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[2021] ZAMPMBHC 47
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Firstrand Bank Ltd v Nel and Others (A58/2020) [2021] ZAMPMBHC 47 (18 October 2021)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(MPUMALANGA DIVISION,
MBOMBELA)
CASE
NO: A58/2020
REPORTABLE: NO
OF INTEREST TO OTHER
JUDGES: YES
REVISED: YES
18/10/2021
In
the matter between:
FIRSTRAND
BANK
LTD
Appellant
and
NESTA
NEL
First Respondent
VUSIMUZI
CHURCHILL MONTGOMERY NKAMPBULE
Second Respondent
OLD
MUTUAL FINANCE (PTY)
LTD
Third Respondent
JUDGMENT
MASHILE
J:
INTRODUCTION
[1]
This appeal emanates from the magistrate’s Court of Barberton.
The appeal follows
upon an order by Magistrate LM Mhlanga on 10
November 2020 that the Appellant had granted reckless credit to the
Second Respondent.
The appeal seeks to overturn the whole judgment
and order of the decision of the Magistrate. The case comes before
this Court with
leave of the Court
a quo
. The Respondents are
not opposing the appeal. As such, no opposing papers have been filed
and neither the Respondents nor their
representatives appeared before
this Court on the date of the hearing of the appeal.
FACTUAL
MATRIX
[2]
To have a proper perspective of this matter, terse factual background
that led to
the matter before the Court
a quo
is imperative.
On 16 April 2019, the First Respondent applied for debt review. On 7
May 2019, the First Respondent advised the
Appellant that she has
applied for debt review. On 14 May 2019, the Appellant provided the
First Respondent with certificates in
terms of which the details of
the Second Respondent’s indebtedness to the Appellant was
disclosed.
[3]
The indebtedness of the Second Respondent stems from two personal
loan agreements
concluded between the parties on 3 September and 2
December 2015 respectively. In terms of those agreements, the
Appellant advanced
certain amounts to the Second Respondent. More
than 3 years after the advancement of the credit, the Second
Respondent experienced
financial hardships, which led to his default
in payment of monthly instalments.
[4]
On 28 May 2019, the First Respondent presented to the Appellant a
recommendation in
terms whereof she suggested that firstly, the
Second Respondent’s indebtedness to the Appellant be paid off
by the reduction
of the respective amounts payable under both
personal loan agreements. Secondly, that the shortfall in monthly
instalments be recovered
by extending the period over which the
initial loans were to be settled.
[5]
The Appellant accepted the First Respondent’s proposal as
described
supra
in respect of the loans. On 12 June 2019,
final acceptance letters were remitted to the First Respondent
setting out the conditions
under which her recommendation was
accepted. The Appellant subsequently restructured the Second
Respondent’s account in accordance
with the valid and binding
debt rearrangement agreement that was concluded with the First
Respondent. The Appellant expected the
Second Respondent to pay the
agreed amounts to the Appellant as per the newly concluded agreement
but he did not. Upon his failure
to pay, the Appellant informed the
First Respondent of the Second Respondent’s non-payment on 28
May 2019.
[6]
On 15 August 2019, the First Respondent served the present
application on the Appellant.
As part of the relief sought, she
required the Court
a quo
to grant an interim order against the
Appellant compelling it to supply documents that relate to reckless
credit.
GROUNDS
OF APPEAL
[7]
Principally, the appeal is premised on four grounds. These are that:
7.1
The
Court
a quo
erred in finding that the credit granted by the Appellant to the
Second Respondent was reckless;
7.2 The
Court
a quo
further erred by upholding the prayer for interim
order against the Appellant to supply documents as it relates to
reckless lending
;
7.3
The Court
a
quo
erred by not dismissing the
Application for Debt Review as being inappropriate in the
circumstances of this matter; and
7.4 The
First Respondent entered the arena and acted beyond the scope of her
statutory duties.
ISSUES
[8]
The issues for decision are not different from the grounds of appeal.
Was the credit
that the Appellant granted to the Second Respondent
some 3 years prior to debt review application reckless? Is the
magistrate’s
court statutorily competent to grant specific
performance? Given the facts in this matter, was the relief granting
the debt review
proper?
