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[2014] ZAGPPHC 523
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Independent Plumbing Suppliers (Pty) Ltd v Thomas Classen t/a TPC Plumbing (5191/2010) [2014] ZAGPPHC 523 (13 June 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION PRETORIA
CASE NR:
5191/2010
DATE: 13 JUNE
2014
REPORTABLE
NOT OF INTEREST
TO OTHER JUDGES
In the matter
between:
INDEPENDENT
PLUMBING SUPPLIERS (PTY)
LTD
..........................................................
PLAINTIFF
and
THOMAS CLASSEN
t/a TPC
PLUMBING
...........................................................................
DEFENDANT
JUDGMENT
MULLER
AJ:
[1]
Plaintiff instituted action for the recovery of R822 287-87 plus
interest at a rate of 15,5% per annum
1
a
tempore
morae
from
3 February 2010, together with costs on a scale as between attorney
and client, in respect of goods sold and delivered to defendant
during the period March to November 2009, in terms of a number of
oral agreements of purchase and sale.
[2] Defendant raised
three interrelated special pleas. I was requested to first adjudicate
the special pleas before embarking upon
a determination on the
merits. I made such an order in terms of Rule 33(4).
[3] The first
special plea is premised on the assertion that the terms of a written
credit application concluded between plaintiff
and defendant amounts
to a “credit facility” as contemplated by s 8(3) of the
National Credit Act 34 of 2005 (hereinafter
referred to as “the
NCA”). The contention is that the agreement is unlawful and
null and void for want of registration
by plaintiff as a credit
provider.
[4] In the second
special plea, it is contended that plaintiff has failed to deliver
the requisite notice to defendant as contemplated
by s 129 read with
s130 of the NCA, before institution of the action, if the agreement
is found to be an incidental credit agreement.
[5] In the third
special plea it is asserted that the agreement constitutes reckless
credit as envisaged by s 80(1) of the NCA,
because credit was
extended to defendant in terms of the written agreement without any
assessment of his financial position as
required by s 81(2).
[6] It was common
cause at the trial:
6.1 that plaintiff
is not a registered credit provider as required by s 40 of the NCA.
6.2 that no
assessment of defendant’s financial position has been made
before the parties entered into the agreement;
6.3 that no notice
in terms of s 129 read with s 130 has been served upon the defendant.
[7] No evidence was
adduced by either party and having considered the arguments advanced,
I made the following order:
“
1.
The second special
plea is upheld with costs;
2.
The first and
third special pleas are dismissed;
3.1
It is ordered that in terms of
s 130(4)(b)(i)
of the
National Credit
Act 34 of 2005
, that the action be adjourned sine die
;
3.2 Plaintiff is
directed in terms of
s 130(4)(b)(ii)
to deliver a notice as envisaged
by
s 129(1)
of the
National Credit Act to
defendant at 110B Highroad
Eastleigh;
4. Plaintiff may
not set the action down until it has:
4.1 complied with
the order set out in paragraph 3.2;
4.2 complied with
the provisions of
s 130(1)(a)
of the
National Credit Act&rdquo
;.
[8] I intimated that
I will advance reasons for the order in due course. These are my
reasons.
[9]
When called upon to identify whether the transaction relied upon by
plaintiff is a credit facility or an incidental credit agreement
as
defined by the NCA, regard to the provisions of the statute, as well
as the nature and substance of the transaction, rather
than the
object or form of the agreement, have to be taken into account.
2
The purpose of the NCA, amongst others, is to promote, protect and
advance the social and economic welfare of all in the credit
market
and improve relations between consumers and credit providers.
3
The NCA, predominantly, has the protection of consumers in mind, but
also seeks to promote an effective, sustainable and efficient
credit
industry and must be holistically understood and interpreted within
the relevant framework of constitutional rights and
norms.
4
[10]
The statute must therefore be interpreted with due regard to its
purpose and within its context.
5
The clear language and ordinary meaning of the instrument to be
interpreted may not be discarded.
6
A statutory provision should, if possible, be construed in such a way
that effect is given to every word so that no word, clause
or
sentence if it can be prevented, be construed as superfluous. If any
uncertainty in a provision can be resolved by an examination
of the
language used in its context there is no rule of interpretation which
requires that effect be given to a construction which
is found not to
be the correct one merely because the construction will be less
onerous on the subject.
7
Any doubt as to the meaning of a statutory provision which imposes a
burden, should be resolved by construing the provision in
a way which
is more favourable to the subject, provided that the provision is
reasonably capable of such a construction.
8
In
Bothma-Batho
Transport v S Bothma & Seun Transport
9
the Supreme Court of Appeal summarised the current state of our law
in regard to the interpretation of documents and legislation
with
reference to the decision in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
:
10
'Over
the last century there have been significant developments in the law
relating to the interpretation of documents, both in
this country and
in others that follow similar rules to our own. It is unnecessary to
add unduly to the burden of annotations by
trawling through the case
law on the construction of documents in order to trace those
developments. The relevant authorities are
collected and summarised
in Bastian Financial Sen/ices (Pty) Ltd v General Hendrik Schoeman
Primary School. The present state of
the law can be expressed as
follows: Interpretation is the process of attributing meaning to the
words used in a document, be it
legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading the particular provision
or provisions in the light of the
document as a whole and the circumstances attendant upon its coming
into existence. Whatever
the nature of the document, consideration
must be given to the language used in the light of the ordinary rules
of grammar and
syntax; the context in which the provision appears;
the apparent purpose to which it is directed and the material known
to those
responsible for its production. Where more than one meaning
is possible each possibility must be weighed in the light of all
these
factors. The process is objective, not subjective. A sensible
meaning is to be preferred to one that leads to insensible or
unbusinesslike
results or undermines the apparent purpose of the
document Judges must be alert to, and guard against, the temptation
to substitute
what they regard as reasonable, sensible or
businesslike for the words actually used. To do so in regard to a
statute or statutory
instrument is to cross the divide between
interpretation and legislation; in a contractual context it is to
make a contract for
the parties other than the one they in fact made.
