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[2012] ZASCA 167
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Firstrand Bank Ltd t/a Honda Finance v Owens (16/2012) [2012] ZASCA 167; 2013 (2) SA 325 (SCA) (23 November 2012)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 16/2012
Reportable
In the matter between:
FIRSTRAND BANK LIMITED
t/a HONDA FINANCE
.................................
APPELLANT
and
CHARMAINE CAROL OWENS
...............................................................
RESPONDENT
Neutral Citation:
Firstrand Bank Ltd v Owens
(16/2012)
[2012] ZASCA 167
(23
November 2012)
Coram:
Lewis,
Mhlantla and Tshiqi JJA and Erasmus and Plasket AJJA
Heard: 15 November
2012
Delivered: 23 November
2012
Summary:
Where a
credit provider terminates a debt review in respect of a particular
credit agreement through a notice given in terms of
s 86(10)
of the
National Credit Act 34 of 2005
, it may proceed to
enforce the agreement under
ss 129
and
130
of the Act. No further
notice need be served under
s 129(1)(
a
) of the Act.
_____________________________________________________________________
ORDER
_
__________________________________________________________________
On appeal from:
North
Gauteng High Court, Pretoria (Legodi J sitting as court of first
instance):
1 The appeal is upheld
with costs.
2 The decision of the
high court is set aside.
3 The matter is remitted
to the North Gauteng High Court to determine whether summary judgment
should be granted against the respondent.
JUDGMENT
LEWIS JA (…concurring)
[1] In
Sebola
v Standard Bank of South Africa Ltd
1
the Constitutional Court
said (per Cameron J) that the core innovations of the
National Credit
Act 34 of 2005
, with which this matter is concerned, are that the
procedures prescribed by the Act are ‘significantly
consumer-friendly
and court-avoidant’.
2
This case (and many
others referred to in
Sebola
)
demonstrate that while that may have been the wish of the
legislature, the provisions in fact lead to considerable confusion
and lend themselves to widely-different interpretations by both
parties and their legal representatives, and courts. This results
in
an unfortunate proliferation of litigation.
[2] In this matter the
high court (Legodi J in the North Gauteng High Court, Pretoria) chose
to differ from a decision of another
judge in the same high court
3
and to disregard the
careful analysis of pertinent sections of the Act by this court.
4
It held that summary
judgment could not be granted against the respondent, Ms C C Owens,
who had defaulted on her obligations under
an instalment sale
agreement, because the appellant, FirstRand Bank Ltd trading as Honda
Finance (FirstRand), had not given the
requisite notice in terms of
s
129(1)(
a
)
of the Act. The appeal against that decision is with the leave of the
high court.
[3] I shall deal with the
provisions of the Act in question
(ss 86
,
129
and
130
) after setting
out the facts. Owens entered into an agreement with FirstRand on 16
November 2007, purchasing a Honda vehicle, the
price to be paid in
instalments over a period of 78 months. She took possession of the
vehicle but defaulted in making payments.
[4] On 17 February 2010
she took the initiative of applying for ‘debt review’
under
s 86(1)
of the Act. No debt review process, as envisaged by the
section, was in fact completed. More than a year after applying for
debt
review, she remained in default in respect of instalment
payments to FirstRand. On 19 July 2011, acting in terms of
s 86(10)
,
FirstRand gave notice to her, to the debt counsellor appointed in
terms of the section, and to the National Credit Regulator,
terminating the debt review in respect of the agreement. Owens
remained in default.
[5] FirstRand instituted
action against her on 11 August 2011, repeating that the agreement
was terminated and asking for the return
of the vehicle and costs.
Owens gave notice to defend the action. FirstRand applied for summary
judgment against her on 7 September
2011. Owens opposed the
application, which was first heard (together with several other such
applications) by Legodi J on 31 October
2011. During the course of
the application Legodi J asked counsel for argument on whether the
application was competent. He enquired
whether ‘a credit
provider, upon termination of debt review proceedings in terms of
s
86(10)
, is entitled to enforce or to cancel the credit agreement
without having taken steps set out in
sections 129
and
130
of
part C
of Chapter VI of the
National Credit Act
. . .’. The learned
judge postponed the applications for summary judgment in three
matters to 2 November 2011 to enable counsel
to prepare written heads
of argument, and to argue in respect of this question.
[6]
Section 86
appears in
Part D
of Chapter 4 of the Act. The chapter is headed ‘Consumer
Credit Policy’ and
Part D
deals with ‘Over-indebtedness
and reckless credit’. The relevant provisions of
s 86
, which is
headed ‘Application for debt review’, are:
‘
(1) A
consumer may apply to a debt counsellor in the prescribed manner and
form to have the consumer declared over-indebted.
(2) An application in terms of this
section may not be made in respect of, and does not apply to, a
particular credit agreement
if, at the time of that application, the
credit provider under that credit agreement has proceeded to take the
steps contemplated
in
section 129
to enforce that agreement.’
Subsections 3, 4 and 5
prescribe the procedures to be followed by the consumer and the debt
counsellor; subsection 5 requires the
consumer and credit providers
to facilitate the evaluation of the over-indebtedness and to
participate in the review and in any
negotiations in good faith.
Subsection 6 requires a debt counsellor to make an evaluation within
the prescribed time and subsection
7 regulates the steps to be taken
when an evaluation has been made. (Owens contended that the debt
counsellor had undertaken an
evaluation. FirstRand stated, however,
that no rearrangement of Owens’s debts had been made and that
was not put in issue.)
Subsection (8) prescribes the steps to be
taken when the debt counsellor’s recommendation is accepted by
the consumer and
her credit providers, and subsection 9 provides for
the situation where a recommendation is not accepted: the consumer
may apply
to a court for an order that the consumer is over-indebted,
or that credit has been issued recklessly, or both, and that the
consumer’s
obligations be rearranged in one of several ways.
