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2015
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[2015] ZAGPPHC 1109
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Firstrand Bank Limited and Another v Barnard and Another (A801/2014) [2015] ZAGPPHC 1109 (11 August 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
DATE:
11/8/15
CASE
NO: A801/2014
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
FIRSTRAND
BANK
LIMITED
First Appellant
NEDBANK
LIMITED
Second Appellant
and
MICHELLE
BARNARD
First Respondent
BAREND
HENDRIK
COETZEE
Second Respondent
JUDGMENT
Tuchten
J
:
1
This is an appeal against an order made in a magistrate's court
under s 87(1)(b)(ii) of the National
Credit Act, 34 of 2005 (the
NCA),
1
re-
arranging the debts of a consumer as defined in s 1. The order was
triggered by a proposal made
by
the first respondent a debt counsellor,
registered as such under s 44.
2
On 31 January 2014, the second respondent (the consumer)
2
applied to the first respondent (the debt counsellor) to have himself
declared over-indebted as contemplated in s 86(1).
3
Among the purposes of the NCA
3
is to address over-indebtedness by providing mechanisms to resolve
over-indebtedness on the principle of satisfaction by the consumer
of
all responsible financial obligations and by providing for a system
of debt restructuring enforcement and judgment which places
priority
on the eventual satisfaction of all responsible consumer obligations
under credit agreements.
4
The consumer disclosed to the debt counsellor in his application to
her that he was indebted to
a number of credit providers,
4
in the total sum (re-calculated as at 9 July 2014) of some R1 360
973. This amount included balances, all of which were due, of
R919
122 owed to the first appellant (FNB) under a home loan secured by a
mortgage bond over a property in Lydenburg, and R128
318 owed to the
second appellant (Nedbank) which traded for this purpose as Motor
Finance Corporation (MFC) in relation to a Kia
Cerato motor vehicle.
5
The debt counsellor accepted the application made to her by the
consumer and proceeded to notify
the credit providers listed in the
consumer's application (who included both FNB and Nedbank) of the
fact of the application. The
debt counsellor then went on to evaluate
the application as required of her under s 86(6) and came to the
conclusion that the consumer
appeared to be over-indebted as
contemplated in the NCA. Section 79(1) describes the content of the
concept of over-indebtedness:
(1)
A consumer is over-indebted if the preponderance of available
information at the time a determination is made indicates
that the
particular consumer is or will be unable to satisfy in a timely
manner all the obligations under all the credit agreements
to which
the consumer is a party, having regard to that consumer's-
(a)
financial means, prospects and obligations; and
(b)
probable propensity to satisfy in a timely manner all the obligations
under all the credit agreements to which
the consumer is a party, as
indicated by the consumer's history of debt repayment.
(2)
When a determination is to be made whether a consumer is
over-indebted or not, the person making that determination must apply
the criteria set out in subsection (1) as they exist at the time the
determination is being made.
(3)
When making a determination in terms of this section, the value of-
(a)
any credit facility is the settlement value at that time under that
credit
facility; and
(b)
any credit guarantee is-
(i)
the settlement value of the credit agreement that it guarantees,
if
the guarantor has been called upon to honour that guarantee; or
(ii)
the settlement value of the credit agreement that it
guarantees,
discounted by a prescribed factor.
6
Some considerable time in argument before us was taken up by a debate
about what a debt counsellor
must establish before coming to the
conclusion that a consumer is over-indebted. I do not think it is
necessary or even possible
exhaustively to identify what a debt
counsellor must determine in this regard. Ithink each case will turn
on its own facts. But
for this purpose, Ithink a debt counsellor is
entitled to accept the say so of the consumer where what the
counsellor is told is
supported by vouchers which appear regular and
genuine. Whether the information supplied by the consumer will be
sufficient for
this purpose and whether the debt counsellor must go
further than merely consulting with the consumer and examining
the vouchers
he produces and how much further she should in any given
case go, will depend on the facts of the case.