The
'inevitable
point of departure is the language of the provision itself
,
read
in context and having regard to the purpose of the provision and the
background to the preparation and production of the document.
(footnotes
omitted).
[11]
For an understanding on how the parties conducted themselves,
cognisance must be taken of the salient facts pleaded by plaintiff
in
the particulars of claim. They are:
“
3
That on 16 November 2007 and at Edenvale Defendant personally signed
a Credit Application form in terms whereof:
3.1 Plaintiff
would sell and deliver goods to Defendant and grant credit facilities
to the Defendant for payment of the goods sold
and delivered, at
agreed prices, alternatively Plaintiffs prevailing prices.
3.2 if any amount
was not paid within thirty (30) days of statement, Defendant would be
liable to pay interest at the maximum rate
permitted by law from time
to time.
3.3 the Defendant
would be liable for cost on the attorney and client scale.
3.4 a copy of the
Credit Application form is annexed hereto as Annexure “A”
the tenns and conditions to be incorporated
in the particulars of
claim.
3.5 in terms of
Section 5(2)
of the
National Credit Act No 34 of 2005
an incidental
credit agreement is deemed to be made twenty (20) business days after
inter alia the supplier of the goods first
charges late payment fee
or interest in respect of the account
3.6
The Plaintiff waives the right to charge or claim a late payment fee
or interest Accordingly
;
the provisions of
the
National Credit Act No 34 of 2005
are not applicable to annexure
“A”. The plaintiff claims interest a tempore morae in
terms of the Prescribed Rate of
Interest Act
”
[1
2]
Annexure
“A”
inter
alia
contains
the following relevant clauses:
12.1
"The Buyer
acknowledges that the purchase price is payable within thirty days
from the date of statement, which date will be
the last day of each
succeeding month during which a particular delivery
was
made
.”
(clause 3)
12.2
“
Ownership
in the goods sold and delivered to the Buyer on account shall pass to
the Buyer only when all amounts due by the Buyer
to the Supplier has
been paid, notwithstanding delivery of the goods to the Buyer. Risk
in and to the goods shall however pass
to the Buyer on delivery.
"
(clause 8).
12.3
“
In the
event of the Supplier or his agents instructing attorneys to collect
from the Buyer an amount owing to the supplier the Buyer
agrees to
pay all cost on a scale as between attorney and own client including
collection commission and tracing charges.
"
(clause 13).
12.4
In
the event of the
Supplier or its agent instructing a debt collector to collect from
the buyer an amount owing to the supplier, the
Buyer agrees to pay up
to 10% collection commission. ”
(clause
14).
12.5
“
A
certificate under the hand of any director or manager or the Suppiier
(whose appointment need not be proved)as to the existence
and the
amount of the Buyers indebtedness and the surety's indebtedness to
the Supplier at any time, as to the fact that such amount
is due and
payable, the amount of morae interest accrued thereon, and as to any
other fact, the matter or thing relating to the
Buyer's indebtedness
to the Supplier and the surety's indebtedness to the Supplier shall
be sufficient and satisfactory proof of
the contents and the
correctness thereof for the purpose of provisional sentence, summary
judgment or any other proceedings of
whatsoever nature against the
Buyer and/or the surety in any competent court shall be valid as a
liquid document for such purpose
”
(
clause
32)
[13] The credit
application form records the anticipated monthly purchases as R600
000-00.
[14]
A plain reading of the written application for credit that embodies
the agreement
11
reveals
that the parties entered into a binding arrangement that the terms
and conditions of the written credit application will
govern future
contracts of purchase and sale of goods on credit between them.
12
They also conducted their business with each other on that basis.
[15]
To determine whether the NCA is applicable to their agreement the
starting point is the provisions of s 8(1). An agreement
constitutes
a credit agreement if it is:
13
(i) a credit facility;
14
(ii) a credit transaction;
15
(iii) a credit guarantee;
16
(iv) any combination of (i) to (iii) above. To established whether
the agreement is a “credit facility” or a “credit
transaction” the content of the agreement needs to be tested
against the definition of, firstly a credit facility defined
in s
8(3), and secondly, with regard to a credit transaction, the
provisions of s 8(1 )(b) read with s8(4)(b).
[16]
A credit facility is defined in s 8(3) as
“
an
agreement
;
irrespective of
its form, but not including an agreement contemplated in subsection
(2) or subsection 4(6)(b), constitutes a credit
facility if, in terms
of that agreement-
(a) a credit
provider undertakes -
(i) to supply
goods and sen/ices or to pay an amount or amounts, as determined by
the consumer from time to time, to the consumer
or on behalf of, or
at the direction of, the consumer; and
(ii)
either to
-
(aa) defer the
consumer's obligation to pay any part of the cost of goods or
services, or to repay to the credit provider any part
of an amount
contemplated in subparagraph (i); or
(bb) bill the
consumer periodically for any part of the cost of goods or services,
or any part of an amount contemplated in subparagraph
(1); and
(b)
any charge, fee or interest is payable to the credit provider in
respect of
-
(i) any amount
deferred as contemplated in paragraph (a)(ii)(aa); or
(ii) any amount
billed as contemplated in paragraph (a)(ii)(bb) and not paid within
the time provided in the agreement
[17]
I am satisfied, after considering the terms of the agreement, that it
does not satisfy the requirements of a credit facility.
