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[2012] ZAKZDHC 38
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ABSA Bank Limited v Mkhize and Another (4084/2012, 4115/2012, 3882/2012) [2012] ZAKZDHC 38; 2012 (5) SA 574 (KZD); [2012] 4 All SA 161 (KZD) (6 July 2012)
IN THE KWAZULU-NATAL HIGH COURT DURBAN
REPUBLIC OF SOUTH AFRICA
CASE NO; 4084/2012
In the matters between:
ABSA BANK LIMITED
…..........................................................................................
Plaintiff
and
BHEKANI ERNEST MKHIZE
…......................................................................
First
Defendant
THOLAKELE CONFIDENCE MKHIZE
…..................................................
Second
Defendant
CASE NO. 4115/2012
ABSA BANK LIMITED
…..........................................................................................
Plaintiff
and
SEAN CHETTY
…..................................................................................................
Defendant
CASE NO. 3882/2012
ABSA BANK LIMITED
…..........................................................................................
Plaintiff
and
DALUBUHLE XOLANIE MLIPHA
….....................................................................
Defendant
JUDGMENT
Delivered : 6 July 2012
P J OLSEN. AJ:
[1] ABSA Bank Limited featured as
the applicant in four applications for default judgment in respect
of home loan mortgage bonds
which came before me in the motion court
on 12 June 2012. Being aware of the judgment of the Constitutional
Court handed down
on 7 June 2012 in
Sebofa
and Another v Standard Bank of South Africa Ltd and Others
[2012]
ZACC 11
, counsel for ABSA handed up 'track and trace' printouts from
the website of the South African Post Office relating to the notices
in terms of section 129 of the National Credit Act, 34 of 2005
('section 129 letters') which had been despatched in each case
by
registered post to the defendants concerned. The Act requires the
delivery of a section 129 notice before proceedings are
launched to
enforce a credit agreement. Until the decision in
Sebola
all that was
required to establish the delivery of such a notice by registered
post was proof of its despatch.
Sebola
held that proof of
one step more, that is to say delivery to the addressee's post
office, was necessary. The track and trace reports
generated by the
website of the Post Office facilitate such proof.
[2] In each of the four cases the
section 129 letter was annexed to the summons, as was a copy of the
receipt from the post office
reflecting that it had been despatched.
In each of the four cases the track and trace report revealed that
the letter had reached
the correct post office. But in three out of
the four cases (the ones before me now) the report revealed that the
registered
item had nevertheless been returned unclaimed. ABSA
wished to argue that proof of delivery to the correct post office
was sufficient,
in the light of the majority judgment in
Sebola.
The three
applications were adjourned to be argued on 28 June 2012 upon the
basis that ABSA would be entitled to supplement the
papers already
before the court.
[3] In each of the three
applications ABSA sought not only a money judgment but also an order
declaring the mortgaged
proper^/
specially
executable; and as to this latter relief, it was supported in each
case by an affidavit setting out the material mentioned
in the
practice notice governing such applications in this division when
the immovable property in question is the primary residence
of the
defendant.
[4] I have had the benefit of full written and oral
argument presented by two counsel for ABSA (for which I am indebted
to counsel)
as well as further material regarded by ABSA as relevant
to the decisions which I am asked to make in these three
applications.
[5] In broad outline there are two questions which need
to be resolved in each of the applications.
(a)Firstly, may I conclude in the
light of the majority judgment in
Sebo/a
that
there has been compliance with section 129 (1) of the
Act despite the fact
that the notices in terms of that section were returned
unclaimed.
(b)lf ( conclude that there has not been compliance
with section 129 of the
Act, what order or directions should be given under
section 130(4)(b)(ii) of the
Act as to the steps to be taken by ABSA before it may
resume its quest for
judgment.
[6] Although the new material placed before me by ABSA
for the purpose of the hearing on 28 June goes more to the second
enquiry
than it does to the first, I think that I should give an
account of it before turning to the decisions I am asked to make.
[7] The Banking Association of South
Africa ('BASA') was one of the parties which sought and was granted
leave to intervene before
the Constitutional Court in
Sebola.
I was informed
from the bar that BASA and the National Credit Regulator ('NCR')
were given notice of this matter and were invited
to intervene, but
that only BASA showed any interest. At the request of ABSA, BASA
agreed to place before me the material it
had put before the
Constitutional Court. (An affidavit confirming this by the person
who attested to BASA's affidavit in
Sebola
was provided.)
[8] There are certain statistics contained in BASA's
affidavit, derived from the Consumer Credit Market Report for the
third quarter
of 2011 issued by the NCR, which were highlighted in
the present matters by ABSA. I summarise them.
(a)The total outstanding credit balance owed to South
African banks in September 2011 was R1 119,30 billion.
(b)The total credit balance outstanding and owed to
other credit providers was R147.20 billion.
(c)The amount owing and secured by mortgage bonds over
immovable property in South Africa was some R786 billion.
(d)Determined as a percentage of debt in monetary
terms, debt which was current (not in arrears) ranged from a low of
75,4 per
cent (in the case of unsecured personal loans) to a high of
89,435 per cent (in the case of secured credit in the form of motor
vehicle finance). (e)Measured by consumers, the statistics are
perhaps more revealing. Out of 19,1 million South African credit
consumers :
(i)10,27 million consumers (53.8 per cent) were in good
standing;
(ii)some 2,7 million consumers (14,2 per cent) were one
to two
months in arrears;
(iii)some 3,57 million consumers (18,7 per cent) were
three months or more in arrears.
[9] The affidavit presented by BASA also dealt with the
question of how registered mail works. Given the other evidence put
before
me by ABSA, the only aspect of BASA's account which I need
mention is the fact that when a letter is returned, the post office
is unable to provide the reason for return; for instance whether the
recipient has left the address or has simply failed to take
delivery. (It turns out that there is one exception to this, which
will be mentioned later.)
[10] ABSA itself provided evidence concerning its own
processes, the extent of the defaults it must deal with and its
experience
of the postal system.
