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Standard Bank of South Africa v Maboea and Another (22676/2016) [2022] ZAGPPHC 755 (7 October 2022)

80 Reportability
Banking and Finance
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Brief Summary

Debt Review — Summary Judgment — Applicant sought summary judgment against respondents for breach of loan agreement secured by mortgage bonds; second respondent contended she was under debt review and had made payments as per a restructuring order. — Legal issue arose as to whether the applicant could issue summons while the second respondent was under debt review and if the applicant had properly terminated the debt review as required by the National Credit Act. — Court held that the applicant failed to serve the necessary notice to terminate the debt review and that the second respondent was not in default at the time of summons; summary judgment against the second respondent was dismissed with costs.

Comprehensive Summary

Summary of Judgment


Introduction


The matter concerned an application for summary judgment in enforcement proceedings arising from an alleged breach of a loan (credit) agreement secured by mortgage bonds. The applicant was The Standard Bank of South Africa and the respondents were Alex Nakedi Maboea (first respondent) and Martha Mahlangu (second respondent).


The applicant launched three interconnected applications against the respondents, namely an application for default judgment, an application for summary judgment, and an application under Rule 46A of the Uniform Rules of Court. Only the summary judgment application was opposed, and only by the second respondent. The court granted the default judgment and the Rule 46A application, but refused summary judgment against the second respondent and made a costs order in her favour. The present judgment provided the court’s reasons for refusing summary judgment against the second respondent.


The dispute centred on the impact of the second respondent’s debt review under the National Credit Act 34 of 2005 (“NCA”), and whether the bank was entitled to institute action and seek summary judgment without having terminated the debt review in accordance with section 86(10), particularly in circumstances where payments were being made.


Material Facts


The applicant’s claim arose from a credit agreement under which the respondents allegedly failed to make due and punctual monthly payments, including payments contemplated by a debt restructuring arrangement or order. The credit agreement was secured by mortgage bonds, and enforcement proceedings were pursued on the basis of breach.


Chronologically, the court recorded that the second respondent applied for debt review on 14 February 2015 in terms of section 86(1) of the NCA. She informed the applicant of the debt review application on 16 February 2015, and the application for debt review was accepted on 9 March 2015.


It was treated as common cause that the applicant did not serve a termination notice in terms of section 86(10) of the NCA. The court also treated as not in dispute that the applicant received payments from the second respondent, specifically that the applicant received full and timeous monthly instalments until July 2016, when summons was served (as stated in the court’s reasons). The second respondent’s version was that she paid an agreed amount of R5 000 per month from April 2015 until July 2016 pursuant to an arrangement with a bank employee, and the court noted that the applicant was silent in response to this allegation in the context of the summary judgment dispute.


The applicant’s case included the contention that there was no agreement between it and the second respondent in relation to debt review proposals because the second respondent did not agree to proposals. The applicant also alleged that the respondents were married in community of property under customary law and therefore jointly and severally liable under the credit agreement. The court’s refusal of summary judgment, however, turned on the debt review and enforcement prerequisites rather than on the matrimonial-property allegation.


On the facts relied on by the court, the second respondent was found not to have been in default for the period relevant to section 86(10), because the bank was receiving monthly payments and had not shown a default that would justify termination and enforcement. The summons was regarded as having been instituted while debt review protection remained operative and without compliance with termination requirements.


Legal Issues


The court identified two principal legal questions for determination.


The first was whether the applicant was entitled to issue summons against the second respondent while she was under debt review in terms of section 86 of the NCA, having regard to the statutory constraints on enforcement while debt review is pending and the conditions for termination.


The second was whether the applicant could contend that the second respondent’s debt review was of no consequence on the basis that the Magistrates’ Court had made no order under section 87 of the NCA.


Although framed as questions of law, the dispute required the court to address the application of statutory requirements to the facts, particularly whether the statutory preconditions for enforcement (including termination under section 86(10) and the existence of default) were satisfied on the facts placed before the court in the summary judgment proceedings.


