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[2011] ZASCA 35
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Nedbank Ltd and Others v The National Credit Regulator and Another (662/2009, 500/2010) [2011] ZASCA 35; 2011 (3) SA 581 (SCA); [2011] 4 All SA 131 (SCA) (28 March 2011)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No:
662/2009
Case No:
500/2010
In
the matter between:
NEDBANK
LIMITED
First Appellant
FISTRAND
BANK LIMITED
Second Appellant
STANDARD
BANK OF SOUTH AFRICA LIMITED
Third Appellant
ABSA
BANK LIMITED
Fourth
Appellant
JOHAN
ERIK JUSELIUS
Fifth Appellant
ONECOR
(PTY)
LIMITED
Sixth Appellant
and
THE
NATIONAL CREDIT REGULATOR
First Respondent
JOHAN
ERIK JUSELIUS
Second
Respondent
Neutral citation:
Nedbank v The National Credit Regulator
(662/2009 &
500/2010)
[2011] ZASCA 35
(28 March 2011)
Coram:
MPATI P, NAVSA, BRAND, MAYA and MALAN JJA
Heard:
21 February 2011
Delivered:
28 March 2011
Summary:
National Credit Act 34 of 2005
–
interpretation of
ss 86(2)
,
86
(7)
and (8),
87
,
129
and
103
(5).
ORDER
On
appeal from:
North Gauteng High Court
(Pretoria) (B R Du Plessis J sitting as court of first instance):
All
the appeals are
dismissed.
JUDGMENT
Malan
JA (MPATI P, NAVSA, BRAND, MAYA JJA concurring)
Introduction
[1]
The National Credit Act 34 of 2005 (the NCA) came into full force and
effect
on
1 June 2007. The NCA is not an amendment of previous legislation
dealing with consumer credit. It seeks to achieve much more
and
replaces legislation that governed consumer credit for more than a
quarter of a century.
[1]
The
objects are set out in s 3 and are directed at providing protection
for the consumer and addressing imbalances that exist between
consumers and credit providers. The NCA seeks –
‘
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 –
...
(g)
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;
(h)
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.’
[2]
The NCA must be interpreted in a manner that gives effect to these
objects.
[2]
Appropriate foreign
and international law may be considered in construing the NCA.
[3]
Unfortunately, the NCA cannot be described as the ‘best drafted
Act of Parliament which was ever passed,’
[4]
nor can the draftsman be said to have been blessed with the
‘draftsmanship of a Chalmers’.
[5]
Numerous drafting errors, untidy expressions and inconsistencies make
its interpretation a particularly trying exercise.
[6]
Indeed, these appeals demonstrate the numerous disputes that have
arisen around the construction of the NCA. The interpretation
of the
NCA calls for a careful balancing of the competing interests sought
to be protected, and not for a consideration of only
the interests of
either the consumer or the credit provider.
[7]
[3]
This is an appeal by the Credit Regulator on the construction of ss
86(2) and 129
as well as appeals by the other parties relating to
further sections of the NCA. I will deal with them under the
appropriate headings.
Sections 86(2) and 129
[4]
The Credit Regulator’s appeal concerns prayer 1.13 of the
notice of motion for
a declarator in the following terms:
‘
The
reference in section 86(2) to the taking of a step in terms of s 129
to enforce a credit agreement is a reference to the commencement
of
legal proceedings mentioned in section 129(1)(b) and does not include
steps taken in terms of section 129(1)(a) ...’.
[5]
None of the other parties opposed the relief sought in prayer 1.13 in
the court below.
In this court, however, the declarator sought was
opposed. Du Plessis J refused to grant the order applied for because
he was not
satisfied that the parties were correct in their
interpretation of s 86(2) and, in the absence of full argument,
declined to make
the order.
[8]
[6]
Section 86(2) reads as follows:
‘
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.’
Section 129(1) provides:
‘
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.’
[7]
The question posed by the Credit Regulator has been and still is the
subject of considerable
academic debate.
[9]
Boraine and Renke
[10]
remarked
that ‘[t]o interpret s
86(2) to read that the delivery of the s
129(1)(a) notice to the
consumer means that the credit provider has proceeded to take steps
to enforce the agreement (with the
effect that no application for
debt review may be made) would be nonsensical as it is proposed in
the s 129(1)(a) notice that the
consumer refer the matter to a debt
counsellor.’
[8]
Despite the use of the word ‘may’ in s 129(1)(a) the
notice referred to
therein is indeed a mandatory requirement prior to
litigation to enforce a credit agreement.
[11]
This is apparent when the subsection is read with ss 129(1)(b) and
130(1). Section 129(1) has been described as a ‘gateway’
or ‘new pre-litigation layer to the enforcement process’.
Delivery of the s 129(1)(a) notice was said to be a compulsory
step
‘devised by the legislature in an attempt to encourage parties
to iron out their differences before seeking court intervention.’
[12]
As such it was said to give effect to the object of the NCA set out
in s 3(h),
[13]
by encouraging
‘a consistent and accessible system of consensual resolution of
disputes arising from credit agreements’,
and as such it is
also consistent with s 3(i). This construction is the subject matter
of the appeal by the Credit Regulator. It
is not only the subject of
the academic debate referred to but also of conflicting
decisions.
[14]
An analysis of
the relevant provisions is thus required.
[9]
The notice required by s 129(1)(a) refers to a specific credit
agreement in respect
of which the consumer is in default. It must
‘propose’ that the consumer refer the credit agreement to
a debt counsellor,
alternative dispute resolution agent, consumer
court or ombud ‘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’. The s 129(1)(a)
notice
deals with one credit agreement only and seeks to bring about
a consensual resolution relating to that agreement. It does not
contemplate
a general debt restructuring as envisaged by ss 86 and
87.
[15]
As was stated by
Wallis J in
Mudaly’s
case,
[16]
‘[t]he proposal is directed at achieving a situation where the
consumer and the credit provider, through the agency of the
debt
counsellor, negotiate a resolution to the consumer’s particular
difficulties under a particular credit agreement. It
is a consensual
process, the success or failure of which will depend upon whether the
parties can arrive at a workable basis upon
which to resolve the
issues caused by the consumer’s default.’
[10]
The scope of s 86, on the other hand, is general and deals with an
application by a consumer
to be declared over-indebted.
[17]
It is concerned with the obligations under all the credit agreements
to which he is a party.
[18]
A
consumer is over-indebted if the preponderance of the available
information at the time the determination is made, indicates
that he
will be unable to satisfy in a timely manner all his obligations
under all the credit agreements to which he is a party
having regard
to his financial means, prospects and obligations and the probable
propensity to satisfy them in a timely manner,
as is indicated by his
history of debt repayment.
[19]
The application to be declared over-indebted or, as it is referred to
in the heading of s 86, for debt review, is made to a debt
counsellor.
[20]
The outcome of
this application may be an order of the Magistrate’s Court
declaring one or more of the credit agreements
reckless or
re-arranging one or more of the consumer’s obligations.
[21]
As I have said, the notice envisaged by s 129(1)(a) is specific and
refers to a particular credit agreement calling on the parties
to
resolve their dispute and agree on a plan to bring the payments up to
date. It is not directed at a declaration of over-indebtedness
at
all.
[11]
Section 86(2) states that an application for debt review ‘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 s 129 to enforce that agreement.’ The section
thus contemplates
a debt review under which a specific credit
agreement may be excluded. But even if a particular credit agreement
falls outside
the scope of debt review a court may, nevertheless, as
provided for by s 85, in any court proceedings ‘in which a
credit
agreement is being considered’ and in which it is
alleged that the consumer is over-indebted, refer that matter to a
debt
counsellor for evaluation and a recommendation in terms of s
86(7) or declare that the consumer is over-indebted and make any of
the orders contemplated in s 87. Moreover, a court may also, in terms
of s 83(1), in proceedings where a credit agreement is being
considered, declare it to be reckless and make any of the orders
provided for in s 83(2) and (3).
[12]
Section 86(2) uses the words ‘has proceeded to take the steps
contemplated in section 129
to enforce that agreement’.
‘Enforce’, it seems, includes a reference to all
contractual remedies including cancellation
and ancillary relief,
[22]
and means the enforcement of those remedies by judicial means.
[23]
This seems to be the meaning of the word where it is used in Part C
of Chapter 6. Section 129 itself is entitled ‘Required
procedures before debt enforcement’ and s 129(1)(b) expressly
provides that legal proceedings may not be commenced ‘to
enforce’ the agreement before certain requirements are met.
