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[2014] ZAGPPHC 215
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First Rand Bank Limited v Kona and Another (13136/2012) [2014] ZAGPPHC 215 (7 March 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
Case
No: 13136/2012
Date
heard: 10 February 2014
Date
of judgment: 07 March 2014
In
the matter between:
FIRST
RAND BANK
LIMITED
....................................................................................................
Applicant
and
RANDMOND
CLAYDE
KONA
.........................................................................................
First
Respondent
AMIE
GERTRUDE
KONA
...........................................................................................
Second Respondent
JUDGMENT
PHATUDI
J:
[1]
Van Oosten J (court a quo) granted provisional sequestration
order
[1]
against the joint estate
of the first and second respondents (the respondents). The
respondents were further ordered to show cause
on the return day
[2]
,
why the provisional sequestration order should not be made final.
[2]
The respondents filed an application seeking an order to set aside
the provisional order of sequestration handed down on 08
August 2013
and to dismiss the rule
nisi
issued consequent to the order. The applicant opposes the
application.
[3]
It is common cause that the respondents are indebted to the applicant
for monies lent and advanced by the applicant. Due
to some
financial challenges of life, Alberton Magistrate Court granted an
order, on the respondents application, for a re-arrangement
of debt
review as contemplated in terms of section 86(7)(c) of the National
Credit Act (NCA).
[3]
It is
ordered that the [respondents’]
[4]
obligation to the [applicant’s]
[5]
is rearranged as per annexures
[6]
thereto.
[7]
[4]
On the 20 January 2011, the applicant instituted an action against
the respondents with a view to enforce a debt.
[8]
The
applicants applied for summary judgment for which leave to defend was
granted.
[9]
The action is still
pending.
[5]
On the 03 March 2012, the applicant applied for an order to
sequestrate the respondent’s joint estate. The provisional
sequestration order was granted. The respondents intend to show cause
why the provisional sequestration order should not have been
granted.
They contend that the provisional order granted should not be made
final.
[6]
The respondents submit that the court
a
quo
relied on the
ratio
in
Investec
Bank v Mutemeri
[10]
(Mutemeri)
and
that of
Firstrand
Bank v Evans
[11]
(Evans)
in granting the provisional sequestration. The respondents submit
that their situation is distinguishable from the abovementioned
cases. The respondents submit that in Evans, the Magistrate’s
Court had ordered the re-arrangement on a provisional basis
by way of
a rule
nisi
.
They lastly submit that it is established law that a court order is
legally unassailable until set aside.
[7]
The applicant submits in rebuttal that the respondents’
submissions are without merit in that a debt review and/or a debt
re-arrangement order is not a bar to a sequestration application.
In addition to the decisions relied upon by the respondents,
the
applicant indicates that the Supreme Court of Appeal in
Naidoo
v ABSA Bank Ltd
[12]
(Naidoo)
confirmed and approved the decision in
Mutemeri
where it was stated that ‘sequestration proceedings are not in
and of themselves “legal proceedings to enforce the
agreement”
within the meaning of section 129(1) (b) [of National Credit Act]’
[8]
The applicant further submit that the respondents defaulted by not
complying with the debt re-arrangement order they rely on.
It
is on those bases that the applicant submits that they (applicant),
by virtue of section 88(3) of the National Credit Act, may
proceed
with further enforcement action. Lastly, the applicant refers
to the Constitutional Court decision in
Ferris
v FirstRand Bank Ltd
[13]
(Ferris)
in
submitting that there is no merit in any of the respondents’
contentions.
[9]
It is common cause that the applicant caused issue of summons against
the respondents in exercising their right to enforce a
debt that
arose when the respondents borrowed money from them. The action
has not been finalised since the granting to the
respondents the
leave to defend.
[10]
It can be inferred from the applicant’s papers and submissions
made that the applicant opted to pursue the recovery of
the debt by
way of insolvency proceedings. The applicant demonstrates this by
stating that ‘it was specifically indicated
in the summons that
the Respondents defaulted on their obligation in terms of a
re-arrangement order granted by the Magistrate
Court and due to the
aforesaid Applicant was entitled to enforce its claim by way of
action or application.’
[14]
In
the applicant’s heads of argument and submissions in court
[15]
,
the applicant stated:
‘
I
then proceeded to indicate that’ to [the respondents] that by
virtue of section 88(3) of the National credit Act, the Applicant
may
then proceed with further enforcement action.’
