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[2016] ZAGPPHC 1115
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Magadze v ADCAP, Ndlovu v Koekemoer (57186/2016) [2016] ZAGPPHC 1115 (2 November 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION,
PRETORIA
Date:
2/11/16
Case
no: 57186/2016
In
the matter between:
THIZWILONDI
ANANIAS MAGADZE (ID no:
[7....]) Applicant
and
ADCAP
(DEBTSAFE)
1
st
Respondent
and 5
others
Case
no:59419/2016
In
the matter between:
SOYAPHI
GREEN
NDLOVU
Applicant
and
BERNICE
KOEKEMOER (THE DEBT EXPERTS 2)
1
st
Respondent
and 8 others
JUDGMENT
NEUKIRCHER
AJ:
1]
These two applications came before me in the unopposed motion
court in which the respective applicants
seek the following relief:
1.
That the they be declared to be no longer over-indebted and no longer
in debt review;
2.
the credit bureau removes the debt review status from the applicants
credit reports;
3.
the respective debt counsellors provide the Form 17.W confirming that
the respective applicants have been declared
no
longer over-indebted.
2]
The applications are virtually mirror images of each
other, other than the specifics pertaining to each debtor and
thus
this judgment will deal with the principles of section 71 and section
88(1)(b) of the National Credit Act no 34 of 2005 ("the
Act").
3]
The ultimate question is: given the amendment to
section 71 on 13 March 2015 will this have
the same
effect as the court granting an order that:
1)
the applicant is no longer over-indebted and no longer in debt
review; and
2)
that the credit bureau removes the debt review status from the
applicant's credit reports.
4]
The facts in both matters are as follows:
4.1.
the applicants applied to have themselves
declared
over- indebted in terms of section 86(1) of the NCA 34 of 2005;
4.2
the applications were never confirmed in terms
of section 87(1) i.e
in terms of a court order of the Magistrate's Court;
4.3
the first Respondent (the debt counsellors in each
case) issued a
Form 17.2 to all applicants' creditors that the applicants' debt
review applications were successful and their debt
obligations
were in the process of being restructured;
4.4
as a result of the successful debt review applications
the applicants
began to make the necessary payments to their creditors;
4.5
as a result of the debt review process the applicants
have now paid
off two of their creditors and they state that their financial
circumstances have significantly improved
subsequent to their application to be declared
over-indebted and that they are now able to afford the increase
the
total monthly amount that their respective debt counsellors (the
first Respondents in each application) directed that they
must pay to
their creditors.
4.6
their present remaining creditors have all received
notice of this
application and none have objected.
5]
It is directly as a result of this set of circumstances that the
applicants wish to terminate the debt review process and pay
their
creditors directly and the first Respondent advised that, as per the
National Credit Regulator's Guidelines,
a debt counsellor does
not have the statutory powers to terminate or withdraw the debt
review process. Thus, so applicants
were informed, they had
only the following options available to them:
5.1.
they would have had to withdraw from
the debt review process prior to
the issuance of Form 17.2;
5.2.
the first Respondent had suspended
provision of service due to
non-cooperation by the applicants but the first Respondent would
remain the debt counsellor on record;
5.3.
the applicants obtain a court order
to rescind the debt review order;
and
5.4.
the applicants obtain a court order
declaring that they are no longer
over-indebted.
6]
In the present two cases the only applicable scenario would be that
set out in 5.3 and 5.4 as:
6.1.
a Form 17.2 was already issued and
thus it is too late for applicants to
withdraw from the debt review process;
6.2.
the applicants have
co-operated
with the
respective first Respondents since being placed under
debt review and
thus 5.2
supra
is not applicable.
7]
During argument I enquired from counsel what the effect of section 71
was with regard to the relief sought by applicants and
whether it
would not have the same effect as a court order declaring the
applicants to be no longer over-indebted and no longer
in debt
review.
8]
To place this in context one must have regard to the decision
of
Rougier
v Nedbank Limited 2013 JOR
1167
(GSJ)
where Nobanda AJ stated the following:
"[12]
In the
circumstances,
the
debt
counsellor
fulfils
a
statutory
function.