[11 ] ABSA pointed out that it is a misconception that
banks 'pounce upon any act of default by a consumer and seek to
proceed
(immediately) by legal action'. It points out that its aim
is to bring arrears up to date if at all possible without
expenditure
on legal fees. Although the deponent to ABSA's affidavit
could speak directly only to its own processes, he did say that he
is
aware from interactions with other banks that the other large
banks follow similar pre-legal processes before handing matters over
to attorneys for collection. It is not necessary to provide a
detailed account of the processes which are followed. I will attempt
a summary.
[12] When a consumer falls into arrears ABSA's
computers automatically generate alerts which may be conveyed to the
consumer through
sms messages or telephone calls, and an attempt is
made thereby to secure a promise to pay from the consumer. All
exchanges and
events are recorded on a computerised system so that
the history of the account can be monitored and accessed when that
is necessary.
[13] Once an account has been in arrears for 31
consecutive days ABSA's computerised system generates a section 129
letter which
is sent by registered post. The significance of the 31
day period is that the consumer has missed two payment cycles if the
account
is in arrears for 31 (consecutive) days.
[14] If the consumer's account remains 'delinquent' for
more than 60 days ABSA usually sends out an official known as a
'risk
mitigation officer' who will attempt to speak to the consumer
at his or her home or place of work. This apparently often results
in the situation being resolved. It is also at this stage that, for
instance in the case of motor vehicle finance, the consumer
may
agree that the best course is to surrender the vehicle so that it
can be sold.
[15] In the case of home loans one of the options
available to consumers who simply cannot cope with the instalments
is what ABSA
calls a 'help-you-sell' programme. Estate agents are
appointed and if an offer is received it is up to the consumer to
accept
or reject it. But unfortunately this programme is often
invoked by consumers whose accounts are substantially in arrears and
who use it as a dilatory tactic, never intending to accept any offer
which might be produced.
[16] It is only when all of these efforts fail that
ABSA hands an account over to attorneys. This rarely happens before
the account
has been in arrears for four payment cycles. The
deponent to ABSA's affidavit summarises the position as follows.
'Thus, by the time the matter is handed over to
attorneys, the customer is significantly in arrears, a s129 letter
has been sent
by the bank and the plaintiff has made numerous
attempts to contact the customer and remedy the situation."
[17] I was provided also with the records of the
exchanges between ABSA and the various defendants in the matters now
before me.
In the cases of Chetty and Mlipha the exchanges were
extensive. In comparison the exchanges in the matter of Mkhize were
brief.
[18] I turn now to some statistics provided by ABSA.
This information was provided in order to indicate the extent of the
problem
with which ABSA is confronted.
[19] ABSA's home loan book is a large part of its
consumer credit business by value, but forms a small portion of its
business
in terms of numbers of accounts or consumers. I have been
provided with a table indicating the foreclosure instructions issued
to attorneys in respect of home loans for each of the six months
from December 2011 to May 2012. By my calculations the average
number of instructions issued per month in that period was 881; and
the average amount of debt involved in each of those months
was R532
million. (These are ABSA's figures for the whole of South Africa.)
[20] During the period January to May 2012 (five
months) ABSA despatched some 5 195 section 129 letters in respect of
unsecured
loans (some 3 803 of which had already been removed from
ABSA's balance sheet by reason of the extent of default). In the
same
period 19 555 section 129 letters were sent out to consumers in
respect of default on credit card debt.
[21] During 2012 ABSA's computerised system has to date
generated between 10 000 and 15 000 section 129 letters per month in
respect
of asset and vehicle finance. (This section of the business
has been worse before. In February 2010, 26 000 such letters were
sent out. The deponent to the affidavit suggests as the likely
explanation the fact that the prime rate of interest was then higher
than it is now.)
[22] Finally, when a matter is handed over to attorneys
the usual arrangement is that another section 129 letter is sent, by
the
attorney on this occasion, so that proof of despatch is readily
to hand.
[23] ABSA has also made an effort to
provide evidence regarding its experience, and that of its
attorneys, with the delivery of
notices in terms of section 129 of
the Act by registered post. Insofar as the numbers of letters
returned are concerned, the
evidence appears to be me to be
acceptable and instructive, despite the fact that before the
judgment in
Sebola
there was no need
to keep statistics of the numbers of registered letters returned
unclaimed, although one of ABSA's employees
did do so in respect of
unsecured loans and credit cards.
[24] ABSA provided an affidavit by one Barbara Mfusi,
employed by the South African Post Office as the Area Manager :
Highway
Area, to describe how the registered post system works. It
may be summarised as follows.
(a)Letters to be sent by registered post are brought to
the sender's post office and handed in there, where an
acknowledgment
of receipt is provided. (This acknowledgement is the
proof of despatch typically provided by attorneys.) (b)The
registered items
are then sorted according to the post office to
which they are to be directed, and sent to that destination post
office accompanied
by a 'despatch bill' for that post office.
(c)When the letters arrive at the destination post
office an employee writes and sends out a first notification slip to
the intended
recipient's address. If the address is a street address
the notification is sent as if it is ordinary mail, and placed in
the
post box at that address. If it is a P O Box address it is
placed in the appropriate box at the post office.
(d)lf the mail remains uncollected for a further ten
days a second and final collection notice is prepared and sent the
same way.
(This second notification is not shown on the internet
track and trace report). (e)lf the mail is collected proof of
identity
must be provided by the person concerned and that is
recorded on the post office system. It sometimes happens that the
addressee
attends, but after having sight of the letter refuses to
accept it. In that case the track and trace report will include the
phrase 'refused' when the item is returned to the sender.
(f)Uncollected mail is returned to the sender after it has remained
at the receiving post office for thirty days from date of despatch
(as I understand it, the date of despatch from the sending
post
office). The various events are recorded on the track and trace
report. There is normally a delay of between one and two
days
between the occurrence of each event (for instance the arrival at
the destination post office) and the availability of that
information on a track and trace report.
[25] The fate of registered letters sent in compliance
with section 129 of the Act under this postal regime is a matter of
some
importance. The statistics which have been provided by ABSA
are, to say the least, startling.