[13]
The language of s 86(2), particularly the plural ‘steps
contemplated in section 129’
to enforce the agreement, was
considered by Wallis J in
Mudaly’s
case,
[24]
who opined –
‘
[t]hat
seems incompatible with it merely requiring the giving of notice
under s 129(1)(a), both because that is a single step and
because it
is not a step directed at enforcing the agreement, but at resolving
the problem occasioned by the consumer’s default.
Consistently
with the language used, this must then be a reference to s 129(1)(b),
which refers to both the giving of notice and
meeting the
requirements in s 130.’
In
his view the relevant provision referred to in s 86(2) is s 129(1)(b)
since that elucidates the use of the plural ‘steps’.
However, he held that there was nothing in s 129(1)(b) to suggest
that these steps included the commencement of legal proceedings.
[25]
The steps, he said, required by s 129(1)(b) prior to legal
proceedings being commenced include the giving of notice in s
129(1)(a);
the giving of notice to terminate a debt review in terms
of s 86(10); and meeting the further requirements of s 130. The
latter
includes the lapse of certain time periods, followed by the
failure of the consumer to remedy the default or his not responding
to the notice or rejecting the credit provider’s proposals.
Furthermore, where the credit agreement is an instalment agreement,
secured loan or lease the credit provider may seek an order enforcing
the remaining obligations under the agreement if the property
has
been sold and the net proceeds were insufficient to discharge all the
consumer’s obligations.
[14]
I do not agree with these conclusions. One of the objects of the NCA
is the provision of a consistent
and accessible system of consensual
dispute resolution. A notice in terms of s 129(1)(a), however, does
not exclude the resolution
of a dispute relating to a specific credit
agreement in this manner. The purpose of a s 129(1)(a) notice is the
resolution of a
dispute and the bringing up to date of payments under
a specific credit agreement. While it is a ‘step’ prior
to the
commencement of legal proceedings it is also the first ‘step’
the credit provider ‘has proceeded to take …
to enforce
that agreement’ (s 86(2)). It does not exclude a debt review
save in so far as it relates to the particular credit
agreement under
consideration. Nor does it exclude a general debt review
pursuant to ss 83 and 85. Key to the construction
of s 86(2) are the
words ‘has proceeded to take the steps’ used in s 86(2).
A ‘step’, amongst its meanings,
includes ‘an action
or movement which leads to a result; one of a series of proceedings
or measures’.
[26]
To
‘proceed’ means ‘to go on with an action’ and
also ‘with stress on the progress or continuance
of the action’
to ‘go on or continue what one has begun; to advance from the
point already reached’.
[27]
By the use of the words ‘has proceeded’ and ‘steps’
an ongoing process is indicated of which the
s 129(1)(a) notice is
the first ‘step’.
[28]
It is the only step expressly mentioned in s 129 although the other
‘steps’ or requirements referred to in s
130 are
incorporated by reference.
[29]
Section 129(1)(b)(i) makes it clear that the notice in terms of s
129(1)(a) is a necessary ‘step’ before legal proceedings
may be commenced. It follows that by giving the notice envisaged by s
129(1)(a) the credit provider ‘has proceeded to take
the steps
contemplated in section 129 to enforce that agreement’: a debt
review relating to that specific agreement is thereafter
excluded.
[30]
[15]
It follows that the court a quo was correct in not granting the
declarator prayed for in prayer
1.13 of the notice of motion.
Sections 86(7) and (8)
and 87
[16]
The fifth appellant, Juselius, appealed against orders 1, 2, 4, 7 and
8 of the court below. They
read as follows:
‘
1
On a proper interpretation of s 86(8)(b), it applies in the
circumstances contemplated
in s 86(7)(c).
2
In circumstances where s 86(8)(b) of the Act applies, a debt
counsellor
is obliged to refer his or her recommendation to a
magistrates’ court and the magistrate to whom the matter is
allocated
is in terms of s 87 obliged to conduct a hearing and make
an order contemplated in either s 87(1)(a) or
s 87(1)(b)
of the
National Credit Act, 2005
.
4
A referral by a debt counsellor to a magistrates’ court under
s
86(8)(b)
(and
s 86(7)(c))
of the
National Credit Act, 2005
is an
application within the meaning of the
Magistrates’ Courts Act,
1944
and the rules of the magistrates’ courts and falls to be
treated as such in terms of
rule 55
of the rules.
7
Rule 9
of the magistrates’ courts’ rules pertaining to
service is applicable to the service of process, any recommendation
and other documents for the purpose of the referral and hearing
contemplated in
ss 86(7)(c)
,
86
(8)(b) and
87
of the
National Credit
Act, 2005
, but service of any such documents may, with the agreement
of the affected parties, be by way of fax or email.
8
A debt counsellor who refers a matter to the magistrates’ court
in
terms of
ss 87(7)(c)
and
86
(8)(b) of the
National Credit Act,
2005
, has a duty to assist the court and should be available and able
to render such assistance by way of furnishing evidence or making
submissions as to his or her proposal or to answer any queries raised
by the court.’
[17]
Juselius contended that the making of orders pursuant to
s 86(7)
deals with relief sought following
ss 86(7)(a)
and (b) only and not
pursuant to
s 86(7)(c)
as well. His argument was that the debt review
system created by
s 86(1)
to (6) provides for the debt counsellor to
ascertain whether the consumer is entitled to relief. The debt
counsellor may then in
terms of
s 86(7)(c
) make a proposal to the
Magistrate’s Court recommending either or both of the orders
provided for: no hearing is required,
nor is service necessary
because the debt counsellor has determined that the consumer is
over-indebted. The Magistrate’s
Court is then called on to
conduct a hearing and may make the orders specified in
s 87.
It was
submitted that neither a
Rule 55
application nor service was required
before the hearing in terms of
s 87
could be held.
[18]
As far as order 8 is concerned, Juselius suggested that the words
after ‘court’ be
deleted and replaced with ‘has a
duty to respond to and take all reasonable steps to assist the Court
on request’.
During the hearing of this appeal counsel for
Juselius effectively conceded that an application in terms of
Rule 55
by the debt counsellor in terms the Magistrates’ Courts Rules
of Court
[31]
was required
before an order pursuant to s 86(7)(c) could be made.
[19]
Section 86(6), (7), (8) and (9) provide:
‘
(6)
A debt counsellor who has accepted an application in terms of this
section must determine, in
the prescribed manner and within the
prescribed time –
(a)
whether the consumer appears to be over-indebted;
and
(b)
if the consumer seeks a declaration of reckless
credit, whether any of the consumer’s credit agreements appear
to be reckless.
(7)
If, as a result of an assessment conducted in terms of subsection
(6), a debt counsellor
reasonably concludes that –
(a) the consumer is not
over-indebted, the debt counsellor must reject the application, even
if the debt counsellor has concluded
that a particular credit
agreement was reckless at the time it was entered into;
(b) the consumer is not
over-indebted, but is nevertheless experiencing, or likely to
experience, difficulty satisfying all the
consumer’s
obligations under credit agreements in a timely manner, the debt
counsellor may recommend that the consumer and
the respective credit
providers voluntarily consider and agree on a plan of debt
re-arrangement; or
(c) the consumer is
over-indebted, the debt counsellor may issue a proposal recommending
that the Magistrate’s’ Court
make either or both of the
following orders –
(i) that one or more of
the consumer’s credit agreements be declared to be reckless
credit, if the debt counsellor has concluded
that those agreements
appear to be reckless; and
(ii) that one or more of
the consumer’s obligations be re-arranged by –
(aa) extending the period
of the agreement and reducing the amount of each payment due
accordingly;
(bb) postponing during a
specified period the dates on which payments are due under the
agreement;
(cc) extending the period
of the agreement and postponing during a specified period the dates
on which payments are due under the
agreement; or
(dd) recalculating the
consumer’s obligations because of contraventions of Part A or B
of Chapter 5, or Part A of Chapter
6.
(8)
If a debt counsellor makes a recommendation in terms of subsection
7(b) and –
(a) the consumer and each
credit provider concerned accept that proposal, the debt counsellor
must record the proposal in the form
of an order, and if it is
consented to by the consumer and each credit provider concerned, file
it as a consent order in terms
of section 138; or
(b) if paragraph (a) does
not apply, the debt counsellor must refer the matter to the
Magistrate’s Court with the recommendation.
(9)
If a debt counsellor rejects an application as contemplated in
subsection 7(a), the consumer,
with leave of the Magistrate’s
Court, may apply directly to the Magistrate’s Court, in the
prescribed manner and form,
for an order contemplated in subsection
7(c).’
