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[2014] ZAGPPHC 1069
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Van Heerden v Nolte (19428/11) [2014] ZAGPPHC 1069 (28 January 2014)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH GAUTENG, PRETORIA)
CASE NO:19428/11
DATE: 28/01/2014
In the matter between:
FRED
VAN
HEERDEN
Excipient
(Defendant in the main action)
and
CHRISTIAAN
JOHANNES
NOLTE
Respondent
(Plaintiff in the main action)
JUDGMENT
MURPHY J
[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 Selmon
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:
Adv JC Klopper
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)