17
Importantly, the parties did not agree to defer the obligations of
defendant to pay only part of the goods or to pay any charge,
fee or
interest in respect of the amount so deferred. The parties,
furthermore, also did not agree that plaintiff may bill defendant
for
part of the purchase price of the goods purchased.
18
[18] I turn now to
establish whether the agreement is a “credit transaction”
as envisaged by s 8(4)(b) which states
that an agreement,
irrespective of its form, but not including an agreement contemplated
in subsection (2) constitutes a “credit
transaction” if
it is an incidental agreement, subject to s 5(2).
[19]
An incidental credit agreement is novel statutory creation by the NCA
that hitherto was unknown to South African law
19
and takes a prominent place in the statutory frame work of the NCA.
20
An incidental credit agreement is defined in s1 and is:
“
an
agreement, irrespective of its form, in terms of which an account was
tendered for goods or sen/ices that had been provided to
the
consumer, or goods or sen/ices that have been provided to the
consumer, or goods or services that are to be provided to a consumer
over a period of time and either or both of the following conditions
apply:
(a)
a fee
,
charge or interest
became payable when payment of an amount charged in terms of that
account was not made on or before a determined
period or date; or
(b)
two prices were quoted for settlement of the account
;
the lower price
being applicable if the account is paid on or before a determined
date
,
and the higher
price being applicable due to the account not having been paid by
that date".
(I
do not propose to deal with para (b) in the context of the facts
before me).
[20]
Ms Cirone, counsel for defendant, was unable to refer me to any
clause in the agreement dealing specifically with the obligation
to
pay interest.
21
She has drawn my attention to clause 32 of the written agreement and
suggested, albeit faintly, that the clause makes provision
for
interest to be charged. The contention cannot be upheld. Although
reference is made to
more
interest
in clause 32, the purpose of the said clause is to facilitate proof
of the amount due by means of a certificate issued
by a director or
manager of plaintiff. In any event, the clause makes no provision for
payment of interest on any amount deferred,
or that interest is
payable if the amount charged in terms of an account has not been
paid before a determined date.
[21]
However, provision is made for payment of collection commission and
tracing charges.
22
Defendant, in addition, also agreed to pay collection commission up
to 10% if plaintiff employs a debt collector to recover from
defendant any amount owing to plaintiff
23
[22]
The agreement, in my judgment, is an incidental credit agreement,
because of the inclusion of the provisions that allow for
the
charging and recovery of collection costs and collection commission,
both of which are, in my view, fees or charges that are
permissible
in terms of s 5(3)(a) when payment of the amount charged in terms of
the account is not made on or before the determined
date. The absence
of a provision that allows for interest to be charged by the supplier
makes no difference. The agreements of
purchase and sale on credit,
as pleaded by plaintiff, qualify to be incidental credit agreements
as defined.
24
[23]
For an agreement to be a “credit transaction” as
envisaged in s 8(4)(b) it has to be an incidental credit agreement,
s
5(4)(b) states that an agreement, irrespective of its
form...constitutes a credit transaction if it is an incidental
agreement,
subject to 5(2). The phrase “subject to s 5(2)”
in s 8(4)(b must be given effect to.
25
(“onderworpe wees aan” in Afrikaans.) On a proper
interpretation of s 8(4)(b) a “credit transaction” can
only be constituted when the deeming provision in s 5(2)(a) is
invoked by a supplier.
26
On a proper interpretation of s 8(4)(b) and s 5(2) a “credit
transaction”and thus a credit agreement is constituted
20
business days after the date an incidental credit agreement is deemed
to have been concluded.
[24]
s 5(1) provides that certain provisions of the NCA are specifically
applicable to an incidental credit agreement.
27
The heading of s 5 reads:
“
Limited
application of Act to incidental agreements”
28
If
it was the intention of the legislature to make the provisions of s
5(1)(a)-(e) and (g), applicable to an incidental credit agreement
once the agreement is deemed to have been made on a future date, in
terms of s 5(2), it could have said so in clear language. It
would
not have been necessary to single only s 5(1 )(f) out to come into
operation once s 5(2) is invoked by a supplier.
It
follows, therefore, that s 5(1)(a)-(e) and (g) apply to the
incidental credit agreements that were concluded.
29
[25] s 5(1 )(f)
makes it clear that Chapter 5, (Parts D and E) apply to an incidental
agreement, once the incidental agreement is
deemed to have been made
in terms of section 5(2)(a). The phrase “once the incidental
agreement is deemed to have been made
in terms of subsection
(2),
”
clearly conveys that the NCA has in mind that
the provisions of Chapter 5 (Parts A and E) will be added to the
provisions of s 5(1)(a)-(e)
and (g) that are applicable to an
existing incidental credit agreement from the date that incidental
agreement is deemed to have
been made in terms of s 5(2).
[26]
Following on s 5(1) are the provisions of 5(2) that commence with the
introductory words: “The parties to an incidental
credit
agreement are deemed to have made that agreement...” The words
imply that s 5(2) applies to an incidental credit agreement
that has
been concluded prior to the date on which the supplier first charges
interest or a late payment fee.
30
I find support for my view in the wording of s 5(1)(f) itself.
