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[2016] ZAGPPHC 223
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Absa Bank Limited v De Kock and Another (72118/13) [2016] ZAGPPHC 223 (24 March 2016)
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REPUBLIC
OF SOUTH AFRICA
IN
THE GAUTENG DIVISION OF THE HIGH COURT, PRETORIA
JUDGMENT
Case
No.: 72118/13
DATE:
24 MARCH 2016
In
the matter between:
ABSA
BANK
LIMITED
..............................................................................................................
Plaintiff
And
SERVAAS
DANIEL DE
KOCK
........................................................................................
1
st
Defendant
ELSOFIA
DE
KOCK
.........................................................................................................
2nd
Defendant
MNGQIBISA-THUSI
J
[l]
This matter came before this
court as a stated case in terms of Rule 33(1) of the Rules of Court
as agreed upon at a pre-trial meeting.
The agreed upon issues to be
determined are the following:
1.1
whether in the main trial
the defendant has the duty to begin; and
1.2
whether
the plaintiff should have used either section 86(10) or 88(3) of the
National Credit Act
[1]
(“the NCA”) in order to enforce its rights under a
mortgage loan agreement.
[2]
The following facts are
common cause.
[3]
The plaintiff and the
defendants concluded three mortgage loan agreements on 14 October
2005; 18 August 2006 and 2 February 2007.
The loans were for the
amounts of R520 000.00 plus an additional amount of R104 000.00; R100
000.00 plus an additional amount of
R20 000.00 and another for R100
000.00 plus an additional amount of R20 000.00, respectively. The
loan agreements were secured
by a mortgage bond over an immovable
property kn
own as Portion 1 of Erf [4……..],
[P………]
Township,
Registration Division
I.
Q, Province of North West;
measuring 952 (Nine Five Two) square metres; held
by Deed of
Transfer [T……….]
,
subject to the conditions therein contained (“the property”).
[4]
The plaintiff advanced to
the defendants the loan amounts.
[5]
The
defendants applied to be placed under debt review in terms of section
86(1)
[2]
of the NCA. The debt counsellor, Mr Jean-Pierre Jordaan, was of the
opinion that the defendants were over-indebted and referred
the
matter, in terms of section 86(7)(cc)(ii)
[3]
of the NCA to the Potchefstroom magistrates’ court.
[6]
On 20 April 2010, the
magistrates’ court declared the defendants to be over indebted
and ordered the restructuring of their
debt to the various service
providers, including the plaintiff. The defendants’ monthly
instalment to the plaintiff was set
at R3 263.13, payable over a
period of 109 months. The debt restructuring order further provided
that payment in respect of the
plaintiff, amongst other service
providers, be made to Consumer Protection Excellence (“CPE”).
[7]
On 1 August 2013, the
plaintiff sought to terminate the defendants’ debt review by
issuing and delivering to the defendants,
the debt counsellor and the
National Credit Regulator, a notice in terms of section 86(10) of the
NCA.
[8]
On 5 December 2013, the
plaintiff served summons on the defendants at the defendants’
domicilium
address. The
defendants entered appearance to defend and the plaintiff applied for
summary judgment against the defendant. The defendants
were granted
leave to defend and filed a plea.
[9]
The plaintiff is claiming
payment of the total capital amount owing in the sum R755 535.46,
together with interest thereon at the
rate of 8.50% per annum.
Furthermore, the plaintiff seeks an order declaring the property
especially executable in favour of the
plaintiff and costs on an
attorney and client scale. The plaintiffs claim for the total capital
amount owed is based on an acceleration
clause contained in the loan
agreements.
[10]
In its particulars of claim
the plaintiff alleges,
inter alia
,
the following:
“
11.2
The Plaintiff duly performed in terms of the mortgage loan agreements
between the parties and more in particular paid the loan
amounts to
the Defendants and informed the Defendants of the dates on which the
instalments were due and payable.
11.2
The Defendants failed to comply with their obligations in
terms of the agreements between the parties and more in particular
failed
to pay punctually the instalment due and payable to the
plaintiff.