As
such,
the
debt
counsellor
is
enjoined
to
act
within the
parameters
of
the
empowering
provision. Accordingly, the
debt
counsellor's
powers in
dealing with
a s
86(1)
application are
limited
as set
out
above. I
could
not
find
any
provision in
the Act that empowers the debt counsellor to
"withdraw" the debt review instituted in terms of s 86(1).
Neither was I
referred to any authority by the Respondent to this
effect.
[13]
In
the
premises
I
find
that
in
purporting to
withdraw the
debt review
instituted
by
the applicant
in
terms
of the provisions
of s 86(1),
the debt counsellor
acted
ultra vires. "
[9]
When reviewing this judgment however, one must bear in mind that it
was handed down in May 2013. At that stage section 71 was
extremely
limited in scope. Section 71(1) and 71(2) read as follows:
"(1)
A consumer whose debts have been re-arranged in terms of
Part 0 of this Chapter, may apply to a debt
counsellor at any time
for a clearance certificate relating to that debt re-arrangement.
(2)
A
debt counsellor
who
receives
an application
in terms of
subsection (1), must -
(a)
investigate
the circumstances
of the debt
re-arrangement;
and
(b)
either
-
(i)
issue
a
clearance
certificate
in
the
prescribed form
if
the consumer
has
fully
satisfied
all
the
obligations
under every
credit
agreement that
was
subject to
the
debt
re arrangement
order
or
agreement,
in
accordance
with
that order
or agreement;
or
(ii)
refuse
to issue
a clearance
certificate,
in any
other
case."
10]
Thus it appears that in order to qualify for the issuing of a
clearance certificate, a consumer under debt review had to fully
satisfy “
all
the obligations under every credit
arrangement”
that was subject to the debt
re-arrangement order or agreement in accordance with that order or
agreement. Once the
consumer had done that:
10.1
he was entitled to receive the clearance
certificate
from the debt counsellor;
10.2
he could file a copy of that certificate with the national register
or any
credit bureau (s 71(4)) and
10.3
upon receipt of the clearance certificate
a credit bureau, or national credit register
must expunge from its records:
(a)
the fact that the consumer was subject
to the debt
re arrangement order or agreement;
(b)
any info regarding to any default by
the consumer
that may have
(i)
precipitated the debt re-arrangement; or
(ii)
been considered in making the
debt re arrangement order or agreement; and
(c)
any record that a particular credit agreement was subject to the
relevant debt re-arrangement
order or agreement.
11]
On 13 March 2015 the provisions of section 71 were substantially
amended with the exception of subsections (5), (6) and (7).
The
provisions of sections 71(1) - (4) now read as follows:
"71.
Removal
of record
of debt adjustment
or
judgment
(1)
A consumer whose debts have been re-arranged in terms of Part 0 of
this Chapter, must be issued with a clearance certificate
by a debt
counsellor within seven days after the consumer has-
(a)
satisfied all the obligations under every credit agreement that was
subject to that debt re-arrangement order or
agreement, in accordance
with that order or agreement; or
(b)
demonstrated-
(i)
financial ability to satisfy the future obligations in terms of the
re-arrangement order or agreement under-
(aa)
a mortgage agreement which secures a credit agreement for the
purchase or improvement of immovable property; or
(bb)
any other long term agreement as may be prescribed;
(ii)
that there are no arrears on the re-arranged agreements contemplated
in subparagraph (i); and
(iii)
that all obligations under every credit agreement included in the
re-arrangement order or agreement,
other than those contemplated in
subparagraph (i), have been settled in full.
(Section
71(1) substituted by section 21 of Act 19 of 2014)
(2)
A debt counsellor must for the purposes of the demonstration
envisaged in subsection (1)(b), apply such measures
as may be
prescribed.
(Section
71(2) substituted by section 21 of Act 19 of 2014)
(3)
If a debt counsellor decides not to issue or fails to issue a
clearance certificate as contemplated in subsection (1),
the consumer
may apply to the Tribunal to review that decision, and if the
Tribunal is satisfied that the consumer is entitled
to the
certificate in terms of subsection (1), the Tribunal may order the
debt counsellor to issue a clearance certificate to the
consumer.
