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[2010] ZASCA 130
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Rossouw and Another v First Rand Bank Ltd t/a FNB Homeloans (Formerly First Rand Bank of South Africa Ltd) (640/2009) [2010] ZASCA 130; 2010 (6) SA 439 (SCA) ; [2011] 2 All SA 56 (SCA) (30 September 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No: 640/2009
In
the matter between:
BENJAMIN
ROSSOUW
First Appellant
SANDRA
WILSON-ROSSOUW
Second Appellant
and
FIRST RAND BANK
LIMITED t/a FNB HOMELOANS
(formerly FIRST RAND
BANK OF SOUTH AFRICA LTD)
Respondent
Neutral
citation
:
Rossouw
v First Rand Bank Ltd
(640/09)
[2010]
ZASCA 130
(30 September 2010)
Coram:
MPATI P, NAVSA, CLOETE, MAYA JJA et EBRAHIM AJA
Heard:
07 September
2010
Delivered:
30 September 2010
Summary:
National Credit Act 34 of 2005
–
summary judgment application – whether
s 130(2)
of the Act
limits a credit provider’s claim under a mortgage agreement to
the proceeds realised upon execution of the mortgaged
property –
whether credit provider complied with the provisions of 129(1) read
with
s 130(1)
of the Act.
ORDER
On
appeal from:
North Gauteng High Court,
(Pretoria) (Ellis AJ sitting as court of first instance).
1.
The appeal is upheld with costs that
include the costs of two counsel.
The order of the court
below is set aside and the following is substituted:
‘
The
application for summary judgment is dismissed with costs.’
JUDGMENT
MAYA JA (concurring Mpati
P, Navsa, Cloete JJA and Ebrahim AJA)
[1]
This is an appeal, with the leave of the court below, against summary
judgment granted
by the Pretoria High Court (Ellis AJ) against the
appellants in favour of the respondent (the bank) based on a loan
agreement and
mortgage bond.
[2]
The facts gleaned from the summons and summary judgment affidavits
are the following.
On 8 June 2006 the appellants, who are married to
each other, concluded a loan agreement with the bank. The latter is a
registered
credit provider
[1]
in
terms of s 40 of the National Credit Act 34 of 2005 (the Act). In
terms of this agreement the bank granted the appellants a loan
in the
sum of R1 030 000 repayable in monthly instalments of R9 003,88 which
was secured by a mortgage bond of R1 800 000 over
the appellants’
immovable property (the mortgaged property).
[3]
Some of the material terms of the mortgage bond were:
‘
16.1.1
If the mortgagor[s] fail to pay any amount due in terms of this bond
… on due date … then, at the option of
the bank, all
amounts whatsoever owing to the bank by the mortgagor[s] shall
forthwith be payable in full … and the bank
may institute
proceedings for the recovery thereof and for an order declaring the
mortgaged property executable …;
17. A certificate
purporting to be signed on behalf of the bank shall be proof until
the contrary is proved of the balance owing
and the fact that it is
due and payable … and shall be valid as a liquid document for
the purposes of obtaining …
summary judgment;
…
20. For the purposes of
this bond and of any proceedings which may be instituted by virtue
hereof, and of the service of any notice,
domicilium citandi et
executandi
is hereby chosen by the mortgagor[s] at the mortgaged
property;
21.1 Any notice given by
the bank in terms of this bond may at the bank’s option be
addressed to the mortgagor[s] at the [chosen]
domicilium
…
and may be served by registered post;
21.2 Notices so posted
shall be deemed to be received by the mortgagor three days after
posting;
21.3 A certificate signed
on behalf of the bank, stating that a notice has been given, shall be
sufficient and satisfactory proof
thereof, and the authority of the
signatory and validity of the signature need not be proved.’
[4]
About two years later, the appellants fell into arrears in respect of
their monthly
repayments. In September 2008 the bank sent them a
notice in terms of s 129(1)(a) of the Act informing them of their
default. As
a result, the appellants attended debt counselling and
subsequently made a debt restructuring proposal to the bank. On 7
October
2008 the bank countered the appellants’ offer with its
own revised payment plan to which the appellants agreed but
inexplicably
abandoned to pursue debt management. No payment appears
to have been made by the appellants until 23 March 2009. The amount
then
paid was only a sum of R20 450. It is not clear how this amount
was computed but it appears to be inadequate in terms of the
requirements
of both the agreement and the revised payment plan
having regard to the considerable period during which no payment was
made.
[5]
On 23 April 2009 the bank allegedly delivered a fresh notice in terms
of s 129(1)(a)
(the notice). On 22 May 2009 it issued a summons to
which was attached a certificate of compliance dated 15 May
2009 stating
that the bank had issued and delivered the requisite
notice. The summons claimed payment of the sum of R1 117 180,65 from
the appellants
and ancillary relief, including an order declaring the
mortgaged property executable. The basis of the claim was that the
appellants
had failed to maintain regular instalments and that the
full outstanding amount had thus become due and payable in terms of
the
agreement.
[6]
The appellants entered an appearance to defend the action, prompting
the bank to apply
for summary judgment in terms of uniform rule 32.
The appellants opposed the application on the bases that:
(a)
the summons was excipiable because s 130(2) of the Act precludes a
credit provider from claiming a shortfall on a mortgage loan
agreement as it is not among the types of agreements specified in the
section and that the only order the court below could have
granted
was merely to declare the property executable;
(b) they had not received
the notice as envisaged in sections 129(1) and 130(1); and
(c) the arrear amount
claimed is incorrect as it ignores payment of sums amounting to R101
950 which reduced the arrears to R12
850 and the outstanding balance
to R1 005 052.