17.1
The Defendant was placed under Debt Review in terms of the
provisions of the National Credit Act, Act 34 of 2005.
17.2
The Plaintiff lawfully terminated the Debt Review in terms of
the provisions of the aforementioned act. ...The Defendant failed to
respond to the aforementioned notice.
18.1
The total arrears due by Defendants to Plaintiff on date of
issuing of summons amounted to 314 535.78.
18.2
The current monthly instalment amounts to R7 277.84.
18.3
Defendants are accordingly 43.22 months in arrears with
payment of the mortgage bond instalments.”
[11]
In their plea, the
defendants deny that they owe the plaintiff the amount of R755 535.46
and that the full capital amount as claimed
by the plaintiff is due.
The defendants deny that they are arrears and allege that they have
been complying with the restructuring
order and duly paying the
instalments as per the order. Further, the defendants deny that the
plaintiff validly terminated the
debt review.
Onus
and the duty to begin
[12]
On behalf of the plaintiff,
Mr Kolides submitted that since the defendants allege that they have
been duly paying the instalments,
and in view of the fact that they
have not discovered proof of those payments since it has not received
any payment from either
the debt counsellor, CPE or Consumer Friend,
the other agency mentioned in the restricting order. It is the
plaintiff’s
contention
that the defendants bear the duty to begin and the onus to prove that
the payments have been made.
[13]
Mr Roux, representing the
defendants, submitted that in view of the fact that, in their plea,
the defendants are disputing the amount
claimed by the plaintiff and
that they were in arrears in terms of the restructuring order, the
quantum of the plaintiffs claim
is in dispute and therefore the
plaintiff bears the onus of proving the amount and has the duty to
begin. The defendants further
allege that they have duly been paying
instalments in excess of the instalment set by the court order and
are as a result ahead
in terms of the repayment plan ordered by the
magistrates' court and are not in arrears. Furthermore, it was argued
that the plaintiff
has failed to plead that the defendants are in
breach of the restructuring order and on that basis, alone its claim
should be dismissed.
[14]
It is common cause that the
defendants’ obligations to the plaintiff in terms of the
amounts loaned are now determined by
the debt restructuring order
made on 20 April 2010 by the Potchefstroom magistrates’ court.
The defendants are denying that
they owe the plaintiff the amount
claimed. The plaintiff, as the party seeking a remedy, bears the
overall burden of proving its
claim. The plaintiff has to show that
the defendants have failed to pay the due instalment amount of R3
263.13. The fact that the
defendants allege that they have duly paid
the instalments and are therefore not in arrears, does not shift the
onus onto the defendants.
All what the defendants have is an
evidentiary burden of adducing evidence showing that they have been
paying the instalments in
terms of the restructuring order. I am
therefore of the view that, in the face of the dispute about the
capital amount owed, the
plaintiff bears the onus of proving its
claim. Therefore, the plaintiff also has the duty to begin.
Procedure
to be followed
[15]
The issue to be determined
is whether the plaintiff was entitled to deliver a section 86(10)
notice terminating the defendants’
debt review and to
thereafter enforce the terms of the original agreement, after a
debt-restructuring order has been granted.
[16]
it
is the plaintiffs contention that it is within its rights to
terminate the defendants’ debt review by issuing the section
86(10)
[4]
notice and enforcing the original credit agreement once the
defendants fell into arrears,
I
read
the plaintiffs argument to mean that, the debt review process
continues even after a restructuring order is made; and therefore
that the section 86(10) procedure is available even after a debt
rearrangement order is made. However, Counsel did not address
me on
the defendants’ assertion that the plaintiff should have used
section 88(3) under the circumstances. In fact, the plaintiff
did not
allude to the existence of the debt rearrangement order in its
particulars of claim.
[17]
It
is the defendants’ contention that as long as they have fully
complied with their obligations in terms of the debt- restructuring
order by paying the instalments as and when they become due, the
plaintiff was not entitled to issue the section 86(10) notice,
terminating the debt review or enforcing the loan agreement. It was
submitted on behalf of the defendants that the procedure in
section
86(10) is available to creditor providers throughout the debt review
process up to the stage where a court makes a debt
restructuring
order. In this regard, the defendants rely on
Collett
v FirstRand Bank Ltd
[5]
,
a
matter involving the determination whether the section 86(10)
procedure is available to a credit provider even when a debt review
application is pending before a magistrates’ court.