[20]
Section 87(1) provides:
‘
Magistrate’s
Court may re-arrange consumer’s obligations
(1)
If a debt counsellor makes a proposal to the
Magistrate’s Court in terms of section 86(8)(b), or a consumer
applies to the
Magistrate’s Court in terms of section 86(9),
the Magistrate’s Court must conduct a hearing and, having
regard to the
proposal and information before it and the consumer’s
financial means, prospects and obligations, may –
(a)
reject the recommendation or application as the
case may be; or
(b)
make –
(i)
an order declaring any credit agreement to be
reckless, and an order contemplated in section 83(2) or (3), if the
Magistrate’s
Court concludes that the agreement is reckless;
(ii)
an order re-arranging the consumer’s
obligations in any manner contemplated in section 86(7)(c)(ii); or
(iii)
both orders contemplated in subparagraph (i) and
(ii).’
[21]
The NCA contains many innovations. One of them concerns the right of
a consumer to apply for
debt review, to be declared over-indebted and
to have his debts arising from credit agreements re-scheduled.
[32]
These matters are provided for in Part D of Chapter 4 of the NCA.
[33]
A consumer is over-indebted if he is unable to satisfy his
obligations in a timely manner having regard to his financial means,
prospects, obligations and history of debt repayment (s 79(1)). The
creation of the office of a debt counsellor is another innovation
and
he plays a central role in the debt review process. To be appointed
as a debt counsellor one must meet certain requirements
and be
suitably qualified. Training is a pre-requisite for appointment.
[34]
In the court a quo Du Plessis J correctly observed that a debt
counsellor fulfils a statutory function.
[35]
[22]
An evaluation of a consumer’s position to ascertain whether he
is over-indebted is initiated
in one of two ways. First, in any court
proceedings where the allegation is made that the consumer is
over-indebted, the court
may refer the matter to a debt counsellor
for evaluation and recommendation, or the court may itself declare
the consumer over-indebted.
[36]
Secondly, the consumer may himself apply to a debt counsellor to be
declared over-indebted.
[37]
He
must then provide the details prescribed by regulation 24. An
application fee is payable to the debt counsellor.
[38]
The debt counsellor must notify all credit providers listed in the
application for debt review as well as all registered credit
bureaux
of the application.
[39]
He
must evaluate the consumer’s position, and both the consumer
and the credit provider must co-operate to this end.
[40]
The debt counsellor must make his determination within 30 business
days of receipt of the application.
[41]
[23]
The debt counsellor’s evaluation may have one of the three
outcomes set out in s 86(7):
First, the debt counsellor may find that
the consumer is not over-indebted and reject the consumer’s
application.
[42]
Where this
occurs the consumer may himself, with leave of the Magistrate’s
Court, apply directly to the Magistrate’s
Court for an order
that one or more of his credit agreements be declared reckless credit
and for a re-arrangement of his debts.
[43]
Secondly, the debt counsellor may conclude that the consumer is not
over-indebted but is experiencing difficulty in paying his
debts in a
timely manner.
[44]
In that
case the debt counsellor may recommend that the consumer and the
credit provider voluntarily agree on a debt re-arrangement
plan. If
they reach an agreement it can be filed as a consent order with the
Consumer Tribunal or a court.
[45]
If no agreement is reached the debt counsellor must refer the matter
to the Magistrate’s Court with that recommendation.
[46]
The Magistrate’s Court may then either reject the
recommendation or make an order that any credit agreement was
reckless
or an order re-arranging the consumer’s obligations or
both.
[47]
Declaring a credit
agreement to be reckless has serious consequences: the court may set
aside or suspend the agreement,
[48]
if no assessment of the creditworthiness of the consumer or of his
understanding of the agreement had been made by the credit provider,
or if the consumer did not understand or appreciate the risks, costs
or obligations under the agreement.
[49]
If the consumer is merely over-indebted, the court may suspend the
agreement without setting it aside.
[50]
Where the court finds that the agreement was reckless and that the
consumer is over-indebted, it may suspend the agreement for
a certain
time period and restructure the debts.
[51]
Thirdly, the debt counsellor may conclude that the consumer is
over-indebted.
[52]
He may then
‘issue a proposal recommending that the Magistrate’s
Court make either or both of the following orders’,
(i) that
one or more of the consumer’s credit agreements be declared
reckless, or (ii) that one or more of the consumer’s
obligations be re-arranged.
[53]
[24]
A consumer who has applied for debt review in terms of s 86(1) or who
has alleged in court that
he is over-indebted may not incur any
further charges under a credit facility or enter into a further
credit agreement until one
of the following events has occurred.
First, the rejection by the debt counsellor of his application and
expiry of the time within
which he has to bring a direct application
in terms of s 86(9). Secondly, the court’s determination that
he is not over-indebted
or its rejection of the debt counsellor’s
proposals or the consumer’s application. Thirdly, a
re-arrangement order
has been made or a re-arrangement agreement has
been entered into and the consumer has fulfilled all his obligations
under it.
[54]
The consequences
for credit providers are equally serious. Subject to s 86(9) and (10)
a credit provider who receives notice of
proceedings under ss 83 and
85 or s 86(4)(b)(i) may not ‘exercise or enforce by litigation
or other judicial process any
right or security under that credit
agreement’ until the consumer is in default and one of the
events referred to has occurred
or the consumer defaults on an
obligation in terms of a re-arrangement agreed to between them
or an order of court or the
Tribunal.
[55]
[25]
In the court below Du Plessis J characterised the essence of the
dispute arising from the contentions
of Juselius as one relating to
the procedure to be followed when a matter is referred to the
Magistrate’s Court under ss
86 and 87.
[56]
Section 87(1) requires the Magistrate’s Court to ‘conduct
a hearing’ and make the relevant orders ‘having
regard to
the proposal and information before it and the consumer’s
financial means, prospects and obligations’. It
has this power
when dealing with a recommendation in terms of s 86(7)(b) and an
application following the rejection by the debt
counsellor of the
consumer’s application in terms of s 86(7)(a). The problem is
that neither s 86(8) nor s 87(1) refers to
s 86(7)(c) at all. Du
Plessis J accepted that matters of over-indebtedness were by their
very nature urgent but rejected the contention
that a hearing before
a Magistrate’s Court was not required in matters falling under
s 86(7)(c). In his view –
‘
s
86(7)(c) requires cases of over-indebtedness to be referred to the
magistrates’ court so as to ensure judicial oversight
of the
entire process. A magistrates’ court can only provide such
oversight if it conducts a hearing and has regard to at
least the
matters referred to in s 87(1). It follows that by necessary
implication the procedure set out in s 87(1) applies also
to cases
coming before the magistrate’s court under s 86(7)(c).’
[57]
[26]
The same urgency, Du Plessis J said, also existed in cases falling
under ss 86(9) and 86(7)(b).
He further held that in proceeding with
a matter falling under s 86(7)(b) and (c) the Magistrates’
Courts Rules find application.
[58]
He concluded that the referral of a matter to the Magistrate’s
Court constituted ‘an extraordinary procedure’
because –
‘
it
concerns a
lis
or
suit between the consumer and his or her credit providers, but the
initiative to refer it to the court is taken by a third party,
the
debt counsellor who acts as pro forma applicant. I say that the
procedure concerns a suit because, by applying to be declared
over-indebted, the consumer is seeking at least a rearrangement of
one or more of his or her obligations… The procedure
also is
out of the ordinary because the debt counsellor is by law required,
in given circumstances, to refer the matter to the
magistrates’
court or, put differently, to apply to the court.’
[59]
Unless
a specific procedure has been prescribed the Magistrates’
Courts Rules apply. The consumer’s initial application
under s
86(1) for debt review must be in the form prescribed by
regulation.
[60]
Where the
consumer applies directly to court in terms of s 86(9) it must do so
in the prescribed manner.
[61]
In cases falling under s 86(8)(b) the debt counsellor must refer his
recommendation to the Magistrate’s Court but no procedure,
as
in the case of an application in terms of s 86(1), is prescribed.
Consequently, the court below held, the Magistrates’
Court Act
and Rules apply. The appropriate rule to follow is Rule 55 which
deals with applications in the Magistrates’ Courts.
[62]
I agree with the reasoning of the court below.
[27]
It seems to me that the risk involved in accepting the contentions
advanced by Juselius, is that
if no hearing is held following a s
86(7)(c) recommendation, a Magistrate’s Court may endorse the
debt counsellor’s
recommendation and re-arrange the debt
without the credit providers having had the opportunity of being
heard, at least not until
after the order is made. The Magistrate’s
Court must in terms of s 87 conduct a hearing and may make any of the
orders provided
for in paragraphs (a) and (b) of s 87(1).