7
In the present case there does not appear to be anything that ought
at this stage of the evaluation
by the debt counsellor to have given
rise to suspicion or to have warranted further investigation. The
tale told by the consumer,
as ultimately embodied in a restructuring
summary compiled by the debt counsellor, is the sadly familiar one
often encountered
in the motion court of this Division of a debtor
who owes, beyond his means to repay, on a home loan, bank loans both
on overdraft
and on credit cards, for clothing and household goods
and for motor vehicles.
8
The consumer told the debt counsellor that he was a mineworker. As at
19 March 2014, the consumer
was employed by San Contracting Services
of Lydenburg. He gave the debt counsellor a salary slip on the face
of it issued by San
with payment date 25 January 2014. The salary
slip reflected a total earnings package of R29 680 for that month and
that after
deductions the consumer had received R20 867 in cash.
9
The material provided by the consumer to the debt counsellor
reflected a monthly payment obligation
of R33 375. He disclosed no
means other than his salary from which immediately to pay his debts.
Clearly, the consumer could not
repay his creditors the full amount
he had undertaken under his credit agreements with them from his
salary. He told the debt counsellor
that he was the sole provider to
his family. This is relevant because for these purposes the financial
means, prospects and obligations
of a consumer include
5
those of any other adult person within the consumer's immediate
family, to the extent that they share their respective financial
means and mutually bear their respective financial obligations.
10
On these facts, the debt counsellor determined that the consumer
appeared to be over-indebted.
Section 86(7)(c) regulates what a debt
counsellor who has accepted an application made to her under s 86(1)
may do when she determines
that a consumer appears to be
over-indebted.
6
Section 86 provides in part relevant to the present enquiry as
follows:
(1)
A consumer may apply to a debt counsellor in the prescribed manner
and form
to have the consumer declared over-indebted.
(2)
…..
(3)
A debt counsellor-
(a)
may require the consumer to pay an application fee, not exceeding the
prescribed
amount, before accepting an application in terms of
subsection (1); and
(b)
may not require or accept a fee from a credit provider in respect of
an
application in terms of this section.
(4)
On receipt of an application in terms of subsection (1), a debt
counsellor
must-
(a)
provide the consumer with proof of receipt of the application;
(b)
notify, in the prescribed manner and form-
(i)
all credit providers that are listed in the application; and
(ii)
every registered credit bureau.
(5)
A consumer who applies to a debt counsellor, and each credit provider
contemplated
in subsection (4) (b), must-
(a)
comply with any reasonable requests by the debt counsellor to
facilitate the
evaluation of the consumer's state of indebtedness and
the prospects for responsible debt re-arrangement; and
(b)
participate in good faith in the review and in any negotiations
designed
to result in responsible debt re-arrangement.
(6)
A debt counsellor who has accepted an application in terms of this
section must
determine, in the prescribed manner and within the
prescribed time-
(a)
whether the consumer appears to be over-indebted; and
(b)
if the consumer seeks a declaration of reckless credit, whether any
of
the consumer's credit agreements appear to be reckless.
(7)
If, as a result of an assessment conducted in terms of subsection
(6), a debt
counsellor reasonably concludes that-
(a)
the consumer is not over-indebted, the debt counsellor must reject
the application,
even if the debt counsellor has concluded that a
particular credit agreement was reckless at the time it was entered
into;
(b)
the consumer is not over-indebted, but is nevertheless experiencing,
or likely
to experience, difficulty satisfying all the consumer's
obligations under credit agreements in a timely manner, the debt
counsellor
may recommend that the consumer and the respective credit
providers voluntarily consider and agree on a plan of debt
re-arrangement;
or
(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-
(i)
t hat one or more of t he cons umer's c redit agreements be 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 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;
(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.
(8)
If a debt counsellor makes a recommendation in terms of subsection
(7) (b) and-
(a)
the consumer and each credit 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 counsellor must refer the
matter to
the Magistrate's Court with the recommendation.
(9)
If a debt counsellor rejects an application as contemplated in
subsection (7)
(a), the consumer, with leave of the Magistrate's
Court, may apply directly to the Magistrate's Court, in the
prescribed manner
and form, for an order contemplated in
subsection (7) (c).
(10)
….
(11)
….