[18]
The Supreme Court of Appeal
(“SCA”) held that a debt counsellor’s role in the
debt review is part of an on-going
process, which culminates in the
order of the magistrate’s court under section 87. The court
further held that “only
then can the debt review be said to be
complete” The SCA confirmed the conclusion reached by the court
a
quo
in that matter where
the court stated that:
“
[18]
I am unable to find anything in the structure of s 86, or of the Act
in its entirety, which is indicative of an intention on
the part of
the legislature to limit the right of a credit provider under s
86(10) to the process prior to the reference to the
magistrate’s
court. On the contrary ... I consider that the credit provider’s
rights to give notice in terms of s 86(10)
and to legitimately
terminate the debt review process continue until the magistrates’
court has made an order as envisaged
in s87.’
n
[19]
Furthermore, it is the
defendants’ contention that, if the plaintiff wanted to enforce
the amount allegedly owed under the
loan agreements, the proper
procedure would have been to lodge a section 88(3)(b)(ii) of the NCA
application.
[20]
In terms of section 86(1) of the NCA, a consumer can, if he
finds himself in financial difficulties and unable to meet his
obligations
in terms of a credit agreement, apply to a debt
counsellor to be placed under debt review on the ground that he is
over- indebted
or that reckless credit has been granted to him.
[21]
If
the debt counsellor is of the opinion that the consumer is over-
indebted or that reckless credit has been granted to the consumer,
he
may make proposals to the consumer’s credit providers for his
repayment to be restructured. If such proposal is not accepted
by the
credit providers, the debt counsellor may refer the matter to a
magistrates’ court in terms of section 86(8)(b)
[6]
of the NCA for an order declaring the consumer over-indebted and an
order rearranging the repayment of the consumer’s debts.
As
correctly pointed out by Counsel for the defendants and in line with
the
Collett
judgment,
if a consumer’s application is still being assessed by the debt
counsellor or is pending before the magistrates’
court, a
credit provider is entitled, in terms of section 86(10) of the NCA,
to terminate such debt review and to enforce the original
credit
agreement, provided that 60 days have expired from the date
application for debt review was made.
[22]
In the event of the
magistrates’ court granting a debt rearrangement order, the
consumer is obliged to pay its credit providers
as per the
instalments as set- out in such order. It is not the aim of the debt
review regime to relieve a consumer of his or her
obligations towards
his or her service providers.
[23]
Section 88(3) of the NCA
provides that:
“
Subject
to section 86(9) and (10), a credit provider who receives notice of
proceedings contemplated in sections 83 or 85, or notice
of section
86(4) (b) (i), may not exercise or enforce by litigation or other
judicial process any right or security under that
credit agreement
until -
(a)
the consumer is in default under the credit agreement; and
(b)
one of the following has occurred:
(i)
An event contemplated in subsection (1)(a) through (c); or
(ii)
the consumer defaults on any obligation in terms of a
rearrangement agreed between the consumer and credit- providers,
or ordered
by a court or Tribunal."
[24]
With
regard to section 88(3) the Constitutional Court in Ferris and
Another v FirstRand Bank Ltd and Another
[7]
,
held that:
“
[14]
Once the restructuring order had been breached, FirstRand was
entitled to enforce the loan without further notice. This is
clear
from the wording of the relevant sections of the Act. Sections
88(3)(b)(ii) does not require further notice- it merely precludes
a
credit provider from enforcing a debt under debt review unless,
amongst other things, the debtor defaults on a debt-restructuring
order."
[25]
The
Constitutional Court in the Ferris matter approved of the decision in
FirstRand Bank Ltd V Fillis and Another
[8]
where the court stated that:
“
[15]
Thus once the credit review process has commenced section 88(3) of
the Act prevents a credit provider from exercising or enforcing,
by
litigation or other judicial process, any right or security under any
credit agreement until:
(a)
‘the consumer is in default under the credit agreement;
and
(b)
one of the following has occurred:
(i)
An event contemplated in subsection (1)(a) through (c); or
(ii)
the consumer defaults on any obligation in terms of a
rearrangement agreed between the consumer and credit- providers,
or ordered
by a court or Tribunal.’