(Section
71(3) substituted by section 21 of Act 19 of 2014)
(4)
(a)
A debt counsellor must within seven days after the issuance of the
clearance certificate, file a certified copy
of that certificate,
with
the national register established in terms of section 69 of this Act
and all registered credit bureaux.
(b)
If the debt counsellor fails to file
a certified
copy of a
clearance
certificate as contemplated in subsection (1), a consumer may file a
certified copy of such certificate with the National
Credit
Regulator and lodge a complaint against such
debt counsellor with the National Credit Regulator.
(Section
71(4) substituted by section 21 of Act 19 of 2014)
12]
It is thus clear that whereas prior to 13 March 2015, in order to
qualify to receive a clearance certificate a consumer had
to have
"
fully satisfied all
the
obligations under
every
credit
agreement"
subject to the
debt-rearrangement or order, this was no longer the case. Whilst this
still remained one of the alternatives, once
a consumer has
demonstrated
'71(1)(b)
(i)
financial ability to satisfy the future obligations in terms
of the re-arrangement
order or agreement under-
(aa)
a
mortgage
agreement
which
secures
a
credit
agreement
for
the purchase
or
improvement
of
immovable
property;
or
(bb)
any other long
term agreement as may be
prescribed;
(ii)
that
there
are
no
arrears
on
the
re-arranged
agreements
contemplated
in subparagraph
(i); and
(iii)
that
all
obligations
under
every
credit
agreement included
in
the
re-arrangement
order
or
agreement,
other
than
those
contemplated
in
subparagraph
(i),
have
been
settled in full."
he
then qualified for a clearance certificate
which would then, when presented to
the credit
bureau, cause the following:
'71(5)
Upon receiving
a
copy
of a
clearance
certificate,
a
credit
bureau,
or
the national
credit register,
must
expunge
from its records-
(a)
the
fact
that
the
consumer
was
subject
to
the
relevant
debt
re-
arrangement
order
or
agreement;
(b)
any
information
relating
to
any
default
by
the
consumer
that
may
have-
(i)
precipitated
the
debt re-arrangement;
or
(ii)
been
considered in
making the
debt
re-arrangement
order
or agreement;
and
(c)
any
record
that
a particular credit
agreement
was
subject
to
the relevant
debt re-arrangement
order
or agreement."
13]
So the question is: does this clearance certificate have the same
effect as the court order envisaged in s 88(1 )?
14]
S 88(1) reads as follows:
"(1)
A
consumer
who
has
filed
an
application
in
terms
of
section
86(1),
or
who
has
alleged
in
court
that
the
consumer
is
over-indebted,
must
not
incur
any
further charges
under
a
credit
facility
or
enter
into
any
further credit agreement, other than a
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
i s
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."
(my
emphasis)
15]
In my view section 71 does not confer any new powers on the debt
counsellor to release the consumer from debt review. All that
the new
provisions of section 71 do, is to inform the creditors that the
consumer is now able to meet his/her monthly obligations
whilst the
clearance certificate may expunge from the consumer's record any
default in respect of a particular credit agreement.
It does not
appear to expunge from the consumer's record the fact that the
consumer successfully applied under section 86(1) to
be placed under
debt review.
16]
This, of course has implications for all future credit transactions
the applicant seeks to enter into:
16.1.
in case no 57186/2016 the applicant requires a loan to further
his tertiary studies. He specifically states that being
under debt
review also cost him a promotion;
16.2
in case 59419/2016 the applicant wishes to purchase a motor vehicle
and
"enrol [his]
children
in
a
good
school."