[7]
None of these defences found favour with the court below. As regards
(a), the court
found that whilst it is so that s 130(2) applies only
to the pledge and cession of movables and has no application to
mortgage
agreements, the bank’s claim fell within the ambit of
s 130(1) of the Act which is not limited by s 130(2) in so far as
mortgage
agreements are concerned.
[8]
In rejecting the appellants’ second defence that they did not
receive the notice,
the court adopted the approach set out in
Munien
v BMW Financial Services (SA) (Pty) Ltd
.
[2]
On
that basis the court held that in view of the legislature’s
omission to define ‘deliver’ in the Act, delivery
of the
notice occurred when it was sent by registered post to an address
chosen by the appellants in the agreement irrespective
of whether it
was actually received. This had to be so, the court reasoned, as this
method is one of four possible methods of delivery
prescribed (as
contemplated in s 65(1)) by the Minister in the definition of
‘delivered’ set out in s 1 of the National
Credit
Regulations (the regulations).
[3]
The
court also relied on the parties’ agreement to a method of
communicating set out in clauses 21.1 to 21.3 of their agreement,
which provided for delivery of notices at the mortgagor’s
domicilium
by registered post.
[9]
The court below found no substance in the defence that the appellants
had paid a substantial
sum towards liquidating the arrears and held
that their affidavit failed to show that they purged their default
thus entitling
the bank to enforce its claim in full. Summary
judgment was then granted against the appellants jointly and
severally, the one
paying the other to be absolved, as prayed.
[10]
The issues on appeal remain as they were in the court below, namely
whether; (a) the court below
could have granted summary judgment when
a mortgage bond is not included in the instances referred to in s
130(2) of the Act, which
entitles specified types of credit providers
to approach a court for the enforcement of the consumer’s
remaining obligations;
(b) the bank complied with s 129(1) read with
s 130(1) of the Act by giving notice to the appellants; and (c) the
appellants set
out sufficient facts in the opposing affidavit to have
constituted a defence against the application for summary judgment.
[11]
Another issue which arose, with which I deal directly as it courted
no controversy, is an application
to lead further evidence in the
appeal proceedings launched by the bank on the eve of the hearing.
Its basis was that the submission
made in the appellants’ heads
of argument in the appeal, that the bank did not establish the method
by which the notice was
delivered, was not raised in the court below.
It was contended on the bank’s behalf that the appellants’
defence at
the summary judgment hearing was merely that the
appellants did not receive the notice and that it was not disputed
that the notice
had been sent to them by registered mail as proof
thereof was handed in without demur from their counsel.
[12]
The evidence sought to be admitted, which it was contended supported
the bank’s stance
in this regard, was a transcript of the
argument at that hearing during which the so-called proof was
submitted to the court. The
appellants did not oppose the application
and the transcript was accordingly received in evidence.
[13]
I turn to deal with the main issues.
WHAT MEANING TO ASCRIBE
TO S 130(2) VIS-À-VIS MORTGAGE AGREEMENTS?
[14]
As mentioned above, the appellants took a point
in limine
that
s 130(2) limits a credit provider’s claim under a mortgage
agreement to the proceeds of the sale of the mortgaged property
and
that the bank is precluded from claiming any shortfall if the full
amount of the debt under the agreement is not realised after
execution of such property. This contention was based on an
application of the
expressio unius est exclusio alterius
principle
in interpreting the section.
[15]
Section 130 provides:
‘
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 the 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;
…
(2) In addition to the
circumstances contemplated in subsection (1), in the case of an
instalment agreement, secured loan, or lease,
a credit provider may
approach the court for an order enforcing the remaining obligations
of a consumer under a credit agreement
at any time if–
(a)
all relevant property has been sold pursuant to–
(i) an
attachment order;
(ii)
surrender of property in terms of section 127; and
b)
the net proceeds of sale were
insufficient to discharge all the consumer’s
financial
obligations under the agreement.’
[16]
The types of agreements referred to in subsection (2), namely an
instalment sale agreement, a
secured loan and a lease are defined in
s 1 of the Act.
[4]
They
all involve a sale, pledge or cession of movable property. A mortgage
agreement, on the other hand, is specifically defined
as a ‘credit
agreement that is secured by a pledge of immovable property’.
Quite clearly, as the court below found,
s 130(2) has no application
to mortgage agreements. The bank did not contend otherwise. The
parties’ point of departure relates
only to the significance of
the Legislature’s exclusion of mortgage agreements from the
classes of contract listed in these
provisions.
[17]
As can be imagined and was properly acknowledged by counsel on behalf
of the appellants, any
number of inequities may result for credit
providers from the interpretation for which the appellants contend.
It needs to be considered
that whilst the main object of the Act is
to protect consumers,
[5]
the
interests of creditors must also be safeguarded and should not be
overlooked.
[6]
This
is evidenced by s 3(d) which provides that equity in the credit
market and industry – which the Act significantly acknowledges
must be competitive, efficient and sustainable – entails, inter
alia, balancing the respective rights and responsibilities
of credit
providers and consumers.
[18]
It is settled that a statute must explicitly state an intention to
alter the common law or the
inference from the statute must be such
that it can only be concluded that that was the legislature’s
intention.