[63]
This is a ‘hearing’ in open court as contemplated in
s 5
of the
Magistrates’ Courts Act 32 of 1944
and the court is a
court of record as contemplated by
s 4(1).
A hearing is
conducted in accordance with
Rule 29
in action proceedings and in
accordance with
Rule 55
in application proceedings.
[28]
There is nothing in the NCA that militates against this conclusion.
The references to the ‘Magistrate’s
Court’ in
ss
86(7)(c)
and
87
(1) were obviously intended as references to a ‘court’
in the strict sense of the word,
[64]
requiring the court to adjudicate the matter according to fundamental
principles of justice which includes the holding of a hearing.
[65]
The Magistrates’ Courts when exercising jurisdiction conferred
by another statute follow their own Act and Rules unless there
are
indications in the enabling legislation allowing for a departure.
[66]
Rule 55 of the Magistrates’ Courts Rules contains the machinery
to permit the proper determination of a dispute regarding
s 86(7)(c).
The matter may be referred to trial and provision may be made for
discovery and the examination of witnesses. In addition,
provision is
made for urgent and ex parte applications and it is for the court in
the exercise of its judicial discretion to determine
the proper
procedure for an application for a restructuring order. There is no
basis for the submission on behalf of Juselius that
the debt
counsellor may approach a Magistrate’s Court ex parte. In each
case the court should be persuaded that this is the
proper approach
particularly where the consequences of a re-arrangement order or a
finding of reckless credit are serious and potentially
detrimental to
credit providers.
[67]
There is
no justification for holding that a different procedure applies in
cases falling under s 86(7)(c) and those under s 86(7)(b)
and (9).
[29]
The omission in s 86(8) to refer to s 86(7)(c), however, remains. A
court is empowered to modify
the wording of a statute where it is
necessary to give effect to what was the true intention of the
legislature.
[68]
This power
will readily be exercised where there are other indications in the
legislation supporting the correction. In terms of
s 86(7)(c) the
debt counsellor may ‘issue a proposal’ that the
Magistrate’s Court make certain orders.
It is not said that he
‘must’ do so but, given his duty in terms of subsec (6)
and his position as statutory functionary,
he ‘must’
issue the proposal. If the contentions of Juselius were to be
accepted it would remain uncertain, in cases
falling under s
86(7)(c), from where the Magistrate’s Court, to which the
matter has been referred, would derive its power
to make any of the
orders set out in s 87(1). By reading in the words ‘and section
86(7)(c)’ in declarator 4 of the
order of the court below
proper effect will be given to the intention of the legislature.
[30]
It follows that the appeal of Juselius against orders 1, 2 and 4 of
the court a quo should be
dismissed.
Manner of service
[31]
Juselius also appeals against order 7 made by the court a quo. The
order reads:
‘
Rule
9 of the magistrates’ courts rules pertaining to service is
applicable to the service of process, any recommendation
and other
documents for the purpose of the referral and hearing contemplated in
ss 86(7)(c)
,
86
(8)(b) and
87
of the
National Credit Act, 2005
, but
service of any such documents may, with the agreement of the affected
parties, be by way of fax or email.’
[32]
In view of the introduction of
rule 9(3)(f)
of the new Rules of the
Magistrates’ Courts from 15 October 2010, making service of
certain documents by way of registered
post or by hand possible,
Juselius did not persist in this part of the appeal. Nor was his
appeal against order 8 proceeded with.
Section 103(5)
[33]
The banks and other respondents appealed against order 11 which
concerns
s 103(5).
The declarator reads
as follows:
‘
11.
On a proper interpretation of
s 103(5)
read with ss 101(1)(b)-(g) of
the National Credit Act, 2005:
(a)
the amounts contemplated in sections 101(1)(b) to (g) which accrue
while the consumer is
in default may not exceed, in aggregate, the
unpaid balance of the principal debt when the default occurred;
(b)
once the total charges referred to in ss 101(1)(b)-(g) equal the
amount of the unpaid balance,
no further charges may be levied;
(c)
once the total charges referred to in ss 101(1)(b)-(g) equal the
amount of the unpaid
balance, payments made by a consumer thereafter
during a period of default do not have the effect of permitting the
credit provider
to charge further interest while such default
persists.’
[34]
In the court a quo, Du Plessis J disposed of the contentions of the
banks with the following
remark:
‘
First,
the subsection makes it plain that it applies despite “any
provision of the common-law”, which includes the
in
duplum
rule.
In the second place it is the amounts “that accrue”
during the default that “may not, in aggregate, exceed
the
unpaid balance”. During the period of default no more than the
stated maximum can accrue. Put differently, the consumer’s
indebtedness in respect of cost of credit cannot grow by more than
the stated maximum.’
[69]
[35]
Section 103(5) is controversial. Section 103 is headed ‘Interest’
and s 103(5) provides
as follows:
‘
Despite
any provision of the common law or a credit agreement to the
contrary, the amounts contemplated in section 101(1)(b) to
(g) that
accrue during the time that a consumer is in default under the credit
agreement may not, in aggregate, exceed the unpaid
balance of the
principal debt under that credit agreement as at the time that the
default occurs.’
Section 101 deals with
the ‘cost of credit’ and prohibits a credit agreement to
require the payment of money or other
consideration by the consumer
except ‘(a) the principal debt, being the amount deferred in
terms of the agreement, plus the
value of any item contemplated in
section 102’; (b) an initiation fee; (c) a service fee; (d)
interest, which – ‘(i)
must be expressed in percentage
terms as an annual rate calculated in the prescribed manner; and (ii)
must not exceed the applicable
maximum prescribed rate determined in
terms of section 105’; (e) the cost of any credit insurance;
(f) default administration
charges; and (g) collection costs.
[36]
In its founding papers the Credit Regulator complained of the fact
that banks sometimes interpreted
s 103(5) as if it were a
codification of the
in
duplum
rule
enabling them to levy interest as soon as the consumer made a further
payment thereby reducing the outstanding interest. The
Regulator
contended that the effect of the subsection was that once the total
charges referred to in s 102 were equal to the unpaid
balance no
further charges could be levied. The
in
duplum
rule
originated in Roman law, underwent development in later centuries and
was consistently applied in South African courts from
as early as
1830.
[70]
[37]
The following two aspects of the common law
in
duplum
rule
are relevant: First, where the total amount of arrear and
unpaid
interest
has accrued to an amount equal to the outstanding capital sum,
interest ceases to run, but any payment made by the debtor
thereafter
will lead to the amount of interest decreasing after which interest
again starts to accrue to an amount equal to the
outstanding capital
amount.
[71]
The purpose of the
rule is to ‘ensure that debtors are not endlessly consumed by
charges and also to ensure that debtors
whose affairs are declining
should not be entirely drained dry.’
[72]
Secondly, the
in
duplum
rule
is suspended
pendente
lite
,
and the
lis
is
said to commence upon service of the initial process, whereafter
interest runs again.
[73]
The
common law rule thus effectively limits the interest recoverable by
preventing interest from accruing further once it reaches
the unpaid
capital amount. Payment is appropriated to interest first, then to
capital.
[74]
Interest, whether
capitalised or not, remains interest.
[75]
[38]
In
LTA
Construction Bpk v Administrateur, Transvaal
[76]
Joubert JA remarked:
‘
Rente
is die lewensbloed van die handelsverkeer. Die afskaffing van die
renteverbod
in
duplum
is
in die huidige omstandighede nie die funksie van hierdie Hof nie.
Hierdie Hof het geen bevoegheid om ‘n nuttige, geldende,
gemeenregtelike regsreël af te skaf nie. Dit is ‘n
aangeleentheid vir die Wetgewer.’
These
were prophetic words. Has the legislature by enacting s 103(5)
effectively abolished the common law
in
duplum
rule
in so far as it concerns credit agreements within the ambit of the
NCA? Section 103(5) has been referred to in the literature
as ‘a
codification’ of the
in
duplum
rule.
[77]
Section 103(5) is not a code
[78]
and embodies no more than a specific rule applicable to specific
circumstances, that is, to credit agreements subject to the NCA.
It
is thus a statutory provision with limited operation.