Court’s Reasoning


The court approached the matter through the statutory framework governing debt review and termination, focusing on section 86(10) of the NCA and the consequences for enforcement where a consumer has applied for debt review. The court set out both the original wording of section 86(10) and the post-amendment wording introduced by the National Credit Amendment Act 19 of 2014, which took effect on 13 March 2015. The amended provision expressly contemplated termination by notice at least 60 business days after the debt review application, and further stipulated that termination is not permitted if the debt review application has already been filed in a court or the Tribunal.


The court relied on the Supreme Court of Appeal decision in Collett v FirstRand Bank Ltd 2011 (4) SA 508 (SCA) for guidance on the interpretation and operation of section 86(10). In summarising that authority, the court emphasised that the credit provider’s statutory right to terminate is triggered only when the consumer is in default, and that the legislation affords a period (described in Collett as a moratorium) in which resolution can be attempted. The court also noted Collett’s conclusion that a credit provider may terminate debt review even after referral to the Magistrates’ Court for an order, provided the statutory conditions are met.


Applying these principles to the facts before it, the court treated it as decisive that the applicant did not give notice in terms of section 86(10) and that the second respondent was not in default in the relevant sense, because payments were being received up to the time summons was served. The court further highlighted that the applicant did not deny receipt of the debt review application or the monthly payments, and also failed to provide proof of termination of the debt review process by the prescribed notice. On this basis, the court concluded that the applicant had not complied with section 86(10) at any stage.


In the court’s assessment, given the absence of default and the lack of a section 86(10) termination notice, the applicant was not entitled to proceed with enforcement by issuing summons against the second respondent. The institution of action was therefore regarded as premature and invalid in relation to the second respondent. The court also recorded an evaluative conclusion that the applicant failed to participate in the process and acted in bad faith by instituting the proceedings in the circumstances described.


The court further noted that the second respondent had exercised an option to approach a court for relief under section 86(11) (to resume debt review), but indicated that such relief had to be sought in the Magistrates’ Court where the review was being dealt with. That observation reinforced the conclusion that summary judgment was not appropriate on the papers before the court.


Outcome and Relief


The court dismissed the application for summary judgment against the second respondent and ordered the applicant to pay the second respondent’s costs of the summary judgment application.


In the broader procedural context (as recorded in the introduction to the reasons), the court also granted the applicant’s applications for default judgment and relief under Rule 46A, but the reasons delivered addressed only the refusal of summary judgment against the second respondent.


Cases Cited


Collett v FirstRand Bank Ltd 2011 (4) SA 508 (SCA)


Legislation Cited


National Credit Act 34 of 2005


National Credit Amendment Act 19 of 2014


Rules of Court Cited


Uniform Rules of Court, Rule 46A


Held


The court held that, on the facts accepted in the summary judgment proceedings, the applicant had not served a termination notice in terms of section 86(10) of the National Credit Act and had not established that the second respondent was in the requisite state of default for termination and enforcement. As a result, the summons and enforcement steps against the second respondent were treated as premature and invalid, and the applicant was not entitled to summary judgment. The summary judgment application against the second respondent was dismissed with costs.


LEGAL PRINCIPLES


The judgment applied the principle that a credit provider’s entitlement to terminate a debt review under section 86(10) of the National Credit Act depends on compliance with the statutory mechanism of termination by notice and is triggered only where the consumer is in default under the credit agreement being reviewed.


The judgment further applied the principle, drawn from Collett v FirstRand Bank Ltd 2011 (4) SA 508 (SCA), that termination under section 86(10) is not an impermissible “derailing” of debt review where the consumer is in default; rather, the statutory scheme allows termination after the prescribed period, but only upon default. Where the consumer is not in default, the debt review continues and the credit provider is not entitled to terminate.


On the application of these principles in summary judgment proceedings, the judgment proceeded on the basis that where a defendant demonstrates, on the facts accepted by the court, the continued operation of debt review protection and non-compliance by the credit provider with section 86(10), summary judgment is not appropriate because enforcement has been initiated without satisfaction of statutory prerequisites.