[26] Quite fortuitously (in the
light of the decision in
Rossouw
v First Rand Bank
2010 (6) SA 439
(SCA))
ABSA's
National Manager: Legal Recoveries happened to have compiled and
retained statistics regarding the returns of section 129
letters
sent by ABSA during the period January to May 2012 in respect of
unsecured loans. The statistics cover South Africa as
a whole. Of
the 1392 letters sent in respect of unsecured loans still on ABSA's
balance sheet, 66,3 percent were returned. Of
the 3803 letters sent
in respect of unsecured loans off ABSA's balance sheet, 70 per cent
were returned. Of the 19 555 letters
sent in respect of credit
cards, 70 per cent were returned.
[27] I have been provided with an affidavit by the
attorney who acts for ABSA in the three matters before me. He does a
lot of
bank collection work. He has not kept statistics, but can say
with certainty that more than half of the section 129 letters sent
by his office are returned unclaimed. They are returned to his
office 'by the box-load'. If he had to commit to a figure, he
would
think that it is 70 per cent of the registered letters that are
returned.
[28] I have been provided with an affidavit by an
attorney who represents ABSA in collection matters in Cape Town. His
estimate
is that 50 per cent of the registered section 129 letters
his office sends out are returned unclaimed. He mentions that he had
thirteen matters on the roll in Cape Town on 15 June 2012. Eight of
the matters had to be postponed as the section 129 letters
had not
been collected by the defendants.
[29] I have also been provided with an affidavit by an
attorney who attends to ABSA's home loan and asset and vehicle
finance
matters in Pretoria. He too has not kept detailed statistics
but estimates that 70 per cent of the registered section 129 letters
his office sends out are returned unclaimed.
[30] In
Rossouw
the court held
that registered mail is a more reliable means of postage
1
.
It also held, when comparing ordinary mail and registered mail in
the light of section 65(2)(a)(i) of the Act, that the 'greater
includes the lesser'.
2
As to the latter proposition
reference was made to
Maharaj
v Tongaat Development Corporation (Pty) Ltd
3
where Wessels JA made the
observation with regard to registered letters that there is 'at
least, a high degree of probability
that most of them are
delivered'. This approach was endorsed by the majority in
Sebola
4
where the court added this.
'But, the fact that there is no
practical means of proving that a notice sent by ordinary mail
reaches the addressee suggests
that, for section 130 'delivery' to
be achieved, more is needed. At the very least, despatch of the
section 129 notice must be
effected by registered mail.'
[31] The deponent to ABSA's
principal affidavit offers some explanation for why ABSA's
experience with registered post as a means
of transmitting notices
in terms of section 129 of the Act contradicts the assumptions made
in Rosso wand
Sebola.
He speaks to the
behavioural patterns of distressed consumers, as he puts it 'from my
own experience as the plaintiff's legal
counsel, within its group
litigation department, where dealing with defaults and recoveries is
an integral part of my responsibility
and from my experience as an
attorney dealing with recoveries matters for the plaintiff'. (He was
previously a practising attorney.)
[32] He points out that by the time such tetters are
sent the consumer is well aware of the condition of default. The
consumer
'Is generally aware that all options short of litigation
have been exhausted and there are difficult times ahead'. Consumers
will therefore tend to avoid registered mail items because 'they
mean trouble'. Many such consumers who know they cannot meet their
obligations 'wish to forestall or avoid the inevitable 'crunch' of
having to hand back the vehicle they are no longer paying
for, or
having their assets attached to pay the long outstanding credit card
bill'.
[33] It seems to me that the
procedure or system in place for the handling of registered mail in
1976 (when
Maharaj
was reported) was
not the same as the one which operates now. The subject is dealt
with at page 1001 of the
report,
where the court
spoke of the letter reaching the purchaser 'or, at least, (being)
made available to him at an address where he
is likely to be placed
in possession thereof. It spoke of evidence that the letter was
'delivered at the specified address
1
as constituting prima facie proof of
delivery to the addressee. That no longer happens. Registered
letters are collected, not
delivered; and the notifications that
they are available for collection proceed as ordinary mail from the
addressee's post office
to the address in question, with the result
that there is no record of the actual delivery of the collection
notice at the intended
recipient's address.
[34] Of course that is not to say that the evidence
before me establishes that the current system of registered post is
not as
good as the one employed in 1976. What it does establish,
however, is that the current system is more often than not
inadequate
when employed to bring notices to the actual (as opposed
to presumed) attention of consumers who are in financial distress.
[35] I have no evidence before me of the efficiency of
the postal services with respect to ordinary mail. But I do not
think that
I overreach the boundaries of judicial notice by
suggesting that in the case of post directed at consumers in
financial distress,
ordinary post is by a substantial margin more
reliable than registered post. The country would be in an uproar if
anything like
50 per cent (let alone 70 per cent) of ordinary mail
went astray. Indeed, it seems reasonable to suppose that the
proportion
of ordinary mail lost is lower than 50 per cent by a very
considerable margin. But of course the difficulty with ordinary
mail,
in the context of section 129 of the Act, is that nothing can
be proved through direct evidence besides posting, unless the credit
provider receives a response to the letter from the consumer.
[36] I
turn
now to the first
of the questions posed in these applications for default judgment,
namely whether the fact that the registered
section 129 letters were
returned unclaimed means that these cases must be adjourned as
contemplated in section 130(4)(b) of
the Act.
[37] It is perhaps appropriate that I attempt a summary
of the applicable legislative provisions, ignoring matters of detail
and
cross-references to provisions not material in the present
context.
[38] Section 129(1)(a) of the Act is to the effect that
when a consumer is in default a credit provider 'may' in writing
'draw
the default to the notice of the consumer' and propose that
the consumer refer the matter to a third party such as a debt
counsellor
or ombud with the intention that, if there is a dispute,
the parties resolve it, or with the intention that a plan be
developed
and agreed upon to bring payments up to date. Section
129(1)(a) does not render the delivery of such writing compulsory.
If it
did, the credit provider would be in breach of the provision
in the statute if it did not act in terms of the section even when
the default is insignificant, and does not raise any alarm.
[39] However section 129(1)(b) is to the effect that a
credit provider cannot commence legal proceedings to enforce the
agreement
without first 'providing notice to the consumer' as
contemplated in section 129(1)(a). It is a condition imposed by
section 130(1)
that a credit provider cannot approach the court to
enforce the creditagreement unless at least ten business days have
elapsed
since the credit provider 'delivered a notice to the
consumer as contemplated in . . . section 129(1)'.