[27]
s 5(2) has the effect if goods were sold and supplied in terms of an
agreement of sale and purchase on credit on a determined
date and the
credit provider has charged a late payment fee and interest when
payment was not made on the deferred date, the date
when the
agreement was concluded is deemed to have been concluded on a date
twenty business days after plaintiff first charged
a late payment
fee. However, the date on which the credit provider first charged
interest or a late payment fee remains unchanged
as the deeming
provision has no effect on that date. It means that the credit
provider has charged interest or a late payment fee
on an incidental
credit agreement deemed to have been concluded on a date in the
future.
31
The absurdity of what the deeming provision accomplishes is
apparent.
32
[28] The legislature
accepts, so it appears, that an incidental credit agreement has
indeed been concluded for the agreement to
be deemed to have been
concluded twenty days hence. Thus the date of that agreement cannot
have real importance. What becomes relevant
is the date on which
payment should have been made as well as the date that the late
payment fee or interest is first charged.
On the latter date Chapter
5 (Parts D and E) comes into operation in terms of s 5(1 )(f)
alongside the provisions of s 5(1)(a)-(e)and
(g). I am not required
to make any finding with regard to s 5(2) for purposes of this
judgment. Counsel also did not address me
on the topic.
[29]
It is important to note that the deeming provision of s 5(2) only
comes into operation when a “supplier” of the
goods or
services, first charges a “late payment fee” or
“interest” that are subject to that account. The
expression “supplier* and “late payment fee” as
well as “interest” are not defined in the NCA. s
5(2)(a)
refers specifically to “a supplier" and not to “a
credit provider”. But, be that as it may, from
the context of
the definition of “credit provider” and the purpose of s
5(2)(a), “supplier” includes a
“credit provider”
that supplies goods or services.
33
[30]
The effect of s 5(2) coming into operation is threefold. Firstly, the
date of the particular incidental credit agreement is
deferred with s
5(3) becoming applicable to the transaction. Secondly, Chapter 5,
(Consumer Credit Agreements) Part D (statements
of account) and Part
E (alteration of credit agreements) becomes operative on the deemed
date in terms of s 5(1 )(f). Thirdly,
and most importantly, the
incidental credit agreement constitutes a “credit transaction”
34
and a “credit agreement”
35
on the deferred date.
[31]
s 4(1) states that, subject to s 5 and 6, the NCA is applicable to
every credit agreement between parties dealing at arm’s
length
and made in, or having effect within the Republic. The phrase must
therefore be interpreted that the NCA, subject to each
of the
provisions of s 5(1), 5(2), s 5(3) and s 6 being taken into account,
is applicable to every credit agreement. The same reasoning
accorded
to the interpretation of the phrase “subject to s 5(2)”
in s 8(4)(b) should be adopted to give meaning to
the words “subject
to s 5 and 6”. In my view the purpose of the words “subject
to s 5 and 6” are to make
the NCA applicable to an incidental
credit agreement to the extent provided for in s 5(1)(a)-(e) and (g).
The subsection applies
to an incidental agreement, so it says
unambiguously. Nothing in the whole of s 5 indicates that s 5(1) is
subject to s 5(2) coming
into operation. Once s 5(2)(a)
36
comes into operation, both a credit transaction and a credit
agreement as contemplated by s 8(1) are constituted.
37
At
the same time, the provisions of Chapter 5 (Part D and Part E) also
comes into operation by means of section 5(1 )(f). Chapter
5, Part D,
on the one hand, deals with statements of account, and Part E, on the
other, with amendments to credit agreements as
well as reductions and
increases to credit limits.
38
[32]
s 6 stipulates that certain provisions of the NCA do not apply to a
credit agreement or “proposed credit agreement”
in terms
of which the consumer is a juristic person.
39
[33]
A late payment fee is that fee or charge that a “person”
is allowed to claim in terms of the provisions of s 101
(d)(f) and
(g) in terms of s 5(3)(a).
40
s 101, also applies to incidental credit agreements by virtue of s
5(1 )(e). In terms of the introductory words of s 5(3) “a
person” may charge or recover a fee, or interest in respect of
a deferred amount under an incidental credit agreement as
provided
for in s 101(d), (f) and (g). “Person” is not defined in
the NCA. The meaning of “a person,”
41
includes a “credit provider” as defined and is no doubt,
not confined to a “supplier” The fees, charges
or
interest that a “person” may charge are subject to the
maximum rates of interest or fees imposed in terms of s 105,
or in
respect of an unpaid amount contemplated in para (a) of the
definition of an “incidental credit agreement” only
if
the credit provider has disclosed, and the consumer has accepted the
amount of such a fee, charge, or interest, or the basis
on which it
may become payable on or before the date on which it may become
payable or on or before the date on which the relevant
goods were
supplied
42
[34]
Collection costs as defined in s 1: “
means
an amount that may be charged by a credit provider in respect of
enforcement of a consumer's monetary obligations under a
credit
agreement
;
but
does not include a default administration charge".
43
In
my view collection costs includes commission and other costs
(excluding an administration charge) incurred by plaintiff in
enforcing
defendant’s obligation to pay the purchase price for
the goods purchased in terms of their contract, provided that the
collection
costs do not exceed the maximum amount allowed.
44
[35]
s 5(2) will not in all circumstances come into operation. It cannot
come into operation if a credit provider (or supplier)
waived its
right to claim a late payment fee or the right to interest, or sues
for the outstanding capital amount of goods sold
and supplied to a
consumer without charging a late payment fee or interest at all. In
such an event an incidental credit agreement
is neither a credit
transaction, as contemplated by s 8(4)(b), nor is it a credit
agreement, as envisaged by s 8(1 )(b), but the
NCA has,
notwithstanding, limited application in terms of s 5(1)(a)-(e) and
(
g
).