LEGAL
FRAMEWORK
[9]
This matter is based on various provisions of the National Credit
Act, 34 of 2005
(“the NCA”). As such, it will be useful
to first describe the different provisions.
The starting point must be S
ection
80, which provides that:
“
80
(1)
A credit agreement is reckless if, at the time that the agreement was
made, or at the time when the amount approved in terms
of the
agreement is increased, other than 10 an increase in terms of section
119(4)—
(a)
the credit provider failed to
conduct an assessment as required by section 81(2), irrespective of
what the outcome of such an assessment
might have concluded at the
time; or
(b)
the credit provider, having
conducted an assessment as required by section 15 81(2), entered into
the credit agreement with the
consumer despite the fact that the
preponderance of information available to the credit provider
indicated that-
(i)
the consumer did not generally
understand or appreciate the consumer’s
risks, costs or obligations under the proposed credit agreement; or
20
(ii)
entering into that credit
agreement would make the consumer over- indebted.”
[10]
Section 81(2) states that:
(2)
“
A
credit provider must not enter into a credit agreement without first
taking reasonable steps to assess-
(a)
the proposed consumer’s-
(i)
general understanding and
appreciation of the risks and costs of the proposed credit, and of
the rights and obligations of a consumer
under a credit agreement;
(ii)
debt re-payment history as a
consumer under credit agreements;
(iii)
existing financial means,
prospects and obligations; and
(b)
whether there is a reasonable
basis to conclude that any commercial purpose may prove to be
successful, if the consumer has such
a purpose for applying for that
credit agreement.”
[11]
Section 81(4) sets out what will constitute a defence to an
allegation that credit was recklessly
granted. It provides that:
“
(4)
For all purposes of this Act,
it is a complete defence to an allegation that a credit agreement is
reckless if—
(a)
the credit provider
establishes that the consumer failed to fully and truthfully answer
any requests for information made by the
credit provider as part of
the 10 assessment required by this section; and
(b)
a court or the Tribunal
determines that the consumer’s, failure to do so materially
affected the ability of the credit provider
to make a proper
assessment.”
[12]
To the extent that the Appellant relies on the provisions of Section
166, entitled: ‘Limitations
of bringing action’, it is
important to cite it in full below:
“
(1)
A complaint in terms of this Act may not be referred or
made to the Tribunal or to a consumer court more than three
years
after—
(a)
the act or omission that is
the cause of the complaint; or
(b)
in the case of a course of
conduct or continuing practice, the date that the conduct or practice
ceased.’’
[13]
In
Wesbank, a Division of
FirstRand Bank Limited v Michelle Barnard and others
Case
no: A05/18
Mbombela Circuit Court
delivered on the 29 November 2018, this Court held that:
“
[17]
In a nutshell a debt counsellor can seek a declaration of reckless
credit only under the following circumstances:
17.1 the
consumer must have sought a declaration of reckless credit in his/her
application for debt review.
17.2 the debt
counsellor must make a determination of whether any of the consumers’
credit agreements appear to be reckless,
and
17.3 the debt
counsellor must then reasonably conclude that any of the consumer’s
credit agreements appear to be reckless.”
[14]
Regulation 24(2) of the NCA provides that a debt counsellor (the
First Respondent) is obliged
to notify credit providers that a credit
receiver had applied for debt review within 5 days after the
application for debt review.
If a Debt Counsellor fails to do so
within the stipulated period, he or she can in terms of Regulation 3
apply to the National
Credit Regulator for an extension of such time.
The National Credit Regulator may grant such extension upon good
cause shown. Lack
of compliance with the time prescribed in
Regulation 3 and failure to apply for condonation for the extension
of the time will
necessarily result in a dismissal of the debt review
application.
EVALUATION
DECLARATION OF
RECKLESS CREDIT
[15]
The Appellant contended that the Court
a quo
could not have
made a finding of reckless credit without any evidence in that regard
having been levied. Moreover, the Court
a quo
seems to have
been on a frolic of its own when it granted the order because it is
not sought in the notice of application. This
must be correct. The
notice of application on which the First Respondent relied when she
launched the application reads as follows:
“
BE
PLEASED TO TAKE NOTICE that NESTA NELL (hereinafter referred to as
'"the Applicant') intends to make application to this
Court for
and order in the following terms:
(1)
That the First Respondent be
declared over-indebted as set out in Section 79 (1) of the National
Credit Act 34 of 2005 (as amended)
(2)
That the First Respondents
payments to the other Respondents be re-arranged in the following
manner:
a.
that the period for payment in
respect of each credit agreement with each Respondent be extended and
the amounts payable per month
be reduced accordingly; and / or
b.
