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First Rand Bank Ltd v Phiri and Another …

First Rand Bank Ltd v Phiri and Another (36247/2011) [2013] ZAGPPHC 90 (4 April 2013)

58 Reportability

Banking and Finance

Brief Summary

National Credit Act — Compliance with section 129 notice — Applicant sought leave to comply with section 129(1)(a) of the National Credit Act by delivering a notice to the first respondent; respondents opposed on grounds of improper service and constitutional implications. — Court found that the applicant failed to deliver the notice as required, and the interpretation of section 130(4)(b) allows for adjournment to ensure compliance rather than an absolute bar to proceedings. — Holding that the court retains discretion to address non-compliance and facilitate the matter's progression to trial.

Full Judgment Text (Click to expand)

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[2013] ZAGPPHC 90
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First Rand Bank Ltd v Phiri and Another (36247/2011) [2013] ZAGPPHC 90 (4 April 2013)

IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
(REPUBLIC
OF SOUTH-AFRICA)
CASE
NO: 36247/2011
DATE:04/04/2013
In
the matter between:
FIRST
RAND BANK LIMITED
(Formerly
known as FIRST NATIONAL BANK
OF
SOUTH-AFRICA)
.................................................................................................
PLAINTIFF
AND
PHIRI,
LUCAS
.............................................................................................................
1st
RESPONDENT
PHIRI,
HUNANDI
JOHANNAH
...................................................................................
2nd
RESPONDENT
JUDGMENT
TOLMAY.
J:
[1]
The applicant brought an application that leave be granted to the
applicant to comply with the requirements of section 129 of
the
National Credit Act 43, of 2005 (the NCA) by delivering a notice in
terms of section 129(1)(a) of the NCA to the first respondent.
The
respondents opposed this application, despite the fact that this
application is only relevant to the position of the first
respondent.
BACKGROUND
[2]
During January 2007 the applicant and the respondents concluded a
written home loan agreement. The parties caused a mortgage
bond to be
registered as security for their indebtedness to the applicant.
[3]
The applicant alleged that the respondent failed to comply with their
obligations in terms of the loan agreement and failed
to effect
regular payments of the required instalments.
[4]
Prior to the institution of this action applicant issued summons
under case no. 47765/2010 and asked for summary judgment. This

application was opposed. The summary judgment was refused. Applicant
withdrew that summons and instituted action in this case.
[5]
The applicant alleged that as at 8 June 2011 the total outstanding
balance due amounted to R346 454-69, and the arrears amounted
to R55
351-69. As a result the applicant instituted action against the
respondent.
[6]
The applicant obtained default judgment against the respondents. The
default judgment was however rescinded and set aside by
order of
court on 23 April 2012. Subsequent to the order being granted the
respondents entered an appearance to defend and delivered
a plea to
the applicant’s declaration.
[7]
The applicant contends that in the bona fide but mistaken belief that
it has indeed complied with the requirements of sec 129
of the NCA,
the applicant erroneously alleged in its declaration that it has duly
delivered a notice in terms of sec 129(1 )(a)
of the NCA to the first
respondent. The respondents were previously married and as a result
the applicant erroneously delivered
only one sec 129 notice to the
respondents. The fact however is that the parties were divorced when
the notice was served and no
longer living together. Consequently
there was no proper service of the sec 129 notice on first respondent
as he didn’t reside
at the address where the notice was served.
[8]
It is thus common cause between the parties that the applicant failed
and/or neglected to deliver a notice in terms of sec 129(1
)(a) of
the NCA to the first respondent.
[9]
Respondents opposed the application and contends that the applicant’s
interpretation of sec 130(4)(b)(ii) of the NCA relating
to instances
where a credit provider has failed to comply with the provisions of
sec 129(1)(a) of the NCA is unconstitutional in
that it contravenes
sec 39(2), sec 32(1 )(b), sec 34, sec, 25, 26 and sec 165 to 180 of
the Constitution. The respondents filed
a notice in terms of Rule 16
A of the Uniform Rules of Court.
[10]
The respondents alleged in the affidavit by their attorney that
granting this order will have the same effect as a declaration
of
rights that will have an impact on not only respondents but on many
other indigent consumers.
THE LEGAL FRAMEWORK
[11]
[12] Section 130(4)(b) of the NCA reads as follows:
“
(4)
In any proceedings contemplated in this section, if the court
determines that —
(a)
...
(b)
the credit provider has not complied with the relevant provisions of
this Act, as contemplated in subsection (3) (a), or has
approached
the court in circumstances contemplated in subsection (3) (c) the
court must -
(i)
Adjourn the matter before it; and
(ii)
Make an appropriate order setting out the steps the credit provider
must complete before the matter may be resumed;”
[12]
The purpose of the NCA is to protect the consumer on the one hand and
on the other hand it aspires to establish responsible
and viable
credit granting practices. It stands to reason that the rights of
credit providers should also be protected, as the
creation of viable
credit granting practices will not be possible in the absence
thereof.
[13]
Section 130(4)(b) and its application must be interpreted within the
broader context of the act and with due regard to its
purpose. The
purpose of the NCA is inter alia to protect the consumer and making
credit and banking services more accessible. The
preamble to the NCA
states as follows:
‘
To
promote a fair and non-discriminatory marketplace for access to
consumer credit and for that purpose to provide for the general