[16]
[11]
The applicant further submits that ‘I demonstrated that an
application for sequestration is not the “enforcement
of a
contract and/or claim”, but indeed an application in order to
declare a debtor insolvent by utilizing the machinery
of the
Insolvency Act. Consequently, the National Credit Act is not
even applicable.’
[17]
[12]
Section 88(3) of the National Credit Act provides:
‘
Subject
to section 86(9) and (10), a credit provider who receives notice of
court proceedings contemplated in section 83 or 85,
or notice in
terms of section 86(4)(b)(i) may not exercise or enforce by
litigation or other judicial process any right or security
under that
credit agreement until:
(a)
The consumer is in default under the credit
agreement; and
(b)
One of the following has occurred:
(i)
An event contemplated in subsection 1(a)
through (c) or
(ii)
The consumer defaults on any obligation in
terms of a rearrangement agreed between the consumer and credit
providers, or ordered
by a Court or the Tribunal.’
[13]
I find it prudent to first determine the meaning of the phrase “other
judicial process” as used in section 88(3)
of National Credit
Act. The phrase “judicial process” is defined as
‘the rule that determines the role
of the judge in a court room
as well as the jurisdiction of the individual courts over definite
areas of law.’
[18]
[14]
It is trite knowledge that sequestrations applications
[19]
“
sui
generis”
as they may seem to be, are initiated by way of motion proceedings in
the High Courts. The applications must comply with
the relevant
requirements of the Insolvency Act.
[20]
The courts
[21]
have the
discretion to grant an application for sequestration
[22]
of a debtor if satisfied that the requirements thereto have been
complied with.
[15]
On the reading of the provisions of section 88(3) of the National
Credit Act, I am unable to agree with the court’s
ratio
in
Investec
Bank Ltd v Mutemeri
[23]
where it is stated that ‘an application by a credit provider
for the sequestration of a consumer does not constitute …
other judicial process by which the credit provider exercises or
enforces any right under the credit agreement between itself and
the
consumer’
[24]
I,
however agree that ‘the credit provider may rely on its claim
in terms of the credit agreement to qualify as a creditor
for the
sequestration
[25]
of the
consumer.’
[16]
In simpler terms, I am of the view that where compulsory
sequestration is sought against a consumer whose obligations has been
re-arranged by
an
order of the magistrate court
[26]
by the time of the application for sequestration is instituted, such
an order of re-arrangement or debt review contemplated in
section
86(7)(c)(ii) constitute a bar against sequestration. Put differently,
the magistrate court order placing the debtor on
debt review or where
the magistrate orders the debtor’s debt re-arrangement as
envisaged in terms of the provisions of section
86(7) (c) (ii) of the
National Credit Act, the credit provider may not exercise or enforce
by litigation or other judicial process
until the magistrate’s
order has been set aside. The words: “other judicial process”
means, in my view, any motion
proceedings including the sequestration
applications.
[17]
The facts in
Ferris
v FirstRand Bank Ltd
[27]
differ materially with the facts in this matter in that in
Ferris
,
the credit provider instituted the action proceedings (litigation) up
to judgment. The credit provider invoked the litigation
process
that enforces a credit agreement. In
casu
,
the litigation proceedings with which the credit provider (the
applicant) instituted is still pending before this court.
It is
difficult to predict what the outcome of the said case would be.
[18]
It is not clear if the applicant instituted the sequestration
proceedings as a means to enforce the action. I infer from
the
applicants submission
[28]
that
the applicant placed in motion the sequestration application to
enforce a debt. It is further not clear as to which process
the
applicant intends to invoke. If the applicant proceeds with the
sequestration application as a tool to enforce the debt,
the
provisions of the NCA must be adhered to.
Can
the magistrate order be set aside by section 86(10)
[19]
The respondents submits that the principle of legality dictates that
the magistrate’s re-arrangement order made in terms
of section
87(1)(b)
[29]
of NCA is a valid
order that stands until set aside
[30]
.
The respondents further submit that such an order cannot be set aside
as envisaged in terms of section 86(10) of the NCA.
[20]
It is trite law that the Magistrate Court Orders are valid until set
aside by a competent court. In my view, the legislature
did not enact
section 86(10) to bypass that principle of legality. The Magistrate
Court Orders cannot in my view be set aside by
a notice envisaged in
terms of section 86(10) of NCA. It is further in my view that section
86(10) provides for termination of
the debt review application
process and not the Magistrate’s Court Order.