[7]
There
are instances in the Act where the legislature makes specific
provision in the event that a party’s rights under a credit
agreement are tampered with. For example, in s 83 provision is made
for the suspension of an agreement that has been found ‘reckless’.
In as many words, in s 83(2) the legislature grants a court a
discretion to set aside all or part of a consumer’s rights
and
obligations under an agreement as it deems just and reasonable in the
circumstances. Section 83(3) makes provision for an agreement
to be
suspended where a consumer has been found over-indebted.
[19] These provisions
make it abundantly clear that the legislature recognised the need to
express its intention where it sought
to interfere with vested
rights. Interestingly, s 90(2)(c) acknowledges the parties’
common law rights and declares unlawful
any provisions in a credit
agreement which purport to waive such rights, as may be applicable to
the agreement. I find it inconceivable,
therefore, that the
legislature would, in the same Act, indirectly do away with vested
rights such as the mortgagee’s right
to claim the balance of
the debt after execution against the mortgaged property. For these
reasons, I am unable to make the inference
advanced by the
appellants.
[20]
As was contended on the bank’s behalf, it seeks to enforce the
entire agreement, which
includes a
lex commissoria
, arising
from the appellants’ default. In my view, the plainly-worded,
self-contained provisions of s 130(1) allow the bank
to do exactly
that. Section 130(2) bears no relevance and that, I think, is the end
of the matter.
WERE THE APPELLANTS GIVEN
NOTICE AS ENVISAGED IN SECTIONS 129(1) AND 130(1)?
[21]
At the heart of this issue is the precise method of delivery of the
notice contemplated in s
129(1)(a) and whether it is necessary that
it is actually received by the consumer. The relevant parts of s 129
read:
‘
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
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.’
[22]
Evidently, a credit provider may not commence legal proceedings to
enforce its claim without
complying with the injunction contained in
s 129(1)(a). But the section does not state the manner in which a
credit provider is
to furnish a defaulting consumer with the written
notification it demands. Section 130(1)
[8]
is
worded differently as it does not use the words ‘draw …
to the notice’. It entitles a credit provider to approach
the
court for an order to enforce a breached credit agreement where,
inter alia, at least ten business days have elapsed since
the credit
provider ‘delivered a notice’ to the consumer as
contemplated in s 129(1) and the consumer has not responded
thereto.
But then, the term ‘delivered’ is not defined in the Act.
[23]
Recourse must therefore be had, first, to s 65 of the Act which deals
with the consumer’s
right to receive ‘documents’
which I understand to include notices. The material provisions of the
section read:
‘
(1)
Every document that is required to be delivered to a consumer in
terms of this Act must be delivered in the prescribed manner,
if any.
(2) If no method has been
prescribed for the delivery of a particular document to a
consumer, the person required to
deliver that document must–
a)
make the document available to the
consumer through one of the following mechanisms–
i)
in person at the business premises of the
credit provider, or at any location designated by the consumer but at
the consumer’s
expense, or by ordinary mail;
by fax;
by
e-mail; or
by
printable web-page; and
b)
deliver it to the consumer in the manner
chosen by the consumer from the options made available in terms of
paragraph (a).’
[24]
The Act has defined the term ‘prescribed’ used in
subsection (1) as meaning ‘prescribed
by regulation’. The
regulations do contain a definition of the term ‘delivered’.
However, bearing in mind that
it is generally impermissible to use
regulations created by a minister as an aid to interpret the
intention of the legislature
in an Act of parliament, notwithstanding
that the Act may include the regulations,
[9]
the
question remains whether this definition is the ‘prescribed
manner’ envisaged by s 65(2).
[25]
Chapter I of the regulations deals with the ‘Interpretation and
Application of [the] Act’
and s 1 thereof reads:
‘
In
these Regulations, any word or expression defined in the Act bears
the same meaning as in the Act and–
…
“
delivered”
unless otherwise provided for, means sending a document by hand, by
fax, by e-mail or registered mail to an address
chosen in the
agreement by the proposed recipient, if no such address is available,
the recipient’s registered address’.
[26]
The use of the expression ‘[i]n these regulations’, which
to my mind strongly suggests
that the definitions in regulation 1 are
operative only for purposes of the regulations, poses a difficulty
for me. This is especially
so as the regulation makes no mention of s
65(1) or the word ‘prescribed’ used in that subsection.
It may be so that
such a cross-reference may not be necessary where
it is not required by the empowering statute,
[10]
but
that apart, there, clearly, is need for the definition in the
regulations themselves as the terms ‘delivered’,
‘deliver’ or ‘delivery are interspersed throughout
their body.
[26]
For example, (a) regulation 4(3) requires a person seeking to
register in terms of s 45 to provide
information requested by the
National Credit Regulator within a certain period after the request
is delivered to him; (b) in terms
of regulation 34 a consumer is
obliged to inform the credit provider of any changes to the location
of the relevant goods by delivering
a written notice; (c)
regulation 38 requires delivery of a notice to a consumer of a
charge or charges made against
an account and (d) regulation 46 makes
provision for charges relating to delivery of a letter of demand.
[11]
For
these reasons, contrary to the views of the court below, I do not
think that any regard should be had to the definition of the
word
‘delivered’ in the regulations in interpreting sections
129(1)(a) and 130(1). As I see it, the definition does
not purport to
contain a ‘prescribed manner’ for delivery and the answer
must lie in the provisions of the Act itself.