[36]
When a consumer pays its obligations to the supplier on or before the
pre-determined date the incidental credit agreement is
similarly,
also not, for the reasons stated above, a credit transaction as
contemplated by s 8(4)(b). If a consumer extinguishes
its
indebtedness after the supplier first charged a late payment fee or
interest, but before of the expiry of the twenty business
days
period, the agreement, although an incidental agreement, is not
constituted as a credit transaction as contemplated by s 8(4)(b)
or
credit agreement as contemplated by s8
(
1
).
[37]
I return to the pleadings. Plaintiff has pleaded that an incidental
credit agreement is deemed to have been entered into between
the
parties. Plaintiff therefore, as a consequence, accepts that the
agreement is a credit transaction by virtue of the deeming
provision
of s 5(2).
45
And, by a parity of reasoning, that a credit agreement to which the
NCA applies has come into being.
46
These assertions are conclusions of law to which I am not bound.
[38]
Plaintiff also pleaded that it waived its right to charge or claim a
late payment fee or interest in respect of the account
resulting, so
it is pleaded, that the provisions of the NCA are not applicable to
the incidental credit agreement. Ironically,
it is common cause that
plaintiff calculated interest and included the interest in the amount
claimed in the summons
47
The allegations in the particulars of claim and the actual inclusion
of interest in the amount claimed are difficult to reconcile.
In
addition, plaintiff claims interest a
tempore
morae
in
terms of the
Prescribed Rate of Interest Act of 1975
.
48
If a supplier charges interest or a late payment fee when the parties
have neglected to include or when they deliberately excluded
a term
from their agreement that entitles the supplier to claim interest, a
fee or a charge, such an agreement is not an incidental
agreement and
cannot be transformed into an incidental credit agreement by charging
mora
interest
in terms of the Prescribed Interest Rate Act of 1975.
49
[39]
A credit provider is not entitled to claim
mora
interest
in terms of the Prescribed Interest Rate Act of 1975 in respect of an
incidental credit agreement.
50
I
must, in this regard, again refer to
JMV
Textiles (Pty) Ltd v De Chalain Spareinvest 14 CC
51
The
agreement in that case allows for interest to be charged at a rate of
2% per month in terms of clause 4.3 of the applicable
standard terms
and conditions, if the purchase price is not paid timeously.
52
Wallis J made no reference to the provisions of s101(1)(d) that is
applicable to an incidental agreement and which prescribe that
interest must be expressed in percentage terms as an annual rate and
he also did not refer to regulation 42 that prescribes the
permissible maximum interest rate that may be claimed.
53
The learned Judge suggested however, that the
Prescribed Rate of
Interest Act of 1975
54
is applicable to an incidental credit agreement if it is silent on
the entitlement of the supplier to charge a fee, charge or
interest.
55
1
respectfully disagree. Unless provision is made for an entitlement to
claim a fee, charge or interest, as required by the definition
of an
incidental credit agreement, the agreement is not an incidental
credit agreement.
56
If an agreement is silent on the issue of an entitlement to interest
if payment is not forthcoming on the determined date, no demand
is
necessary, because in that event
mora
interest
automatically attaches to the debt by operation of law.
57
[40]
I respectfully disagree with Bhikha AJ in
Voltex
(Pty) Ltd v SWP Projects CC and Another
58
that interest is payable as damages in consequence of breach of the
agreement. The inclusion of the clause that entitles the supplier
to
claim interest if the debt is not paid on or before the expiry of the
determined period brings the agreement into the definition
of an
incidental credit agreement. It matters not that the provision states
that interest may be claimed on all overdue sums or
amounts in terms
of the Usury Act. That statute has been repealed by the NCA. Interest
must therefore be claimed under the NCA
for the reasons that I
alluded to.
59
[41]
The fact that plaintiff has waived certain rights flowing from their
contract of purchase and sale on credit does not detract
from the
nature of the agreement as an incidental credit agreement. I cannot
accept that an unscrupulous credit provider or supplier
can change
the nature of the agreement by selectively waiving rights to
circumvent the provisions of the NCA or to make the agreement
more
favourable towards the credit provider. An agreement which satisfies
(when it is concluded) the requirements of an incidental
credit
agreement, is and it will remain such an agreement throughout.
60
[42] The parties
agreed to collection commission and collection costs being charged.
Plaintiff elected to waive the right to claim
a late payment fee and
also waived a purported right to claim interest. Plaintiff can only
waive a contractual right if it has
such a right. No right to
interest was established. The purported waiver of the right to claim
interest is, therefore, without
force and effect, as it amounts to
waiver of a non-existing contractual right. By waiving the right to a
late payment fee, plaintiff
is unable to invoke s 5(2).
[43]
Mr Mulligan accepted, during argument, that s 129 and 130 are
applicable if the agreement is found to be an incidental credit
agreement, but contended that it will serve no apparent purpose to
adjourn the action to allow plaintiff to comply with the provisions
of s 129. To insist upon such written notice when both parties are
legally represented and present in court, so the argument went,
will
be a waste of time and costs. The argument is rejected outright.
Compliance with s 129(1) is a substantive prerequisite for
the valid
institution of legal proceedings on a credit agreement or an
incidental credit agreement to which the NCA is applicable.
61
The constitutional court in
Sebofa
and Another supra
62
ruled
clearly that the provisions of s 129(1 )(b)(i) precludes the
commencement of legal proceedings to enforce a credit agreement
unless notice is first given to the consumer
63
It is common cause that no such notice was served upon the defendant.
In the premises, I
granted the order set out in this judgment.
