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[2015] ZAGPPHC 1058
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First Rand Bank Limited v Barrett and Another (81205/2014) [2015] ZAGPPHC 1058 (19 May 2015)
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
[REPUBLIC
OF SOUTH AFRICA]
CASE
NUMBER: 81205 / 2014
DATE:
19/6/2015
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
FIRSTRAND
BANK
LIMITED APPLICANT
AND
HARRY
WILLIAM BARRETT
1
st
RESPONDENT
MATILDA BARRETT 2
nd
RESPONDENT
JUDGMENT
MAVUNDLA
J,
[1]
This is an opposed summary judgment application, brought by the
applicant against the respondents, for payment of an amount
of R547
814. 96, with further ancillary relief.
[2]
The applicant's claim arises from a mor tgage loan agreem
ent concluded by the parties, secured by a
mortgage bond
repayable in monthly installments of R5537, 68. It is common cause
that the respondents were in default of their
monthly installments
payment.
[3]
It
is
common
cause
that
the
respondents applied
for debt
review
on
the
29
April
2014.
The debt
counselor
Mr. Russell
Clifford
Dickson
submitted
a
restructuring
proposal
to
the
respondents'
creditors
on the
13 August
20
1
4
[1]
What
was
available
for
distribution to the creditors was an amount of R8513. 04. In terms of
the restructured proposal, the applicant was to be paid
an amount of
R3 987-95 per month with the first installment date of payment to be
at the end July 2014.
[4]
The applicant terminated the respondents' debt review by way of
notice in terms of section 86(1) on the 3 and 7 October 2014.
The
applicant proceeded to issue summons against the respondents on the 9
November 2014. On the 27 November 2014 the respondent's
application
for the re-instatement of the debt review was dismissed by the
Magistrate Court in Springs.
[5]
The respondents entered an appearance to defend the action. The
applicant brought a summary judgment application. That very
application for summary judgment was opposed by the respondents and
served before Legodi
J
on the 17 February 2015, who
found that: "the applicant prematurely proceeded to issue a
letter of termination of debt review
in terms of s86(1) on the 3 and
7 October 2014; and prematurely issued summons on the 10 November
2014."Legodi J proceeded
to resort to s130 (4) and postponed
sine
die
the summary judgment application
and directed the applicant to comply with the statutory notice in
terms of the Act, which
has since been done. The summary judgment
application was reinstated and served before this Court.
[6]
It is trite that the only way a defendant can successfully avoid
summary judgment being granted against him, is to satisfy the
court
by way of an affidavit, that he has a
bona fide
defence to the
action. He must disclose fully the nature and grounds of the defence
and the material facts relied upon. The Court
does not have to decide
on a balance of probabilities whether the defence has been fully
disclosed. Neither does the Court approach
the matter as it would,
during trial. It must content itself that the defence so disclosed,
would make the applicant's case not
unassailable during the trial;
vide
Tesven
CC
and
Another
v South African
Bank
of
Athens
2000 (1) SA 268
(SCA) at 275H-276F
citing
inter alia, M
aharaj
v Barcla
ys
Bank
Ltd
1976 (1) SA
418
(A) at 426A-426E.
[7]
The respondents contended that the
Payment
Distribution
Agency
("PDA") was appointed by the debt counsellor to
provide its functions of management, administration, operation,
regulation
and supervision of payment, clearing and settlement
systems with the applicant, and was not the agent of the consumer.
The delay
and short
I
non-payment were not a direct result of
negligence on the part of the respondents, so it is contended. The
respondents further
contended that the plan was
part of the debt review process, and while the process is under way,
one cannot institute
legal proceedings. The respondents further
contended that it was not shown how in terms of s86(10)
they fell in default
in terms of the reviewed credit agreement as
payments have been made in terms of the proposed plan.
[8]
The respondents contend that in terms of the proposed restructured
repayment plan, they were to pay the applicant an amount
of R3987. 95
per month and the first payment were to be made end of July 2014. The
first collection installment date was end May
2014. The first and
second installment was distributed towards the debt counselors and
legal fees. The total amount available to
creditors, from the third
installment, per month after various fees, was R7821. 89. They were
making payment in accordance with
the restructured repayment plan. At
the time the debt review was terminated they were not in default and
it was therefore not competent
for the applicants to issue notice in
terms of section 86(10). In this regard they have attached annexure
"HB3" which
is a list of payments they effected to the
Payment Distribution Agency, namely:
8.1
End May 2014 payment 5 and 6 June 2014: total R8513. 04;
8.2
End June 2014 payment made 3 July 2014: R8513.04;
8.3
End July 2014 payment made on 4 August 2014: R8513.04;
8.4
End July 2014 payment made on 28 August 2014: R8513.04;
8.5
End September 2014 payment made on 27 September 2014: R8513.04;
8.6
End October 2014 payment made on 3 November 2014: R8513.04;
8.7
End November 2014 payment made on 28November 2014: R8513.04;
8.8
End December 2014 payment made on 29 December 2014: R8513.04.