[27] This finding
requires an examination of s 65(2). The section sets out six methods
by which a document may be delivered. Thus,
the document may be made
available to a consumer, ‘in person’, at the credit
provider’s premises or at any other
location he chooses. In the
latter instance, he bears the expenses of the exercise. The document
may also be delivered by ordinary
mail, fax, email or printable
web-page. Notably, the manner of such delivery is chosen from these
options by the consumer.
[28]
It appears to me that s 96 which deals with the address for delivery
of legal notices –
and a s 129(1)(a) notice by its very nature
must fall in this category – is relevant for present purposes
and must be read
with s 65(2). It provides:
‘
(1)Whenever
a party to a credit agreement is required or wishes to give legal
notice to the other party for any purpose contemplated
in the
agreement, this Act or any other law, the party giving notice must
deliver that notice to the other party at–
(a) the address of that
party as set out in the agreement, unless paragraph (b) applies; or
(b) the address most
recently provided by the recipient in accordance with subsection (2).
(2) A party to a credit
agreement may change their address by delivering to the other party a
written notice of the new address
by hand, registered mail, or
electronic mail, if that other party has provided an email address.’
[29]
As previously stated, the parties agreed in clause 21 of their
agreement to a
domicilium
and mode of delivery of notices as
envisaged by sections (65)(2) and 96. From the available options,
which include personal delivery
at their expense, the appellants
chose delivery by post. In my view, that the method chosen was
registered mail, which is not one
of the options provided in s 65(2),
does not offend the provisions of the section. The legislature has
sanctioned postal delivery.
Registered mail is, in any event, a more
reliable means of postage and cannot harm either party’s
interests.
[30]
I am reinforced in this view by the catch-all provisions of s 168 of
the Act dealing with service
of documents, which in the legal context
is synonymous to ‘delivery of documents’. This section
deems sending a document
by registered mail to a person’s last
known address proper service, unless otherwise provided for in the
Act. These provisions,
I think, put it beyond doubt that the
legislature was satisfied that sending a document by registered mail
is proper delivery.
And ‘send’ according to
The
Shorter Oxford English Dictionary
means ‘to despatch (a
message, letter, telegram etc) by messenger, post etc.’. It
does not include ‘receipt’
of the sent item.
[31]
It appears to me that the legislature’s grant to the consumer
of a right to choose the
manner of delivery inexorably points to an
intention to place the risk of non-receipt on the consumer’s
shoulders. With every
choice lies a responsibility and it is after
all within a consumer’s sole knowledge which means of
communication will reasonably
ensure delivery to him. It is entirely
fair in the circumstances to conclude from the legislature’s
express language in s
65(2) that it considered despatch of a notice
in the manner chosen by the appellants in this matter sufficient for
purposes of
s 129(1)(a) and that actual receipt is the consumer’s
responsibility.
[32]
Does this finding conflict with the purposes of the Act which
requires such purposes to be given
effect to in the interpretation of
its provisions? I think not. I understand the legislature to have
basically meant to protect
the consumer from exploitation by credit
providers by, inter alia, preventing predatory lending practices; to
ameliorate the financial
harm which a consumer may suffer where
unable to meet his obligations under a credit agreement and generally
to achieve equity
in the lending market by levelling the playing
field between parties who do not have equal bargaining power. I do
not see how the
above interpretation of the relevant provisions of
the Act detracts from this object.
[33]
Having established what section 129(1) required of the bank, it
remains to determine whether
or not the latter complied with the
relevant provisions. No allegation was made either in the summons or
the summary judgment affidavit
regarding the method employed in
delivering the notice. The bank merely stated cryptically in its
summons that ‘[t]he plaintiff
has … complied with
section 129(1) and 130 of the said Act. Copies of the notices in
terms of the aforementioned sections
are annexed hereto as “A”
and “B” respectively.’ Annexures A and B were
documents titled ‘NOTICE
IN TERMS OF
SECTION 129(1)
OF THE
NATIONAL CREDIT ACT’ and
‘CERTIFICATE OF COMPLIANCE IN
TERMS OF
SECTION 129(1)
OF THE
NATIONAL CREDIT ACT&rsquo
;,
respectively.
[34] It is only in
Annexure B, signed by one of the bank’s managers, that further
mention of the notice was made. There, it
was alleged that ‘[a]
notice in terms of s 129(1) of the Act was issued to the [appellants]
on 23 April 2009. At least ten
business days have lapsed since the
bank delivered the notice.’ These allegations are obviously
inadequate for purposes of
establishing whether the notice was
delivered in terms of the relevant provisions. And, no doubt,
realising this material shortcoming
in its papers, the bank sought to
rely on the document handed in during the summary judgment hearing,
which is referred to in the
transcript of those proceedings, as proof
that the notice had been delivered by registered mail.
[35]
However, there is an insurmountable hurdle. Uniform rule 32(4) limits
a plaintiff’s evidence
in summary judgment proceedings to the
affidavit supporting the notice of application. The document was not
annexed to the summons.
Thus, it matters not that it was handed in
without complaint. It was simply inadmissible.
[36] Even if this were
not so, the document could not have assisted the bank’s case.