[79]
It seeks not only to amend the common law
in
duplum
rule
but also to extend it. It deals with the same subject matter as the
common law rule but this does not mean that it incorporates
all or
any of the aspects of the common law rule. It is a self-standing
provision and must be construed as such. The rule of interpretation
is that a statutory provision should not be interpreted so as to
alter the common law more than is necessary unless the intention
to
do so is clearly reflected in the enactment, whether expressly or by
necessary implication: ‘[I]t is a sound rule to construe
a
statute in conformity with the common law, save where and insofar as
the statute itself evidences a plain intention on the part
of the
Legislature to alter the common law. In the latter case the
presumption is that the Legislature did not intend to modify
the
common law to any extent greater than is provided in express terms or
is a necessary inference from the provisions of the enactment.’
[80]
Steyn
[81]
cautioned:
‘‘
n
Doelbewuste afwyking moet nie verwring word om in die vorms van die
gemene reg te kan inpas nie.’
Section
103(5), it seems, signifies such an intention by providing in the
introductory words ‘[d]espite any provision of the
common law
or a credit agreement to the contrary’. The NCA is not an act
consolidating the law as it existed at the time
of its enactment. It
replaces legislation that governed consumer credit for more than a
quarter of a century, recasting the whole
body of law. The
introduction of debt review procedures and innovations such as the
power of courts to rearrange consumer obligations
demonstrate
dramatic departures from the previous state of the law.
[82]
The subsection must be construed against this background.
[39]
Section 103(5) was intended to provide some redress for borrowers of
expensive credit.
[83]
It
includes within its ambit not only interest but also the other costs
of credit which are set out in s 101(1)(b) to (g). Kelly-Louw
[84]
correctly summarised one of the differences brought about by its
introduction:
‘
From
this exposition it is apparent that the vital difference between the
common-law and the statutory in duplum rules lies in the
fact that
under the common-law rule it is only interest (contractual and
default) that ceases to run if it equals the outstanding
capital
amount. By contrast, under the statutory rule, all the amounts –
such as the initiation fees, service fees, interest
(contractual and
default), costs of any credit insurance, default administration
charges, and collection costs – cease to
run if they combine to
exceed the outstanding principal debt.
Clearly the statutory in
duplum rule offers better consumer protection than its common-law
counterpart. However, the statutory rule
has worsened the position of
credit providers.’
[40]
The court a quo granted the declarator sought by the Credit
Regulator. Each of the appellants
advanced a different construction
of s 103(5) and suggested variations of the declarator made. The
variations are mainly directed
at preserving the common law rule that
payments of arrear and unpaid interest decrease the amount of
interest owing and allow interest
to run again up to the amount of
the capital. They, however, require words to be read into the section
that are simply not there.
Nedbank emphasised the words ‘accrue
... in aggregate’, submitting that the section was intended to
clarify and codify
the
in
duplum
rule.
It amended the rule by including the costs of credit in calculating
the double and by setting the limit as the unpaid balance
of the
principal debt ‘as at the time that the default occurs’.
Nedbank appears to have conceded that the suspension
of the rule
pendente
lite
was
done away with by s 103(5). Relying on
Margo
& another v Gardner & another; Gardner & another v Margo
& another
[85]
where
the common law rule was said to entail ‘prevent[ing] unpaid
interest from accruing further once it reache[d] the unpaid
capital
amount’, it argued that no further charges will accrue for as
long as the accumulated charges equalled the unpaid
capital. If
payment is thereafter made, the credit provider must appropriate it
in terms of s 126(3) and should this result in
the aggregate being
less than the unpaid capital interest will accrue again. Had the
legislature intended to depart radically from
the common law it
would, so the argument went, have used clearer language. On behalf of
Nedbank a reformulation of the declarator
was suggested to read as
follows:
‘
On
a proper interpretation of s 103(5) ... the amounts referred to in ss
101(1)(b) to (g) which accrue during the period of default
cease to
accrue further when but only for as long as the total of the unpaid
amounts which have so accrued equal the unpaid balance
of the
principal debt under the credit agreement in question as at the time
the default occurred.’
[41]
On behalf of First Rand reliance was also placed on s 126(3). It was
submitted that this section
makes no difference between payments made
during the time of default and the time when the consumer is not in
default. Thus, so
the argument proceeded, the credit provider may
again charge interest until the double is reached. Referring to the
presumption
that the legislature did not intend to modify the common
law to a greater extent than is provided in express terms or is a
necessary
inference, a recasting of the declarator in the following
terms was sought:
’
1.1
once the costs of credit referred to in Section 101(1)(b) to (g)
equal the outstanding principal debt as at the date of default,
such
costs may once again accrue to an amount not exceeding the
outstanding principal debt at the date of default in circumstances
where a defaulting consumer during a period of default makes payments
on his account, thereby reducing the costs of credit to below
the
proscribed threshold;
1.2 its operation is
suspended pendente lite upon service of the initiating process and
that once judgment has been granted, the
costs of credit referred to
in Section 101(1)(b) to (g) may run until it reaches the double of
the capital amount in terms of the
judgment.
[42]
On behalf of Standard Bank it was argued that the word ‘accrue’
in s 103(5) should be given
the narrow meaning of ‘due and
payable’ and not the wider one of ‘entitled to’. In
developing this argument
reference was made to
Cactus
Investments (Pty) Ltd v Commissioner for Inland Revenue
[86]
where the meaning of the word ‘accrued to’ for the
purposes of s 5(1) of the Income Tax Act 58 of 1962 was considered.
The court in that case accepted that it meant ‘has become
entitled to’.
[87]
The
court held that at common law, unless the parties otherwise agree, a
lender of money became entitled to interest, payable at
a future
date, the moment he advances the funds to the borrower although the
interest is only payable on a future date. Gross income
includes not
only income actually received but also rights of a non-capital
nature, such as the interest under consideration, which
accrued
during the tax year and are capable of being valued in money.
[88]
It was submitted on behalf of Standard Bank that s 103(5)
operated as a moratorium on the payment of the costs of credit
listed
in s 101(1), whilst the consumer was in default but that it did not
affect the underlying obligation (ie the credit agreement)
to make
full payment in future. It sought a declaration in the following
terms:
‘
The
proper interpretation of section 103(5) of the NCA, read with
sub-sections 101(1)(b) to (g), is that the section operates as
a
moratorium against payments whilst the consumer is in default, but
does not affect an underlying obligation to make full payment
in the
future of the underlying obligation once the consumer is no longer in
default.’
This interpretation, it
was suggested, would give a consistent meaning to the different
charges that may be recovered by the credit
provider under s 101(1)
and effect to the intention of the legislature, that all responsible
consumer obligations be satisfied
eventually: s 103(5) does not
affect the underlying obligation to make payment of the different
charges. What is affected is the
time they fall due and the time is
extended for the benefit of the consumer. ‘Accrue’, it
was submitted, could not
have the wider meaning of ‘has become
entitled to’ because the right to receive interest accrues
prior to the default.
[43]
On behalf of ABSA s 126(3) was invoked and it was argued that
payments made during default would
prevent the aggregate amount of
the costs of credit from reaching the unpaid balance of the principal
debt with the result that
arrear interest and other charges could
accumulate from time to time. It was argued that s 103(5) must be
construed in conformity
with the common law. Following this approach
it was submitted that a declarator in the following form should have
been made:
‘
(b)
once the total charges referred to in section 101(1)(b) to (g), less
any payment made by the consumer while in default, equal
the amount
of the unpaid balance of the principal debt as at the time that the
default occurred, no further charges may be levied
while such default
persists.
(c)
Once the total charges referred to in section
101(1)(b) to (g), less any payment made by the consumer while in
default, equal the
amount of the unpaid balance of the principal debt
as at the time that the default occurred, payments made by the
consumer thereafter
during the period of default do not have the
effect of permitting the credit provider to charge further interest
while such default
persists.’
[44]
The appeal by Onecor follows very much the same approach by
considering the extent to which s
103(5) departed from the common
law. The argument distinguished between two or more ‘notional
accounts’ to which payments
had to be allocated. The word
‘aggregate’, it was suggested, meant no more than that
for
in duplum
purposes the credit provider must debit all of
the different items in s 101(1)((b) to (g) to the notional interest
account. The
submission was made that the legislature had not
expressed an intention ‘clearly, unambiguously and beyond
reasonable doubt’
to encroach on further rights of the credit
providers whose rights were already curtailed by the common law rule.
It was submitted
that, on a linguistic interpretation, s 103(5) left
unaffected the common law rule that once interest is paid it runs
again up
to the amount of the outstanding capital. Nor did the
section abolish the common law rule that the running of interest is
suspended
pendente lite
.