11
A debt counsellor who has formed the opinion
(determined,
in the language of the NCA) that a consumer is over-indebted is
not obliged in all circumstances to take the matter further. But
she
"may" issue a proposal under s 86(7)(c) recommending that
the magistrate's court make one or more of the orders specified
in s
86(7)(c). No doubt she will decline to do so if she is unable to
formulate a proposal which, having record to the objects
and the
provisions of the NCA, she considers makes business sense. It is
unnecessary for present purposes to try to identify all
the
circumstances under which a debt counsellor who has made the
requisite determination may decline to take the matter further
and
formulate a recommendation that the magistrate's court make orders.
In the present case, the debt counsellor did indeed issue
such a
proposal.
12
The proposal of the debt counsellor contemplated that the home loan
debt owed
to FNB be restructured by reducing the monthly minimum
instalment due from R9 310 down to RS SS1 (including an insurance
premium)
and maintaining the interest rate applicable at 7,4% per
annum. The relevant proposal in relation to Nedbank
7
was that the monthly instalment of R5 695 be reduced to R1 500 and
that the interest rate, agreed at 1S,7S%, be reduced to
10%.
Similar re arrangements were proposed for the consumer's other
obligations to creditors identified in the proposal.
13
The proposal was submitted to all the consumer's creditors. All
accepted the
proposal except FNB in relation to the home loan and
Nedbank in relation to the relevant motor vehicle agreement. The debt
counsellor
was then obliged under s 86 (8)(b) to refer
(
must refer)
the matter to the magistrate's court "with
the recommendation". In the present case the debt counsellor's
recommendation
was that the court approve the proposal. In the notice
of motion, the debt counsellor cited the consumer and the several
creditors,
including those who had accepted the proposal, as
respondents. She asked for orders,
inter a/ia,
declaring the
consumer to be over-indebted and restructuring the consumer's debt
obligations in accordance with the proposal. Significantly,
for
present purposes, the debt counsellor as applicant sought an order
for costs against any respondent who opposed the application.
14
What is to happen when a debt counsellor refers a proposal to a
magistrate's
court under s 86(8)(b) is provided for in s 87:
(1)
If a debt counsellor makes a proposal to the Magistrate's Court in
terms of
section 86 (8) (b), or a consumer applies to the
Magistrate's Court in terms of section 86 (9), the Magistrate's Court
must conduct
a hearing and, having regard to the proposal and
information before it and the consumer's financial means, prospects
and obligations,
may-
(a)
reject the recommendation or application as the case may be; or
(b)
make-
(i)
an order declaring any credit agreement to be reckless, and an order
contemplated in section 83 (2) or (3), if the Magistrate's Court
concludes that the agreement is reckless;
(ii)
an order re-arranging the consumer's obligations in any manner
contemplated
in section 86 (7) (c) (ii); or
(iii)
both orders contemplated in subparagraph (i) and (ii).
15
A magistrate presiding in a court to which a re-arrangement proposal
has been
referred fulfils a judicial and not an administrative role.
The magistrate's court derives its power in this regard from the NCA.
The procedure such a court must follow is that found in rule 55 of
the rules applicable to proceedings in magistrates' courts.
8
The magistrate must therefore apply the law of procedure and of
evidence as applicable to judicial proceedings.
16
The re-arrangement proposed by the debt counsellor provided for a
reduction in the monthly
amounts which the consumer would be required
to pay each of his creditors. It was based on an amount of R 11 608 a
month to be
made available by the consumer towards his debts and a
recommendation that the terms of such repayments be extended to terms
of
between 18 months and 105 months. Built into the scheme was
provision for increased payments to the longer proposed term
creditors
as the shorter term creditors become repaid in full.
17
The conclusion in
National
Credit Regulator
v
Nedbank
and
Others, supra,
that an
application such as this must be brought by the debt counsellor in
accordance with Rule 55 of the magistrates' courts rules
was affirmed
in the Supreme Court of Appeal.
9
This could therefore lead to the court's being confronted with
disputes of fact which would then bring into operation, in an
appropriate
case, the procedural rule in
Plascon-Evans.