regulation of consumer credit and improved standards of consumer
information, to promote black economic empowerment and ownership

within the consumer credit industry; to prohibit certain unfair
credit and credit-marketing practices; to promote responsible credit

granting and use and for that purpose to prohibit reckless credit
granting; to provide for debt re-organisation in cases of
overindebtedness;
to regulate credit information; to provide for
registration of credit bureaux, credit providers and debt counselling
services;
to establish national norms and standards relating to
consumer credit; to promote a consistent enforcement framework
relating to
consumer credit; to establish the National Credit
Regulator and the National Consumer Tribunal; to repeal the Usury
Act, 1968,
and the Credit Agreement Act, 1980; and to provide for
related incidental matters.”
[14] In Firstrand Bank t/a FNB
Seyfrett
1
Willis J held that:
“
Certainly,
the NCA is designed to protect consumers but it was not intended to
make South Africa a ‘debtors paradise’.
Indeed a
‘debtors’ paradise’ will not last for long. Very
soon, credit would not be available to ordinary people.
Sight must
not be lost of the fact that among the purpose of the Act is the
‘development of a credit market that is accessible
to all South
Africans’. It should be remembered that access to responsibly
granted credit, on fair and reasonable terms,
is an important means
of social upliftment for ordinary citizens. It also needs to be borne
in mind that responsibly granted credit
has a ‘multiplier
effect’ in an economy. For example, money lent to build a house
is used not only to pay the wages
of the builders but also to buy
materials (and, in so doing, pays the wages of those who produced the
materials). These payments
by the borrowers who is building a house
find their way back into the banking systems as deposits and are lent
out again. This
the system multiplies, depending on the reserve
ratios that the banks, either voluntarily or by regulation, maintain.
In other
words, money-lending not only creates wealth but jobs as
well. It is inconceivable that it could have been the intention for
the
legislature to facilitate the wholesale evasion of debt under the
banner of ‘consumer protection’. Moreover, sec 86(5)(b)

requires hat, when it comes to debt review, consumers and credit
providers are to act in good faith towards one another. ”
[15]
In Nedbank v National Credit Regulator
2
Malan JA stated in paragraph 2 that:
“
Unfortunately,
the NCA cannot be described as ‘the best drafted Act of
Parliament which was ever passed, nor can the draftsman
be said to
have been blessed with ‘draftsmanship of the Chalmers’.
Numerous drafting errors, untidy expressions and
inconsistencies make
its interpretation a particularly trying exercise ... The
interpretation of the NCA calls fora careful balancing
of the
competing interest sough to be protected, and not for a consideration
of only the interest of either the consumer or the
credit provider. ”
[16]
The problems with the drafting of the NCA is illustrated in casu as
the wording of sec 130(4)(b) gives the impression that
the matter
“must” be adjourned at the same time as the directions
are being given for compliance with the NCA.
[17]
The respondent contended that the trial court must grant an order
giving directions for compliance. This approach is in my
view not
correct. The purpose of sec 130(4)(b) is to ensure that there is
compliance with sec 129. Section 130 envisages a postponement
of the
matter if there was no compliance with sec 129. In my view there is
nothing that prevent a party to approach the court prior
to the
hearing of the matter to give directions as envisaged in sec
130(4)(b)(ii). The legislators’ intention could not have
been
that only the trial court is empowered to postpone and give
directions in this regard or that the adjournment of the matter