On its face, it lists the names and address
of the appellants among
the addressees to which registered letters are to be sent. But, it
further requires confirmation of the
number of letters to be posted,
the signature of the client sending the letter or letters, the
signature of the ‘accepting
officer’, presumably the post
office official processing the transaction, and the date of the
transaction. None of these
entries were made. These omissions, which
the bank did not explain, materially affect the document’s
reliability. As it stands,
it does not confirm that a registered
letter was actually sent to the appellants. Even if it did, without
the date it is not possible
to link it to the sending of the relevant
notice particularly in view of the fact that an earlier one was
previously sent in 2008.
[37] In the
circumstances, the bank did not prove that it delivered the notice.
As pointed out earlier, sections 129(1)(b)(i) and
130(1)(b) make this
a peremptory prerequisite for commencing legal proceedings under a
credit agreement and a critical cog of a
plaintiff’s cause of
action. Failure to comply must, of necessity, preclude a plaintiff
from enforcing its claim; this despite
the fact that in this matter
it was not disputed that the appellants were in arrears and thus
breached their contractual obligations.
The bank, therefore, failed
to make out a case for summary judgment and it ought to have been
refused. It is unnecessary to consider
the third issue in the light
of this finding.
[38]
In the result the following order is made:
1. The appeal is upheld
with costs that include the costs of two counsel.
2. The
order of the court below is set aside and the following is
substituted:
‘
The
application for summary judgment is dismissed with costs.’
MML MAYA
JUDGE
OF APPEAL
CLOETE JA (MPATI P, NAVSA
and MAYA JJA and EBRAHIM AJA concurring):
[39]
I have had the benefit of reading the judgment of my colleague Maya
JA. I agree with the order
she proposes, and also her reasoning. I
wish however to add further reasons in justification of her
conclusion that s 130(2) of
the Act does not have the meaning
accorded to it by the appellants. I also wish to deal in greater
detail with the contents of
the summary judgment application, the
proceedings in the court below and the handing up of documents to a
court seized with such
an application. Finally, I wish to deal with
standard form documents and the effect of the stated purpose of the
Act in cases such
as the present.
[40]
I shall deal first with the s 130(2) argument advanced by the
appellants. The argument was that
s 130(2) limits the claim by a
credit provider who is a mortgagee to the proceeds of the sale of the
mortgage property, so that
the credit provider is precluded from
claiming any shortfall if the full amount of the debt is not realised
after execution against
the property mortgaged.
[41]
The argument is without substance. What the section means is that in
the three types of credit
agreement mentioned (ie an instalment
agreement, a secured loan and a lease), if the further requirements
of the section are satisfied
(ie all relevant property has been sold,
pursuant to an attachment order or the surrender of property in terms
of s 127; and the
net proceeds of sale were insufficient to discharge
all the consumer's financial obligations under the agreement), then
the credit
provider is excused from complying with subsec (1) (ie the
credit provider does not have to send a notice and wait for the days
to elapse). The circumstances under which a credit provider in the
three types of contract mentioned in subsec (2) may approach
a court
for the enforcement of a credit agreement, are in addition to the
circumstances set out in subsec (1) ─ that is why
subsec (2)
commences with the very words 'in addition to the circumstances
contemplated in subsec (1)'.
[42]
The omission of a credit provider who is a mortgagee in subsec (2)
means that such a credit provider
can only proceed under subsec (1).
The rationale is clear: the consumer's property is at stake, and that
will usually mean (for
those fortunate enough to own property) his or
her home and that of the family as well. The omission of a credit
provider who is
a mortgagee in subsec (2) cannot mean that to the
extent that the debt is not satisfied by execution against the
mortgaged property,
that part of the debt is unenforceable. That
would constitute a serious inroad upon the rights of the mortgagee
which would probably
be constitutionally unjustified and which
certainly cannot be reconciled with the provisions of s 83(2)(a)
which forms part of
Part D: Over-indebtedness and reckless credit.
Section 83 provides:
'(1)
Despite any provision of law or agreement to the contrary, in any
court proceedings in
which a credit agreement is being considered,
the court may declare that the credit agreement is reckless, as
determined in accordance
with this Part.
(2)
If a court declares that a credit agreement is reckless in terms of s
80(1)(a) or 80(1)(b)(i),
the court may make an order ─
(a)
setting aside all or part of the consumer's rights and obligations
under that agreement,
as the court determines just and equitable in
the circumstances . . .'.
It cannot have been the
intention of the legislature to provide in Part D of the Act for a
mechanism for determining whether credit
was recklessly granted and
vest a discretion in a court to set aside all or part of a consumer's
obligations, and then at the same
time provide that to the extent
that execution against property mortgaged does not cover the mortgage
debt, there would be automatic
forfeiture of the balance even where
the incurring of credit under the bond was not reckless.
[43]
I therefore agree with my learned colleague, both for the reasons she
has given and for the reasons
set out above, that s 130(2) of the Act
does not have the effect for which the appellants contend.
[44]
As my learned colleague has said, there was an application to admit
evidence on appeal. I now
propose dealing with that evidence. It
comprised a transcript of the argument in the court a quo and a
document handed up by the
Bank's junior counsel during those
proceedings. In the absence of opposition, the evidence was admitted.
In retrospect, I consider
that it would have been more appropriate to
admit the evidence provisionally. Had that been done, the court would
have been in
a position to refuse to admit it, which I consider would
have been the correct conclusion for the reasons which follow.
