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[2010] ZASCA 72
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Naidoo v ABSA Bank Ltd (391/09) [2010] ZASCA 72; 2010 (4) SA 597 (SCA) ; [2010] 4 All SA 496 (SCA) (27 May 2010)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 391/09
In
the matter between:
SELVIN LABAN NAIDOO
Appellant
v
ABSA
BANK LTD
Respondent
Neutral
citation:
Naidoo
v ABSA Bank
(391/2009)
[2010] ZASCA 72
(27 May 2010)
Coram:
Mthiyane,
Heher, Cachalia, Shongwe and Tshiqi JJA
Heard:
11
May 2010
Delivered:
27
May 2010
Summary:
A
credit provider need not comply with the procedure provided for in
s
129(1)(a)
of the
National Credit Act 34 of 2005
before instituting
sequestration proceedings against a debtor because such proceedings
are not proceedings to enforce a credit
agreement.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
KwaZulu-Natal High Court, Durban (Gyanda J sitting as court of first
instance).
The following order is made:
(i) The appeal is dismissed with
costs;
(ii) The
application to lead further evidence is dismissed with each party
paying its own costs.
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA
(Mthiyane,
Heher, Shongwe and Tshiqi JJA concurring):
[
1] The
appellant was sequestrated by an order of Gyanda J at the
respondent’s instance in the Durban High Court on 25 May
2009.
The sequestration order followed the appellant’s failure to
meet his payments to the respondent under instalment sale
agreements
relating to six motor vehicles and two home loan agreements. The
National Credit Act 34 of 2005 (‘the NCA’)
applies to
these agreements – the appellant is a ‘consumer’
and the respondent a ‘credit provider’
as envisaged in
s 1 of the NCA.
1
[2] The appellant contends that it was
not competent for the respondent to have instituted proceedings for
his sequestration before
complying with the procedure provided for in
s 129(1)(a) of the NCA. (This section is set out in para 3
below.) The appellant
did not raise this defence in his papers
opposing the sequestration application in the high court. Nor did he
do so when he appeared
personally before the learned judge to resist
the application for his final sequestration. His counsel, however,
invoked it as
a ground in his application for leave to appeal against
the sequestration order. The high court accordingly referred the
dispute
to this court by granting the necessary leave.
[3] Mr Reddy, who appears for the
appellant, came into the matter belatedly after counsel who had
prepared written submissions withdrew.
So, adopting his predecessor’s
written argument, he submits that the procedures before debt
enforcement provided for in s
129(1)(a) read with s 130(3) of the NCA
should be interpreted to cover circumstances relating not only to the
enforcement of a
credit agreement but also to sequestration
proceedings since the unpaid claims, which are the subject of the
sequestration application,
arise from credit agreements to which the
NCA applies. The relevant parts of these provisions read as follows:
‘
Section
129
Required
procedures before debt 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) .
. . may not commence any legal proceedings to enforce the agreement
before –
(i) first
providing notice to the consumer, as contemplated in paragraph
(a)
. . .
(ii) .
. .
’
and
‘
Section
130
Debt
Procedures in a Court
.
. .
(3)
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 sections 127, 129 or 131 apply, the
procedures required by those sections have been complied
with;
(b) .
. .’
[4] Mr Reddy’s
submission, as I understand it, implicitly contains a concession that
sequestration proceedings are not in
and of themselves ‘legal
proceedings to enforce the agreement’ within the meaning of s
129(1)(b). That his concession
is correct is clear from the recent
judgment in
Investec
Bank Ltd v Mutemeri
2
where Trengove AJ concluded that an order for the sequestration of a
debtor’s estate is not an order for the enforcement
of the
sequestrating creditor’s claim and sequestration is thus not a
legal proceeding to enforce an agreement.
3
He did so after carefully considering the authorities which have held
that ‘sequestration proceedings are instituted by a
creditor
against a debtor not for the purpose of claiming something from the
latter, but for the purpose of setting the machinery
of the law in
motion to have the debtor declared insolvent’
4
– they are
not
proceedings ‘for the recovery of a debt’.
5
The learned judge’s reasoning accords with this court’s
description of a sequestration order as a species of execution,
affecting not only the rights of the two litigants but also of third
parties, and involves the distribution of the insolvent’s
property to various creditors, while restricting those creditors’
ordinary remedies and imposing disabilities on the insolvent
–
it is not an ordinary judgment entitling a creditor to execute
against a debtor.
