum over 239 months. The
last payment by the first appellant prior to filing this affidavit
was made through a distribution
agency on 27 August 2010 in an amount
of R819,34.
[5] When the matter came
before it, the high court granted summary judgment. In dealing with
both the present matter and three similar
applications, the learned
judge remarked:
‘
The
affidavits of the respondents have been cryptic to the extent of
coyness. These affidavits are laconic, if not supine, with
regard to
the real possibility of extrication from financial difficulties which
the respondents face. Even where the respondents
presented some
acceptable evidence as to the fact that they had referred the matter
to a debt counsellor, and in some instances
annexed that person’s
recommendations, in no such instance does the proposal make any
economic sense at all. Indeed, the
proposals are devoid of economic
rationality.’
He also said:
‘
The
conundrum that arises from s 86(10) is this: may a debtor, who has
made an application for debt review in terms of s 86(1) of
the NCA,
by the simple expedient of making such an application, indefinitely
frustrate the enforcement of a debt to which he or
she has no real
defence and where no serious effort is being made to enter into some
sensible arrangement for the rescheduling
or re-arrangement of his or
her debt (as is provided for in the NCA)?’
He concluded:
‘
[W]here a
credit provider has given a consumer proper notice in terms of s
86(10) of the NCA, a court hearing an application for
summary
judgment upon a credit agreement, may, depending on the contents of
the affidavit resisting summary judgment:
grant the application; or
dismiss the application; or
adjourn the application on
appropriate terms and conditions.
Active endeavours to exchange serious,
sensible and reasonable proposals to resolve a consumer’s debt
problems will be among
the factors which will weigh heavily with a
court in deciding which order to make.’
[6] In this court it was
argued on behalf of the appellants that the high court should have
exercised its discretion in their favour
by acting in terms of either
s 85 or s 87 and referring the matter to a debt counsellor, or
declaring them over-indebted and rearranging
their repayments. It was
submitted that the respondent had not acted in good faith by
terminating the debt review after requesting
a postponement to file
papers opposing it. Moreover, it was suggested that the effect of the
rearrangement would merely have been
to extend the period of
repayment for a short period without prejudice to the respondent.
[7]
These contentions cannot be accepted. It was explained in
FirstRand
Bank Ltd v Collett
1
that –
‘
the right of
the credit provider to terminate the review is balanced by s 86(11),
which provides that, if the credit provider has
given notice to
terminate and proceeds to enforce the agreement, “the
Magistrates’ Court … may order that the
debt review
resume on any conditions that the court considers to be just in the
circumstances”. It is at this moment that
the participation of
the credit provider in the debt review becomes relevant. He is
obliged to comply with the reasonable requests
of the debt counsellor
(s 86(5)
(a)
),
and to participate in good faith in the review and any negotiations
designed to result in responsible debt rearrangement (s 86(5)
(b)
).
Should the credit provider fail or refuse to participate in the
review, a resumption of the process may well be ordered. But
where
the credit provider on good grounds concludes that the proposed
restructuring will not lead to the “satisfaction by
the
consumer of all responsible financial obligations” (s 3
(g)
and
(i)
)
or a rearrangement as contemplated by s 86(7)
(c)
,
the court considering the resumption of the debt review may well
refuse to sanction its resumption.
’
[8] Where, as in this
case, debtors have applied for debt review, they and the credit
provider are obliged not only to comply with
any reasonable request
by the debt counsellor to facilitate an evaluation of the debtors’
indebtedness and the prospects
for responsible debt restructuring,
but also to participate in good faith in the review and negotiations.
The duty to negotiate
in good faith does not terminate on the debt
counsellor’s proposal being referred to the magistrate’s
court, nor when
it is postponed.
2
The right to terminate the debt review in respect of a particular
credit agreement is balanced by s 86(11) which gives the ‘enforcing
court’
3
the power to order the resumption of the debt review. It is at this
stage that the participation of the credit provider in the
debt
review process becomes relevant and at which the conduct of both
parties will be assessed. As was further stated in
Collett’s
case:
4
‘
Over-indebtedness
is not a defence on the merits.
However,
because of its extraordinary and stringent nature, a court has an
overriding discretion to refuse an application for summary
judgment.
It
would be proper for a defendant to raise termination of the debt
review by reason of the credit provider‘s failure to
participate or its bad faith in participating when application for
summary judgment is made. These issues may be raised, not as
a
defence to the claim, but as a request to the court not to grant
summary judgment in the exercise of its overriding discretion.
Of
course, sufficient information on which the request for a resumption
of the debt review is based must be placed before the court.’
[9] The court considering
the enforcement of a credit agreement may decide whether there is any
benefit in postponing the application
for summary judgment in order
to determine the advantages of a resumption of the debt review. The
conduct of both parties will
be relevant in making such
determination. Moreover, the terms of a proposed rearrangement will
then also be relevant to assess
whether it is likely to lead to the
satisfaction of all responsible consumer obligations, if implemented.
It is at this stage that
a balance must be struck between the
interests of the consumer and those of the credit provider.
5
[10] As I have mentioned
above, the first debt rearrangement proposal referred to in the first
opposing affidavit was based on a
monthly instalment of R474,96
which, it was suggested, would lead to the discharge of the debt over
a period of 239 months. However,
this suggestion is based on faulty
arithmetic. The proposal envisaged payments from October 2009 when
the balance owing was apparently
R203 786,18 and, clearly, even
with regular payments of the suggested instalment, the debt would not
have been discharged
within that period. Close examination of the
proposal reveals that it is based on the monthly instalments being
used to discharge
some of the interest as it accumulated with no
payments being made in respect of the capital amount of the loan. In
the result
there would be a balance of R288 898,64 still due in
September 2029. Not even the accumulating interest (which the debt
counsellor
set at 10 per cent per annum) would have been covered by
payment of the proposed instalments.