GC
MULLER
ACTING JUDGE OF
THE HIGH COURT
Date delivered: 13
June 2014
Date heard: 24 April
2014
Counsel for
Plaintiff: Advocate S Mulligan
Attorneys for
Plaintiff: Mark W Nixon Attorneys.
Pretoria.
Counsel for
Defendant: Advocate P Cirone
Attorneys for
Defendant: Gavin Mostert Attorneys.
c/o
Wehmeyers Attorneys Pretoria
1
The Minister of Justice and Constitutional Development gave notice
in terms of
s 1
(2) of the
Prescribed Rate of Interest Act 55 of
1975
of a contemplated reduction of the prescribed
mora
rate of interest from 15,5% to
9,0% per annum as from 1 May 2014 but has failed to implement the
amendment. See Government Gazette
No 37454 dated 19 March 2014.
2
Bridgeway
Limited v Markham
[2008] ZAGPHC 251
;
2008
(6) SA 123
(W) at 126;
Renier
Nel Inc and Another v Cash on Demand (KZN) (Pty) Ltd
2011
(5) SA 239
(GSJ) at para 20.
3
s
3
of the NCA
4
Sebola and Another v Standard Bank of South Africa Ud and Another
2012 (5) SA 142
(CC) par 40;
Kubyana v Standard Bank of South Africa Ltd
2014 (3) SA 56
(CC) par 18-21;
Asmal v Essa
(38/2013)
[2013] ZASCA 62
(14 May 2014) par 9-10. In
Bato
Star Fishing (Pty) Ud v Minister of Environmental Affairs and
Tourism and Others
[2004] ZACC 15
;
2004
(4) SA 490
(CC) par 72 the court said: “The Constitution is
now the supreme law in our country. It is therefore the starting
point
in interpreting any legislation. Indeed, every court "must
promote the spirit, purport and objects of the Bill of Rights”
when interpreting any legislation. That is the command of section
39(2). Implicit in this command are two propositions: first,
the
interpretation that is placed upon a statute must, where possible,
be one that would advance at least an identifiable value
enshrined
in the Bill of Rights; and second, the statute must be reasonably
capable of such interpretation.” (footnotes
omitted).
5
s
2(1) of the NCA requires a purposive approach.
6
Investigating Directorate: Serious Economic Offences and Others v
Hyundai Motor Distributors (Pty) Ltd and Others: In re Hyundai
Motor
Distributors (Pty) Ltd v Smit NO and
Otters
2001 SA (1) SA 545 (CC) par 23-24; 26.
7
Glen Anil Development Corporation v Secretary of Inland Revenue
1975 (4) SA 715
(A) at 726
in
fine
727H.
8
Wills Faber Enthoven (Pty) Ltd v Receiver of Revenue and Another
1992(4)
SA 202 (A) at 216C;
Fundstrust
(Pty) Ltd (In liquidation) v Van Deventer
1997(1)
SA 710 (A) at 735G-H.
9
2014
(2) SA 494
(SCA) at par 10.
10
2012 (4) SA 593
(SCA) at par 18;
Aktiebolaget
HSssle & another v Triomed (Pty) Ltd
2003
(1) SA 155
(SCA) par 8 and 9.
11
"agreement" as defined in s 1 includes an arrangement or
understanding between or among two or more parties, which
purports
to establish a relationship in law between those parties. The
written agreement is thus an enforceable
pactum de
contrahendo. Hirschowitz v Moolman
1985
(3) SA 739
(A) at 765I.
12
s 1 defines “credit” to mean (a) a deferral of payment
of money owed to a person, or a promise to defer such a payment;
or
(b) a promise to advance or pay money to or at the direction of
another person. Innes CJ formulated the general rule to determine
whether the parties agreed to credit in
Lairtg
v South African Milling Co Ltd
1921
AD 387
at 394 as follows;
u
Now
a seller who has unconditionally agreed to wait for payment until a
date subsequent to delivery has, in the ordinary meaning
of that
expression, given credit to the buyer”. Juta JA stated it thus
at 402 “...where the price is not claimable
at once, but a
subsequent period has been fixed for payment, it is a sale on
credit...”;
Leandalease
Finance Lid v Corp de Mercado & Associates
1976
SA 464
(A) at 490D;
Erikson
Motors Ltd v Protea Motors and Another
1973
(3) SA 685
(A) at 694A-F.
13
A credit agreement is an agreement that meets all the criteria set
out in s 8 as per the definition of credit agreement in s
1. s 4(1)
states that subject to ss 5 and 6 the NCA applies to every credit
agreement between the parties, subject to certain
exceptions, which
for purposes of the judgment are irrelevant and need no discussion.
The reference to s 5 is of importance and
will be discussed
elsewhere in the judgment. If the NCA applies to a credit agreement,
it continues to apply, in terms of s 4(4),
to that agreement in
relation to every transaction, act or omission under that agreement.
14
As
described in s 8(3).
15
As
described in s 8(4).
16
As
described in s 8(5).
17
JMV Textiles (Pty) Ltd
v
De Chatain Spareinvest 14 CC and Others
2010 (6) SA 173
(KZD) at par 14
and 15; Otto “The Incidental Credit Agreement” 2010
Tydskrifvir Hedendaagse Romeins-Hollandse Reg
640-641. See Otto in Scholtz
(ed)
Guide to the
National Credit Act
(loose
leaf) para 8.2.2. See
also
Voltex (Pty) Ltd v SWP Projects
2012
(6) SA 60
(GSJ) at par 7 and 8.
18
s
8(3)
(a)(ii)(bb).
19
">
19
The
incidental credit agreement is called “a new animal on the
legal landscape” in Otto The Incidental Credit Agreement"
2010
TydskrifvirHedendaagse
Romeins-Hollandse Reg
649.