6
[5] However, Mr
Reddy contends that the effect of s 130(3)(a) of the NCA, when read
with s 129(1), indicates that the legislature
intended to encompass
all proceedings to which the NCA applies and not merely proceedings
to enforce a credit agreement. This is
because, he submits, the words
in s 130(3) ‘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. . .’
suggest
that all proceedings of which the underlying
causa
is
a credit agreement to which the NCA applies fall within its ambit.
[6] Read in
isolation the language of s 130(3) may convey the meaning for which
the appellant contends. In
Ex
Parte Ford and Two Similar Cases
7
the
court was faced with the question whether s 85 of the NCA was
applicable to proceedings for the voluntary surrender of an estate.
The section’s phraseology is almost identical to that of s
130(3) and gives the court a discretion ‘despite any provision
of law or agreement to the contrary, in any court proceedings in
which a credit agreement is being considered’
to
refer the matter to a debt counsellor for debt review.
8
And once a debt counsellor becomes involved the credit provider ‘may
not exercise or enforce by litigation or other judicial
process any
right . . ..’
9
The learned judge observed that the language of s 130(3) is cast
widely and the
limitation
of the provision to proceedings in which a credit agreement is being
considered did not imply that the proceedings in
question were
restricted only to those in which the enforcement of a credit
agreement is in issue. And so, the court concluded,
s 85 was also
applicable to proceedings for voluntary surrender under the
Insolvency Act.
10
Whether the learned judge was correct in this conclusion I need not
decide because
Ford
is
distinguishable from the present matter. Section 85, which
Ford
was
concerned with, is to be found in Part D of Chapter 4
and
provides for the alleviation of over-indebtedness through a process
of debt relief in the form of debt restructuring.
11
Sections 129-133 on the other hand deal with debt enforcement and are
to be found in Part C of Chapter 6. Section 130(3) must
therefore be interpreted in the context of that part of the chapter
within which it is situated – not in isolation and outside
of
its context.
[7] It is clear
from the language employed in s 130(3)(a) that the proceedings
referred to there do not extend the remit of s 129,
as the appellant
contends, but as Trengove AJ has correctly pointed out, it simply
provides that where a credit provider decides
to institute
proceedings to enforce the agreement, he may do so only after having
complied with the procedure in s 129(1)(a).
12
Similarly the reference in s 130(3)(a) to s 127 and to s 131 refers
specifically to procedures which are applicable to those proceedings
involving the surrender and attachment of goods respectively under a
credit agreement – not to ‘any proceedings’
concerning a credit agreement. It follows that the appellant’s
insistence that the respondent had to comply with the procedure
provided for in s 129(1)(a) before commencing sequestration
proceedings against him has no merit.
[8] It bears
mentioning that academic writers have observed that it is not
completely clear whether the word ‘enforce’
as it is used
in s 129(1)(b) carries the meaning which is usually ascribed to it in
legal parlance – the enforcement of payment
or of another
contractual obligation – or includes the credit provider’s
remedy to cancel the agreement and claim damages.
Enforcement and
cancellation are mutually exclusive remedies and a credit provider
must, in the event of a debtor’s breach
of an agreement, elect
which of the two courses to pursue. They conclude that ‘enforce’
must bear a wider meaning so
as to include all contractual remedies,
including cancellation. This interpretation, they say, will avoid a
debtor being left without
the procedural protection of s 129(1)(a) in
the event of a credit provider electing to cancel the agreement.
13
This view was endorsed recently by a full court in
Absa
Bank Ltd v De Villiers
.
14
It is, however, not necessary for me to say more on this question
because on either interpretation and for the reasons already
given a
sequestration proceeding is not the kind of proceeding to which s
129(1)(b) refers.
[9] There remains one other matter.
The respondent brought an application to lead further evidence in
this court to prove that it
had in any event complied with s
129(1)(a). It asked for costs of the application only if the
appellant opposed it. The appellant
did so vigorously. It is
therefore necessary to decide the question of costs in this
application.
[10] It appears
from the respondent’s application that, after leave to appeal
had been granted, its attorneys discovered fortuitously
that they had
posted s 129 notices to the appellant’s chosen
domicilium
citandi et executandi.