[45]
To the extent that the transcript was relied upon by the Bank as
demonstrating that in the court
a quo the appellants' junior counsel
did not dispute that the notice in terms of s 130(1) read with s
129(1) of the Act was sent
by registered post, it is irrelevant.
Whatever happened in the court below, it remained open to the
appellants to raise this point
on appeal.
[46]
To the extent that the transcript was relied upon by the Bank as
demonstrating that its junior
counsel handed up to the court the
document, entitled 'List of Registered Letters', without objection by
the appellants' junior
counsel, both it and the list are
inadmissible. The list was handed in to the court a quo to prove that
annexure A to the particulars
of claim, the notice in terms of ss
130(1) and 129(1), had been sent by registered post. That was not
permissible, whether the
appellants' counsel objected or not; the
provisions of uniform rule of court 32 are clear and peremptory:
'(2)
The plaintiff shall within 15 days after the date of delivery of
notice of intention to
defend, deliver notice of application for
summary judgment, together with an affidavit made by himself or by
any other person who
can swear positively to the facts verifying the
cause of action and the amount, if any, claimed and stating that in
his opinion
there is no
bona fide
defence to the action and
that notice of intention to defend has been delivered solely for the
purpose of delay. If the claim is
founded on a liquid document a copy
of the document shall be annexed to such affidavit and the notice of
application for summary
judgment shall state that the application
will be set down for hearing on a stated day not being less than 10
days from the date
of the delivery thereof.
(4)
No evidence may be adduced by the plaintiff otherwise than by the
affidavit referred to in sub-rule (2)
, nor may either party
cross-examine any person who gives evidence
viva voce
or on
affidavit: Provided that the court may put to any person who gives
oral evidence such questions as it considers may elucidate
the
matter.' (Emphasis supplied.)
The fact that the list
does not prove the fact it was submitted to the court a quo to prove
is irrelevant. It was not permissible
for the Bank's junior counsel
to hand it up, it was correctly disregarded by the court a quo and it
falls to be ignored on appeal.
[47]
The certificate of balance, also handed up to the court a quo,
stands, however, on a different
footing. The court a quo refused to
have regard to the certificate. That approach was not correct. The
certificate did not, as
the court a quo considered, amount to new
evidence which would be inadmissible under rule 32(4). To the extent
that the certificate
reflects the balance due as at the date of
hearing, it is merely an arithmetical calculation based on the facts
already before
the court which the court would otherwise have to
perform itself. Such calculations are better performed by a qualified
person
in the employ of a financial institution. And to the extent
that such a certificate may reflect additional payments by the
defendant
after the issue of summons, or payments not taken into
account when summons was issued, this constitutes an admission
against interest
by the Bank and the Bank is entitled to abandon part
of the relief it seeks. Certificates of balance handed in at the
hearing (whether
a quo or on appeal) perform a useful function and
are not hit by the provisions of rule 32(4).
[48]
Before turning to the facts of the appeal, it may be useful for me to
point out that there are
remedies available to defendants in the
position of the present appellants who have not received notices
allegedly delivered to
them. They are entitled to invoke the
provisions of rule 35(11) and, where applicable, rule 35(12), to
obtain production of documents
evidencing the credit provider's
compliance with s 65(2), eg a slip reflecting proof of posting by
registered post or a telefax
transmission sheet. Those rules provide:
'(11)
The court may, during the course of any proceedings, order the
production by any party thereto under oath
of such documents or tape
recordings in his power or control relating to any matter in question
in such proceeding as the court
may think meet, and the court may
deal with such documents or tape recordings, when produced, as it
thinks meet.
(12)
Any party to any proceeding may at any time before the hearing
thereof deliver a notice as near as
may be in accordance with Form 15
in the First Schedule to any other party in whose pleadings or
affidavits reference is made to
any document or tape recording to
produce such document or tape recording for his inspection and to
permit him to make a copy or
transcription thereof. Any party failing
to comply with such notice shall not, save with the leave of the
court, use such document
or tape recording in such proceeding,
provided that any other party may use such document or tape
recording.'
If a document is produced
which supports the plaintiff credit provider's case, it cannot be
handed in or relied upon by the plaintiff
for the reasons already
discussed; but if no such document is forthcoming, or a document is
produced which is defective (eg the
address or telefax number is
wrongly stated) the document or its absence can be relied upon by the
defendant consumer as evidencing
non-compliance with the notice
provisions of the Act.
[49]
I now intend considering whether the Bank has proved that it complied
with the notice provisions
of s 130(1) read with s 129(1) of the Act.
I am not satisfied that it has. The summons contains the following
allegations:
'The plaintiff is a
registered credit provider as defined in terms of
s 40
of the
National Credit Act, 34 of 2005
and has complied with
s 129(1)
and
130
of the said Act. Copies of the notices in terms of the
aforementioned sections are annexure to as 'A' and 'B' respectively'.
[50]
Annexure A is dated 23 April 2009 and headed 'Notice in terms of
s
129(1)
of The
National Credit Act, 34 of 2005
'. The notice was
addressed to the appellants at the address referred to in the
summons. Had it been 'delivered' this would have
constituted
compliance with
s 130(1)
read with s 129(1) of the Act.
[51]
Annexure B is dated 15 May 2009 and headed 'Certificate of compliance
in terms of s 129(1) of
The National Credit Act, 34 of 2005 ("the
Act")'. In this document the Manager ─ Foreclosure of the
Bank has said
inter alia:
'4.
A notice in terms of Section 129(1) of the Act was issued to the
client/s on 23 April
2009.