20
The definition has been called “rather meaningless" in
Otto “The Incidental Credit Agreement"
supra
638 and “a strange
creature" in Otto “THE DISTINCTION BETWEEN A CREDIT
FACILITY AND A CREDIT AGREEMENT IN TERMS
OF THE
NATIONAL CREDIT ACT,
AND
AN AFTERTHOUGHT ON CREDIT GUARANTEES AND REGISTRATION" 2011
Journal of South-African Law
at
548. Wallis J (as he then was) described the definition as: “an
unhappy one" in
JMV Textiles (Pty) Ltd v De
Chalain Sparelnvest 14 CC and Others
supra
at par 19.
21
Counsel for plaintiff also accepted that the agreement makes no
provision for interest to be charged by the supplier.
22
Clause
13.
23
Clause
14.
24
Seaworld Frozen Foods (Pty) Ltd v The Butcher’s Block and
Another
CA 122/2011
[2011 ] ZAECGHC (24 November 2011) par 19;
Voltex
(Pty) Ltd v Chenleza CC and Others
2010
(5) SA 267
(KZP) at par 39. See also Otto “The Distinction
Between a Credit Facility and an Incidental Credit Agreement in
terms of
the
National Credit Act, and
an Afterthought on Credit
Guarantees and Registration” 2011
Tydskrif
vir die Suid-Afhkaanse Reg
552-55;
Tennent The Incorrect Understanding of an Incidental Credit
Agreement Leads to Undesirable Consequences; JMV Textiles
Ltd v De
Chalion" 2011
South African Mercentile Law
Journal
128 states that
the main difference between a credit facility and an incidental
credit agreement is that a credit facility will
embody a charge,
fee, or interest from the onset of the agreement and will be
included in the agreement. In case of an incidental
credit agreement
the parties will agree that a charge, fee or interest may only be
charged when the account is not paid on a
specified date. Aucamp
“The incidental credit agreement: A theoretical and practical
perspective (2)” 2013
Tydskrif vir die
Suid-Afrikaanse Reg
508-509.
25
In
Rennie NO v Gordon NNO
1988(1)
SA 1 (A) at 21D-H the court stated: “In S v
Marwane
1982(1) SA 717 (A) this
court had to consider the meaning of the words 'subject to the
provisions of the Constitution” appearing
in s 93(1) of the
Republic of Bophuthatswana Constitution Act 19 of 1977. Miller JA,
delivering the majority judgement, stated
(at747H-748A): “the
words “subject to the provisions of the Constitution" in
s 93(1) of the Constitution clearly
govern the provision that laws
in operation immediately prior to the commencement of the
Constitution are to continue in operation.
The purpose of the phrase
“subject to” in such a context is to establish what is
dominant and what is subordinate
or subservient; that to which a
provision is “subject” is dominant - in case of conflict
it prevails over that which
is subject to it. Certainly, in the
field of legislation, the phrase has this clear and accepted
connotation. When the legislator
wishes to convey that that which is
now being enacted is not to prevail in circumstances where it
conflicts, or is inconsistent,
or incompatible, with a specified
other enactment, it very frequently, if not almost invariably,
qualifies such enactment by
the method of declaring it to be
“subject to” the other specified one. As Megarry J
observed in C
and J Clark v Inland Revenue
Commissioner
[1973] 2
All ER 513
at 520: In my judgment, the phrase 'subject to’ is
a simple provision which merely subjects the provisions of the
subject
subsections to the provisions of the master subsections.
When there is no clash, the phrase does nothing: if there is
collision,
the phrase shows what is to prevail." Also
Sentra-Oes Kooperatief Bpk v Commissioner for
Inland Revenue
1995(3)
SA 197 (A) at 207B-G;
Ynuico Ltd v Minister of
Trade and industry and Others
1996(3)
SA 989 (CC) at par 8-10;
Premier Eastern Cape and
Another v Sekeleni
2003
(4) SA 369
(SCA) at 375G-I where it was found that the context
indicated that “subject to” should be understood as
“except
as curtailed by”.
26
I
disregard s 5(2)(b) for present purposes.
27
s 5(1)(a)-(e) and (g) states that only the following provisions of
the NCA apply with respect to an incidental credit agreement:
(a)
Chapters 1,2,7,8 and 9; (b) Chapter 3, sections 54 and 59; (c)
Chapter 4 Part A and B; (d) Chapter 4, Part D, except to the
extent
that it deals with reckless credit; (e) Chapter 5, Part C, subject
to subsection 3(a); (f) Chapter 5 Parts D and E, once
the incidental
credit agreement is deemed to have been made in terms of subsection
(2) and; (g) Chapter 6 Part A and C
28
Chotabhai
v union government (Minister of Justice) and Registrar of Asiatics
1911AD 13 at 24
29
s 5(2) cannot be invoked if the agreement is not an incidental
credit agreement. In
JMV Textiles (Pty) LtdvDe
Chalain Spareinvest 14 CC and Others supra
at
par 23 Wallis J (as he then was) in considering the type agreement
before him made a broad statement that s 5 has limited application
to an incidental credit agreement without elaborating. He did not
deaf specifically with the consequences of s 5(2) coming into
operation, but he must have considered its provisions. If it is
accepted, as the court concluded, that the agreement is an
incidental credit agreement and that interest was charged on the
deferred amount by the supplier, then it follows that a credit
transaction came into being which constituted a credit agreement as
defined in s 8.1 think the learned Judge had he a credit
facility in
mind and not a credit agreement when he said that the agreement is
not a credit agreement. If I am wrong, and the
conclusion was indeed
that the incidental agreement is not a credit agreement as defined
in s 8, then I respectfully disagree
with that conclusion.