[7]
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.’
Section 86(11)
then
provides that if a credit provider has given notice to terminate
under subsection (10), and proceeds to enforce the agreement
under
Part C
of Chapter 6, the court hearing the matter
5
may order that the debt
review resumes on conditions it deems just in the circumstances.
[8] Chapter 6 of the Act
regulates ‘Collection, repayment, surrender and debt
enforcement’.
Part C
(ss
129
-
133
) sets out the procedures for
‘debt enforcement by repossession or judgment’. The
sections deal thus with how a credit
provider should proceed to
enforce an agreement.
Section 129
is headed ‘Required
procedures before debt enforcement’. Subsection (1) reads:
‘
If the
consumer is in default under a credit agreement, the credit provider
–
(a)
may
draw the default to the notice of the consumer in writing and propose
that the consumer refer the credit agreement
to a debt counsellor,
alternative dispute resolution agent, consumer court or ombud with
jurisdiction, with the intent that the
parties resolve any dispute
under the agreement or develop and agree on a plan to bring the
payments under the agreement up to
date; and
(b)
subject
to
section 130
(2), may not commence any legal proceedings to enforce
the agreement before –
(i) first
providing notice to the consumer, as contemplated in paragraph
(a)
,
or
in
section 86
(10), as the case may be;
and
(ii) meeting any
further requirements set out in
section 130.
’ (My emphasis.)
[9]
Section 130
is headed
‘Debt procedures in a court’. Subsection (1) reads:
‘
(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 least 20 business days and –
(a)
at
least 10 business days have elapsed since the credit provider
delivered
a notice to the consumer as contemplated in
section 86
(9), 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
(c)
in
the case of an instalment agreement, secured loan, or lease, the
consumer has not surrendered the relevant
property to the credit
provider as contemplated in
section 127.
’ (My emphasis.)
[10] A reading of
subsections (1) of each of
s 129
and
s 130
shows that where it is the
credit provider that wishes to enforce the debt, a notice must
6
be given by it to the
consumer in terms of
s 129(1)(
a
).
That subsection also makes it clear that the credit provider must
draw to the consumer’s attention the possible methods
of
resolving the debt default.
Section 86(10)
, on the other hand,
assumes knowledge on the part of the consumer of these methods: it
applies only where the consumer has already
applied for debt review.
A notice under
s 129(1)(
a
)
is thus redundant where the consumer has already taken steps to
rearrange her debts. That is why
s 129(1)(
b
)(i)
states that in order to commence legal proceedings, a credit provider
must give notice
either
under
s 129(1)(
a
)
or
s 86(10).
The former
applies where there has been no debt review. The latter applies where
there has been. The requirement of two notices
to the consumer where
these are meant to serve different purposes, and in different
contexts, is absurd.
[11] I accordingly agree
with the decision of Murphy J in
Changing
Tides
7
that a notice in terms of
s 129(1)(
a
)
is not required where a notice under
s 86(10)
has been given. I also
agree that the reference in
s 130(1)(
a
)
to a notice under
s 86(9)
must be a reference to
s 86(10).
8
anc" HREF="#sdfootnote8sym">
8
It is an obvious error.
Section 86(9)
does not deal with notices at all. And
s 130(1)(
a
)
must be read with
s 129(1)(
b
)(i),
which refers to
s 86(10):
they both refer to the requisite
notice to be given to the consumer.
[12] It follows that the
appeal must be upheld, and the judgment of the high court set aside.
Because of the diversion by the high
court in requiring argument on
the need for a notice in terms of
s 129(1)(
a
),
when a notice has been sent under
s 86(10)
of the Act already, no
argument would have been addressed to the court below on whether
there is any bona fide defence to the application
for summary
judgment. In her opposing affidavit Owens set out the reasons for her
default and explained what steps she had taken
to rearrange her
debts. These were confirmed by her debt counsellor. In the
circumstances I consider that the matter must be remitted
to the high
court to determine whether summary judgment should be granted. That
court may not require, however, that any further
notice under
s
129(1)
be given by FirstRand.
[13] Owens advised this
court that she could not afford legal representation for the appeal.
At the request of the court Mr C D
Pienaar of the Free State Bar
furnished heads of argument for her, and represented her in court.
This was done pro bono and the
court is indebted to him.
[14] In the result, the
following order is made:
1 The appeal is upheld
with costs.
2 The order of the high
court is set aside.
3 The matter is remitted
to the North Gauteng High Court to determine whether summary judgment
should be granted against the respondent.
__________
C H Lewis
Judge of Appeal
APPEARANCES
Counsel for Appellant: N
Konstantinides
Instructed by: Hack Stupel & Ross
Pretoria
Lovius Block Attorneys
Bloemfontein
Counsel for Respondent: C D Pienaar
Instructed by: Moyo Attorneys
Pretoria
1
Sebola
v Standard Bank of South Africa Ltd
2012 (5) SA 142
(CC).
2
Para
59.
3
Murphy
J in
Changing Tides 17 (Pty) Ltd v Grobler
: Case 9266/2010,
handed down on 2 June 2011.
4
In
Collett v FirstRand Bank Ltd
2011 (4) SA 508
(SCA),
particularly in respect of
ss 86(10)
and (11), paras 9, 10 and 11.
5
In
Collett
this court held (para 17) that although the
subsection refers only to a magistrate’s court, a reference to
a high court
must be read in to make sense of the provision. It is
the court that hears the proceedings to enforce the agreement that
must
order the resumption of the debt review.
6
A
reading of
s 129(1)(
a
) with
s 129(1)(
b
), and 130(1)
shows that compliance is compulsory.
7
Above,
paras 24 and 25.
8
Para
25.