10
The starting point is that where there is a dispute as to the
facts, final (as opposed to interim) relief should only be granted
in
motion proceedings if the facts as stated by the respondents together
with the admitted facts in the applicant's affidavits
justify such an
order. Where it is clear that facts, though not formally admitted,
cannot be denied, they must be regarded as admitted.
In certain
instances, however, the denial by respondent of a fact alleged by the
applicant may not be such as to raise a real,
genuine or
bona fide
dispute of fact. Where the allegations or denials of the
respondent are so far-fetched or clearly untenable, the court is
justified
in rejecting them merely on the papers. A re-arrangement
order made under s 87(1)(b)(ii) is final relief.
18
This situation, where an application is brought by a person who has
no legal interest
in its outcome, is not unique in our law. For
example, where a person is in possession of property to which there
are competing
claims but the person himself makes no claim to the
property, the person in possession may initiate interpleader
proceedings. Inthe
case of an interpleader, the rival claimants for
the property then are in a substantive sense the litigants rather
than the possessor,
who has no interest in the dispute except, in the
usual case, in relation to his costs for bringing the dispute before
the court.
11
The position of the debt counsellor in the present circumstances has
been described, in my view aptly, as that of a
pro
forma
applicant.
12
19
In the present case, the application by the debt counsellor in
relation to the consumer's
affairs was opposed bythe present
appellants. Both of them delivered answering affidavits in which
issues were pertinently raised.
I shall deal only with those I think
are necessary for the disposal of this case.
20
Before I do that, I need to deal with two procedural aspects which
were raised
in the appeal. The first is the submission made on behalf
of the appellants that the application lacked particularity as to the
consumer's assets and in particular documentary material which might
be relevant to an assessment of the proposal. While of course
the
founding affidavit should demonstrate that the consumer is over-
indebted and deal with the prospects for the improvement of
the
consumer's financial predicament, Ido not think that it is necessary
for a debt counsellor to attach to the application all
the documents
and vouchers she has obtained from the consumer. It has been said,
correctly in my view, that the debt counsellor
must display good
faith in the application. To that end, her file should be made
available to all interested parties and she should
tender inspection
of all documents in her possession in her founding affidavit.
21
Broadly stated, the debt counsellor's application should deal with
the essentials of
her proposal. It cannot be expected of a debt
counsellor to anticipate every objection to the re-arrangement which
a creditor might
raise. She need only deal, in the discharge of her
duty to the court, in her founding affidavit with those issues of
which she
is aware or might by reasonable and diligent enquiry of the
consumer become aware. Counsel referred us to the unreported judgment
of
Motor Finance
Corporation (Pty) Ltd v
Joubert and Others.
13
In paras 12 and following, it was held that the obligation of
disclosure on an applicant debt counsellor applying for debt relief
was equivalent to that resting on an applicant for the voluntary
surrender of his estate. I respectfully disagree. The wide ranging
obligation in such a case arises from the fact that such an
application is brought
ex parte.
A case such as the present is
brought on notice to all concerned. The duties of disclosure inthe
present case are, subject to the
obligation of the debt counsellor to
play open cards with other interested parties and the court, no
higher than in any other opposed
application.
22
The second procedural aspect arises from the fact that the appellants
adduced facts
in their answering affidavits which gave rise to
disputes. The debt counsellor responded to those disputes not, as she
should have,
by the delivery of a replying affidavit, but by the
delivery of heads of argument in which certain factual assertions
were made.
The appellants justifiably objected inthe court below to
this procedure. The general rule is that facts are placed before
courts
in applications through affidavits sworn by deponents with
personal knowledge of that to which they depose.
23
It was submitted on behalf of the debt counsellor that it was not
competent for
the consumer, being a respondent in the application, to
respond to the issues raised by the other creditor respondents. That
is
wrong because it puts form above substance. The application, in
substance although not in form, is the application of the consumer.
He is required by law to confirm on oath, as he did in this case, the
allegations made by the debt counsellor in her founding affidavit.
He
may go further, as he did in this case, and put before the court in
his affidavit any factual material which he considers or
is advised
is material to the decision of the case.