[45]
The objects of the NCA include ‘encouraging responsible
borrowing, avoidance of over-indebtedness
and fulfilment of financial
obligations by consumers’.
[89]
It seeks to promote equity in the credit market by ‘balancing
the respective rights and responsibilities of credit providers
and
consumers’,
[90]
and
promotes responsibility in the credit market by providing for a
consistent system of debt restructuring, enforcement and judgment
‘which places priority on the eventual satisfaction of all
responsible consumer obligations under credit agreements.’
[91]
[46]
Accepting these objects, the question to be asked is what the
‘responsible consumer obligations’
are. Section 100(1)
provides that a credit provider must not charge an amount to, or
impose a monetary liability on, a consumer
in respect of:
‘
(a)
a credit fee or charge prohibited by this Act;
(b) an amount of a fee or
charge exceeding the amount that may be charged consistent with this
Act;
(c) an interest
charge under a credit agreement exceeding the amount that may be
charged consistent with this Act; or
(d) any fee, charge,
commission, expense or other amount payable by the credit provider to
any third party in respect of a credit
agreement, except as
contemplated in section 102 or elsewhere in this Act.’
[47]
The interest that may be charged under a credit agreement must
therefore be ‘consistent’
with the Act. Section 103
contains the provisions relating to interest. It follows that any
interest charged must be ‘consistent’
with s 103. Section
103 thus expressly forms part of the credit agreement and defines the
obligations of the parties. The ‘responsible
consumer
obligations’ must, it follows, be construed with reference to s
103. Section 103(5), in accordance with this approach,
specifically
provides ‘[d]espite any provision of the common law
or a
credit agreement to the contrary
’. (My emphasis.) There is
thus no contractual entitlement to interest (or to the other charges)
except as allowed for by
s 103. The intention of the legislature
could not have been expressed in clearer terms. Section 103(5) does
not merely give rise
to a ‘moratorium’ on payments whilst
the consumer is in default but indeed determines the latter’s
obligations
under the credit agreement.
[48]
Section 126(3) provides for the appropriation of payments: first, to
due or unpaid interest charges;
secondly, to due or unpaid fees or
charges; and thirdly to the principal debt. This provision takes the
matter no further. While
it is correct that this section makes no
distinction between payments before and after default it cannot
affect the question whether
a particular charge has ‘accrued’.
Payments during the time of default cannot revive obligations that
never ‘accrued’.
Any payment made during the time of
default which does not have the effect of ending the default simply
reduces the outstanding
principal debt.
[49]
Much has been said about the word ‘accrue’, which is a
word often encountered in
the context of the common law
in
duplum
rule
where reference is made to the accumulation of arrear and unpaid
interest.
[92]
But the word
must be construed in the context of the statute under
consideration.
[93]
The word
‘accrue’ would not usually be
used
in the context of a fee such as the ‘initiation fee’ in s
101(1)(b) or a ‘service fee’ in s 101(1)(c)
or the ‘cost
of any credit insurance’ in s 101(1)(e) or ‘default
administration charges’ in s 101(1)(f)
or ‘collection
costs’ in s 101(1)(g). One would rather refer to a fee that is
earned or costs that are incurred or
charges that are levied.
However, s 103(5) does not provide that the fees, costs and charges
‘accrue’, but that the
‘amounts contemplated in
section 101(1)(b) to (g)’, that is the amounts in respect of
the fees, costs and charges,
may not ‘accrue’ in
aggregate to more than the stated limit, viz the amount of the
principal debt at the time of default.
This is really the point in
issue: these amounts ‘accrue’ whether they are paid or
not. Section 103(5) makes no distinction
between paid and unpaid
charges. These amounts will only ‘accrue’ if the credit
provider has a contractual right to
them. Once the amounts referred
to in s 101(1)(b) to (g) that accrue during the period of default,
whether or not they are paid,
equal in aggregate the unpaid balance
of the principal debt at the time the default occurs, no further
charges may be levied. It
is not that a moratorium against payment is
introduced by s 103(5): no amount in respect of the fees, costs and
charges may ‘accrue’
any further. Put differently, no
enforceable right to the charges outlined in s 101(1)(b) to (g)
thereafter arises. This, it seems,
is the meaning of the word used in
cases on the common law rule.
[94]
The words of s 103(5) simply do not allow for a different
construction. If all the legislature intended was a restatement of
the
in
duplum
rule
it would have said so and would not have included the introductory
words to the subsection. It follows that Du Plessis J was
correct to
make the declaratory order in respect of s 103(5). The legislature
had in mind the protection of the consumer who may,
under the common
law rule, end up by paying much more that the capital originally
owing.
[50]
It follows that the Credit Regulator’s appeal and the other
appeals should all be dismissed.
No order for costs was sought.
All the appeals are
dismissed.
F R MALAN
JUDGE OF APPEAL
APPEARANCES:
Appellant
(National Credit Regulator):
C D A
Loxton SC
M A
Chohan
1
st
Respondent:
O
Rogers SC
2
nd
Respondent:
G
Faber SC
N
Konstantinides
3
rd
Respondent:
M
Kuper SC
J Cane
4
th
Respondent
D E
van Loggerenberg SC
G H
Meyer
5
th
Respondent
K J
Kemp SC
6
th
Respondent
P F
Louw SC
S G
Gouws
Instructed
by:
Van
der Spuy Attorneys (1
st
Appl Case 662/09)
Cape
Town (1
st
Resp
Case 500/10)
Hill
McHardy & Herbst
Bloemfontein
Werksmans
Attorneys (3
rd
&
6
th
Appl
Case Sandton 662/09)
(3
rd
& 6
th
Resps Case 500/10)
Symington
& De Kok
Bloemfontein
Van
Hulsteyns Attorneys (2
nd
Appl Case 662/09l)
Sandton
(2
nd
Resp
Case 500/10)
Rossouws
Attorneys
Bloemfontein
Jay
Mothobi Inc (4
th
Appl
Case 662/09)
Rosebank
(4
th
Resp
Case 500/10
Naudes
Bloemfontein
Booysens
& Company Inc (5
th
Appl)
Durban
(Also 2
nd
Resp
in Case 662/09 & 12
th
Resp in Case 500/10)
Peyper
Sesele Attorneys
Bloemfontein
Coombe
& Associates Inc (11
th
Resp Case Silverton Pretoria 500/10)
Symington
& De Kok
Bloemfontein
[1]
See J
W Scholtz in J W Scholtz, J M Otto, E van Zyl, C M van Heerden and N
Campbell
Guide
to the
National Credit Act
(2008
)
Service Issue 2 p 2-1 (
Guide)
;
J M Otto and R L Otto
The
National Credit Act Explained
2
ed (2010) p 3 and cf the remarks in
ABSA
Bank Ltd v Prochaska t/a Bianca Cara Interiors
2009
(2) SA 512
(D) para 16ff.
[2]
Section
2(1).
Cf
ABSA
Bank Ltd v De Villiers & another
2009(5)
SA 40 (C) para 27;
Ex
parte Ford
and
two similar cases
2009 (3) SA 376
(WC) para 20;
Standard
Bank of South Africa Ltd v Hales & another
2009
(3) SA 315
(D) paras 11 and 13;
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
2010
(5) SA 618
(KZD) para 16
.
[3]
Section
2(2).
[4]
This
was how the
Bills
of Exchange Act 1882 was described in
Bank
Polski v K J Mulder & Co
[1942]
1 All ER 396
at 398.
[5]
Chalmers
was the draftsman of the English Bills of Exchange Act, 1882. See
British
Movietonews Ld v London and District Cinemas Ld
[1951]
1 KB 190
at 202.
[6]
Cf
Firstrand
Bank Ltd t/a First National Bank v Seyffert & another
and
three similar cases (6) SA 429 (GSJ) para 10.
[7]
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
16;
Firstrand
Bank Ltd t/a First National Bank v Seyffert & another
and
three similar cases para 10.
[8]
National
Credit Regulator v Nedbank Ltd & others
2009
(6) SA 295
(GNP) at 318I-319J.
[9]
See C
M van Heerden and J M Otto ‘Debt enforcement in terms of the
National Credit Act 34 of 2005
’ 2007
TSAR
655;
Danie van Loggerenberg SC, Leon Dicker and Jacques Malan ‘Aspects
of debt enforcement under the
National Credit Act’
January/February
2008
De
Rebus
40;
C van Heerden in
Guide
p
11-10; A Boraine and S Renke ‘Some practical and comparative
aspects of the cancellation of instalment agreements in terms
of the
National Credit Act 34 of 2005 (Part 2)’ (2008) 41
De
Jure
1
p 9 and J M Otto and R L Otto
The
National Credit Act Explained
2
ed (2010) p 100; J M Otto ‘Over-indebtedness and
applications for debt review in terms of the
National Credit Act:
Consumers
beware!
