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[2014] ZAGPPHC 12
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Van Heerden v Nolte (19428/11) [2014] ZAGPPHC 12; 2014 (4) SA 584 (GP) (28 January 2014)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG, PRETORIA)
CASE
NO: 19428/11
DATE: 28 JANUARY 2014
REPORTABLE
OF INTEREST TO OTHER
JUDGES
In
the matter between:
FRED
VAN
HEERDEN
..................................................................................
Excipient
(Defendant
in the main action)
and
CHRISTIAAN
JOHANNES
NOLTE
.........................................................
Respondent
(Plaintiff
in the main action)
JUDGMENT
MURPHYJ
[1]
The
excipient (the defendant) has excepted to the plaintiff’s
particulars of claim on the grounds that they lack averments
necessary to sustain an action in that they fail to allege compliance
with essential provisions of the National Credit Act
[1]
(“the NCA”).
[2]
The
plaintiff alleges in the particulars of claim that the defendants
owes him three amounts arising from various agreements. It
is alleged
that in April 2008 the plaintiff and defendant entered into a written
agreement for the sale of immovable property in
terms of which the
defendant sold the property to the plaintiff for an amount of R700
000. The plaintiff paid the full purchase
price to the defendant and
took occupation of the property. It subsequently became apparent that
the defendant was unable to transfer
the property to the plaintiff
because it had been unlawfully transferred to a close corporation,
Import Export 2020 CC, and was
bonded to a financial institution. The
plaintiff then agreed to advance monies to the defendant to enable
him to repay the amounts
due to the financial institution in order to
allow the property to be transferred to him.
[3]
According
to the particulars of claim, the parties entered into three oral
agreements. In terms of the first, the defendant agreed
to pay
interest on the purchase price of R700 000 calculated at the prime
rate from 25 April 2008 capitalised monthly, in consequence
of which
the defendant owed the plaintiff R249 347,78 as at 30 April 2012. The
second loan, concluded on 15 July 2010, was for
an amount of R467
734,97 and was advanced by the plaintiff to the defendant to pay the
financial institution for the purpose of
cancelling the bond over the
moveable property in order to allow the transfer of the property to
the plaintiff. The defendant agreed
to pay interest on this loan at a
rate of 10% per annum from 10 November 2010 capitalised monthly.
Various amounts were paid by
the defendant in redemption of this loan
with the result that the amount owing on 30 April 2012 was R269
826,34. Finally, on 15
July 2010 the plaintiff advanced the defendant
an amount of R85 964,91 to pay VAT on the transfer transaction, at a
rate of 10%
interest capitalized monthly. The amount owing in respect
of this loan at 30 April 2012 was R101 856,96. The plaintiff claimed
the three amounts separately in his summons on the grounds of the
defendant’s failure to repay the outstanding amounts.
[4]
In
the alternative to these claims the plaintiff sued for an amount of
R632 397,07 plus interest at a rate of 15,5% per annum a
temporae
morae
from 1
September 2010 allegedly owing in terms of an acknowledgement of debt
concluded on 22 July 2010 in terms whereof the defendant
acknowledged
to the plaintiff that he was indebted to the amount of R882 397,07.
It is alleged that the defendant has paid R250
000 of the capital
amount and hence that only the balance claimed by the plaintiff
remains owing
.
[5]
The
defendant’s exception to the particulars of claim raised
various grounds of objection. He however confined himself during
argument to two grounds related to the plaintiff’s alleged
non-compliance with the requirements of the NCA.
[6]
The
first ground of exception is that because the agreements are credit
agreements and the total amount of the principal debt owing
under
them exceeds R500 000, the plaintiff was obliged to make the
allegation in his particulars of claim that he is a registered
credit
provider in terms of the NCA, which he has not done with the result
that the particulars of claim are excipiable.
[7]
It
is common cause that the agreements in question are credit
agreements. The relevant part of section 8 of the NCA reads:
“
(
1)
Subject
to subsection (2), an agreement constitutes a credit agreement for
the purpose of this Act if it is -
(b)
a credit transaction as described in subsection (4) ”
Section
8(4) of the NCA provides:
“
An
agreement, irrespective of its form but not including an agreement
contemplated in subsection (2), constitutes a credit transaction
if
it is -
(f)
any other agreement, other than a credit facility or credit
guarantee, in terms of which payment of an amount owed by one person
to another is deferred, and any charge, fee or interest is payable to
the credit provider in respect of -
(i)
the
agreement; or
(ii)
the
amount that has been deferred.”