[9]
Section 86(10) of the NCA provides that:
"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 give notice to terminate the review in the
prescribed manner to-
(a)
the consumer;
(b)
the debt counsellor;
(c)
the National Credit Regulator,
at
any time at least 60 business days after the date on which the
consumer applied for the debt review."
[10]
In the matter of
Collett
and Firstrand
Bank
[2]
the Supreme Court of Appeal held that the
credit
provider
cannot
terminate
the
debt
review
after
referral
to
the
Magistrate.
The
Supreme
Court
of
Appeal
further
pointed
out
that a
consumer who is
over-indebted
or finds himself in
financial
constrain, "may apply
for debt
review
in terms of
s86(1) whether or not he is in arrears under any particular credit
agreement. Where
he
is not in
default
of
any
of
his
obligations,
the
credit
provider
is
unable
to
terminate
the process
because
s86 (
1
0)
gives
the
right
to
terminate
the
debt
review
only
where
the
consumer is in default. In such a case the credit provider must await
the hearing in terms of s87.
Neither can
the credit
provider
proceed to
enforce
the
credit
agreement
because the
consumer is not in default. Where the consumer, however, is in
default the credit provider is entitled to
enforce
the credit
agreement
provided
the
consumer
has not
made
application for
debt
review
pursuant
to
s 86(1)
and the
credit
provider
has
complied
with
the
requirements
of s129 and 130. In
terms of s
86(2) an application for debt review concerning
a
particular credit agreement
may not be
made if the credit provider has 'proceeded to take the steps
contemplated
in section
1
29
to enforce that agreement."'
[11]
The Supreme Court of Appeal in
Collett and
Firstrand
Bank
(supra
)
further
held that, where the consumer has applied for a debt review before
the credit provider has proceeded to enforce the credit
agreement,
the consumer and the credit provider are obliged to, as s 86(5)
requires not only to comply with any reasonable request
by the debt
counselor to facilitate an evaluation of the consumer's
over-indebtedness and the prospects for responsible debt
restructuring
but also to participate in good faith in the review and
negotiations.
[
1
2]
In casu,
the
applicant
terminated
the
debt
review
between
3
and
7 October
20
1
4
and issued summons on 9 November 2014 before the finalization of the
debt review process
at
the
Magistrate
Court
on
Legodi,
quite
correctly
found
that
the
termination
of the debt
review and issue of summons were premature.
[3]
[13]
In casu,
the
respondents made certain payments
to
the PDA.
However it would seem that
after
deductions for
the
legal
fees,
what
remained f or
distribution
was an amount of R7821. 89, clearly falling short of the amount of
R8513. 04. In
the matter
of
Nedbank
v
Thamson
[4]
the
Court
held that
Payment
Distribution
Agency
("NPDA")
is
a
payment distribution
agency
approved
by
the
National
Credit
Regulator
(the
"NCR")
an d is
not
the
agent of the consumer
but
of
the
counselor. Where the
consumer
has
been
effecting
payments,
but
there
was
shortfall
as
the
result
of
the
deductions
of
the
legal
fees
from
such
payments,
it
cannot
be
said
that
the
consumer
was in
default,
for purposes of
s88. In
my
view,
the
applicant
has
not
shown
that
the
respondents
were
in default
when it
took
the
premature
decision
to
terminate the
debt
review.
On
the
contrary, I
conclude
that
the
respondents were
not
in
default. If
I am
wrong
on
this
aspect,
which
is
not
conceded,
the
shortfall
of the
respondent's
payments
as
determined
by the
counselor,
were
negligible
and
did
not warrant
the
termination
of
the
debt
review,
but
an
accommodative
approach.
[14]
Similarly,
in casu,
the contention of the respondents was that
the shortfall was as the result of the deduction of various legal
fees on the part of
the PDA. In my view, there is merit in the
respondents' contention that the termination of the debt review by
the applicant was
not in good faith because there was no effort to
comply with s86(5) which requires not only compliance with any
reasonable request
by the debt counselor to facilitate an evaluation
of the consumer's over-indebtedness. On the contrary the applicant
opposed even
the reinstatement of the debt review
application.
[15]
It needs mentioning that according to the respondents the PDA failed
to timeously remit Form 17.2 to the applicant once the
proposal was
calculated, and this failure contributed towards the applicant taking
a decision to terminate the debt review. In
my view, any remissness
on the part of the PDA should not be visited on the respondents.