Firstrand
Bank Ltd v Olivier
’
(2009)
21
SA
Merc LJ
272
p 276-7; and J M Otto ‘
Die
oorbelaste skuldverbruiker: die Nasionale Kredietwet verleen
geensins onbeperkte vrydom van skulde nie’ 2010
TSAR
399 p
405. See the discussion of the literature by
Wallis
J in
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
6ff.
[10]
A
Boraine and S Renke
p
9 fn 186.
[11]
Section
129(1)(b)(i).
See
ABSA
Bank Ltd v De Villiers
para
14;
ABSA
Bank Ltd v Prochaska t/a Bianca Cara Interiors
para
27.
[12]
Van
Heerden in
Guide
p
12-7 and 12-8.
[13]
Cf
Firstrand
Bank Ltd v Olivier
2009
(3) SA 353
(SE) para 18.
[14]
The
matter was left open in
BMW
Financial Services (SA) (Pty) Ltd v Donkin
2009
(6) SA 63
(KZD) para 13 and note 4; and
Investec
Bank Ltd & another v Mutemeri & another
2010
(1) SA 265
(GSJ) paras 25 and 26. In the following decisions the
courts held that a
s 129(1)(a)
notice barred a consumer from
applying for debt review:
Nedbank
Ltd v Motaung
(2245/07)
[2007] ZAGPHC 367
(14 November 2007) (TPD);
Potgieter
v Greenhouse Funding (Pty)
(08/31825)
[2009] ZAGPJHC84 (26 June 2009);
Mercedes
Benz Financial Services SA (Pty) Ltd v Viljoen
(18995/09)
[2009] ZAGPPHC 145 (19 November 2009) para 6;
ABSA
Bank Ltd v Prochaska t/a Bianca Cara Interiors
para
29;
Standard
Bank of South Africa v Hales & another
para
21. Cases expressing the contrary view include
Starita
v ABSA Bank Ltd & another
2010
(3) SA 443
(GSJ) para 12 and
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
13ff.
[15]
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
12;
BMW
Financial Services (SA) (Pty) Ltd v Donkin
para
10;
National
Credit Regulator v Nedbank Ltd & others
at
319A.
[16]
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
11 and see his remarks in
BMW
Financial Services (SA) (Pty) Ltd v Donkin
para
10.
[17]
See,
however,
s 86(7)(b)
which deals with a consumer who is not
over-indebted but finds himself in what has been described as
‘strained’ circumstances
(H C J Flemming
Flemming’s
National Credit Act
2ed
139 ff).
[18]
Section
86 does not deal with agreements other than those arising from
credit agreements as contemplated by the NCA. Cf
Nelson
Mandela
Bay Metropolitan Municipality
v
Nobumba NO & others
2010
(1) SA 579
(ECG) para 28 ff.
[19]
Section
79(1) and see
Standard
Bank of South Africa Ltd v Panayiotts
2009
(3) SA 363
(W) paras 6-10.
[20]
See
the discussion below paras 16ff.
[21]
Section
86(7)(c).
[22]
Cf
Naidoo
v ABSA Bank Ltd
(391/09)
[2010] ZASCA 72
,
2010 (4) SA 597
(SCA) (27 May 2010).
[23]
C v
an
Heerden in
Guide
para
12.1 suggested that ‘enforce’ means the credit provider
using any of his remedies: it refers to ‘enforcement
of a
credit provider’s remedies by means of legal proceedings’.
See C M van Heerden and J M Otto ‘Debt enforcement
in terms of
the
National Credit Act 34 of 2005
’ 2007
TSAR
655.
[24]
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
13. See also
Investec
Bank Ltd & another v Mutemeri
para
25; and
Starita
v ABSA Bank Ltd & another
para
12.
[25]
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
para
14. In para 15 he concluded: ‘In other words, it refers to the
steps that must be taken by the credit provider in order
to arrive
at the point where they are entitled to commence legal proceedings
to enforce the agreement. Those steps may be positive,
such as the
giving of notice, the acceptance of the surrender of the property
and the sale of the property, or may be negative,
such as the
obligation to await the elapse of the time periods in
s 130(1)
and
130
(1)(a). Whatever their character, once those steps have been
taken the credit provider is entitled to commence legal proceedings.
It is at that stage, as a matter of language, that
s 86(2)
debars
the consumer from applying for debt review.’
[26]
The
Oxford Universal Dictionary Illustrated
(1965)
sv
‘
step’.
[27]
The
Oxford Universal Dictionary Illustrated
(1965)
sv
‘
proceed’.
[28]
See
Flemming 143.
[29]
Absa
Bank Ltd v Prochaska t/a Bianca Cara Interiors
2009
(2) SA 512
(D) paras 29-31.
[30]
I am
not called upon to construe
s 130(3)(c)(i)
but the use of the words
‘the matter’ can only refer to the particular agreement
in respect of which relief is sought.
Nor does the word ‘approached’
refer to the time the summons is issued but to the time the order is
requested (Flemming
203). It seems that the time ‘the matter
was before a debt counsellor’ refers to
s 130(1)(a)
which
again refers to the time periods of 10 days in
s 130(1)(a)
and
60
days in
s 86(10)
(not
s 86(9)
as
s 130(1)(a)
incorrectly states).
[31]
GG
33487
of 23 August 2010 which came into operation on 15 October 2010.
[32]
Persson ‘Over-indebtedness – a growing problem’ in
Wahlgren (ed)
Scandinavian
Studies in Law – What is Scandinavian Law?
(2007) 463 p 472 stated:
‘Debt restructuring has a number of purposes, the main one
being rehabilitation. People who are
heavily indebted must be given
the chance of solving their financial problems and in this way of
leading (sic) more adequate
and socially useful lives. This
rehabilitative purpose, however has to be balanced against the
individual creditors’ rightful
interest in asserting their
financial claims. The institute of debt restructuring is designed to
make even-handed provision for
these somewhat contradictory
interests ... A third purpose of debt restructuring is to favour the
creditor collective in the
sense of debtors coming to pay at least
part of what is owing. Through debt restructuring the debtor usually
pays more than would
otherwise have been the case. If both the
debtors and his (sic) creditors benefit, society will be spared a
great deal of expense
in various fields. It is also important that
the debt restructuring system should not impair general payment
morale and that
it should be constructed so as to gain the
confidence of the general public’ (quoted by J M Otto ‘Die
oorbelaste
skuldverbruiker: die Nasionale Kredietwet verleen
geensins onbeperkte vrydom van skulde nie’ 2010
TSAR
399).
[33]
See
Michelle Kelly-Louw ‘The prevention and alleviation of
consumer over-indebtedness’ (2008) 20
SA
Merc LJ
200.
[34]
Section
44
read with reg 10 of the Regulations in terms of the
National
Credit Act 34 of 2005
GN R489 of 31 May 2006 as amended.
[35]
At
311G-H.
[36]
Section
85.
[37]
Section
86(1).
[38]
Section
86(3).
[39]
Section
86(4)(b).
[40]
Section
86(5).
[41]
Regulation
24(6).
[42]
Section
86(7)(a).
[43]
Section
86(9).
[44]
Section
86)(7)(b).
[45]
Section
86(8)(a)
and
s 138.
It is not clear whether a court would have the
power in terms of
s 138
where a debt counsellor is involved.
[46]
Section
86(8)(b).
[47]
Section
87(1)(a)
and (b).
[48]
Section
83(2).
[49]
Section
80(1)(b).
[50]
Section
83(2)
and (3).
[51]
Section
83(3).
[52]
Section
86(7)(c).
[53]
Section
86(7)(c)(i)
and (ii).
[54]
Section
88(1).
[55]
Section
88(3).
[56]
At
307F-G.
[57]
At
304I-305 B.
[58]
At
309G–310 B.
[59]
At
309D-F.
[60]
Section
86(1)
and NCA Form 16.
[61]
NCA
Form 18.
[62]
At
310B-D.
[63]
Section
2(7)
of the NCA also provides that the provisions of the NCA are not
to be construed as ‘(a) limiting, amending, repealing or
otherwise altering any provision of any other Act …’.