[40] Section 130(3) is to the effect that the court may
not 'determine' a matter in which enforcement of a credit agreement
is
sought unless the court is satisfied that the 'procedures
required by' section 129 'have been complied with'. And section
130(4)(b)
is to the effect that if in such proceedings the court is
not so satisfied, it must adjourn the matter before it, and 'make an
appropriate order setting out the steps the credit provider must
complete before the matter may be resumed',
[41] The judgment of the Supreme
Court of Appeal in
Rossouw
settled
conflicting single-judge decisions concerning the questions as to
what 'providing notice to the consumer' means where
it appears in
section 129(1)(b), and the circumstances in which a court could be
satisfied that there had been compliance with
that requirement when
the post is used to provide notice.
5
In order both to establish what
section 129(1)(b) requires, and also to determine what would suffice
as proof
that
the
requirement has been met, the court in
Rossouw
reasoned mainly
around three sections of the Act which deal with delivery of
documents or notices, that is to say sections 65(2),
96 and 168.
[42] Again in summary :
(a)section 96 provides that when a legal notice is
required it must be delivered to the intended recipient at the
address of that
party set out in the agreement, or at the address
most recently provided by that party when giving notification of
intention
to change that party's address set out in the agreement;
(b)section 65(2) of the Act determines that in the
absence of a method prescribed by regulation for delivery of a
particular document,
a document required to be delivered to a
consumer must be made 'available to theconsumer' through one or more
of a number of
alternative mechanisms (including ordinary mail), and
that the delivery must be made in the manner chosen by the consumer
from
those options set out in the section; and (c)section 168 is to
the effect that when the Act requires a document to be served it
'will have been properly served' when it is either delivered to that
person or 'sent by registered mail to that person's last
known
address'.
[43] The court in
Rossouw
reasoned as
follows.
6
(a)Section 129(1) does not state how notice is to be
provided to the consumer, and where section 130(1) provides for the
time
which must elapse before the court is approached it is measured
from when the section 129 notice is 'delivered' to the consumer.
But
the term 'delivered' is not defined in the Act.
(b)Delivery by post is one of the options given in
section 65(2).
(c)Section 96 deals with delivery of notices providing
that notices must be
delivered at the selected address.
(d)Registered mail, being more reliable, is a selection
which may be made in compliance with section 65(2).
(e)Section 168 is to the effect that 'sending' a
document by registered mail to a person's last known address is
proper service
(unless otherwise provided for in the Act) and
'service' is synonymous with 'delivery', (f)These provisions 'put it
beyond doubt
that the legislature was satisfied that sending a
document by registered mail is proper delivery'. And 'send' means
'despatch',
and does not include 'receipt'.
(g)Given that the consumer is allowed the choice of
mode of delivery, the legislature intended the risk of non-receipt
to lie
with the consumer.
[44]
Rossouw
accordingly held
that
(a)when registered post is the mode of delivery,
despatch of the registered item is ali that the credit provider need
prove;
(b)the fact that the letter does not reach the address
(or the consumer) is of no consequence in the enquiry as to whether
there
has been compliance with section 129 of the Act; where
registered post is properly employed, despatch on its own
constitutes
compliance with section 129.
[45] In
Sebola
it was decided
that proof of despatch is on its own insufficient to satisfy a court
that there has been compliance with section
129(1) of the Act. The
credit provider must go further and establish that the registered
item reached the addressee's post office.
ABSA argues that
Sebola
otherwise left
intact the finding in
Rossouw
that the risk of
non-delivery lay with the consumer, merely altering the regime set
out in
Rossouw
by
providing that the risk in effect passes when the section 129 letter
reaches the recipient's post office, and not at the earlier
stage
when it is despatched from the sender's post office. And
accordingly, following
Sebola,
in cases such as
the three before me, the court should accept the track and trace
report as proof of the fact that the registered
item reached the
recipient's post office, but ignore the fact that the report
establishes conclusively that the item did not
reach the consumer's
address (or the consumer).
[46] ABSA refers to the fact that
one of the purposes of the Act is to promote equity in the credit
market by balancing the respective
rights and responsibilities of
credit providers and consumers
7
;
that the court in
Sebola
accepted
the proposition that the Act calls for a 'careful balancing of the
competing interests sought to be protected'
8
;
and that indeed, in its analysis of what may be assumed upon proof
that the notice reached the correct post office,
Sebola
incorporates
the proposition that 'a reasonable consumer would have ensured
retrieval of the item from the post office
’
.
9
[47]
Sebola
recognises that
section 65(2) of the Act indicates that 'delivery' entails making
the document 'available'.
10
ABSA argues that the Constitutional
Court also recognised that neither section 96(1) nor section 168
implies a requirement of
proof of actual delivery to a specified
address; section 168 on the contrary providing that proof of
despatch is sufficient for
purposes of service.
11
Ultimately ABSA's argument is to the
effect that what
Sebola
determined is that
the credit provider need do no more than prove that it took
reasonable measures to ensure that the notice reached
the consumer's
address, so that, if the consumer acted reasonably, the notice
should have come to his or her notice.
[48] ABSA points out that the NCR,
in its submissions to the Constitutional Court, argued that one of
the averments which the
credit provider must make in order to
satisfy the court that the notice was received at the stipulated
address is that it was
not returned to the sender.
12
And yet, argues ABSA, the majority
judgment in
Sebola
contemplates
only two scenarios, namely unopposed matters where it is sufficient
for the credit provider to prove the arrival
of the notice at the
recipient's post office, and opposed matters where the consumer
responds to the summons and makes submissions
to the court on the
subject of compliance with section 129(1) of the Act This is said to
be significant not only because the
NCR raised the question of
returned items, but because the Constitutional Court would have been
aware, inter alia because of
its judgment in
De
Beer v North Central Local Council
13
,
of the
obligation of the credit provider to disclose the fact that a
section 129 notice had been returned unclaimed, it is argued
that
this omission on the part of the court in
Sebola
to deal
with what must have been an obvious potential factual scenario (i.e.
the return of registered items), indicates that the
decision of the
majority in
Sebola
does not
contradict or seek to contradict what was decided in
Rossouw,
namely that
the risk of ultimate non-delivery lies with the consumer; this
notwithstanding the fact that
Sebola
would
allow the consumer who appears to oppose the enforcement of the
credit agreement to raise the question of non-receipt, and
claim the
benefit of the processes contemplated by section 129(1)(a) before
legal action proceeds any further.
