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[2018] ZALMPPHC 20
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Botha v Koekemoer t/a The Debt Expert 2 and Others; Mafakane v MSA Consultants t/a Consumer Financial Services and Others (7723/2017; 750/2018) [2018] ZALMPPHC 20 (11 May 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO DIVISION,
POLOKWANE)
Case
no:7723/2017
:750/2018
ADRI
BOTHA
APPLICANT
AND
BERNIICE
KOEKMOER (NCRDC760) T/A THE DEBT EXPERT 2 FIRST
RESPONDENT
DIRECT
AXIS
(PTY)LTD SECOND
RESPONDENT
FINCHOICE
(PTY)LTD THIRD
RESPONDENT
NEDBANK
LTD FOURTH
RESPONDENT
RAINBOW
FINANCE C/O OF FURNITURE FIFTH
RESPONDENT
WESBANK
– VEHICLE
FINANCE SIXTH
RESPONDENT
RICHARD
MAFAKANE APPLICANT
AND
MSA
CONSULTANTS TA CONSUMER FINACIAL SERVICES
FIRST RESPONDENT
CAPITEC
BANK
LTD SECOND
RESPONDENT
CONSUMER
FRIEND THIRD
RESPONDENT
JUDGMENT
MULLER
J:
[1] Two applications were
placed before me in the unopposed motion court. The relief claimed is
identical and is formulated as follows:
“
(1)
That the applicant be declared no longer to be in debt review;
(2)
That the credit bureau remove the debtor review status from the
Applicant’s credit reports;
(3)
That the Debt Counsellor provide Form 17.W confirming that the
Applicant have been declared no longer over-indebted.”
[2]
The salient facts relevant to the issues are that the applicants
applied for debt review in terms of section 86 of the
National
Credit Act 34 of 2005 (hereinafter the NCA). Their respective debt
counsellors issued Form 17.2 to their creditors confirming
that the
debt review applications had indeed been successful. None of the
applications had been rejected or had been submitted
by the
respective debt counsellors to a magistrates’ court with
jurisdiction to make an appropriate order when the creditors
were
provided with form 17.2.The notifications were misleading in the
absence of an explanation by the relevant debt counsellors
why they
have done so.
[1]
The applicants
nevertheless continued to pay their indebtedness towards their
creditors, without any objection.
[3]
It is averred by the applicants that their respective financial
circumstances have improved since the applications were made
to their
respective debt counsellors to such an extent that they are presently
in the position to pay their debts. The applicants,
therefore, wish
to terminate the debt review process instituted by them.
[4]
Acting on advice that debt counsellors do not possess the power in
terms of the NCA to terminate the debt review proceedings
instituted
by the applicants, they seek relief from this court.
[5]
To determine whether the applicants are entitled to the relief they
seek, an analysis of the debt review process must be undertaken
to
determine whether debt review process initiated by the applicants may
be terminated at any time before the application is placed
before a
magistrate, and, if not, whether a magistrate has the authority to
terminate debt review in the exercise the court’s
discretion.
[6]
Debt review is a novelty. It was introduced in South African law for
the first time, by the NCA. The debt review process is
therefore
regulated by statute. The aim of debt review proceedings is to avoid
litigation for the enforcement of credit agreements
by providing
consumers an opportunity to settle their credit related debts.
[7]
The procedure commences with a consumer making an application to a
debt counsellor
[2]
in a
prescribed manner and form to have the consumer declared
over-indebted.
[3]
On the receipt
of prescribed application the debt counsellor notifies the applicant
as well as all the credit providers listed
in the application as
proof of receipt of the application and the debt counsellor also
notifies every registered credit bureau
as proof of receipt of the
application.
[4]
[8]
A debt counsellor who has accepted the application for debt review
must determine in the prescribed manner and time whether
the consumer
appears to be over-indebted.
[5]
If he debt counsellor, after assessment of the application,
reasonably concludes that the applicant is not over-indebted, the
said debt counsellor rejects the application.
[6]
In such an event the debt counsellor is obliged to provide the
consumer with the letter of rejection setting out the basis for
finding that the consumer is not over indebted.
[7]
[9]
Section 86(7)(b) provides that if a debt counsellor concludes that a
consumer is not over-indebted, but is of the opinion that
the
consumer is nevertheless experiencing, or is likely to experience
difficulty in satisfying all the consumers obligations in
a timely
manner, the debt counsellor may recommend that the consumer and the
credit providers voluntarily consider and agree on
a plan of debt
re-arrangement. If the parties, as a result, agree and accept the
proposal, the debt counsellor must record the
proposal in the form of
an order. The debt counsellor is obliged to file
[8]
the agreement as a consent order in terms of section 138, if the
parties involved are amenable to have their agreement be made
an
order of court.