[64]
Briel
v Van Zyl; Rolenyathe v Lupton-Smith
1985
(4) SA 163
at (T) 165E-F (‘”Hof” beteken net een
ding, naamlik die hof soos ‘n hof gewoonlik onder die
besondere
statuut funksioneer’ (at 167C-D));
Minister
of the Interior & another v Harris & others
1952
(4) SA 769
(A) at 787E-789E;
S
v Thompson & another
1968
(3) SA 425
(E) at 427C-F.
[65]
Body
Corporate Houghton Villas v Got Construction (Pty) Ltd
2002
(1) SA 760
(W) at 762EG.
[66]
Rutenberg
v Magistrate, Wynberg, & another
1997
(4) SA 735
(C) at 750I-751C.
[67]
Cf
BMW
Financial Services (SA) (Pty) Ltd v Mudaly
2010
(5) SA 618
(KZD) paras 39 to 42.
[68]
Durban
City Council v Gray
1951
(3) SA 568
(A) at 580B cited with approval in
S
v Tieties
[1990] ZASCA 4
;
1990
(2) SA 461
(A) at 463E-F;
Shenker
v The Master & another
1936
AD 136
at 143.
[69]
At
320A-C.
[70]
LTA
Construction Bpk v Administrateur, Transvaal
[1991] ZASCA 147
;
1992
(1) SA 473
(A) at 476ff where reference is made (at 482B) to
Niekerk
v Niekerk
(1830)
1 Menz 452.
[71]
Commercial
Bank of Zimbabwe Ltd v M M Builders & Suppliers (Pvt) Ltd &
others and three similar cases
1997
(2) SA 285
(ZHC); and
Van
Coppenhagen v Van Coppenhagen
1947
(1) SA 576
(T) at 581 where it was stated: ‘It is clear law …
that when an amount of arrear interest reaches the amount of the
capital, interest ceases to run. It is not merely that the excess of
interest over an amount equal to the amount of the capital
is
irrecoverable. There can never be more interest accumulated than an
amount equal to the capital sum.’ In
Sanlam
Life Insurance Ltd v South African Breweries Ltd
2000
(2) SA 647
(W) at 652G-H it was said: ‘[N]o debtor can be
required to pay arrear interest on a due debt arising from a loan or
in
any other way which is in excess of the capital sum due at the
time of repayment.’ See
Verulam
Medicentre (Pty) Ltd v Ethekweni Municipality
2005
(2) SA 451
(D) at 453C-D;
Union
Government v Jordaan’s Executor
1916(1)
TPD 411 at 412-3.
[72]
Sanlam
Life Insurance Ltd v South African Breweries Ltd
at
652H-I. In
Stroebel
v Stroebel
1973
(2) SA 137
(T) at 138C-D it was said: ‘Daar is in ons reg
heelwat gesag vir die stelling dat rente nie die bedrag van die
kapitaal
self te bowe mag gaan nie; sodra die onbetaalde rente ‘n
bedrag gelyk aan die van die kapitaal bereik, loop die rente nie
meer nie: as die opgeloopte rente of ‘n deel daarvan gedelg
word, begin dit weer loop, maar net totdat dit nog eens so
hoog as
die kapitaal is.’ See
Meyer
v Catwalk Investments 354 (Pty) Ltd & andere
2004
(6) SA 107
(T) at 115H-I and Monica L Vessio ‘A limit on the
limit on interest? The
in
duplum
rule
and the public policy backdrop’ (2006) 39
De
Jure
25.
[73]
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
Liquidation)
[1997] ZASCA 94
;
1998
(1) SA 811
(A) at 834B-D: ‘It appears … that the rule
is concerned with public interest and protects borrowers from
exploitation
by lenders who permit interest to accumulate. If that
is so, I fail to see how a creditor, who has instituted action can
be said
to exploit a debtor who, with the assistance of delays
inherent in legal proceedings, keeps the creditor out of his money.
No
principle of public policy is involved in providing the debtor
with protection
pendente
lite
against
interest in excess of the double. … A creditor can control
the institution of litigation and can, by timeously
instituting
action, prevent the prejudice to the debtor and the application of
the rule. The creditor, however, has no control
over delays caused
by the litigation process.’ See also
Commissioner,
South African Revenue Service v Woulidge
2002
(1) SA 68
(SCA) para 12.
[74]
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
Liquidation)
at
832E-F.
[75]
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
Liquidation)
at
828I -829H.
[76]
[1991] ZASCA 147
;
1992
(1) SA 473
(A) at 482G-H.
[77]
See
eg J W Scholtz and E van Zyl in
Guide
to the
National Credit Act
>
p
10-17 who refers to the ‘codified’
in
duplum
rule
and Jonathan Campbell ‘The in duplum rule: relief for
consumers of excessively priced small credit legitimised by the
National Credit Act’ (2010
) 22
SA
Merc LJ
1
p 4.
[78]
The
NCA is not a code, a word frequently encountered in the literature
on the subject, particularly in respect of
s 103(5)
, in the
continental sense. It does not do away with the common law except as
provided for, nor does it profess to be a comprehensive
enactment
dealing with all aspects of credit
agreements. Understood
in this manner there can be no objection to the use of the word
‘codification’ in respect of
s 103(5)
but there is no
particular advantage in using it. See the comments by Denis V Cowen
and Leonard Gering
Cowen The Law of Negotiable Instruments in
South Africa
(1985) 5ed p 118-121 with reference to the
English Bills of Exchange Act, 1882.
[79]
See
Michelle Kelly-Louw ‘Better consumer protection under the
statutory in duplum rule’ (2007) 19
SA
Merc LJ
337
who refers to the ‘statutory’
in
duplum
rule.
See also J M Otto and R L Otto
The
National Credit Act Explained
p
87.
[80]
Mills
v Starwell Finance (Pty) Ltd
1981
(3) SA 84
(N) at 87B-D and further
S
v Leeuw
1980
(3) SA 815
(A) at 823F-G;
Casserley
v Stubbs
1916
TPD 310
at 312;
Joss
v Board of Executors
1979
(SA 780 at 782A-C;
Gouws
v Theologo & others
1980
(2) SA 304
(W) at 306C-D;
Shell
South Africa (Edms) Bpk v Gross h/a Motor Maintenance
1980
(4) SA 151
(T) at 152H-153A;
Johannesburg
Municipality v Cohen’s Trustees
1909
TS 811
at 818.
[81]
L C
Steyn
Die
Uitleg van Wette
5
ed (1981) p
99.
[82]
See
para 1 above and cf the approach in
Louw
NO & others v Coetzee & others
[2003]
1 All SA 34
(SCA) para 16.
[83]
Jonathan
Campbell ‘The excessive costs of credit on small money loans
under the National Credit Act 34 of 2005’ (2007)
19
SA
Merc LJ
251
p 269.
[84]
Michelle
Kelly-Louw p 344.
[85]
(564/09,
511/09)
[2010] ZASCA 110
;
2010 (6) SA 385
(SCA) (17 September 2010)
para 12.
[86]
[1998] ZASCA 98
;
[1999]
1 All SA 345
(A). See also
Lategan
v Commissioner for Inland Revenue
1926
CPD 203
at 209;
Commissioner
for Inland Revenue
v
Delfos
1933
AD 242
at 251.
[87]
At
3350a-b.
[88]
At
349b-j.
[89]
Section
3(c)(i).
[90]
Section
3(d).
[91]
Section
3(h).
[92]
See
eg
Commercial
Bank of Zimbabwe Ltd v M M Builders & Suppliers (Pvt) Ltd &
others and Three Similar Cases
1987
(2) SA 285
(ZHC) where it is said at 303C that ‘interest,
whether it accrues as simple or as compound interest, ceases to
accumulate
upon any amount of capital owing’. In
Margo
para
12 it was said that the common-law rule ‘prevents unpaid
interest from accruing further, once it reaches the unpaid
capital
amount’.
[93]
Petker
v Makda
1956
(1) SA 26
(SR) at 27H-28C.
In
Black’s
Law Dictionary
9ed
the second meaning of ‘accrue’ is given as ‘To
accumulate periodically’ and under ‘interest’
‘accrued interest’ is referred to as ‘[i]nterest
that is earned but not yet paid…’.
The
Oxford Universal Dictionary Illustrated
(1965)
refers to ‘accrue’ as (1) ‘To fall … as a
natural growth or increment; to come to an accession
or advantage’;
(2) ‘To arise or spring … as a natural growth or
result. Used esp. of interest …’.
And further:
‘interest begins to [accrue] from the moment … hence
accrued interest … an accumulation by growth
…’.
[94]
See
notes 71, 72 and 93 above.