24
While the provisions of rule 55 are applicable to proposals made by
debt counsellors
to the court under s 87(1), this does not mean that
they must rigidly apply as if this were, for example, a claim for
payment of
a specified amount on a cause of action which accrued
before the application was launched. The
power
of the court approached under s 87(1)
derives, as I have said, from the NCA and the procedure provided by
magistrates'
courts rule 55 should not be applied so as to defeat the
purposes of the NCA. The position of a debtor such as the
consumer
is dynamic and may, in the time between
when the application to court is launched and when it is heard,
improve
or deteriorate with the
vicissitudes of life. The purposes of s 87 of the
NCA, viewed
through the prism of the measure as a whole,
require that the court conducting the hearing be apprised of such
relevant material
as the parties may wish to put before it. For
this purpose, it is a necessary implication
of
the provision that the court conducting
a hearing under s 87 is empowered
right up to the time it delivers its judgment to receive information
additional to that provided by the founding, answering and
replying
affidavits conventionally encountered in an opposed
application. Such power should of course be exercised
in accordance
with a judicial discretion, which will usually involve a
consideration of the reasons for the late
provision
of the new material and any prejudice to other parties affected by
the hearing and the relief sought.
25
To return to the answering affidavits. Firstly FNB attacked the
proposition that
the consumer should, under the proposal, remain the
owner and thus in possession of the property which was the subject of
FNB's
bonds. The contention was that the property ought to be sold
and the consumer required to buy a cheaper property or rent a
property for himself and his family. This proposition, in my view,
cannot be dismissed on the papers as palpably without merit.
26
An "automated valuation report" in the papers places the
value of the
property in question at about R850 000, with an
"estimated lower selling price" of R?OO 000. If these
figures were placed
in dispute, the value would have to be
established as it would in any other case. Also of relevance would be
the availability of
cheaper sale property and rental property in
Lydenburg and the cost of rental. It has been said that the object of
debt review
and restructuring is not to enable a consumer to continue
in possession and use the relevant property after the instalment sale
agreement under which that property is held is cancelled.
14
I think the same can be said in regard to a claim on a home loan. The
policy underlying the relationship between home loan lender
and
borrower is that the borrower will build up equity in his own home
while repaying the loan that enabled him to buy it. When
he is no
longer able to meet his obligations to the lender, the question
arises whether it is equitable that the defaulting
borrower remain in
occupation at the expense of the lender. It is regrettably often
overlooked that funds for home loans do not
come out of a bottomless
money pit and that the provision of loans to new entrants into the
home loan market depends in large measure
upon repayments by existing
market participants.
27
It was fundamental to the proposal of the debt counsellor that the
home loan debt owed to the consumer's major creditor, FNB, be
restructured from R9 310 a month to R5 000. But there was a
dispute
of fact in that regard which could not be decided on the papers.
There was no request that the issue be referred to evidence.
That
being the case, the proposal ought not to have been approved. In the
case of FNB, the evidence before the court below was
not such that
justice permitted the supplanting of FNB's contractual rights by the
proposal. In the case of all the other creditor
respondents, the
knock on effect, without any further investigation, was such that the
funds proposed for the settlement of their
claims would simply not be
available because there would be, absent an order for re-arrangement
binding on FNB, no bar to enforcement
by FNB of its claim.
28
A second difficulty with the proposal relates to debt due for the Kia
Cerato
2.0 motor vehicle which is the subject of Nedbank's claim. The
consumer bought the vehicle on 1 February 2010. The vehicle, a 2010
model, was bought new. The repayment terms agreed were some RS 249 a
month for 72 months. The parties therefore initially contemplated
that the debt would be discharged by 1 January 2016. For reasons not
disclosed in the papers, the instalment had increased by the
time the
founding affidavit was signed to some RS 69S a month. The proposal
was that the instalments be reduced to R1 SOO a month,
that the
interest rate be reduced from 1S,7S% to 10% per annum and the term
extended to 1OS months, an extension of just under
three years.
29
There are in my view three insuperable problems with this proposal.