5.
At least 10 (TEN) business days have elapsed since the Bank delivered
the notice.'
[52]
There is no allegation in the summons or the certificate of
compliance, annexure B (which is
not 'a notice in terms of s 130', as
the summons describes it) that annexure A, the notice in terms of s
129, was sent by any of
the methods prescribed in s 65(2) of the Act.
The submission on behalf of the Bank was that the notice was sent by
registered post.
But that is nowhere averred in the summons or
annexures thereto.
[53]
The summons alleges that the Bank has complied with sections 129(1)
and 130 of the Act. That
is a bald conclusion of fact (that something
was done) and law (that what was done, complied with the statutory
prescripts). The
method of compliance ─ there are six in s
65(2) ─ has not been specified and the court cannot accordingly
determine
whether there has indeed been delivery in terms of the Act.
It is true that annexure A, the notice in terms of s 129, is
addressed
to the appellants. But that is not to say that it was
posted, or delivered in some other way as contemplated in s 65(2).
[54]
The statement in annexure B that 'a notice in terms of s 129(1) of
the Act was issued to the
client/s' neither amounts to an allegation
that the notice was 'delivered' in terms of the Act nor does it say
how this was allegedly
done. As paragraph 5 of annexure B is
concerned with the lapse of the prescribed period and not delivery of
the notice, it does
not cure the problem. The appellants and the
court are left to speculate as to whether there was indeed compliance
with the provisions
of the Act. That is not sufficient.
[55]
Nor does clause 21.3 of the bond assist the appellant. That clause
provides:
'21.3 A
certificate signed on behalf of the Bank, stating that a notice has
been given, shall be sufficient and
satisfactory proof thereof, and
the authority of the signatory and validity of the signature need not
be proved.'
The clause suffices for
the purposes of the contract; but (leaving aside the fact that an
allegation that a notice has been 'given'
would not amount to an
allegation that the notice had been 'delivered in terms of the Act'),
a court must still be satisfied that
a credit receiver has received
the protection afforded by the Act. If justifiable concern exists
that this has not been done, the
court should exercise its discretion
in terms of rule 32(5) to refuse summary judgment as the Act
provides, in terms, in
s 130(3) that:
'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 . .
. .'
[56]
I wish to make two observations in regard to the choice of the method
of delivery of documents
in terms of s 65(2) of the Act. The first is
that the bond provides in clause 21.1 that:
'Any notice given by the
Bank in terms of this bond may at the Bank's option be addressed to
the mortgagor at the domicilium referred
to in clause 20 or to the
mortgagor's last postal address recorded with the Bank and may be
served by registered post.'
One
of the options a consumer may choose for delivery of a notice in
terms of s 65(2) is ordinary post. But to be effective, the
notice
would have to comply both with the contract and with the Act. The
notice would therefore have to be sent by registered post
to comply
with the contract. Section 65(2)(a)(i) of the Act only requires
'ordinary mail'. But the greater includes the lesser.
As Wessels JA
said in
Maharaj
v Tongaat Development Corporation (Pty) Ltd
:
[12]
'In prescribing a method
whereby the seller is required to send a letter to the purchaser by
registered post, the Legislature no
doubt accepted that that method
is almost invariably employed where important letters or other
documents are sent to an addressee
through the post. Whilst
registered letters no doubt do go astray, there is, at least, a high
degree of probability that most of
them are delivered.'
In the present matter,
therefore, sending by registered post would be both necessary and
sufficient. However, had the appellants
chosen another method of
delivery in terms of s 65(2), the Bank would have had to comply with
that choice and send the notice by
registered post as well. I
emphasize that the Act in s 65(2)(b) obliges the Bank to deliver the
notice in the manner chosen by
the consumer from the options in
paragraph (a) of that section. The Bank cannot reserve other options
to itself.
[57]
The second observation is this. Section 3 of the Act states that one
of its purposes is to protect
consumers by:
'(e)
Addressing and correcting imbalances in negotiating power between
consumers and credit
providers by ─
(i)
providing consumers with education about credit and consumer rights;
(ii)
providing customers with adequate disclosure of standard information
in order to
make informed choices . . . .'
Unless credit providers
inform consumers of their options in terms of s 65(2), the benefits
of that section are likely to remain
illusory rather than real. A
consumer could hardly complain if the method of delivery of a
document chosen by him or her proves
ineffective. But for so long as
credit providers employ standard form contracts which make provision
for one possibility only ─
in the present matter, a notice sent
by registered post to an address (which, in the absence of an address
specified, will be the
address of the mortgaged property) ─ the
argument loses sight of reality. Credit providers should accordingly
not complain
if courts require compliance to the letter with both the
Act and the terms of credit agreements, or approach with a leery eye
standard
form certificates of compliance coupled with contractual
provisions similar to clause 21.3 of the bond quoted above.
[58]
I therefore concur in the order proposed by my colleague Maya JA.
T D CLOETE
JUDGE OF APPEAL
APPEARANCES:
For
appellants:
MC
Erasmus SC (with him DJ Van Heerden)
Instructed
by De Buys Human, Pretoria
Symington
& De Kok, Bloemfontein
For
Respondent:
C da
Silva SC (with him AP Ellis)
Instructed
by Friedland Hart Solomon Nicholson,
Pretoria
Webber
Attorneys, Bloemfontein
[1]
Section 1 of the Act defines a credit provider, as follows: ‘“credit
provider”, in respect of a credit agreement
to which this Act
applies, means –
…
c)
the party who extends credit under a credit facility;
…
d)
the mortgagee under a mortgage agreement;
…
h)
the party who advances money or credit to another under any other
credit agreement’.