[8]
Accepting
that the agreements are credit agreements, the plaintiff is
accordingly a credit provider as defined in section 1(h) of
the NCA
which defines a credit provider as “the party who advances
money or credit to another under any other credit agreement”.
[9]
At
issue for the purpose of determining the exception is whether the
plaintiff was obliged to register as a credit provider. Section
40(1)
of the NCA provides:
“
A
person must apply to be registered as a credit provider if -
(a)
that
person, alone or in conjunction with any associated person, is the
credit provider under at least 100 credit agreements, other
than
incidental credit agreements: or
(b)
the
total principal debt owed to that credit provider under all
outstanding credit agreements, exceeds the threshold prescribed
in
terms of section 42(1) ”
The
Minister set the threshold at R500 000 in Government Gazette No.
28893 on 1 June 2006.
[10]
The
plaintiff has argued that while the total principal debt owed to him
under the outstanding credit agreements exceeds R500 000
he was not
obliged to register as a credit provider under section 40(1) because
he is not a person who frequently provides credit.
The submission is
to the effect that the purpose of the NCA is to regulate the credit
providing industry and the credit market
and hence that section 40 is
directed exclusively at persons who engage regularly in the provision
of credit to consumers and not
at “once-off”
transactions, as in the present case where an individual purchases
immovable property from another individual.
[11]
In
support of this submission, counsel for the plaintiff relied on the
unreported decision of a Full Court of this division in
Friend
v Serdall
[2]
in
which Legodi J held that section 40(1 )(b) of the NCA “must be
seen as having been directed at those who are in the credit
market or
industry or at those who intend to participate in the credit market
and/or industry”. In reaching this conclusion
the learned judge
had regard to section 40(2)(a) of the NCA which provides that in
determining whether a person is required to
register as a credit
provider the provisions of section 40(1) “apply to the total
number and aggregate principal debt of
credit
agreements
in
respect of which that person, or any associated person, is the credit
provider” and concluded that section 40(1) did not
apply to
once-off loans or to a single credit agreement which exceeds the
threshold.
[12]
While
I appreciate the pragmatism of the underlying idea that it may be
socially and economically imprudent to regulate lending
to the extent
that all loans above R500 000 will be illegal unless the lender is
registered, the interpretation, in my respectful
opinion, is
strained. The intention and purpose of section 40(1) of the NCA is to
require credit providers, who make more than
100 loans or who lend
more than R500 000, to register. The intention of the legislature
appears from the plain and unambiguous
language of section 40(1 )(b).
In terms of that provision, it is the total amount of the principal
debt which is relevant. The
reference to “all outstanding
agreements” does not evince an intention to exclude a single
agreement in excess of R500
000. It is linguistically permissible to
consider an amount owing under a single agreement as being the
principal debt owed under
“all outstanding agreements”.
If there is only one transaction then it will constitute “all”
of the outstanding
agreements. Section 40(1 )(a) regulates the
position from the perspective of the number of agreements, while
section 40(1 )(b)
is intended to govern the position with regard to
the total capital advanced by any provider.
The
fact that such a policy may be unwise and stifling of economic
activity for small and medium enterprises is in itself insufficient
reason for a court to strain the meaning of the provision to offer
exemption to single transactions above R500 000. If the total
principal debt exceeds R500 000, in my view, the Act requires the
credit provider to register.
[13]
Considering
that the
Friend
decision
is a judgment of the Full Court of this division, as a single judge I
would normally be bound by it, despite my reservations
about its
correctness. However, it would seem to me that the
ratio
decidendi
in
Friend
is
limited to a finding that the requirements of section 40(1) do not
apply to single credit agreements with a principal debt exceeding
R500 000. In the present case, the main cause of action is
constituted by two (or perhaps three) credit agreements with an
aggregate
principal debt exceeding R500 000. Thus, even were the
ratio
in
Friend
correct,
the exemption there laid down would not apply to the plaintiff in
this case; coincidentally demonstrating its somewhat
arbitrary reach,
namely that one agreement will suffice for exemption, but not two,
irrespective of the total principal debt of
the single agreement - a
single agreement of R10 million will be exempt while two agreements
making up R500 000 will not.