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[2022] ZAGPPHC 755
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Standard Bank of South Africa v Maboea and Another (22676/2016) [2022] ZAGPPHC 755 (7 October 2022)

SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
FLYNOTES:
DEBT REVIEW AND SUMMARY JUDGMENT
Civil
procedure – Summary judgment – Debt review –
Respondent making payments – Contending that this
in terms
of restructuring – Bank not providing proof that it
terminated debt review with notice – Summary judgment
not
granted –
National Credit Act 34 of 2005
,
s 86(10).
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION- PRETORIA
CASE
NO: 22676/2016
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: YES
REVISED:
Yes
7
October 2022
In
the matter between:
THE
STANDARD BANK OF SOUTH AFRICA
Applicant
and
ALEX
NAKEDI MABOEA
First Respondent
Identity
number: [....]
MARTHA
MAHLANGU
Second Respondent
Identity
Number: [....]
JUDGMENT
Introduction
[1]
The applicant in this matter brought three applications against the
respondents namely;
a default judgment, a summary judgment and a Rule
46A of the Uniform Rules of Court. Only the summary judgment
application was
opposed by the second respondent. I granted the
default judgment and Rule 46A application and dismissed the summary
judgment against
the second respondent with costs. The applicant has
requested reasons for my refusal of the summary judgment against the
second
defendant which I will deal with hereunder.
[2]
These applications essentially stem from a breach of a loan agreement
by the respondents,
which are secured by mortgage bonds. The
applicants alleged that the respondents failed to make due and
punctual monthly payments
to the applicant in terms of the credit
agreement and in terms of the restructuring order.
[3]
On 18 March 2016, the applicant
served summons on the respondents. The second respondent
applied for
debt review (for debt re-structuring) on 14 February 2015 in terms of
section 86(1)
of the
National Credit Act. The
second respondent
informed the applicant of its application for debt review on 16
February 2015. The application for debt review
was accepted on 9
March 2015. The second respondent submitted that the applicant was
precluded from instituting action in terms
of
section 88(3)
of the
NCA and further that the applicant did not terminate the review in
terms of
section 88(10)
of the NCA.
[4]
The questions of law in dispute between the parties and which this
court was called
upon to adjudicate are:
4.1
If the applicant was entitled to issue summons against the second
respondent where the second respondent was
under debt review in terms
of
section 86
of the
National Credit Act; and
;
4.2
Whether the applicant can contend that the debt review of the second
respondent is of no consequence as the
Magistrate’s Court made
no order in terms of
section 87
of the
National Credit Act.
[5
]
The applicant’s contentions are that on 2 February 2012 the
first respondent had
applied for debt review and a debt restructuring
ordered was granted. The first respondent has defaulted on this order
and as a
result the applicant became entitled to exercise its rights
to enforce litigation
[1]
. The
applicant confirmed that no agreement existed between the applicant
and the second respondent as the second respondent did
not agree to
any proposals
[2]
.  It
further alleged that the first and second respondents were married in
community of property on terms of customary law
and that the first
respondent instituted divorce proceedings under case number
86667/2014 which is proof that the respondents were
married in
community (of property. As a result, the respondents are jointly and
severally liable in terms of the credit agreement.
Further that in
terms of
section 88
(3) it was entitled to institute action where
there is a default on a debt restructuring agreement without further
notice. Lastly
it averred that the second respondent failed to raise
any triable issue and that the defences raised are a sham.
[6]
The second respondent contends
that the applicant has never served a notice in terms of
section
86(10)
of the NCA and therefore the summons was premature, as there
was an application pending in the Magistrate’s Court. It
submitted
that the applicant did not refuse the application for debt
review which was served on it or terminate the debt review as
required
in terms of
section 86(10).
[7]
Section 86(10)
originally read as follows:
“
If
a consumer is in default under a credit agreement that is being
reviewed in terms of this section, the credit provider in respect
of
that credit agreement may give notice to terminate the review in the
prescribed manner to-
(a)
the
consumer
(b)
the
debt counsellor; and
(c)
The National Credit Regulator, at
any time at least 60 business days after the date on which the
consumer applied for the
debt review”
[8]
Section 86(10)
was amended by the National Credit Amendment Act 19 of
2014, and such amendment took effect on 13 March 2015. The amended
section
86(10) reads as follows:
“
(a)
If a consumer is in default under a credit agreement that is being