[2]
2010
(1) SA 549 (KZD).
[3]
Published
in Government Notice R489 of 31 May 2006.
[4]
The
agreements are defined as follows:
‘
“
instalment
agreement”
means a sale of movable property in terms of
which–
a)
all or part of the price is deferred and is to be paid by periodic
payments;
possession
and use of the property is transferred to the consumer;
ownership
of the property either–
(i)
passes to the consumer only when the agreement is fully complied
with; or
(ii)
passes to the consumer immediately subject to a right of the credit
provider to re-possess
the property if the
consumer fails to satisfy all of the consumer’s financial
obligations
under the agreement; and
b)
interest, fees or other charges are payable to the credit provider
in respect
of the agreement, or the amount that has been deferred;
“
lease”
means an agreement in terms of which–
a)
temporary possession of any movable property is delivered to or at
the direction
of the consumer, or the right to use any such property
is granted to or at the direction of the consumer;
payment
for the possession or use of that property is–
(i) made on an
agreed or determined periodic basis during the life of the
agreement; or
(ii)
deferred in whole or in part for any period during the life of the
agreement;
b)
interest, fees or other charges are payable to the credit provider
in respect
of the agreement, or the amount that has been deferred;
and
at
the end of the term of the agreement, ownership of that property
either–
(i)
passes to the consumer absolutely; or
(ii)
passes to the consumer upon satisfaction of specific conditions set
out in the agreement;
“
secured
loan” means an agreement, irrespective of its form but not
including an instalment
agreement, in terms of
which a person–
a)
advances money or grants credit to another; and
retains,
or receives a pledge or cession of the title to any movable property
or other thing of value as security for all amounts
due under that
agreement;’
[5]
The
purpose of the Act is set out in s 3 which reads:
‘
The
purposes of this Act are to promote and advance the social and
economic welfare of South Africans, promote a fair transparent,
competitive, sustainable, responsible, efficient, effective and
accessible credit market and industry, and to protect consumers,
by–
a)
promoting the development of a credit market that is accessible to
all South
Africans, and in particular to those who have been unable
to access credit under sustainable market conditions;
ensuring
consistent treatment of different credit products and different
credit providers;
a)
promoting the development of a credit market that is accessible to
all South
Africans, and in particular to those who have historically
been unable to access credit under sustainable market conditions;
ensuring
consistent treatment of different credit products and different
credit providers;
b)
promoting responsibility in the credit market by–
(i)
encouraging responsible borrowing, avoidance of over-indebtedness
and fulfilment of financial obligations by consumers; and
discouraging
reckless credit granting by credit providers and contractual default
by consumers;
c)
promoting equity in the credit market by balancing the respective
rights and
responsibilities of credit providers and consumers;
addressing
and correcting imbalances in negotiating power between consumers and
credit providers by–
(i)
providing consumers with education about credit and consumer
rights;
providing
consumers with adequate disclosure of standardised information in
order to make informed choices; and
providing
consumers with protection from deception, and from unfair or
fraudulent conduct by credit providers and credit bureaux;
d)
improving consumer credit information and reporting and regulation
of credit
bureaux;
addressing
and preventing over-indebtedness of consumers, and providing
mechanisms for resolving over-indebtedness based on the
principle of
satisfaction by the consumer of all responsible financial
obligations;
providing
for a consistent and accessible system of consensual resolution of
disputes arising from credit agreements; and
(i)
providing for a consistent and harmonised system of debt
restructuring, enforcement and
judgment,
which places priority on the eventual satisfaction of all
responsible consumer obligations under credit agreements.’
[6]
See
Jaftha
v Schoeman & others; Van Rooyen v Stoltz & others
[2004] ZACC 25
;
2005
(2) SA 140
(CC) paras 42 and 51.
[7]
Casserley
v Stubbs
1916
TPD 310
at 312.
[8]
The
section is quoted in full at para 15 of this judgment.
[9]
Clinch
v Lieb
1939
TPD 118
AT 125;
Hamilton-Brown
v Chief Registrar of Deeds
1968
(4) SA 735
(T) at 737 C-D;
Moodley
& others v Minister of Education and Culture, House of
Delegates, & another
1989 (3) SA 221
(A) at 233E-F;
National
Lotteries Board v Bruss NO
2009 (4) SA 362 (SCA).
[10]
Administrateur,
Transvaal v Quid Pro Quo Eiendommaatskappy (Edms) Bpk
1977
(4) SA 829
(A);
Howick
District Land Owners Association v Umngeni Municipality
2007 (1) SA 206
(SCA) paras 19 and 20;
Shaik
v Standard Bank of SA Ltd
2008
(2) SA 622
(SCA) para 17.
[11]
See,
also, regulation 6 which requires delivery of a notice for purposes
of s 48(3); regulation 24(2) and (5) dealing with a notice
to be
delivered by debt counsellor to creditors and regulation 37 which
prescribes delivery of a notice terminating an agreement
to the
credit provider. These particular regulations, however, specify the
manner in which the contemplated delivery is to be
effected but
consonant with the definition.
[12]
1976 (4) SA 995
(A) at 1001A-B.