[49] The marriage of the judgments
in
Rossouw
and
Sebola
proposed
by ABSA would make a contribution to the efficient and
cost-effective administration of justice in connection with the
enforcement of credit agreements. Indeed, the essence of ABSA's
argument before me (that the risk of non-delivery lies with the
consumer once the registered item reaches the consumer's post
office) accords with the judgment of the Western Cape High Court
delivered on 21 June 2012 in the matter of
Nedbank
Limited v Anelene Binneman and 12 similar cases
14
.
In that case the
court held that it did not read the judgment of the majority in
Sebola
as
having overruled the principles laid down in
Rossouw
and in
Munien
v BMW Financial Services
15
which had been specifically endorsed
more recently in
Majola
v Nitro Securitisation
16
.
The court in
Nedbank
found
it unnecessary to come to a conclusion as to what was meant, for
instance in paragraph 87 of the majority judgment in
Sebola,
where the court
held that proof that the notice reached the appropriate post office
would constitute sufficient proof of delivery
'in the absence of
contrary indication'.
[50] My difficulty with many of
ABSA's arguments is that they offer more support for the proposition
that
Rossouw
was
correctly decided than they do for the proposition that
Sebola
actually endorsed
Rossouw,
subject
only to the one obvious point of difference. Furthermore, ABSA's
submissions do not address the crucial difference between
the
reasoning adopted in
Rossouw
and
that followed
in
Sebola.
In
Rossouw
the
court decided that upon a proper construction of the provisions of
the Act dealing with delivery, all that the legislature
required was
that the (registered) letter should be despatched. There is nothing
arbitrary about selecting that point as the
one where the credit
provider's duty is discharged; from that point onwards theprocess of
delivery is beyond the control of the
credit provider. In
Sebola,
on the other hand,
according to ABSA the court decided that the credit provider's duty
is discharged (i.e. the requirements of
section 129(1) are met) when
the letter reaches the consumer's post office. Given how registered
post works, the selection of
that point in the process may very well
have been significant given the facts in
Sebola,
but in the
ordinary case (where the letter reaches the correct post office) the
selection of that point in the process would be
entirely arbitrary
but for the fact that the attainment of it can be proved. That seems
to me to be no justification for a finding
that the legislature
ordained that the credit provider's obligations under section 129(1)
of the Act are discharged when the
letter reaches the consumer's
post office.
[51] Applying the well-known
principles governing the rules of interpreting a court's judgment
set out in
Firestone
South Africa (Pty) Ltd v Genticuro A. G.
17
,
I am unable to
reach the conclusion
that
the majority
judgment in
Sebola
sanctions this
court ignoring conclusive evidence that the section 129 notice did
not reach either the consumer or the consumer's
address; which is
what would be required to be done to hold in the circumstances of
the three cases before me that compliance
with section 129(1) of the
Act has been proved. It is unnecessary for me to furnish a complete
analysis of the majority judgment
in
Sebola
in order to
express my reasons for having come to this conclusion. I will
confine myself to what appear to me to be the essentials.
[52] In paragraph 57 of the majority
judgment the following appears. 'SERI sought an order that the
notice must come "to
the attention of the consumer".
That
is indeed what section 129 requires,
but
the critical question is what the statute requires a credit provider
to prove
to
establish this.'
(My
emphasis.)
And
further, in the same paragraph after referring to section 130 as
imposing an obligation to deliver the notice, the judgment
proceeds
as follows.
This requires the credit provider to
establish, to the satisfaction of the court from which enforcement
of a credit agreement
is sought,
that
it has delivered a notice to the consumer as contemplated in section
129'
(My
emphasis.)
And a little later in paragraph 60, immediately before
turning to the subject of the meaning of 'delivered' in section 130
of
the Act, the majority judgment makes the point that before the
credit provider seeks enforcement 'the legislation insists the
consumer should have the benefit of a notice'. This is described as
a 'plain statutory objective' which must influence the meaning
of
the word 'deliver'.
[53] From the aforegoing one may
deduce that the majority judgment in
Sebola
holds that actual
notice to the consumer is indeed the standard set by section 129(1)
of the Act. And one would assume that in
the subsequent paragraphs
of the judgment, where the subject is the quantum of proof necessary
to be tendered by the credit provider
(given that proof of actual
notice to the consumer will in most cases not be feasible),
everything that is said will be qualified,
or should be taken to be
qualified, by a
caveat
that proof
positive of the fact that the notice did not reach the consumer
trumps any conclusion which may be drawn from facts
which suggest
that the notice ought to have reached the consumer. In my view a
proper reading of the subsequent paragraphs of
the judgment does in
fact reveal that the decision of the court in
Sebola
as to what will
'ordinarily' suffice cannot be read to convey or imply an
endorsement of the decision in
Rossouw
that once what
will 'ordinarily' suffice is proved, the question as to whether the
notice actually reached the consumer is irrelevant.
[54] In paragraph 72 of the majority
judgment in
Sebola
the court noted
that section 129 'requires that notice be provided to the consumer'
and held that the obligation to 'deliver'
the notice must be read in
the light of the importance of that notice. In paragraph 73, after
endorsing the Supreme Court of
Appeal's observation that section
65(2) 'expressly attaches value' to the communication method chosen
bythe consumer, and that
choice entails responsibility
18
the court in
Sebola
states the
counter-argument that a fair reading of the statute demands that
'the consequences ascribed to the consumer's choice
of communication
method be off-set against the pivotal significance of the section
129 notice.'
[55] In paragraph 74 of the judgment
the court then reached the conclusion that an understanding of the
meaning of the term 'deliver'
in section 130 must be found in a
broader approach by determining what the credit provider should
establish 'by way of proof
that the section 129 notice in fact
reached the consumer'. In my view if one knows that 'in fact' the
section 129 letter did
not reach the consumer then evidence which
might have gone the other way in other circumstances becomes
irrelevant, and the court
in
Sebola
must have been
alive to that. Indeed, at the end of paragraph 74 of the majority
judgment it is stated that the point of the evidence
is to 'satisfy
the court from which enforcement is sought that the notice, on
balance of probabilities, reached the consumer'.