[11] Although in the
supplementary affidavit reference is made to a proposal to pay an
instalment of R808,42 per month, the proposal
annexed is neither
signed nor dated. But even if this later proposal were to be
implemented, it would not lead to the appellants’
debt being
discharged by September 2029. In fact a sum of R193 968,90 would then
still be outstanding ex facie the proposal itself.
[12] No reference was
made by the appellants to any negotiations between the parties from 9
December 2009 (when the debt review
was postponed) and 7 December
2010 (the date of the supplementary affidavit). In the light of the
appellants’ failure to
present any realistic proposal to pay
the debt, there is no basis for alleging that the respondent had
failed to negotiate in good
faith. The contention that it had not
acted in good faith as it failed to file opposing papers despite
having sought the postponement
is also without merit. The appellants
intended amending their debt review application. They never did that.
The respondent therefore
had no reason to file further papers. The
appellants have not shown any facts on which an inference of bad
faith on the part of
the respondent can be drawn.
[13] The appellants did
not apply for a resumption of the debt review in terms of s 86(11).
Nor did they demonstrate any basis upon
which the respondent was not
entitled to terminate the debt review. Their restructuring proposals
were simply, as the court below
found, ‘devoid of economic
rationality’, and would have left a substantial part of the
debt unpaid.
[14] The appellants also
relied on s 85 which allows a court ‘in any court proceedings
in which a credit agreement is being
considered, if it is alleged
that the consumer under a credit agreement is over-indebted’ to
–
‘
(
a
)
refer the matter directly to a debt counsellor with a request that
the debt counsellor evaluate the consumer’s circumstances
and
make a recommendation to the court in terms of section 86 (7);
or
(
b
)
declare that the consumer is over-indebted, as determined in
accordance with this Part, and make any order contemplated in section
87 to relieve the consumer’s over-indebtedness.’
The appellants contended
that the high court erred in not declaring the appellants
over-indebted under this section and by not making
their proposal an
order of court, alternatively, not making an order as contemplated by
s 87.
[15] A ‘review’
as contemplated by s 85 is not necessarily initiated by the consumer
as in the case of a debt review
under s 86. Nor can the credit
provider terminate the ‘review’ under s 85.
6
It has been suggested that, despite the wide introductory words of s
85,
7
-
‘
reference
to the broader context of the statute impels the conclusion that the
section was not intended to provide a basis for a
repetition of the
process already provided for in terms of s 86, or to draw back within
the ambit of debt review debts already
excluded therefrom by the
operation of other provisions of the Act, such as s 86(2), s 86(10)
or s 88(3). To construe s 85 otherwise
would be conducive to the most
unwholesome circularity, at odds with the basic principle –
interest
rei publicae ut sit finis litium
.’
This conclusion is too
absolute and loses sight of the discretion given a court by the word
‘may’ in s 85 to make either
of the two orders envisaged
by it, and the commencing words of the section ‘Despite any
provision of law or agreement to
the contrary’.
8
However, before the court can exercise the discretion, the material
facts relied upon must be placed before it.
9
It may well be pointless in most cases where the matter has already
been referred to a debt counsellor to do so again.
10
Indeed, a court should be slow to exercise its discretion to make
either of the orders envisaged in s 85 where the matter has been
dealt with by a debt counsellor, or a debt review has justifiably
been terminated, and where no material change in circumstances
has
been demonstrated.
[16] In any event, as I
have already mentioned, the appellants’ proposals, if accepted,
will not lead to the discharge of
their debt. They may well be
over-indebted but this is no reason why the respondent should have
accepted their proposals. The respondent
was entitled in law to
terminate the debt review and, on the facts, justifiably did so. Only
scant material was presented by the
appellants to the court below,
and their evidence falls short of inspiring confidence that their
affairs will improve so as to
enable them to eventually discharge
their obligations. Neither of the proposals envisages the discharge
of the debt within the
agreed period or within any suggested, and
feasible, extended time. This is not a case where a debt review can
usefully be employed.
[17] In the result the
appeal is dismissed with costs.
__________
F R MALAN
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: A P Bruwer
Instructed
by:
Smit & Grové
Attorneys
Johannesburg
Andries Spangenberg Inc
Bloemfontein
For
Respondent: N Konstantinides and GTS Eiselen
Instructed
by:
Charl Cilliers Inc
Johannesburg
Steyn-Meyer Inc
Bloemfontein
1
Collett
v FirstRand Bank Ltd v
2011 (4) SA 508
(SCA) para 15.
2
Collett
para 13.
3
Collett
para 17.
4
Para
18. Cf
Changing Tides 17 (Pty) Ltd v
Grobler & another
[2011] ZAGPPHC
84 (2 June 2011) para 18.
5
FirstRand
Bank Ltd v Burton Evans & another
[2011]
ZAWCHC 474
(23 September 2011) at 11 and 14.
6
Collett
para 11.
7
The
Standard Bank of South Africa Limited v Panayiotis Kallides
case
[2012] ZAWCHC 38
(2 May 2012) para 8; and
see
Matimba Management and Labour CC &
others v SA Taxi Securitization (Pty) Ltd & another
[2010] ZAPJHC 32 (14 April 2010)
para
24.
8
FirstRand
v Olivier
2009 (3) SA 353
(SE) para
14;
Standard Bank of South Africa Ltd v
Hales & another
2009 (3) SA 315
(D) paras 12-13;
BMW Financial Services
(SA) (Pty) Ltd v Mudaly
2010 (5) SA
618
(KZD) paras 36-7.
9
Standard
Bank of South Africa Ltd v Hales & another
2009
(3) SA 315
(D) paras 12-13.
10
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
2010
(5) SA 618
(KZD) para 37.