The first is that while the court below had jurisdiction to extend
the term, it had no power to reduce the interest rate applicable
to
the debt. The second problem is that no attention seems to have been
given to the complaint of Nedbank that the term extension
sought
would mean that in all likelihood, the value of its security, the
motor vehicle itself, would depreciate to far below what
was owed to
Nedbank if Nedbank were precluded from exercising its rights of
cancellation and repossession. There is a third problem,
which arises
from the order made by the magistrate. I shall deal with this problem
later.
30
It was established that the consumer was in possession of a total of
three vehicles.
It is difficult to understand why the court below
decided that it would be appropriate to allow all three of these
vehicles to
remain in the consumer's possession rather than be sold
to reduce his over all indebtedness.
31
The final difficulty with the proposal was the provision for payment
of the costs
of para 3 of the order as proposed by the debt
counsellor and as made by the court below, which reads:
That
in terms of Section 86(7)(c)(ii)(bb) the date upon which payments to
the [creditor respondents] become due be postponed until
after all
Debt Counselling Fees and Legal Fees [in] relation to this
application are paid in full.
32
What the debt counsellor sought to achieve by this remarkable
paragraph was the
subordination of the payment scheme in the order in
favour of her own fees and those of her attorney in relation to the
application.
Section 86(7)(c)(ii)(bb) simply does not permit of such
a subordination. But a far greater problem is that these unspecified
amounts
may never be paid at all. In such a case, the due dates for
settlement of the claims of the creditor respondents would be
postponed
indefinitely. This irrationality was imported uncritically
into the order of the court below and is fatal to the order itself.
33
To return to the debt owed to Nedbank in relation to the Kia Cerato
motor vehicle:
the magistrate appreciated that the NCA as it stands
does not permit a court, acting under s 87(1)(b), to reduce the
interest rate
applicable to any specific debt. But what the
magistrate then did was to restore to the order the agreed interest
rate, 15,75%,
while leaving in the order the other integers of the
calculation as they were in the proposal. The effect of this is that
the monthly
payments ordered, R1 500, are not large enough to reduce
any of the capital. So on the order as made by the court below,
Nedbank's
claim which is the subject of this appeal will never be
repaid in full. The order of the court below effectively granted the
consumer
perpetual credit at the expense of Nedbank and violated the
purpose of the legislation to achieve eventual satisfaction of the
debt.
34
Despite the opposition of the present appellants, the court below
granted an order
in the terms I have described. In the face of the
irrationalities which I have identified, the order of the court below
cannot
be supported.
35
For these reasons, the appeals must succeed. The appellants asked at
the hearing
of the appeal only that the order of the court be varied
only by the deletion of those provisions of the court's orders which
relate
to them specifically. Although, as I have explained, the
deficiencies in the case presented to the court below should have led
to the rejection of the application, I am prepared to allow the re
arrangement to stand in relation to those creditors who
were not
aggrieved by the order of the court below.
36
It remains to deal with the question of costs. In that regard I must
mention two procedural
developments in relation to the appeal itself.
The first is that the appeals of the two appellants were noted and
initially prosecuted
separately. Only the successful applicant in the
court below, the debt counsellor, was cited as a respondent on
appeal. The appeals
were set down for hearing in this court on 20
March 2015. Prior to or at the hearing on that date, the point was
taken on behalf
of the debt counsellor that all the respondents in
the court below should have been joined as respondents on appeal.
This prompted
the court (Ismail J
et
Nkosi AJ) to order that
the appeal be postponed and that the present appellants should notify
all respondents in the court below
of the pending appeal. The order
went on to provide that such of those respondents who wished to
oppose or join issue with the
appeal were to give notice to that
effect. In the result only the consumer, who was obviously aware of
the appeal through the debt
counsellor anyway, gave such notice. The
consumer thereupon became the second respondent on appeal. The costs
of the hearing on
20 March 2015 were reserved and we must decide who
should pay those costs.
37
The second development in the appeal related to an application
brought by the debt
counsellor to lead further evidence on appeal.
The evidence she sought to have led related to abortive attempts to
settle the appeal
and the present financial position of the consumer.
In fact the application to lead further evidence was withdrawn,
prudently in
my view. Although there was a tender of costs of the
abortive application to lead further evidence in the notice of
withdrawal
of the application, the incidence of those costs was
argued at the appeal and must too be determined.