should be adjourned by the trial court. Such a narrow interpretation
of sec 130(4)(b) will not assist the credit provider or the
consumer
as it will only delay the process and cause further costs.
[18]
The purpose of sec 130(4)(b) is to ensure compliance with the NCA and
the reference to an adjournment should not be seen in
isolation. The
purpose of the adjournment is to ensure compliance with the Act and
nothing else. In my view the court in which
division the action has
been launched remains vested with the discretion and power set out in
section 130(4)(b). Therefore the
reference to the court refers to the
division in which the matter is vested and can therefore include the
court hearing default
judgment, summary judgment, the trial itself or
even the court in an interlocutory application, as in this case.
[19]
In my view sec 130(4)(b) of the NCA is directed at providing the
court with an inherent discretion to deal with matters where
there
has not been compliance with inter alia sec 127, 129 or 131, and
nothing more than that.
[20]
The reference to “setting out the steps” in sec
130(4)(b)(ii) clearly should be interpreted to mean providing direct

guidelines as to the path which needs to be followed to enable the
matter to proceed to trial. Therefore the section is designed
not to
be an absolute bar to proceedings to trial but rather to function as
a bridge to address issues which impede the matter
from proceeding to
trial.
[21]
Our courts have taken the approach in summary judgment applications
and default judgments that matters be adjourned to ensure
compliance
with the act.
[22]
In this regard the following was stated pertaining to a summary
judgment application, in Firstrand Bank v Dhlamini
3
supra:
“
[32]
... Section 130 (4) (b) provides that if it is determined that the
credit provider has not complied with s 129(1) (a), and
has
instituted action prematurely, the court may adjourn the matter and
make an appropriate order setting out the steps the credit
provider
must complete before the matter may resume. The respondent in the
present case has failed to put up a defence on the merits,
it may be
that if the process contemplated in s 129 are followed without
success, summary judgment should be granted. It would
be unfair to
the credit provider to deny it that possibility on the ground of a
procedural defect Accordingly the orders that follow
are appropriate
in a case such as this.”
[23]
Thus in summary judgment applications the approach has been adopted
where there is non-compliance with the provisions of section
129 or
where compliance is lacking, that those applications are postponed to
enable the plaintiff to comply by sending a fresh
notice, where after
the summary judgment application could be re-enrolled
4
.
[24]
In the matter of Standard Bank of South Africa Limited v Bekker &
Another
5
and four similar cases the full Court dealt with an application in
terms of Uniform Rules of Court 46(1 )(a). In one of the cases
dealt
with in that matter the Summons was issued prior to the period of a
minimum of 10 business days required in terms of section
129(1 )(b)
and 130(1 )(a) of the NCA having lapsed. The full Court referred with
approval to the decision of Standard Bank of South
Africa Limited v
Rockhill & Another
6
and held that it would be appropriate, under those circumstances, to
adjourn the application for default judgment and to direct
the
plaintiff, if it wishes to proceed with the application, to first
provide notice afresh to the defendants in terms of section
129(1) of
the NCA.
[25]
Accordingly the full Court acknowledged the principle that the Court
is vested with the discretion and power to grant an order
in terms of
section 130(4)(b) and to direct a party to take the steps the Court
deems fit to rectify any non- compliance.
[26]
As the guidelines which the court will give are to ensure compliance
of sec 129 it is inconceivable that the respondents could
argue, as
they do:
(i)
by doing so the consumer will be deprived of his right to notice as
envisaged in sec 129 or
(ii)
that by doing so the consumers will be deprived of their rights in
terms of the Constitution or that it will prevent them from
having a
fair trial.
[27]
The respondent’s argument is not valid in that:
(i)
This section merely sets out the steps that needs to be followed to
ensure compliance with section 129(1 )(a);
(ii)
The purpose of sec 129 is to protect the rights of the consumer and
ensure that notice is given to the consumer; and
(iii)
No right of the consumer is affected as the court merely gives
guidelines to ensure compliance with the NCA. The consumer
still has
all the defences in terms of the NCA as well as all other defences
available to him.
[28]
There is thus no merit in the argument that to apply sec 130(4)(b)
will undermine the purpose of the Act. The respondents'
rights in
terms of the Constitution remain unaffected and to the contrary the
consumer’s rights are protected as compliance
with the NCA is
ensured. The Court furthermore does not make any order pertaining to
the rights of the consumer and thus the argument
that consumers will
be deprived of any of their rights is without any merit. As a result
the application should be granted.
[29]
The applicant proposed that apart from service on the first
respondent, the notice should also be served on the respondent’s