[9]
[10] Section 86(8)(a) and
(b) states:
“
If
a debt makes a recommendation in terms of subsection (7)(b) and-
(a)
the consumer and each creditor 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
collector must refer the matter to the Magistrate’s Court with
the recommendation.”
[11]
It is necessary, before moving on to section 86(7)(c), to make
reference to the purpose of section 86(7)(b) and the relationship
between this section and section 86(8). When a debt counsellor
concludes that an applicant is not over-indebted but in the opinion
of the debt counsellor is experiencing difficulty or is likely to
experience difficulties with its obligations, the debt counsellor
does not reject the application as required by section 86(7)(a), but
recommends to the credit providers and the applicant to voluntarily
agree to a plan of debt arrangement
[10]
.
The debt counsellor, in such a case, assumes the role of a mediator
by making proposals to the parties. If a proposal is accepted
by all
the parties an agreement is concluded, which agreement must be
recorded in the form of an order and filed as a consent order.
[11]
Section 138(1) explains that if a dispute is resolved by an ombudsman
consumer court, alternative dispute resolution agent, or
the National
Credit Regulator and the debtor agrees to the proposed terms of an
appropriate order, the National Consumer Tribunal
[12]
or court or may confirm the agreement as an order by consent.
[13]
Debt review proceedings are instituted by debtors, who are
over-indebted but have not defaulted yet in respect of credit
agreements
entered into, and also by those who have defaulted to
prevent credit providers enforcing credit agreements by the
institution of
legal proceedings against a debtor. When the former
application is made no dispute has arisen between the debtor and
creditor.
Usually two basic requirements must be met before a court
makes an agreement an order of court. One, the court must be
satisfied
that the parties freely and voluntarily entered into the
agreement that they wish to make a consent order. And two, a court
must
be satisfied that the agreement relates to pending
litigation.
[14]
There cannot
be any doubt that section 86(8) has in mind that voluntary agreements
reached between a debtor and credit providers
after a recommendation
have been made by the debt counsellor shall be made an order of
court.
[15]
[12] Section 86(7)(c)
provides that if a debt counsellor reasonably concludes that a
consumer is over-indebted, the debt counsellor
makes a proposal in
which the debt counsellor recommends that a magistrate’s court
having jurisdiction may make either or
both of the following orders:
“
(i)
that one or more of the consumers credit agreements 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 consumers obligations be rearranged by-
(aa) extending the period
of the agreement and reducing the amount of each payment due
accordingly;
(bb) postponing during
specified period the dates on which payment 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.”
[16]
[13]
It is clear from the scheme of the NCA dealing with debt review that
consumers are over-indebted when a court makes an order
in terms of
section 86(7)(c). Until such an order is made, a proposal made by a
debt counsellor has no legal effect. The recommendation
simply sets
in motion a chain of prescribed events which, ultimately may lead to
a court determining that an applicant to be over-indebted.
[17]
[14] The NCA makes no
provision for an applicant to terminate the debt review process once
an application containing the required
information is submitted to a
debt counsellor.
[15] Section 86(7)(c)
must be read with 88(1) which provides that a consumer who has filed
an application for debt review in terms
of section 86(1) may not
incur any further charges under the credit facility or enter into any
further credit agreement other than
the consolidation agreement with
any credit provider until one of the following events has occurred:
“
(a)
The debt counsellor rejects the application and the prescribed time
period for direct filing in terms of section 86(9) has expired
without the consumer having so applied;
(b) the court has
determined that the consumer is not over-indebted, or has rejected a
debt counsellor’s proposal or the consumer’s
application;
or
(c)
a court having made an order or the
consumer and credit providers having made an agreement re-arranging
the consumer’s obligations,
all the consumer’s
obligations under the credit agreements as re-arranged are fulfilled,
unless the consumer fulfilled the
obligations by way of a
consolidation agreement.”
[16] Section 88(1)(b)
authorizes a court to:
(i) hold that a consumer
is not over-indebted;
(ii) reject a proposal of
a debt counsellor; or
(iii)
reject an application by a consumer.