That such rearrangement be
reviewed at the Court’s discretion after a period of time to be
determined by the above Honorable
Court.
(3)
An interim order as per Annexure
X be granted against 3
rd
and 4
th
Respondents, compelling them to supply documents as it relates to
reckless credit;
(4)
Ordering that any Respondents who
oppose this application be ordered to pay the costs of the
application; and
(5)
Further and/ or alternative
relief.”
[16]
The Court
a quo
should, on this basis alone, have dismissed
the application simply because it is not what the Second Respondent
wanted. The issue
pertaining to the Second Respondent’s over
indebtedness is irrelevant to this matter.? it is important to note
that at the
time when the Second Respondent applied for credit in
2015, the question of over indebtedness did not feature anywhere. His
over
indebtedness now, if any, cannot be ascribed to the credit that
was advanced some 3 to 4 years earlier. The Second Respondent
complied
with the terms and conditions of the loan agreements until
he over committed himself later. The loan agreements were not the
cause
of his over indebtedness.
[17]
The Court
a quo
could not have declared the Appellant to have
granted reckless credit because according to the Wesbank case
supra
circumstances under which a credit provider can be so declared are
circumscribed. These are firstly, that the consumer must have
sought
a declaration of reckless credit in his/her application for debt
review, which I have already dealt with
supra
. Secondly, that
the debt counsellor must make a determination of whether any of the
consumer’s credit agreements appear to
be reckless. Thirdly,
that the debt counsellor must then reasonably conclude that any of
the consumer’s credit agreements
appear to be reckless.
[18]
The debt counsellor could not have made a determination that the loan
agreements appeared to
be reckless because there was no evidence
demonstrating that at the time when the loans were advanced, the
Appellant did not observe
the provisions of Sections 80(1) and 81(2).
The Court
a quo
therefore misdirected itself when it declared
the transactions to be reckless credit because it lacked basis to
make that determination.
The misdirection warrants intervention by
this Court.
PRESCRIPTION IN
TERMS OF SECTION 166
[19]
There is another reason why the Court
a
quo
misdirected itself and that is to
be found in Section 166 of the NCA, which I have quoted in full
supra
. The
essence of the provision in Section 166 is that a complaint cannot be
referred to a tribunal or consumer court 3 years after
the act or
omission that is the cause of the complaint or in the case of a
course of conduct or continuing practice, the date that
the conduct
or practice ceased. The credit was advanced in September and December
2015 respectively. The First Respondent launched
the debt review
application on 15 August 2015 being outside of the 3-year period
prescribed in Section 166. This simply means that
the Court
a
quo
should not have entertained the
application at all as it is in contravention of the provisions of the
NCA.
LACK OF COMPLIANCE
WITH REGULATION 24(2)
[20]
Insofar as Regulation 24(2) of the NCA is concerned, the Appellant
stated that the Second Respondent
applied for debt review on 16 April
2019 and the First Respondent only informed the Appellant about the
application on 7 May 2019.
Regulation 24(2) requires that the credit
provider be informed of the application within 5 days of the date of
the launching and
that if a debt counsellor fails to comply with the
period laid down in the Regulation, he or she must apply for
condonation. The
National Credit Regulator can, on good cause shown,
grant such condonation.
[21]
The First Respondent’s failure to comply with Regulation 24(2)
is glaring and it is not
denied. The Second Respondent applied for
debt review on 16 April 2019 but news of this only reached the
Appellant on 7 May 2019
being approximately 15 days after the expiry
of the 5-day period mentioned in Regulation 24(2). Additionally, she
made no attempt
to apply to the National Credit Regulator for
condonation. The Court
a quo
ought to have dismissed the
application on the ground of lack of compliance with the Regulation.