[
1
6]
The
respondents
have,
however,
not
disclosed
a
defence
on
the
merits.
In
the
Collett
[5]
matter the
Supreme
Court
of Appeal
held that:
"[
1
8]
As was said in
Joob
Joob
Investments (Pty) Ltd v
Stocks
Mavundlo Zek Joint Venture
[6]
:
'summary
judgment procedure was not intended to 'shut (a defendant ) out from
defending', unless it
was very clear
indeed that he
had no case in the action.
It was intended to prevent
sham defences
from defeating the rights of the parties by delay,
and at the same time causing great loss to plaintiffs
who were
endeavoring to enforce their rights.'
Over-indebtedness
is not a defence on the merits. However, because of the extraordinary
and stringent nature a court has over-riding
discretion to refuse an
application for summary judgment. It would be proper for the
defendant to raise termination of the debt
review by reason of the
credit provider's failure to participate or its bad faith in
participating when the application for summary
judgment is made.
These issues may be raised, not as defence to the claim, but as
request to the court not to grant summary judgment
in the exercise of
its over-riding discretion."
[
1
7]
The
relevant
bonded
property
forming
subject
matter
of
the
loan
agreement
is
the
primary
residence
of the
respondents.
They
stay
in this
primary
residence
together
with
their
two
minor
children
and
the
first
respondent's
elderly
parents.
In my view,
the granting
of
summary judgment
would
invariably
precipitate
the
eventual attachment and execution and sale of the primary
residence of the respondents and deprivation
of their
constitutionally
enshrined
right to
housing
[7]
and dignity
[8]
.
In the circumstances of this case, where the respondents
have made
an effort to pay whatever
little
they
can
afford, the
Court
should
be
slow
in granting
summary
judgment,
but rather
exercise
its
over-riding
discretion
in favour
of the
respondents.
[
1
8]
The
counselor
in
his
restructured
plan
had
determined
payment
to
the
applicant
in an
amount of R3987. 95. In the matter of
Changing
Tides
(Pty)
Ltd
v
Grobler
[9]
Murphy
J
held
that:
"Once
there has
been
termination
of
debt
review
under
section
86(10),
it
is
for
the
enforcing
court
to
decide
in
terms of section
86(11)
if there will be benefit in a further debt review."
Masipa
J
in
Standard
Bank
of
South
Africa
Ltd
v
Pan
a
yiotts
[10]
cautioned
that
it
is
undesirable
for
the
High
Court
to
be
bogged
down
with
restructuring
of
debt
repayment
when
there
was
another
structure
designed
for
that
purpose. I take note of
the
fact that
at
the
Magistrate Court did not
decide
whether
the
respondents were over-indebted. Masipa J further held that a
consumer, who claims to be over-indebted, should not keep
the
commodity forming subject of
the
indebtedness but rather should sell it to alleviate his indebtedness.
[11]
I am of the view
that
it would
be
in the
interest
of
both
parties,
not
to
grant
the
summary
judgment and
dismiss it,
to afford
respondents to reconsider their position and sell
the
property,
and
settle
their
debts
from
the
proceeds.
[19]
In the result the application for summary judgment is dismissed with
costs.
_______________________
N.M.
MAVUNDLA
JUDGE
OF THE HIGH COURT
DATE
OF HEARING
: 07
/ 05 / 2015
DATE
OF JUDGMENT
: 19
I
05
I
2015
APPLICANT'S
COUNSEL
: ADV M. RILEY
BRIEFED
BY HACK STUPEL and ROSS
RESPONDENTS'
COUNSEL : ADV KERRY HOWARD
BRIEFED
BY STANILAND ATTORNEYS
[1]
Paginated
page 78 paragraph
1 1
of
the founding affidavit i n support of application for debt rev
iew
at the
magistrates
court in Springs.
[2]
2011 (3) ALL SA 585
(SCA) 592 para [11].
[3]
Vide
para 5
supra and Collet decision supra
[4]
2014
(5) SA 392 (GJ) 2014 (5) SA p395.
[5]
Supra
at
para[l 8]
[6]
[2009] ZASCA
23:
2009
(5) SA
I
(SCA) para
31
[also
reported
at
[2009] 3
ALL
SA
407
(SCA)-Ed]:
Changing
Tides (Pty)
Lid
v Groh/er
2012
(3) ALL SA 518
(GNP) at 525 para [27]
[7]
Section 26, Act
I 08 of
1996.
[8]
Section
I
0 Act I 08 of 1
996.
[9]
2012 (3) ALL
SA 518
(GNP) at
525c.
.
[10]
2009 (3) SA 363
at 369 para
[30]-[31].
[11]
In
Standard
Bank
of
South Africa
Ltd
v Panayiotts
at 366
para
[10].