[18]
[17]
The court has a discretion in terms of the provisions of section
88(1)(b) to determine whether an applicant for debt review
is not
over-indebted and also to reject a recommendation of a debt
counsellor. Section 88(1)(b) read with section 87(1)) obliges
a court
to conduct a hearing when it considers an application for debt
review. The Constitution guarantees a fair hearing before
a
court.
[19]
A court cannot act
as a rubber stamp of the debt counsellor (and to a lesser extent the
parties) simply to confirm the status of
a debtor at the request of a
debt counsellor or to confirm an agreement entered into between the
debtor and credit providers. It
is a restriction upon the
independence of the courts and offends the doctrine of separation of
powers. When making a consent order,
a court exercises an independent
discretion. A court, for the same reason, exercises a judicial
discretion, when acting in terms
of section 86(7)(c)(ii).
[18]
The NCA neither expressly allows nor prohibits the withdrawal an
application for debt review by the applicant. The fact that
no
mention is specifically made with regard to withdrawal of an
application does not mean that an applicant is unable to withdraw
an
application by means of the debt counsellor. A debt counsellor plays
a pivotal role in the process once an application is submitted
to
him/her. The contents of the application needs to be scrutinized to
determine whether it contains the prescribed information
and it then
has to be appraised to make an informed decision. If a debt
counsellor has made a recommendation such debt counsellor
is obliged
to refer the application within a reasonable time to a court for an
order.
[20]
[19]
In
Rougler
v Nedbank Ltd
[21]
it was held that a debt counsellor acts
ultra
vires
the NCA if the debt counsellor wishes to terminate debt review
proceedings which has commenced. I agree, the application is after
all not his application, but that of the applicant. I am in agreement
that a debt counsellor may not terminate debt review proceedings
subsequent to him having made a proposal in terms of section
86(7)(c). The debt counsellor is obliged to make a determination
within thirty days from receipt of the application.
[22]
However, it cannot seriously be contended that a court may not take
into account that an applicant wishes to withdraw the application
or
that the applicant has entered into further credit agreements
subsequent to the commencement of the debt review proceedings
in
contravention of section 88(1). A hearing is central to debt review
proceedings. I cannot think of any reason why a debt counsellor
cannot place the subsequent wishes of the applicant to withdraw an
application before the court. A court after considering the
reasons
for the withdrawal of the application by the applicant may reject
[23]
the application in terms of section 88(1)(b)
[24]
for that very reason.
[25]
The
express wording of section 88(1)(b) is wide enough.
[26]
[20]
Attention was drawn to the judgment in
Manamela
v Hein Du Plessis trading as Debt Safe and Others.
[27]
The
court stated that:
“
Where
a consumer is found to be over indebted, section 86(7) of the Act
requires that such status be confirmed by order of the magistrate
court. Upon the debt counsellor finding that a consumer is
over-indebted and prior to the magistrate’s order confirming
the status being obtained, the consumer’s status gets
registered thus obviously adversely affecting his credit worthiness
or ability to obtain credit.”
[21]The court referred to
the following:
“
The
predicament that arises, as in the present case, is a situation where
the consumer, having been found to be over-indebted and
that fact
registered against his name, but prior to a magistrate order being
obtained, finds a second wind and becomes financially
able to honour
his repayment terms and, therefore desires to have his registered
financial status reversed. It is apparent that
the Act did not
envision this and, therefore, makes no provision for the withdrawal
of the debt review process and the reversal
of the adverse effects
thereof on a consumer in the situation of the applicant.”
[22]
Until such time that an application for debt review is heard by a
magistrate and an order in terms of section 86(7)(c)(ii)
is made that
an applicant’s obligations are rearranged, such an applicant is
not over indebted for purposes of the NCA. I
disagree with the
reasoning that that a court is merely required to confirm the status
of a consumer who applied for debt review.
A consumer may be
factually over-indebted when an application is submitted to a debt
counsellor, but the law takes no cognizance
of that fact until the
consumer is declared over-indebted by a court of law.
[28]
A debt counsellor has no power to declare a debtor to be
over-indebted. As stated previously, courts do not act as a rubber
stamp
for a debt counsellors to give judicial recognition to, or
approval of, a conclusion reached by the debt counsellor. The NCA
does
not deprive magistrates of their judicial independence.
[29]
The final arbiter to pronounce on the over-indebtedness of a debtor
is the court.
