About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2019
>>
[2019] ZAWCHC 75
|
|
Harris v Rossouw (5178/2019) [2019] ZAWCHC 75 (21 June 2019)
Republic of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No.
5178/2019
Before:
The Hon. Mr Justice Binns-Ward
Date of hearing: 19 June 2019
Judgment:
21 June 2019
In the matter
between:
SHAUN ANDREW
LLEWELLYN
HARRIS
Plaintiff
and
RACHEL CORNELIA
ROSSOUW
Defendant
JUDGMENT
BINNS-WARD J:
[1] In this matter
the plaintiff sought in action proceedings to recover the sum of
R515 361 plus interest thereon a tempore
morae, being in respect
of the repayment of a loan in the aforementioned amount extended by
the plaintiff to the defendant ‘
in or about December
2016
’
[1]
The claim was not defended, and the case came up before me by way of
an application for default judgment. When the
matter was called
I raised my doubts about whether judgment as prayed for could
competently be granted. My concern was that
the pleaded case
left me in doubt as to the applicability of the National Credit Act
34 of 2005 (‘the Act’) and, if
it was applicable, whether
an entitlement to the relief sought had been made out. After
hearing counsel’s submissions
I stood the matter down for
further consideration.
[2] It was alleged
in the particulars of claim that the loan agreement, which had not
been reduced to writing, provided that the
loan was repayable on
demand and would bear interest at the rate prescribed in terms of the
Prescribed Rate of Interest Act 55 of 1975
. The defendant
subsequently executed an acknowledgment of debt in terms of which she
acknowledged her indebtedness in terms
of the loan. The
acknowledgment of debt, dated 9 January 2018, which made no reference
to the term in the loan agreement
in respect of mora interest,
recorded in material part that:
The loan amount was contributed
towards my personal expenses as well as towards the establishment of
the new business,
The Biolab
of which [the plaintiff] was part
of at the time. [The plaintiff] decided to exit the new
business
The Biolab
by choice early August 2017.
I won’t be able to commit
to pay back arrangements as yet as the new business is still in the
develpopent phase and I haven’
started earning any income.
I will be able to construct a pay
back payment structure during July/August 2018.
I trust that you will find the
above in order.
[3] Subject to the
exceptions expressly provided for in terms of the Act, a loan
agreement qualifies as ‘
a credit agreement
’ for
the purposes of the Act. The plaintiff alleged in his summons
that the Act did not apply because the agreement
was not between
parties dealing at arms’ length, and therefore excluded from
the application of the Act by virtue of the
provisions of s 4(1)
read with 4(2)(b) thereof. In this regard it was alleged that
the agreement ‘
amounted to arrangements:
1.
in terms of which each party was not independent
of the other and consequently did not necessarily strive to obtain
the utmost possible
advantage out of the transaction; or
2.
that are of the type that has been held in law to be between
parties who not dealing at arms’ length
’.
[4] The facts
pleaded in the particulars of claim gave no insight into the nature
of the parties’ relationship. The
factual basis for the
allegation that they were ‘
not independent of the other
’
was not disclosed. The pleading also did not cast any light on
the significance of the alleged failure of one or the
other parties
to ‘
necessarily strive to obtain the utmost possible
advantage out of the transaction
’. It also did not
identify - and nor did counsel when I invited her to address the
court on the applicability of the
Act - the matters in which it has
allegedly been held that the transaction is ‘
of the type
that has been held in law to be between parties who not dealing at
arms’ length
’. As will appear, the latter
allegations merely parrot s 4(2)(b)(iv) (aa) and (bb) of the Act
without pleading
any facts to substantiate why those paragraphs
should be applicable. (I would have thought in any event that
it would primarily
be a matter of fact, rather than one of law,
whether parties dealing with each other were doing so at arms’
length or not,
which makes it difficult to make sense of
s 4(2)(b)(iv)(bb) – but that is by the way.)
[5] The contract
alleged in the particulars of claim is not of the types of credit
agreement specified in paragraphs (a) to (d)
of s 4(1) of the
Act that are expressly excluded from the application of the statute.
The pleader was obviously relying
on the introductory part of the
sub-subsection, which provides ‘
Subject to sections 5 and 6,
this Act applies to every credit agreement between parties
dealing
at arm's length
…
’.
[2]
Section 4(2)(b), which is evidently intended to assist in
understanding what is intended by the aforementioned phrase in
the
introduction to s 4(1), provides:
For greater certainty in applying subsection (1)-
(b)
in any of the following
arrangements, the parties are
not
dealing
at arm's length:
(i)
a shareholder loan or other credit agreement between a juristic
person, as consumer, and a person who has a controlling interest
in
that juristic person, as credit provider;
(ii)
a loan to a shareholder or other credit agreement between a juristic
person, as credit provider, and a person who has a controlling
interest in that juristic person, as consumer;
(iii) a credit agreement between natural persons who are
in a familial relationship and-
(aa)
are co-dependent on each
other; or
(bb)
one is dependent upon
the other; and
(iv) any other arrangement-
(aa)
in which each party is
not independent of the other and consequently does not necessarily
strive to obtain the utmost possible advantage
out of the
transaction; or
(bb)
that is of a type that
has been held in law to be between parties who are not dealing at
arm's length
(Underlining
supplied.)
[6] It is a
requirement of proper pleading that the pleading should ‘
contain
a clear and concise statement of the material facts upon which the
pleader relies for his claim … with sufficient
particularity
too enable the opposite party to reply thereto
’. See
Uniform Rule 18(4). As already touched upon, the particulars of
claim in the current matter fall short
in identifying the material
facts upon which the pleaded conclusion that the Act is not
applicable supposedly stand.