The
notices stated that if the appellant did not avail himself of the
remedies to which consumers are entitled under s 129(1)(a)
it
would institute legal proceedings for the return of the goods and
hold the appellant liable for any damages it may have suffered.
After
the appellant had failed to respond to the notices, the respondent
instituted
sequestration proceedings against him. The respondent sought to place
this further evidence before us as a precautionary
measure in the
event of it being unsuccessful in its main submission.
[
11] Even
though I have held that a credit provider need not comply with the
procedure provided for in s 129(1)(a) before instituting
sequestration proceedings against a consumer (the s 129 notices are
therefore immaterial to the outcome of this appeal) it should
be
borne in mind that when the high court granted leave to appeal to
this court there was no decided case on this question. The
Mutemeri
judgment
was delivered after the high court granted the appellant leave to
appeal on this point. So, given the uncertainty on this
legal issue,
the respondent in my view acted reasonably by attempting to place
this evidence before this court. The appellant’s
opposition to
the application on the other hand was not based on whether the
evidence sought to be admitted on appeal was relevant.
Instead he
attempted, without any factual basis, to impugn the respondent’s
motives in bringing the application. However,
because of the view I
have taken on how s 129(1) and s 130(3) should properly be
interpreted, the further evidence has no
bearing on the outcome of
the appeal. In the circumstances I think it is appropriate for each
party to pay its own costs on this
aspect.
[12] In the result I make the
following order:
(i) The appeal is dismissed with
costs;
(ii) The
application to lead further evidence is dismissed with each party
paying its own costs.
_________________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: G Reddy
Instructed by Anand Pillay &
Associates, Pietermaritzburg
Symington & De Kok, Bloemfontein
RESPONDENT: A Stokes SC
Instructed by Johnston & Partners,
Durban
Naudes, Bloemfontein
1
'consumer'
,
in respect of a credit agreement to which this Act applies, means-
(a)
the
party to whom goods or services are sold under a discount
transaction, incidental credit
agreement or
instalment agreement;
(b)
the party to whom money is paid, or credit granted, under a pawn
transaction;
(c)
the party to whom credit is granted under a credit facility;
(d)
the mortgagor under a mortgage agreement;
(e)
the borrower under a secured loan;
(f)
the lessee under a lease;
(g)
the guarantor under a credit guarantee; or
(h)
the
party to whom or at whose direction money is advanced or credit
granted under any other credit agreement;
'credit
provider'
,
in respect of a credit agreement to which this Act applies, means-
(a)
the party who supplies goods or services under a discount
transaction, incidental credit
agreement or
instalment agreement;
(b)
the party who advances money or credit under a pawn transaction;
(c)
the party who extends credit under a credit facility;
(d)
the mortgagee under a mortgage agreement;
(e)
the lender under a secured loan;
(f)
the lessor under a lease;
(g)
the party to whom an assurance or promise is made under a credit
guarantee;
(h)
the party who advances money or credit to another under any other
credit agreement; or
(i)
any other person who acquires the rights of a credit provider
under a credit agreement after it
has been entered
into.
2
2010 (1) SA 265
(GSJ) at paras 27-31.
3
Ibid para 31.
4
Collett v Priest
1931
AD 290
at 299.
5
Prudential Shippers SA Ltd
v Tempest Clothing Co (Pty) Ltd
1976
(2) SA 856
(W) at 863D-865A. Although not cited by Trengove AJ the
same conclusion was arrived at in
WP
Koöperatief Bpk v Louw
1995
(4) SA 978
(C) at 987G.
6
Samsudin v De Villiers
Berrange NO
[2006] SCA 79
(RSA).
7
2009 (3) SA 376
(WCC).
8
Section 86.
9
Section 88(3).
10
See above (n7) at para 12.
11
For a discussion of this judgment see Van Heerden and Boraine ‘The
Interaction Between the Debt Relief Measures in the
National Credit
Act 34 of 2005
and Aspects of Insolvency Law’ 2009 (12) 3
PELJ
22 at 46.
12
See
Mutemeri
(above)
(n 2) at para 33. For a discussion of this judgment see Boraine and
Van Heerden ‘Is Sequestration “Debt Enforcement”
for Purposes of the National Credit Act 34 of 2005?’ (Soon to
be published in
PELJ.
)
13
J M Otto
The National
Credit Act Explained
(2006)
p 87-88; Van Heerden and Boraine (n9) p 39-41.
14
2009 (5) SA 40
(C).