It is impossible so
to be satisfied if one knows that as a matter of fact the notice did
not reach the consumer because it was
returned to the credit
provider.
[56] In that context what is
conveyed in paragraph 77 of the majority judgment is clear enough.
Coupled with the required allegations
in the credit provider's
summons, proof that the notice reached the correct post office
brings about that 'it may reasonably
be assumed
in
the absence of contrary indication,
..
. that notification of its arrival reached the consumer and that a
reasonable consumer would have ensured retrieval of the
item from
the post office'. (My emphasis.)
[57] That is why, in my view, in
paragraph 78 of the majority judgment, the court in
Sebola
held that the
evidence to which it had referred would 'ordinarily' constitute
adequate proof of delivery of the section 129 notice.
[58] Finally, in my view paragraph
79 of the majority judgment in
Sebola
puts it beyond
doubt that the Constitutional Court has not endorsed the decision in
Rossouw
that
the risk of non-delivery lies with the consumer. The paragraph of
the judgment ought to be quoted in full.
'If in contested proceedings the consumer asserts that
the notice went astray after reaching the post office, or was not
collected,
or not attended to once collected, the court must make a
finding whether, despite the credit provider's proven efforts, the
consumer's
allegations are true, and, if so, adjourn the proceedings
in terms of section 130(4)(b).'
[59] The adjournment contemplated by section 130(4)(b)
of the Act is one which takes place because the court has found that
there
has not been compliance with section 129 of the Act (or rather
that it is not satisfied that there has been such compliance), ff
delivery to the consumer's post office is compliance, then it would
not be open to the court, no matter the evidence tendered
by the
consumer, to adjourn the case in terms of section 130(4)(b), as the
enquiry into whether there had been compliance with
section 129(1)
of the Act would be closed. (Of course, especially where the
judgment sought involves permission to execute against
a primary
residence, the fact that the section 129 notice had not actually
been delivered may feature as a consideration going
to the exercise
of the court's discretion with regard to that form of relief, or
with regard to any other discretion which in
a particular case may
arise because of the provisions of the Act, but an adjournment
eventuating in such circumstances would
not be one in terms of
section 130(4)(b) of the Act.)
[60] I conclude, accordingly, that in the three matters
before me there has not been compliance with the procedures required
by
section 129 of the Act, as a result of which I must adjourn these
matters and make appropriate orders as to the steps ABSA must
complete before these matters may be resumed.
[61] In
Nedbank
the
court found
that in four of the 13 matters before
it
there had
not been
compliance with section 129 of the Act because the letters had not
been properly posted, or because the letter in question
had not
reached the correct post office. It accordingly made a direction in
terms of section 130(4)(b) that the requisite notice
be given In any
manner authorised by the Act
and
chosen by the defendant in terms ofs65(2) of the Act'
(My
emphasis.) That order was appropriate because of the court's finding
that delivery to the correct post office constitutes
compliance with
section 129(1) of the Act. Of course, in the light of the decision I
have reached as to the effect of the judgment
in
Sebola,
the
Nedbank
order would not be
appropriate. In the light of the evidence placed before me of just
how unreliable registered post is in the
case of distressed
consumers, the grant of that order in cases where the section 129
letter reached the correct post office,
but was nevertheless
returned, would in all probability yield nothing as, on the
available evidence, it is overwhelmingly probable
that compliance
with the order would not achieve compliance with the Act. (Resending
by registered post might prove successful
if in the particular case
the first attempt at delivery had failed because the consumer
omitted to collect the registered item
through inadvertence, or
perhaps because of a temporary absence. But the failure rates of 50
per cent to 70 per cent which ABSA
has established must be the
product of deliberate evasion in the overwhelming majority of
cases.)
[62] The problem I have identified
with the order granted in
Nedbank
(in the context of
the decision which I have reached as to the meaning of
Sebola)
does not arise in
the three cases before me. That is because in each case the
consumer(s) concerned chose an address, but not
the mode of delivery
to that address. As I read section 65(2) if the consumer has not
chosen one of modes set out in section
65(2)(a) of the Act, then all
of them are available to the credit provider.
[63] Nevertheless, the order I make
in these matters under section 130(4)(b) should be consistent with
what I might regard as
an appropriate wider framework within which
to handle the problems which have arisen in connection with
registeredpost, and which
will in the future arise in many thousands
of cases both in the High Courts and the Magistrates Courts. In
considering the shape
which such a framework may take it must not be
overlooked that whereas section 129(1) has the most laudable purpose
of avoiding
litigation, it and the related sections of the Act
cannot be taken to have been designed as a mechanism either to
prevent access
to court by credit providers, or to render it so
difficult and time consuming that otherwise unnecessary write-offs
feature as
viable alternatives to the enforcement of a credit
provider's rights. To adopt a phrase from BASA's affidavit, such an
outcome
would be likely to have a 'chilling effect' on the credit
market, which in my opinion would be felt most amongst disadvantaged
communities who may not have the privilege of living in a place
where postal deliveries to their homes are made (or of internet
access or fax machines), and whose fair and reasonable access to
credit as a means of advancing themselves in our economic society
is
one of the goals of the
National Credit Act.
19
[64
] The first question is whether the 'appropriate
order" contemplated by
section 130(4)(b)(ii)
must be one which
achieves compliance with the provisions of
section 65(2)(b)
, which
requires delivery to the consumer in the manner chosen by the
consumer. If that method has failed, and on the available
evidence
is likely to fail again, insisting upon compliance with
section
65(1)(2)(b)
being achieved will in all probability impose a bar
against the credit provider resuming its action, in my view the
discretion
given the court in
section 130(4)(b)(ii)
is wide enough
to permit an order which appears to the court to offer a reasonable
prospect of achieving compliance with section
129(1) of the Act
despite the fact that the order does not stipulate the consumer's
chosen mode of delivery.