[7] It is not
apparent on what basis it is alleged that the loan was not an
agreement entered into between the parties at arms’
length.
The acknowledgment of debt suggests that the plaintiff and defendant
may have been involved in some form of business
venture together, and
that the plaintiff may have advanced the loan in part to finance the
intended capital contribution of the
defendant to that venture, but
that is not pleaded in the particulars of claim and is merely surmise
on my part as the reader.
Even if the surmise were well
founded, it would not sustain the conclusion that the agreement had
not been a transaction entered
into between the parties at arms’
length. The mere fact that parties, even if they are friends,
enter into a joint
business venture serves as no indication, by
itself, that in doing so they are not acting independently of the
other; each in its
own proprietary interest, and to make a profit for
their respective ultimately individual benefit. Equally, any
arrangement
they may enter into between themselves in furtherance of
such venture is not indicative, without more, that they are not
transacting
at arms’ length. Indeed, insofar as it
permissible on the pleading to have regard thereto, the subsequent
provision
of an acknowledgment of debt and the stipulation for
mora
interest on the loan, if anything, stand as pointers suggesting that
the parties in this case did act independently of each other
and at
arms’ length in entering into the transaction. Suffice it
to say that the allegations in the particulars of
claim would require
to be supplemented if a case were to be made out that the contract
was not a transaction entered into at arms’
length.
[8] It was alleged
in the alternative that if the Act were applicable, the plaintiff had
complied with s 129 thereof. A copy
of a letter purporting to
give the defendant notice in terms of s 129 was attached as an
annexure to the pleading. The pleading
gave no indication,
however, of how the purported notice had been given. The
letter, dated 30 January 2018, bears the
endorsement ‘
By
Sheriff
’, which suggests that it was intended to be served
on the addressee by a sheriff or deputy sheriff. But there is
no
return to confirm that that happened.
[9] Furthermore, the
pleading does not contain any allegation that the plaintiff is a
registered credit provider. If the Act
is applicable, that
would be relevant because the amount involved exceeds the threshold
determined in terms of s 42(1),
[3]
and the plaintiff would therefore have to be registered as a credit
provider by virtue of s 40(1) of the Act. It is
also
relevant because s 40(4) of the Act provides that a ‘
credit
agreement entered into by a credit provider who is required to be
registered in terms of subsection (1) but who is not so
registered is
an unlawful agreement and void to the extent provided for in section
89
’.
[4]
Thus, if the Act applies and the plaintiff was not registered as a
credit provider, or had not within 30 days of entering
into the
transaction applied to be registered, he would not be entitled to
enforce the agreement on the basis pleaded, and would
instead be
limited to a claim for unjust enrichment.
[5]
[10] I believe that
I have said enough to indicate why I am not satisfied on the pleading
as it stands that the Act is not applicable
to the loan agreement in
issue, and also why, if it is applicable, the pleading lacks
allegations necessary to sustain the claim.
In the
circumstances the following order is made:
1. The application for default judgment is refused.
2. The plaintiff is granted leave, if so advised, to take such steps
as he might consider meet to amend his particulars of claim
to
address the difficulties identified in this judgment, and to avail of
Uniform Rule 28 for that purpose.
A.G.
BINNS-WARD
Judge
of the High Court
[1]
I quote from the particulars of claim. An allegedly related
acknowledgment of debt attached to the pleading gives the date
of
the transaction as January 2017.
[2]
Underlining provided for emphasis.
[3]
Currently R0,00, with effect from 11 May 2016; having
previously been R500 000.
[4]
The object to be served by requiring someone like the plaintiff in
this case to register as a credit provider eludes me. I expressed
my
puzzlement in this regard in my judgment in
Opperman v Boonzaaier
and Others
[2012] ZAWCHC 27
at para. 28, remarking that it ‘
was
not evident from the provisions of the statute why a person like the
applicant intending to provide credit on an ad hoc basis
to a
personal friend should, in order to be able to do so in an amount
exceeding R500 000, have to provide information to
the fourth
respondent to enable the latter to consider matters such as the
commitments, if any, made by him or any associated
person in terms
of black economic empowerment considering the purpose, objects and
provisions of the Broad-based Black Economic
Empowerment Act, 2003
(Act No. 53 of 2003), or in connection with combating
over-indebtedness (s 48(1)(a) and (b)).
Indeed, the
‘Memorandum on the Objects of the National Credit Bill, 2005’
that accompanied the proposal to Parliament
for the adoption of the
NCA
[4]
suggested that the Act would not apply to or regulate ‘loans
between family members, partners and friends on an informal
basis’.
(There was no explanation, however, of what was meant by a loan ‘on
an informal basis’, and the
statute itself, while excluding
from its ambit credit agreements concluded between persons in a
familial relationship who are
in a situation of dependence or
co-dependence, makes no reference to friends.
[4]
)
The content of the prescribed application form for registration as a
credit provider is also consistent with that which
someone carrying
on business as a credit provider might be expected to complete,
rather than a person intending to make just
one, or even two or
three ad hoc loans to someone in their ken, even if in a large sum
’
(footnotes omitted), but these considerations do not appear to have
been considered in the subsequent amendments to the
Act. All
that has happened is that the reduction in the threshold in terms of
s 42(1) from R500 000 to R nil has apparently
been effected to
address the anomaly that persons carrying on business as
microlenders who previously were not required to register
if they
kept their book below a total of R500 000 (see
Opperman
at para. 36). Such persons are now required to be
registered.
[5]
See s 89 of the Act.