[16]
It follows, in my view, as a matter of interpretation, that
once the jurisdictional requirement set out in section 88(3) coexists
with any one of the jurisdictional requirements set out in section
88(3)(b), the credit provider is at liberty to proceed and to
exercise and enforce,, by litigation or other judicial process, any
right or security under his credit agreement without further
notice.”
[26]
[27]
Nm
[28]
Bearing in mind the
exposition given by the courts with regard to a credit provider’s
right to terminate debt review and enforce
the original credit
agreement, the converse is true. If a consumer complies with its
obligations in terms of a debt restructuring
order, the credit
provider is precluded from terminating the debt review process under
those circumstances. Should the credit provider
be allowed to
terminate debt review in circumstances where there is compliance with
a debt restructuring order that would render
nugatory one of the
purposes of the NCA. In the
Fillis
matter
(supra)
the court in this
regard said the following:
“
[14]
The Act provides very extensive protection to a consumer who has
become over-indebted, whether it be his or her own making
or through
circumstances beyond his or her control. Not only does a
rearrangement afford him or her alleviation from onerous monthly
obligations that he or she has in all seriousness undertaken to his
or her credit providers but he or she also enjoys the protection
of
section 103(5) against the ravaging effect of escalating interest
whilst he or she remains in default under the credit arrangement.
If,
however, he or she fails to embrace this opportunity, or
him
or her
, notwithstanding this very
considerable assistance, unable to comply with his or her
restructured debt commitment, the Act permits
the common law to run
its course.”
[29]
[29]
1 am of the view that the
legislature contemplated providing for the termination of debt review
in circumstances where a restructuring
order is in place and a remedy
has been provided in the form of section 88(3) in the event of the
consumer being in default of
the debt rearrangement order.
[30]
I am of the view, in the
light of the jurisdictional pre-requisites set out in section 88(3)
for the enforcement of the original
credit agreement in cases where a
debt rearrangement order has been granted, that the plaintiff was not
entitled during the subsistence
of the debt-restructuring order
granted by the magistrates’ court, to issue a section 86(10)
notice and issue summons enforcing
the original credit agreement. The
issue of whether or not the defendants have complied with the
re-arrangement order is still
in dispute.
[31]
The plaintiff’s
section 86(10) notice is of no effect in the face of the debt
rearrangement order and its failure to show
that the defendants are
in default of the rearrangement order.
[32]
Accordingly, the following
order is made:
The plaintiffs claim
is dismissed with costs.’
MNGQIBISA-THUSI
Judge
of the High Court
Appearances:
For
the plaintiff: Adv Kolides
Instructed
by: Snyman De Jager Inc
For
the defendants: Adv Roux
Instructed
by: Messrs, Jordaan Attorneys
[1]
Act 3 of 2005.
[2]
In terms of section 86(1) of the NCA, a consumer can, if finds
himself/ herself in financial difficulties and unable to meet
his or
her obligations in terms of a credit agreement, apply to a debt
counsellor to be placed under debt review on the grounds
that s(he)
is over- indebted or that reckless credit has been granted to him or
her.
[3]
Section 86(7)(cc)(ii) provides that “If, as a result of an
assessment conducted in terms of subsection
[6]
, a debt counsellor reasonably concludes that- (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-... (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; 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
[4]
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
[5]
2011 (4) SA 508
(SCA) at para [11].
[6]
Section 86(8)<b) of the NCA provides that: If a debt counsellor
makes a recommendation in terms of
subsection
(7)(b) and
[7]
2014 (3) SA 39 (CC).
[8]
2010 (6) SA 565
(ECP) at para [15]. The Ferris decision was followed
by the Supreme Court of Appeal \n Jili v FirstRand Bank Ltd t/a
Wesbank
2015 (3) SA 586(SCA)
at para [12] and [25].