[23]
In
Magadze
and Another v ADCAP (Debtsafe) and Others
[30]
Neukircher AJ held that section 71 does not confer new powers on a
debt counsellor to release a consumer from debt review but that
the
purpose of the section is to inform creditors that the consumer is
now able to meet his/her obligations. It does not expunge
from the
record that the consumer successfully applied for debt review in
terms of section 86(1). Section 71 becomes relevant only
after a debt
review application has been successful either in terms of an order in
terms of section 87(1)(b) or by agreement in
terms of section
86(8)(a) after the debtor has satisfied all the obligations under the
credit agreements which were subject to
re-arrangement. It will be
recalled that section 86(4) only requires a debt counsellor to notify
credit providers and every credit
bureau that a debt review
application has been received. The credit history of the applicant
remains unaffected. It is in the interest
of credit providers to be
made aware that a consumer has applied for debt review. If an
application is rejected by the debt counsellor
a notice must be
issued to notify the aplicant credit providers and credit bureau’s
of the outcome. Credit providers generally,
are entitled to be
informed and to be aware if an application was rejected by the court
or that the debts have been re-arranged
by the court. Every creditor
and every credit bureau should be notified of the outcome of a
matter, even if no provision is made
for notification.
[24]
The provisions of section 87(1) are informative with reference to the
right to a fair trial. The section should also be read
with section
86(7) and 88(1)(b). It applies in instances where a debt counsellor
has made a recommendation and has referred the
application to court
in terms of section 86(8)(b) or where the consumer applied to court
in terms of section 86(9) for an order
after the application was
rejected by a debt counsellor. A magistrate is obliged to conduct a
hearing and have regard to the proposal
of the debt counsellor and
other information before making an order in terms of section 87(1)(a)
or (b). A magistrate conducting
a hearing, is obliged to have regard
to all evidence properly placed before him/her. A debt counsellor is
obliged to place information
before the court when the applicant has
subsequently indicated that he/she no longer wishes to continue with
the debt review application,
notwithstanding a positive
recommendation by the debt counsellor.
[31]
A court, in such an event, when considering the application, may
reject the application on the basis that the applicant no longer
persists with the debt review application.
[25]
The purpose of the NCA is to promote and advance the social and
economic welfare of all and addressing and preventing
over-indebtedness
and to provide mechanisms for resolving
over-indebtedness by providing for a consistent and accessible system
of debt restructuring,
enforcement and judgment which places priority
on satisfaction of consumer obligations.
[32]
A court cannot be hamstrung in the exercise of its discretion simply
because Form 17.W is insufficiently worded.
[26]
Courts do not have the inherent jurisdiction to disregard statutory
provisions but is under a duty to interpret and apply legislation
in
a manner that promotes the spirit purport and objects of the Bill of
Rights.
[33]
Legislation must
be interpreted purposively. The judgment in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[34]
sets
out to the approach to be adopted when interpreting legislation:
“
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible
or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between
interpretation and
legislation; in a contractual context it is to make a contract for
the parties other than the one they in fact
made. The “inevitable
point of departure is the language of the provision itself”,
read in context and having regard
to the purpose of the provision and
the background to the preparation and production of the document.”
[27]
In both the applications before me, the applications for debt review
never reached a court due to the failure of the debt counsellors
to
refer the applications with their recommendations to court. In
Collett
v FirstRand Bank Ltd
[35]
the court stated the following in the course of the judgment:
I do not think that s 86
requires the consumer or his debt counsellor to “approach the
court” within a period of 60
days. Indeed no time period is
specified within which the debt counsellor must make application to
the magistrates’ court.
Nor does the NCA require the process of
debt-restructuring to be complete within the period of 60 days after
the application is
made. To do so would obviously be unrealistic..”
The
debt counsellors should have made recommendations to a court for an
order. It is quite unacceptable that debt counsellors who
have the
responsibility to administer the Act callously flout their
responsibilities towards the applicants and creditors alike
without
any consequences.
[28] I am not prepared to
issue declaratory orders as prayed. The applicants were at no time
declared to be over-indebted by a competent
court. In my view the
applications must be referred to the respective magistrates’
court with jurisdiction for hearing. All
the evidence inclusive of
the subsequent events must be placed before the court by the debt
counsellors with notice to all the
parties and every credit bureau.
In the result, I make the
following order.
ORDER
The
application under case no 7723/2017 is dismissed.
The
application under case no 750/2018 is dismissed.
A
copy of this judgment must be made available to the National Credit
Regulator and the debt counsellors concerned.