reviewed in terms of this section, the credit provider in
respect of
that credit agreement may, at any time at least 60 business days
after the date on which the consumer applied for the
debt review,
give notice to terminate the review in the prescribed manner to-
(i)   the
consumer;
(ii)   the
debt counsellor; and
(iii)   the
National Credit Regulator; and
(b)
No credit provider may terminate an
application for debt review lodged in terms of this Act, if such
application for review has
already been filed in a court or in the
Tribunal.”
[9]
The issue of whether a credit provider may terminate a debt review
while there is
a pending application in the Magistrate’s Court
has been dealt with by the Courts. In
Collett v First Rand Bank
Ltd 2011(40 SA 508 (SCA)
the court undertook a thorough analysis
of the relevant provisions of the NCA and section 86 in particular.
The court also discussed
some of the conflicting decisions, and
remarked at p516 C-F that
“
A
sounder approach is to recognise the express words of s 86(10),
which gives the credit provider a right to terminate the
debt review
in respect of the particular credit transaction under which the
consumer is in default, and only when he is in default,
at least 60
business days after the application for debt review was made. It must
be emphasised that it is only when the consumer
is in default that
the credit provider has this right. If he is not, the debt review
continues without the credit provider being
entitled to terminate it.
It is not that the credit provider is 'derailing' the process when he
terminates the debt review: it
is the consumer that is in breach of
contract, not the credit provider. If the consumer applies for
debt review before he
is in default the credit provider may not
terminate the process. But if the consumer is in default the consumer
is entitled to
a 60 business days' moratorium, during which time the
parties may attempt to resolve their dispute.”
[10]
The court ultimately held that if the consumer is
in default under the credit agreement, the credit provider
has the
right to terminate the debt review even after the debt counsellor
referred the matter to the Magistrate’s Court for
an order
envisaged in section 86 (7)(c).
[11]
In this matter it is common cause or not in dispute that the
applicant did not serve a notice
in terms of section 86(10) and that
the second respondent was not in default, as full and timeous
payments of the monthly instalments
were received by the applicant
until July 2016, when the summons was served. The applicant alleged
that there was no agreement
between itself and the second respondent
as the second respondent did not agree to the proposals. However, the
applicant is silent
on the allegation by the second respondent that
she paid duly in terms of an agreement with one Mr Harry Green, in
the employ of
the applicant, an agreed amount of R5000 per month from
the period April 2015 until July 2016 when she was served summons and
therefore
was not in breach of the restructure agreement at the time
of the action being instituted. Therefore, I find that the second
respondent
was not in default for a period of 60 business days after
the date on which she applied for debt review which was in February
2015
and her first payment to the applicant in terms of the
restructure was April 2015. The summons was only served in July 2016
almost
a year and a half after the applicant was receiving payments
of R5000 per month from the second respondent.
[12]
The applicant has not denied receipt of the second respondent’s
application for debt review
or the payment of R5000 per month by the
second respondent. It has also not provided this Court with proof
that it terminated the
debt review by way of a notice in terms of
section 86(10) of the NCA. The applicant had not, at any stage
complied with the requirements
of section 86(10) of the NCA. In light
of the
Collet
decision
supra
there was no
breach and in fact the applicant failed to participate and acted in
bad faith by instituting this application against
the second
respondent. In view thereof, the applicant was not entitled to
proceed to enforce the credit agreement and by issuing
summons did so
prematurely and invalidly, against the second respondent. I note that
the second respondent has exercised the option
of approaching the
Court for an order in terms of section 86(11), to resume the debt
review, however she must do so at the Magistrate’s
Court where
the review is being dealt with. I cannot, therefore, see any reason
to grant the application.
ORDER
[13]
In the circumstances, I make the following order:
13.1
The application for summary judgment against the second respondent is
dismissed with costs.
C
SARDIWALLA
Judge
of the High Court
REPRESENTATION
On
behalf of Plaintiff

:Adv DJ Van Heerden
Instructed
by

:Hannes
Gouws & Partners Inc.
On
behalf of second respondent
:Adv AJ Swanepoel
Instructed
by

:Jay Inc Attorneys
Date
of trial :

21 April 2023
Date
of reasons:

6
OCTOBER 2022
[1]
Index to application, Applicant’s Heads of Argument, page 0024
[2]
Index to application, Applicant’s Heads of Argument, page 0025

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