30
s
5(1) supports that proposition.
31
S
51(1) also comes into operation on the future date as if the
agreement was concluded on that date.
32
The
reason for the deeming provision is obscured and seems unnecessary.
33
The definition of “credit provider” in s 1 states that a
credit provider in respect of a credit agreement to which
the NCA
applies is,
inter
alia,
a
party who supplies goods and services under a discount transaction,
incidental credit agreement or instalment agreement.
34
A credit transaction according to s 1: “means an agreement
that meets the criteria set out in s 8(4).” s 8(4)(b)
states
that an agreement....constitutes a credit transaction if it is, an
incidental agreement, subject to s 5(2).
35
s 1 defines a “credit agreement” to mean an agreement
that meets all the criteria set out in s 8.
36
I
do not find it necessary to deal with s 5(2)(b) in the context of
the facts in this case.
37
s 8(4) (b) of the NCA
38
Otto
“The Incidental Credit Agreement" supra 646.
39
The expression “proposed credit agreement” in s 6 is
illusory. Broadly speaking a proposal made by the one party
has no
legal consequences until it is accepted by the other party
animus
contrahendi
to create
binding rights and obligations between them.
40
s 101 (1)(d) deals with interest which must be expressed in
percentage terms and may not exceed that applicable maximum
prescribed
rate. s101(1)(f) deals with default administration
charges and s 101 (1 )(g) permits a credit agreement to include
collection
costs, which may not exceed the prescribed maximum for
the category of credit agreement concerned and may be imposed only
to
the extent permitted by Part C of Chapter 6. Regulation 47
provides that for all categories of credit agreements, collection
costs may not exceed the costs incurred by the credit provider in
collecting the debt to the extent limited by Part C of Chapter
6
which is applicable to an incidental credit agreement.
41
“
person"
in s 2 of the
interpretation
Act
33
of 1957 includes -(a) any divisional council, municipal council,
village management board, or like authority;(b) any company
incorporated or registered as such under any iaw;(c) any body of
persons corporate or unincorporate;
Commissioner
for iniand Revenue v NST Ferrochrome (Pty) Lid
1999
(2) SA 228
(T) at 232B-D.
42
s 5(3)(a) and (b) of the NCA. It is common cause that the credit
application was signed during 2007 and that the goods were sold
and
supplied during the period March-November 2009.
43
Default administration charge as defined in s 1 “means a
charge that may be imposed by a credit provider to cover
administration
costs incurred as a resuit of a consumer defaulting
on an obligation under a credit agreement”.
44
See
Van Zyl in Scholtz (ed)
Guide
to the
National Credit Act
>
(loose
leaf) para 10.9. See also
Evans
v Smith
2011
(4) SA472 (WCC) at para 16-19.
45
s
8(4)(b)
read with
s 3
of the NCA.
46
s8(1)(b).
47
">
47
Surprisingly Plaintiff has pleaded in par 3.2 of the particulars of
claim that a term entitling Plaintiff to charge interest
is provided
for in the credit application notwithstanding the conspicuous
absence of such a provision from the agreement. The
mere fact that
no provision is made for an entitlement to interest, fee or charge
as required by the definition of an incidental
agreement
disqualifies it to be an incident credit agreement.
48
Para
3.5 and 3.6 of the particulars of claim. In terms of the common law
mora
interest
constitutes a form of damages for breach of contract on the basis
that that the creditor who cannot employ his capital
amount
productively has suffered loss.
Crookes
Brothers Ltd v Regional Land Claims Commission
,
Mpumulanga
2013
(2) SA 259
(SCA) par 16.
49
s
5(2)
clearly refers to: [the] parties to an incidental credit
agreement.
50
The provisons of Chapter 5 (Part C) is also applicable to an
incidental credit agreement in terms of
s 5(1)(e)
, despite the
expressed reference to a credit agreement in
s 101(1)
read with
s
103
and
regulation 40.
51
">
51
supra.
52
Par
11.
53
The
permissible rate is 2% per month.
54
s 1
(1) states: If a debt bears interest and the rate at which the
interest is to be calculated is not governed by any other law or
by
an agreement or a trade custom or in any other manner, such interest
shall be calculated at the rate prescribed under subsection
(2) as
at the time when such interest begins to run, unless a court of law,
on the ground of special circumstances relating to
that debt, orders
otherwise.
55
para 16..
56
Voltex (Pty) Ltd v Chenleza CC and Others
2010
(5) SA 267
(KZP) at par 38-39.
57
Union Government v Jackson and Others
1956
(2) SA 398
(A) at 411C-412A;
Belfairs v Hodnett and
Another
1978 (1) SA 1109
(A) at 1145D-G and
Crookes v Regional Land Claims
Commissioner
2013 (2)
SA259 (SCA) at par 15-17.
58
2012(6)
SA 60 (GSJ).
59
Aucamp “The Incidental credit agreement: A theoretical and
practical perspective (2)"
supra
at
511 Also Otto “Mora Interest, Consensual Interest, Incidental
Credit Agreement and the National Credit Act:
Voltex
(Pty) Ltd v SWP Projects CC
2012 6 SA 60
(GSJ)”2QU
Journal
for South African Law 405-406.
60
s
95 of the NCA.
61
Nkata
v
Firstrand
Bank
2014
(2) SA412 (WCC) at par 21.
62
Par
24.
63
Par
45: See also
African
Bank Ltd v Myambo NO
2010
(6) SA298 (GNP) at 311A-D.