__________________________
G.C
MULLER
JUDGE
OF THE HIGH COURT LIMPOPO DIVISION:POLOKWANE
APPEARNCES
ATTORNEYS FOR APPLICANT :
H MASINDI ATTORNEYS POLOKWANE
:
ADV L NEMUKULA
DATE HEARD :20 MARCH 2018
DATE DELIVERED :11 MAY
2018
[1]
Both
the applications were served upon the debt counsellors. They did not
oppose the applications and consequently no explanation
why the
notifications had been issued to creditors without complying with
their obligations in terms of s 86 was offered.
[2]
s 44. The NCA contains no definition of debt counsellor.
[3]
s 86(1)read with s 79 which contains the criteria to be met to be
over-indebted.
[4]
s 86(4).
[5]
s 86(6).
[6]
s 86(7)(a).
[7]
Regulation
25 prescribes that the letter must contain certain information which
includes information that the application will
be removed from all
registered credit bureaux within 5 business days with the result
that credit providers will be entitled to
take legal steps against
the consumer.
In
addition it must also advise the applicant that he/she has the right
to approach the magistrates’ court within 20 business
days for
an order to be declared over-indebted and have agreements declared
reckless and/or restructuring of his/her debt obligations.
Regulation 26 requires that the application must be submitted to
court within 20 days after receipt of the letter of rejection.
The
time period of 20 business days may be extended by the court with a
further 20 days on application and good cause shown.
[8]
The
use of the word “file” is unfortunate. In
Hodd
v Hodd
1942 NPD 198
, 204 it was held that a court is not a mere registry of
documents or agreements. Court orders are obtained by instituting an
appropriate process in a court.
[9]
s
87(8) read with s 138.
[10]
The application falls to be rejected if the mediation is
unsuccessful.
[11]
Procedure in magistrates’courts is governed entirely by
statute and the rules of the magistrates’s court.
[12]
The
tribunal.
[13]
s
138(1).
[14]
Schierhout
v Minister of Justice1925
AD
417 at 423. Courts determine disputes between parties. A dispute is
a disagreement on a point of law or fact, a conflict of
legal views
or interests between parties. It falls to the court determine
whether the claim of one party is positively opposed
by the other.
Case
Concerning Certain Property (Liechtenstein v Germany
(Preliminary
Objections) (10 February 2005) ICJ Reports (2005) para 24.
www.icj-cii.org.
This
definition of a dispute is equally appropriate in our domestic law.
[15]
s
138(1) is not only applicable to disputes being settled but is also
applicable to agreements concluded in terms of section 86(8).The
rule that court decides disputes is therefore not applicable.
[16]
S
86(7)(c).
[17]
The application and the subsequent issuing of notices in terms
of section 86(4)(b)(i) have legal consequences for the debtor
and
credit providers until the debtor is in default under a credit
agreement.
[18]
The
wording of the printed document (Form 17.2) is inadequate and makes
no provision for such an eventuality.
[19]
s 34 of the Constitution.
[20]
A debt counsellor has no discretion to withhold an application from
court after he has made his recommendation. A court however
may
consider the withdrawal at the hearing.
[21]
2013
JDR 1167para 12.
Case
no 27333/2010. South Gauteng High Court.
[22]
Regulation
24(7).
[23]
Dismiss the application.
[24]
Also
s 87(1)(a) which is similarly worded.
[25]
A
court will hardly proceed to re-arrange the debts of a debtor if the
debtor wishes to withdraw from a voluntary process to the
benefit of
the debtor.
[26]
By
rejecting the recommendation or by rejecting the application by the
court the applicant is not over-indebted.
[27]
)
Case no 78244/2016. Gauteng Division Pretoria (14 June 2017).
[28]
Also
by consent order.
[29]
Van
Rooyen and Others v The State and Others (General Council of the Bar
of South Africa Intervening
)
2002 (5) SA 246
(CC) para 19.
NSPCA
v Minister of Agriculture Forestry and Fisheries and Others
2013
(5)
SA 571
CC para 14-17.
[30]
Case
57186/2016 (25 October 2016) Gauteng Division Pretoria.
[31]
It is highly unlikely that a court will insist to rearrange the
debts of an applicant if the applicant wishes to withdraw the
application for debt review.
[32]
s
3(g)-(i).
[33]
s
39(2) of the Constitution.
[34]
2012
(4) SA 593
(SCA) 13 para 18.
[35]
2
011
(4) SA 508
(SCA) para 9.