SPECIFIC
PERFORMANCE
[22]
The interim order granted by the Court
a quo
that the
Appellant is directed to furnish certain documents relating to
reckless credit in prayer 3 of the notice of application
is
incompetent. In this regard, it is important to note that Section 46
of the Magistrate’s Court Act 32 of 1944 specifically
sets out
matters over which the magistrate’s court does not have
jurisdiction. The Section provides:
“
46
“Matters beyond the jurisdiction
(1)
..
(2)
A court shall have no jurisdiction in
matters-
(a)
in which the validity or
interpretation of a will or other testamentary document is in
question;
(b)
in which the status of a person in
respect of mental capacity is sought to be affected;
(c)
in which is sought specific
performance without an alternative of payment of damages, except in-
(i)
the rendering of an account in
respect of which the claim does not exceed the amount ^determined by
the Minister from time to time
by notice in the Gazette;
(ii)
the delivery or transfer of
property, movable or immovable, not exceeding in value the amount
^-determined by the Minister from
time to time by notice in the
Gazette;
(iii)
the delivery or transfer of property,
movable or immovable, exceeding in value the amount determined by the
Minister from time to
time by notice in the Gazette, where the
consent of the parties has been obtained in terms of section 42 of
Act 56 of [1984.]
(d)
in which is sought a decree of
perpetual silence.”
[23]
The magistrate’s court is therefore barred from dealing with
matters pertaining to specific
performance without the alternative of
a damages claim or unless it forms part of the 3 exceptions mentioned
in the Section. The
Court
a quo
therefore granted this order
in violation of the provisions of the Magistrate’s Court Act 32
of 1944. As such, the order
cannot be countenanced to stand.
COSTS
[24]
Here the Appellant’s complaint is that it is plain that the
debt review application launched
by the First Respondent was
objectively a non-starter in many respects. The launching of that
application, regardless of the defects
associated with it, meant that
the First Respondent descended into the arena, which act should make
her vulnerable to a cost order
of the appeal. The Appellant points
out that this is borne out by the fact that the First Respondent and
not the consumer, the
Second Respondent, deposed to the replying
affidavit.
[25]
Furthermore, the First Respondent sought and was granted relief that
was not supported by the
notice of application. In fact, the relief
was not even foreshadowed in the founding affidavit, which of course
means that it is
not one that the Second Respondent wanted. Even the
evidence before the Court
a quo
did not in any manner suggest
that the credit that was advance in 2015 led to the Second
Respondent’s over indebtedness.
This probably is an explanation
why the Second Respondent never sought a relief declaring that the
Appellant had granted reckless
credit to him. It is in this sense
that I stated earlier that the Court
a quo
was on a frolic of
its own when it declared the transactions to have been reckless
credit.
[26]
The numerous defects in the debt review application are indicative
that it should never have
been brought in the first place. The appeal
was a clear sign that not all was well with the application that had
been granted by
the Court
a quo
. The First Respondent would,
despite that fact, not withdraw its opposition promptly to avoid
gratuitous costs being incurred.
When the First Respondent ultimately
withdrew, costs that could have been avoided had already been
sustained. The question is who
should be liable for them? Since the
First Respondent is the party who could have ensured that such costs
were not suffered, it
should be mulcted with the costs of the appeal.
CONCLUSION
[26]
In the result, I propose the following order:
1.
The appeal is upheld;
2.
The order of the Court
a
quo
is set aside and substituted for:
“
The
application is dismissed with costs”
3.
The Respondents are liable for the costs of
appeal and those of the Court
a quo
.
B A MASHILE
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA
MPUMALANGA DIVISION,
MBOMBELA
I agree,
D GREYLING-COETZER
ACTING JUDGE OF THE
HIGH COURT OF SOUTH AFRICA
MPUMALANGA DIVISION,
MBOMBELA
This judgment was
handed down electronically by circulation to the parties and/or
parties’ representatives by email. The date
and time for
hand-down is deemed to be 18 October 2021 at 10:00.
APPEARANCES:
Counsel
for the Appellant:
Adv BD Stevens
Instructed
by:
CF Van Coller Inc
C/O Cochrane Inc
Counsel for the
Respondent:
No appearance
Instructed
by:
EDJ Attorneys
C/O Gerrie Groenewald
Attorneys
Date of
Judgment:
18 October 2021