[14]
In
any event, the
ratio decidendi
in
Friend
is
inconsistent with the approach taken by the Constitutional Court in
National Credit Regulator v
Opperman and others
,
[3]
handed
down in December 2012, three months after the Full Court handed down
its judgment in
Friend.
The
basic facts in
Opperman
are
not dissimilar to those in the present case. Opperman had lent his
friend a total amount of R7 million under three separate
credit
agreements. The Constitutional Court found that he had been obliged
to register as a credit provider despite the facts that
he was not in
the business of providing credit, was unaware of the requirement to
register as a credit provider and had no intention
of violating the
NCA. It held further that Opperman was required to register as a
credit provider because the “total principal
debt exceeded the
R500 000 threshold prescribed in terms of section 42(1) of the
NCA”
[4]
[15]
In
the result, the plaintiff was indeed obliged to register as a credit
provider in terms of the NCA before extending credit and
making a
loan with an aggregate principal debt in excess of R500 000. Section
40(3) of the NCA provides that a person who is required
to be
registered as a credit provider, but who is not so registered, must
not offer, make available or extend credit, enter into
a credit
agreement or agree to do any of those things. In terms of section
40(4) of the NCA, a credit agreement entered into by
a credit
provider who is required to be registered but who is not registered
is an unlawful agreement and void to the extent provided
for in
section 89. In terms of section 89(2)(d), a credit agreement is
unlawful if at the time the agreement was made the credit
provider
was unregistered and the Act required the credit provider to be
registered. In terms of section 89(5)(a) if a credit agreement
is
unlawful in terms of section 89 it is void as from the date the
agreement was entered into.
[16]
It
follows that when an unregistered credit provider who is required to
be registered lends money to a consumer he or she will have
no
contractual cause of action and will be obliged to sue the consumer
under the law of unjustified enrichment, by means of the
condictio
ob turpem vel iniustam causa,
to
recover the money.
[17]
In
light of the legal position, the defendant has contended that where a
plaintiff sues contractually to recover money owing under
a credit
agreement, and the principal debt is in excess of R500 000, he or she
is obliged to make the allegation in his or her
particulars of claim
that he or she is registered as a credit provider. I agree. The
failure to plead such facts renders the summons
excipiable for want
of necessary averments on which to found a contractual cause of
action. This is not a matter that should be
left for evidence at
trial. Registration as a credit provider is an essential allegation
in an action on a credit agreement with
a principal debt in excess of
R500 000, in the absence of which the particulars fail to disclose a
cause of action. It is procedurally
appropriate to take the exception
at this stage, which in the event of the plaintiff not being able to
make the allegation will
most probably result in the dispute between
the parties being properly ventilated in pleadings sustaining an
action based on the
law of unjustified enrichment.
[18]
A
similar approach was followed in
IS
and GM Construction CC v Tunmer,
[5]
and
Tyrone Seimon Properties (Pty) Ltd
v Phindana Properties 112 (Pty) Ltd
[6]
where
exceptions were upheld on the ground that the particulars of claim
did not disclose a cause of action in that the plaintiffs
had failed
to allege compliance with the provisions of protective legislation
which visited non-compliance with the sanction of
nullity.
[19]
The
particulars of claim are also excipiable on the grounds that they do
not allege compliance with section 129 of the NCA other
than in
relation to the alternative cause of action based on the
acknowledgement of debt. If the agreements are credit agreements,
then the averments in the particulars of claim must include
allegations that the plaintiff has complied with the provisions of
section 129 and 130 of the NCA, which permit a credit provider to
enforce an agreement only once alternative procedures have been
pursued.
[20]
In
the premises, the following orders are made:
i)
The
exception is upheld with costs.
ii)
The
plaintiff is afforded the opportunity to amend his particulars of
claim within 20 days of this order failing which the defendant
is
granted leave to apply for dismissal of the action.
JR
MURPHY
JUDGE
OF THE HIGH COURT
NORTH
GAUTENG
Representation
for the excipient/defendant:
Counsel:
Adv HF Oosthuizen
Instructed
by Attorneys: Froneman Roux & Streicher
Representation
for respondent/plaintiff:
Counsel:
AdvJCKIopper
Instructed
by Attorneys: Van Greunen & Associates
[1]
Act 34 of 2005
[2]
(Case No. A973/2010 - 3 August 2012).
[3]
2013 (2) BCLR 170 (CC)
[4]
Para 4 and 8.
[5]
2003 (5) SA 218 (W)
[6]
[2006] 1 All SA 545
(C)