38
Before I deal specifically with the two issues, I need to say
something about
the special character of the debt counsellor as
applicant in s 87(1) proceedings and any appeal arising from such
proceedings and
of the creditor respondents in s 87(1) proceedings.
39
The debt counsellor is a
pro forma
applicant who has only a
professional, as opposed to a personal, interest in the outcome of
the proceedings. She should not take
sides with one or other of the
litigants. She should not in an untoward manner advance her own
interests to the detriment of those
of the litigants proper. She must
be available to the court at the hearing until excused. She may
explain and defend her proposal
and, of course, defend herself and
her reputation if personal attacks are made on her in the
proceedings.
40
A debt counsellor should when asked to do so by the court and even in
some cases
offer sources of information relevant to the proceedings.
For example, relevant to the present case, if she has knowledge of
the
property selling and renting market relevant to the case, she may
offer this information to the court. This may be accepted as correct
by the parties. Of course, if what the debt counsellor says in this
regard is not accepted as correct, the necessary facts would
have to
be proved in the usual way. Another example relevant for present
purposes is the value of a motor vehicle. The debt counsellor
might
offer information contained in a reputable publication as indicative
of the value of a vehicle.
41
A debt counsellor may not seek to have her own fees and expenses
preferred to those of the creditors and the consumer. A debt
counsellor may however make provision for her own fees and expenses
in specified amounts to be paid by instalments ranking equally with
the consumer's other creditors.
42
With this in mind, I think that a debt counsellor who does no more
than I have outlined should not in general be mulcted in costs if the
proposal is not accepted by the court
hearing the matter under s 87(1).
43
Indeed, I do not think that the principle that costs follow the
result should apply
in its usual rigour in proceedings under s 87(1).
The position of a consumer in such proceedings is much the same as a
litigant
who asks for an indulgence such as a rescission of a
judgment, an amendment or an extension of time. Where the opposition
of a
creditor is reasonable, therefore, the creditor similarly should
not be mulcted in costs. A court should bear in mind, however,
that
imposing a costs obligation on a consumer whose obligations are
re-arranged under s 87(1) would often defeat the purpose of
the order
by imposing an obligation not subject to the order on an already
financially burdened consumer.
44
To return to the present case: the debt counsellor entered the
dispute between
the parties when she sought the order which would
give her fees and expenses preference over the claims of the creditor
respondents.
She perpetuated her personal involvement inthe dispute
in the manner in which she made the case of the consumer her own. On
appeal,
the debt counsellor adopted a partisan attitude. In bringing
the abortive application to lead further evidence on appeal, she
sought
costs from the appellants if they opposed the application. The
application to lead further evidence was brought to advance the
interests of the consumer, not those properly so called of the debt
counsellor.
45
In addition, the proposal made by the debt counsellor was fatally
irrational.
Hadthe debt counsellor appreciated that her proposal
ought not to succeed and applied to withdraw it without more, I do
not think
that I would have exercised my discretion in the same way
as was done in
Absa Bank and Others
v
Robb.
15
In
that case, a debt counsellor who appreciated that a consumer was not
in fact over indebted and withdrew the application
to the court
she had made under s 87(1) the day before the hearing was ordered on
appeal to pay the costs of the opposing creditors.
46
A debt counsellor who formulates and circulates a proposal under s 86
is
bound
to refer it to the court in the circumstances
described in s 86(8)(b). I do not think that the position of a debt
counsellor who
bona
fide
comes to the
conclusion that her initial proposal can no longer be supported
should necessarily be made to pay costs.
47
But in my view, in the case before us exceptional circumstances are
present.
Not only did the debt counsellor advance a proposal which
was irrational in several material respects but she defended it in a
partisan manner. In these circumstances, she should pay the costs
both in the court below and on appeal as well as the costs of
the
abortive application to lead further evidence on appeal.
48
As to the costs of the postponed hearing of the appeal: I think that
the fairest
result would be that those costs should be costs in the
appeal. The appeal has gone against the debt counsellor. So she must
pay
those costs as well.