attorney of record, strangely enough respondent’s attorney
opposed this proposal. I am of the view that, as he is their
representative it is appropriate and in the interest of the
respondent that the notice is served on him too. The applicant
conceded
that costs of this application should be costs in the cause,
in the light thereof such an order is made.
[30]
In the light of the aforesaid I make the following order:
30.1
The applicant is ordered to deliver a notice in terms of section
129(1)(a) of the national Credit Act 34 of 2005, per registered
post
to:
30.1.1The
first respondents, at the following address:
Number
53, Block E, MABOPANE
30.1.2
The first respondent’s attorney of record, at the following
address:
Greef
& van Wyk Attorneys 745 Park Street
ARCADIA
PRETORIA
30.2
The action against the first respondent may not be set down for
hearing, until such time that the applicant has complied with
the
order set out in paragraph 1 above; and
30.3
The costs related to the applicant’s application in terms of
section 130(4)(b)
of the
National Credit Act 34 of 2005
, are costs in
the cause.
CASE
NAME: FIRST RAND BANK vs L & H J PHIRI
CASE
NO: 36247/2011
JUDGE:
TOLMAY
DATE
OF HEARING: 18 MARCH 2013
DATE
OF JUDGMENT: 4 APRIL 2013
ATTORNEY
FOR APPLICANT: HACK STUPEL & ROSS
PRETORIA
ADVOCATE
FOR APPLCIANT: ADV J A DU PLESSIS
ATTONREY
FOR RESPONDENT; GREEFF & VAN WYK ATTORNEYS
ARCADIA,
PRETORIA ATTORNEY FOR RESPONDENT: F GREEFF
[26]
As the guidelines which the court will give are to ensure compliance
of
sec 129
it is inconceivable that the respondents could argue, as
they do:
(i)
by doing so the consumer will be deprived of his right to notice as
envisaged in
sec 129
or
(ii)
that by doing so the consumers will be deprived of their rights in
terms of the Constitution or that it will prevent them from
having a
fair trial.
[27]
The respondent’s argument is not valid in that:
(i)
This section merely sets out the steps that needs to be followed to
ensure compliance with section 129(1 )(a);
(ii)
The purpose of sec 129 is to protect the rights of the consumer and
ensure that notice is given to the consumer; and
(iii)
No right of the consumer is affected as the court merely gives
guidelines to ensure compliance with the NCA. The consumer
still has
all the defences in terms of the NCA as well as all other defences
available to him.
[28]
There is thus no merit in the argument that to apply sec 130(4)(b)
will undermine the purpose of the Act. The respondents'
rights in
terms of the Constitution remain unaffected and to the contrary the
consumer’s rights are protected as compliance
with the NCA is
ensured. The Court furthermore does not make any order pertaining to
the rights of the consumer and thus the
[29]
The applicant proposed that apart from service on the first
respondent, the notice should also be served on the respondent’s

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