[21]
The purpose of the National Credit Act has recently been revisited in
Kubyana
v Standard Bank of SA Ltd
.
[31]
where the court stated that ‘the Act is a legislative effort to
regulate and improve relations between consumers and provider
of
credit. The main purpose is “to promote and advance the
social and economic welfare of South African, promote a
fair,
transparent, competitive, sustainable, responsible, efficient …
and to protect consumers”’
[32]
[22]
The NCA is enacted to assist the consumers who may have fallen in the
pit of debt to recover from their economic recession.
[23]
The applicant instituted an action. The applicant did not succeed to
obtain judgment at summary judgment level. Had the
applicant
succeed with the summary judgment, execution of the respondents’
properties including the house would have been
effected.
Failure to secure such judgment prompted the applicant to approach
the court by way of sequestration without first
applying to set the
magistrate’s order aside. The applicant, in my view, knew or
reasonably expected to know that sequestration
applications, “
sui
generis”
as they may seem to be, will ensure the execution
of the respondents’ house to enforce the debt. The conduct such
as the
applicant’s does not improve relations between consumers
and providers of credit.
[24]
It is trite that costs follow the event. The respondents succeed in
opposing the granting of the final sequestration order
and are thus
entitled to their costs. I thus make the following order:
Order:
1.
The provisional order of
sequestration granted by Van Oosten J on 08 August 2013 is hereby set
aside.
2.
The Rule Nisi is hereby discharged.
3.
The applicant is ordered to pay the
respondents’ costs.
A.M.L.
Phatudi
Judge
of the High Court
On
Behalf of the Applicant: Rorch, Wolmarans & Luderits Inc
Block
C, Equity Park
257
Brooklyn Road
Brooklyn
Pretoria
Adv.
L. Meintjies
On
Behalf of the Respondent: Ledwaba Attorneys
C/O
Phukubye Attorneys
1
st
Floor, Rooms 2 and 3
Lapa
Building
Cnr
Bosman & Visagie Street
Pretoria
Adv.
S.S. Cohen
[1]
Judgment
handed down on 8 August 2013.
[2]
03
October 2013. See order and judgment by Van Oosten J.
[3]
National
Credit Act 34 of 2005
.
[4]
The
respondent is the applicant in the Alberton, debt review
application.
[5]
The
applicant is one of the respondents in that application.
[6]
The
annexures are marked A1 – A9.
[7]
The
order issued on 29/08/2009.
[8]
Summons
issued by this court under case number 3331/2011
[9]
Ibid:
page 507 paragraph 19
[10]
2010(1)
SA (GSJ)
[11]
2011(4)
SA 597 (KZD)
[12]
2010(4)
SA 597 (SCA)
[13]
CCT
52/13
[2013] ZACC 46
(12 December 2013)
[14]
Applicants
Founding Affidavit. Paragraph 29 paginated page 37.
[15]
Adv.
Meintjies represents the applicant
[16]
Applicant’s
Supplementary Heads of Argument: paragraph 7
[17]
Applicants
Supplementary Heads of Argument: Ibid
[18]
www.ask.com
– what is – the – meaning –judicial -
process
[19]
Voluntary
surrender or compulsory sequestration
[20]
Section
3
-
7
in cases of voluntary surrender and
section 8
–
12
in
cases of compulsory sequestration.
[21]
High
Court with a judge presiding
[22]
Either
voluntary or compulsory
[23]
2010(1)
SA 265
[24]
Ibid
paragraph 34
[25]
Ibid
[26]
Section
87(1)
(b) (ii) (my emphasis in bold.)
[27]
CCT52/13
[2013] ZACC 46
[28]
Supplementary
Heads of Argument paragraph 7
:
‘I then proceeded to indicate that by way of virtue of
section
88(3)
of the
National Credit Act, the
Applicant may then proceed
with further enforcement action.
[29]
87
Magistrate's Court may re-arrange consumer's obligations
(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)
…
(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).
[30]
The
respondents rely on V&A Waterfront Properties (Pty) Ltd v
Helicopter & Marine Services (Pty) Ltd & others 2006(1)
SA
252 (SCA).
[31]
CCT
65/13 [2013] ZACC1 (20 February 2014)
[32]
Ibid
paragraph [19]