49
The consumer and the debt counsellor made common cause both in the
court below and
on appeal. When invited to do so in the order of this
court made on 20 March 2015, the consumer gave notice of his
intention to
oppose the appeal. He did so in a notice dated 1 April
2015 delivered by the attorney of record for the debt counsellor. The
attorney
of record for the debt counsellor proceeded to act as
attorney of record for the consumer in the appeal as well. The
abortive application
to lead further evidence was brought by both the
debt counsellor and the consumer. The notice of withdrawal of the
application
to lead further evidence, dated 29 July 2015, two days
before the appeal was due to be heard was signed by the attorney of
record
on behalf of both the debt counsellor and the consumer. I may
add that both debt counsellor and consumer tendered in this notice
the "Respondent's wasted costs".
50
There is thus no good ground upon which to exempt the consumer from
liability
for the costs of appeal incurred from 1 April 2015 onwards.
However, different considerations apply in relation to the costs in
the court below. We have a transcript of the proceedings in that
court. It appears from the transcript that only the debt counsellor,
FNB and Nedbank were represented in those proceedings and that the
consumer played no part in them. There is thus no good reason
to make
the consumer pay the costs incurred in the court below.
51
Finally, the appellants seek a punitive costs order. I think the
manner in which proceedings
were conducted on behalf of the
respondents on appeal was misguided but not morally reprehensible. I
find no basis for a punitive
costs order.
52
I make the following order:
1
The appeal succeeds.
2
The order of the court below is altered to read:
2.1
The application to re-arrange the debt owed to the 9th respondent,
Firstrand Bank Limited, arising
from a home loan is refused;
2.2
The application to re-arrange the debt owed to the 15th respondent,
The Motor Finance Corporation,
arising from the sale of a Kia Cerato
motor vehicle is refused.
3
Save as set out in 2, the order of the court below is to stand.
4
The costs of opposition in the court below of the appellants in their
capacities as 9th and 15th
respondents respectively in the court
below must be paid by the first respondent on appeal, Michelle
Barnard.
5
The appellants' costs incurred in the appeal, including the costs
reserved on 20 March 2015 and
the costs of the application in terms
of s 19(b) of the Superior Courts Act, must be paid by the first
respondent on appeal.
6
The appellants' costs incurred in the appeal from 1 April 2015
onwards and the costs of the application
in terms of s 19(b) of the
Superior Courts Act must be paid by the second respondent on appeal,
Barend Hendrik Coetzee.
7
The liabilities for costs imposed upon the first and second
respondents in the appeal will be joint and
several.
___________________________
NB
Tuchten
Judge
of the High Court
5
August 2015
I
agree.
___________________________
S
Magardie
Judge
of the High Court
5
August 2015
1
In what follows, references to statutory material will be to the NGA
unless otherwise stated.
2
Persons in the position of the second respondent, amongst others,
are described in the NGA as consumers and for that reason I
shall
call the second respondent the consumer in what follows.
3
Section 3
4
"Credit provider" is defined in s 1.
5
Section 78(3)(b)
6
There is a change of language from s 86(6)(a) ("... appears to
be indebted ...") to s 86(7)(c) (''...
is
over-indebted ..."). I do not think the change in language
is significant. See
Nedbank
Limited
and
Others
v National
Credit
Regulator
and Another [2011
]
4 All
SA 131 SCA para 2.
7
Nedbank was reflected as having more than one claim against the
consumer.
8
National Credit
Regulator v
Nedbank
Limited and Others
2009 6 SA 295 GNP 306H, 3088 and 310C
9
Nedbank and Others v National Credit Regulator and Another, supra,
para 26
10
Plascon-Evans
Paints
Ltd
v
Van
Riebeeck
Paints
(Pty)
Ltd
1984 3
SA
623 A
634F-635C.
11
Costs was a significant issue in this appeal and I shall have more
to say on this subject later.
12
National
Credit regulator
v Nedbank
Limited and
Others
2009 6 SA 295 GNP 309E
13
Case no A629/2013 in this court decided on 22 August 2013
14
Standard
Bank
of
SA
Ltd
v
Newman
Cape High
Court case no 27771/2001; judgment delivered 15 April 2001
15
2013 3 SA 619 GSJ