[65] It seems to me that the
execution of any order which the court makes should be capable of
generating proof upon a balance
of probabilities that there has been
compliance with section 129(1) of the Act (as long as no contrary
indications emergebefore
the credit provider asks the court to allow
the matter to be resumed). In my view the order should not be framed
in terms which
render compliance with it a substantial obstacle to
the exercise of the credit provider's right of access to court. The
order
should reflect the need for 'a careful balancing of the
competing interests sought to be protected'.
20
[66] The evidence placed before me
by ABSA establishes that, contrary to the position taken in
Rossouw
and
Sebola,
far from being a
more reliable method than ordinary post of getting notices to a
distressed consumer, registered post is in fact
likely to fail.
21
The only advantage of registered
post, on the evidence before me, is the facility of proof; and if
the experience of ABSA and
its attorneys reflects the experience of
other lending institutions, what will be facilitated in most cases
is proof of failure.
In my view it is accordingly worth having
another look at ordinary post when registered post has failed,
despite the expressed
preference of both the Supreme Court of Appeal
and the Constitutional Court for registered post. Ordinary post is
after all sanctioned
by section 65(2) of the Act. Furthermore, when
registered post has failed because the consumer did not collect the
letter, there
is a high degree of probability that the consumer has
avoided delivery. That must be put in the scale when balancing the
interests
sought to be protected.
[67] But if ordinary post is to be sanctioned, then I
think it is important that credit providers wherever possible
increase the
level of probability attaching to ultimate receipt by
sending the notice not only to the chosen address of a consumer, but
to
all other addresses where, according to the records of the credit
provider, the consumer may be found. I have in mind the place
of
work of the consumer who is employed; the address of a family member
which might have been provided at the time credit was
applied for,
and so on. Collating the necessary information and sending out
multiple letters may well impose an additional administrative
burden. But that does not seem to me to be an unreasonable
imposition given the importance of achieving compliance with section
129(1) of the Act, and given the fact that success opens the way to
judicial enforcement if the offer of the processes contemplated
by
section 129(1)(a) is declined, or if they fail. I think that if
ordinary post is to be sanctioned, it should be accompanied
by
another attempt at delivery by registered post to the consumer's
selected address. This would meet the case of the consumer
who did
not evade receipt of the first letter, but failed to collect it for
some other reason.
[68] Section 65(2) of the Act offers other
alternatives, any one of which may in a particular case be more
conveniently employed
by the credit provider, as long as it is in a
position to satisfy the court that the method will probably be
employed successfully.
[69] Employing the sheriff has been raised before as an
alternative and viable means of achieving compliance with section
129(1)
of the Act. In my view that alternative should be regarded as
a last resort for the following reasons.
(a)The only mode of service which the sheriff could
employ in precise compliance with section 129(1), read with section
65(2)
of the Act, would be personal service, and given the
difficulties often experienced in effecting personal service that is
likely
to be expensive.
(b)lt is correct that proof of delivery to the address
of a consumer (as opposed to delivery to the consumer) can be
readily provided
through the sheriff at a cost in most cases lower
than might be incurred to achieve personal service. But like any
postal delivery,
that does not guarantee that the notice will come
to the attention of the consumer; which raises the question as to
whether the
other considerations I mention hereunder do not outweigh
the advantage of proof of delivery achieved by employing the
sheriff.
(c) ABSA has provided me with evidence on oath
illustrating that, staffed as they are at present, sheriffs' offices
are unlikely
to be able to handle the delivery loads which would be
imposed on them by the banking industry if the sheriff is to be
employed
to serve section 129 notices in all cases where registered
post has failed.
(d) ABSA has provided evidence of the numbers of
section 129 letters it sends out. If, as a matter of course, courts
order service
by the sheriff as a substitute for each of the 50 per
cent to 70 per cent of ABSA's notices which are returned unclaimed,
and
follows the same practice in the case of other banks, that is
likely to have a meaningful impact on the nature of the mandate
given to sheriffs. At the moment a sheriffs mandate is to see to the
proper and efficient service and execution of court process.
I do
not think that it would be wise for the courts to follow a course
which might compromise the performance of that mandate
without the
subject first being property researched so that steps may be taken
to avoid collateral damage to the performance
of the fundamentally
important role now played by sheriffs in the administration of
justice.
[70] There are many actions launched
before the judgment in
Sebola
waiting in the
wings, with track and trace reports recording that the mandatory
section 129(1) notice has been returned unclaimed.
If my
construction of the judgment in
Sebola
is
correct,
then in each of
these cases the matter will have to be placed before the court in
order to obtain the directions contemplated
by section 130(4)(b)(ii)
of the Act. It seems to me that when these matters are placed before
the court the credit provider should
provide information on oath
which will enable the court to decide which of the options furnished
by section 65(2) are likely
to generate a decision that on the
probabilities the notice has reached the consumer. Using ordinary
post as an example, such
an affidavit would disclose the information
available to the credit provider as to addresses in addition to the
selected one,
to which ordinary mail might be directed with a
reasonable expectation that it will come to the attention of the
consumer. The
quality of service of the summons already effected may
persuade the court that posting to the service address will be
sufficient,
especially if it is the address selected by the
consumer. It would be of undoubted assistance to the court if such
an affidavit
were to be accompanied by a draft order reflecting the
credit provider's submissions as to what would constitute an
appropriate
order under section 130(4)(b)(ii) in the particular
case.
[71] In the three cases before me I do not have all of
the information I have referred to above. But given the exigencies
of the
occasion, I propose to work around that.
[72] I should mention that if
(a)my interpretation of the effect
of the majority judgment in
Sebola
is correct;
(b)my understanding of the options available to a court
under section 130(4)(b)(ii) is correct; and
(c)other judges share my view that there is value in
ordinary mail, and that the use of it may justify a conclusion in an
appropriate
case that notice has probably reached the attention of a
consumer
then the question arises as to whether in future cases
it may not be possible to take steps to avoid the costs involved in
more
than one hearing in motion court being necessary before default
judgment can be granted in unopposed matters.