17]
The purpose of the NCA 34/2005 ("the Act") is:
"The
purposes of
this
Act
are
to
promote
and
advance
the
social
and economic
welfare
of
South
Africans, promote
a
fair,
transparent, competitive,
sustainable,
responsible,
efficient,
effective
and
accessible credit
market
and
industry,
and
to protect
consumers,
by-
(a)
promoting the
development
of
a
credit
market
that
is
accessible
to
all
South Africans,
and in particular
to
those
who have
historically
been
unable
to
access
credit under
sustainable
market
conditions;
(b)
ensuring
consistent
treatment
of
different
credit
products and different
credit
providers;
(c)
promoting
responsibility
in
the credit market
by-
(i)
encouraging
responsible
borrowing,
avoidance
of
over-indebtedness
and fulfilment
of
financial
obligations by consumers;
and
(ii)
discouraging reckless credit granting by credit
providers
and contractual
default by
consumers
..
.
(d)
..
.
(e)
..
.
(f)
..
.
(g)
addressing and
preventing
over-indebtedness
of
consumers, and
providing
mechanisms
for
resolving over-indebtedness
based on the
principle
of satisfaction
by the consumer
of all
responsible
financial obligations;
(h)
providing
for
a
consistent
and
accessible
system
of consensual
resolution of disputes arising from credit agreements; and
(i)
providing
for
a
consistent
and
harmonised
system
of
debt
restructuring, enforcement
and judgment,
which
places
priority on
the
eventual
satisfaction
of
all
responsible
consumer
obligations
under
credit agreements."
18]
It is clear that the Act is geared towards the protection of the
consumer and where relevant, the fiscal rehabilitation of the
consumer. It can only be with this in mind that the records of a
credit bureau must be expunged upon issuing of a clearance
certificate
under section 71 but this section of the Act does not go
so far as to remove from the credit bureau records the fact that the
consumer
had, at some stage, been placed under debt review. All that
section 71 does is remove from the credit bureau records the specific
details of the debt re-arrangement as well as details of the credit
agreement that was subject to this re arrangement. This
naturally means that each time that the consumer applies for credit
(eg the purchase of a house or motor vehicle or even apply
for a
credit card or cellular telephone account) the fact that the debtor
was, at some stage, under debt review will come up and
may adversely
affect his application.
19]
The situation would be the same if one has regard to the provisions
of section 88(1)(b) as that section simply provides that
a court can
declare a consumer to be no longer over-indebted but that does not
take away the obvious inference that at some stage
the consumer
was
over indebted. (my emphasis)
20]
Interestingly enough, section 88(1) does not have a similar proviso
to section 71(5) which is the expunging of the credit bureau
records.
21]
In my view it would create an anomalous position where a Form 17.W
(which is a form issued by the National Credit Regulator
and is
termed
"Withdrawal
from Debt Review") is issued pursuant to a court order and the
credit bureau did not expunge the consumer's
records
in
toto.
To grant an order that falls short of failing to expunge the
consumer's credit record
in
toto
would
effectively mean that section 71 would carry more weight than an
order issued out by the High Court and that situation
would be
untenable. In any event, it is my view that a court has wide powers
to grant the order sought to expunge the records of
the consumer
given the specific facts set out in the applications that these
consumers are no longer over-indebted and are financially
in a
position to pay their creditors.
22]
I therefore find that the amended provisions of section 71 have not
conferred any additional powers on a debt counsellor to
release a
consumer from debt review proceedings instituted in terms of section
88(1).
23]
I was satisfied in both matters that a case was made out for the
relief sought. Accordingly, the following orders are granted:
23.1.
In case no 57186/2016:
(a)
the applicant is declared to be no longer over-indebted and no longer
under debt review;
(b)
the credit bureau is ordered to remove the applicant's debt review
status from applicant's
credit records;
(c)
the debt counsellor is to provide the Form 17.W to all the
applicant's creditors to confirm
that the applicant has been declared
to be no longer over-indebted.
23.2
In case no 59419/2016:
(a)
the applicant is declared to be no longer over-indebted and no longer
under debt review;
(b)
the credit bureau is ordered to remove the applicant' s debt review
status from applicant's
credit records;
(c)
the debt counsellor is to provide the Form 17.W to all the
applicant's creditors to confirm
that the applicant has been declared
to be no longer over-indebted.
__________________________
NEUKIRCHER
AJ
18
OCTOBER 2016