[73] I do not believe that in
actions which have already been instituted it is possible to argue
that anything favourable to the
credit provider can be deduced from
the absence of an appearance to defend despite the fact that the
section 129 notice was attached
to the summons. The consumer must
suppose, unless he or she takes legal advice, that the opportunity
offered by section 129(1)
has passed, and that it cannot be
resurrected. However as the precursor to actions instituted after
Sebola
it
might be a good idea for the credit provider not only to send the
section 129 notice by registered post (that being compulsory
in the
light of the decision in
Sebola,
and probably
mandatory also by virtue of the provisions of most credit
agreements), but also and at the same time to send the
same notice
by ordinary post to the selected address and to any other address
which may appear to hold out a prospect of delivery
to the consumer.
The summons could then be endorsed with words drawing the consumer's
attention to the fact that the litigation
instituted by service of
the summons is only permissible in the event of the annexed section
129 notice having come to the consumer's
attention, and to the
consumer's right to defend the action upon the basis that the notice
was not received, even if the consumer
otherwise admits liability
for the claim. If that is done then, despite a negative track and
trace report eventuating, the credit
provider may be able to
persuade the court that it ought to be satisfied that there was
compliance with section 129(1) in the
light of
(a)an explanation on oath as to the significance of the
address or addresses to which the notice was directed by ordinary
post,
coupled with evidence of posting, and
(b)the quality of service achieved
which
together may point to a probability that the absence of opposition
supports a conclusion that the notice did reach the consumer.
[74] I now turn to the three cases before me. In the
case of Mkhize service was effected on the daughter of the two
defendants
at the address selected for service. In the case of
Chetty the summons was served on the defendant's father at the
selected address.
[75] In the case of Mlipha service was effected by
affixing a copy to the outer or principal door of the premises at
the chosen
address. But ABSA engaged the services of a tracing agent
whose evidence is before me on oath, and whose investigations
revealed
that the defendant, who is self-employed, continues to
reside at the selected address, but that he is doing his very best
to
avoid his creditors, apparently in particular because he owes
arrear levies with respect to his property of about R80 000.
[76] It accordingly appears that in each of these
cases, if a letter is sent by ordinary post to the selected address,
as long
as it arrives there it is likely to come to the attention of
the consumer. And of course in each of those cases ABSA may be able
to identify other addresses to which it is worth sending a notice by
ordinary mail.
[77] I propose in these cases to leave all options
provided by section 65(2) of the Act open. One or more of the other
alternatives,
including delivery by hand to the address (if not into
the hands of the consumer), may be found more convenient, or more
likely
to generate a successful application to resume the
proceedings, depending on the information available to ABSA
concerning the
consumers in question, and depending on the
administrative capacity and manpower available to ABSA to service
these matters.
Of course, if no response is received from the
consumers, the explanation for what was done, and the facts
necessary to establish
that what was done probably achieved success,
will have to be presented by ABSA on oath when it asks the court to
make the determination
required by section 130(3), and entertain the
application for default judgment.
[78] Given the circumstances of the
three cases before me I accordingly propose to make an order in each
of them along the lines
of the one granted by the Western Cape High
Court in
Nedbank.
In each of the three matters before me I make the
following order. (In the Mkhize matter references to the "defendant"
must be rendered in the plural.)
(1) The application for default judgment is postponed sine die.
(2) The plaintiff is afforded an opportunity to provide a notice
to the defendant as contemplated in
section 129(1)
of the
National
Credit Act, 2005
through one or more of the mechanisms listed in
paragraph 65(2)(a) of the Act, and also by registered post directed
to the defendant's
chosen address.
(3)
Such
notice must, in addition to meeting the requirements of section
129(1)(a) of the Act, also draw the defendant's attention
to
(a) the fact that action has already been instituted against the
defendant, the relevant case number and the fact that an application
for default judgment has been postponed sine die;
(b) the current amount of arrears;
(c) the fact that the defendant's rights in terms of the Act, and
in particular those contemplated by section 129(1)(a) of the Act,
are unaffected by the fact that action has already been instituted.
(4) The plaintiff is granted leave to set down the application
for default judgment on notice to the defendant, but may not do so
until at least ten business days shall have elapsed since delivery
of the notice referred to in paragraph [2] of this order;
or if that
date is not known, since the date by which the plaintiff contends
that such delivery must have been effected.
(5) The application for default judgment shall be accompanied by
evidence on oath
(a) establishing to the best of the plaintiffs ability that the
notice required by paragraph [2] of this order was provided to the
defendant, and explaining the plaintiffs choice of mode of delivery
of the notice; and
(b) dealing with the matters referred to in
section 130(1)(b)
of
the
National Credit Act.
(6) (a) The costs incurred in producing the evidence placed
before the court for the hearing on 28 June 2012, and all other
costs
incurred in connection with that hearing, shall be paid by the
plaintiff.
(b) Save as aforesaid, the costs of the action to date are
reserved for later determination.
OLSEN, AJ
Counsel for the Plaintiff: AM Annandale SC
AJ Boulle
Plaintiff's
Attorneys: Easton-Berry Inc
3 The
Crescent
Westway
Office Park
Westville
Date of
hearing: 28 June 2012
Date of
Judgment: 6 July 2012
1
See
para 30.
2
See
para 57.
3
1976
(4) SA 994
(A) at 1001 A - B.
4
See
paras 68 and 75, also with reference to
Maharaj.
5
A
convenient list of the decisions, and summary of the finding in
each, appears in note 6 to the majority judgment in
Sebola.
6
See
paras 22, 23, 29, 30, 31 and 32.
7
Section
3(d).
8
">
8
Para
40.
9
Para
77.
10
1U
Paras 67 and 68.
11
Paras
69 and 70.
12
Paras
27 and 49.
13
[2001] ZACC 9
;
2002
(1) SA 429
(CC), para 25,
14
Case
number 7241/11.
15
2010
(1)SA 549 (KZD).
16
2012
(1)SA 226 (SCA).
17
1977
(4) SA 298
(A) at 304.
18
See
para 32 of the judgment in
Rossouw,
where this is said
to point inexorably 'to an intention to place the risk of
non-receipt on the consumer's shoulders'.
19
See
in particular section 3(a) of the Act
20
Sebola,
para 40.
21
As
far as I can ascertain no factual evidence was placed before either
the Supreme Court of Appeal or the Constitutional Court
concerning
the reliability of the two postal alternatives. Thus, I think, the
reference made in both cases to
Maharaj
as authority for
the proposition that registered post is more effective.