About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Durban
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Durban
>>
2012
>>
[2012] ZAKZDHC 64
|
|
Standard Bank of South Africa Ltd v Dlamini (2877/2011) [2012] ZAKZDHC 64; 2013 (1) SA 219 (KZD) (23 October 2012)
IN
THE HIGH COURT OF SOUTH AFRICA, DURBAN
REPUBLIC
OF SOUTH AFRICA
Case no.: 2877/2011
In the matter between
STANDARD BANK OF SOUTH
AFRICA LIMITED
.....................................
Applicant
and
MBUYISENI DLAMINI
.................................................................................
Defendant
JUDGEMENT
Heard August 2012
Handed down:23 October
2012
D. PILLAY J
[1] Mbuyiseni Dlamini
bought a 2004 Toyota Corolla 160i GLE on credit from Standard Bank
for R85 745.02 on 3 June 2010. Starlight
Auto Sales, a second hand
car dealership in Pinetown, acted as the Bank’s agents to
facilitate the Bank’s financing
of the purchase of the vehicle.
Four days later he had it towed back to the dealership. He informed
the salesman, Sibusiso Mthetwa,
that the vehicle malfunctioned and
that he did not want it or any other vehicle from that dealership. He
demanded a refund of his
deposit. When he did not get his refund he
approached Scorpion Legal Protection (Pty) Ltd for legal assistance.
[2] On 5 October 2010
Scorpion despatched a letter to the dealership demanding the refund
of the deposit of R15 000 and cancellation
of the agreement. On 21
October 2010 the Bank’s attorneys sent a notice in terms of s
129 of the National Credit Act 34 of
2005 (the NCA) addressed to Mr
Dlamini but to an incorrect address demanding payment in terms of the
credit agreement. On 3 March
2011 the Bank had summons issued for
judgment to be entered against Mr Dlamini confirming the termination
of the agreement, ordering
the return of the vehicle, costs of suit
and the costs of locating, removing, storing and disposing of the
vehicle.
[3] In support of its
claims, the Bank relied on clause 10.6 in its credit agreement which
provided that if the agreement was not
entered into at the Bank’s
registered business premises, Mr Dlamini could, within five business
days after signing the agreement,
terminate it on notice to the
Bank’s vehicle and asset finance division head office at fax
number 011 6313168, and return
or tender the return of the vehicle.
If he terminated the agreement in this way he was obliged to pay the
rental for the use of
the vehicle for the time that he had it and any
reasonable costs the Bank might incur to have the vehicle returned or
restored
to a saleable condition. What the agreement did not record
was that he was also entitled to a refund in terms s 121(3)(a) of the
NCA.
[4] In short, the Bank
relied on s 121 the NCA read with reg 37 of the National Credit
Regulations, GN R713,
GG
28893, 31 May 2006 (the NCR). Because
Mr Dlamini did not notify the Bank of the termination in the manner
prescribed by clause
10.6 of the agreement and reg 37, the Bank
contended that the termination was a voluntary surrender contemplated
in s 127(5) to
(9) of the NCA.
[5] Clause 10.3 which
provides for termination by voluntary surrender, entitles the Bank to
sell the vehicle, account to Mr Dlamini
and claim any shortfall due
by him under the agreement. In the circumstances, finding the basis
for the termination is important
to determine the consequences and
remedies each party has on termination.
[6] In his defence, Mr
Dlamini denied that he surrendered the vehicle. He alleged that he
returned it because it broke down. On
driving it from the dealership
he had noticed that it was jerking and smoking. He consulted his
cousin, a mechanic who testified
in corroboration. After they test
drove it for about two kilometres they diagnosed that it would not
last for more than 30 kilometres.
They discovered that the vehicle
was rebuilt following an accident. As predicted, it broke down and
they had it towed back to the
dealership.
[7] In his answering
affidavit to the summary judgment application Mr Dlamini elaborated
on his defence that he was unaware that
he had to notify the Bank of
the termination of the agreement in the prescribed manner. He alleged
that it was only Sibusiso Mthetwa
who attended to him at the
dealership at all times. Mr Mthetwa created the impression that he
worked for both Starlight and the
Bank when he assisted Mr Dlamini to
complete the paperwork to arrange the loan from the Bank. Mr Dlamini
denied that Mr Mthetwa
or anyone else had explained the terms of the
agreement to him. If he had known that he had to telefax notice to
the Bank at the
number provided in the agreement informing it that he
terminated the agreement and tendered the return of the vehicle he
would
have complied.
[8] As it was common
cause that Mr Dlamini did not notify the Bank of the termination of
the agreement by fax as prescribed in the
agreement, the only issue
in dispute on the facts was: did Mr Dlamini know and understand the
terms of the agreement?
[9] On the facts, the
only material witnesses for the Bank were the persons from the
dealership who interacted with Mr Dlamini when
he bought and returned
the vehicle. Mr Dlamini persisted that it was Mr Mthetwa who attended
to him on both occasions. However,
the Bank first called Nomuso
Eugenia Ndlela, an employee in its legal department, to testify about
how credit agreements were usually
concluded at motor dealerships,
the importance of receiving notice of termination in the prescribed
way, how the vehicle had been
repossessed from Starlight in September
and that it has yet to be resold.
[10] Strangely, although
the Bank authorised its agent at the dealership to forward
applications for credit, explain the terms to
consumers and attend on
signing credit agreements, it did not authorise its agents to receive
vehicles on its behalf when agreements
were terminated. Nor did it
expect its agents to notify it of the termination. As Ms Ndlela
surmised, this must have been so for
the convenience of not the
consumer, but of the Bank.
[11] Much of Ms Ndlela’s
evidence was unnecessary as Mr Dlamini admitted his signature to the
agreement and did not dispute
that the agreement was what it
purported to be. The interpretation of the termination clause and its
materiality were also not
disputed. Ms Ndlela’s evidence could
easily have been curtailed, if not dispensed with altogether, if the
parties had defined
the issues in dispute precisely at their
pre-trial conference.
[12] At the end of Ms
Ndlela’s evidence the Bank signalled its intention to call Ms
N. Marimutho whose signature appeared
on the agreement on behalf of
the Bank. Mr Dlamini vehemently denied having any dealings with Ms
Marimutho at all.
[13] On resumption, the
Bank abandoned Ms Marimutho as its witness and called Mr Mthetwa
instead. The gist of Mr Mthetwa’s
evidence was that he was the
salesman who sold the vehicle to Mr Dlamini. He informed Mr Dlamini
that the dealership could arrange
finance from one of several
institutions including Standard Bank. He took Mr Dlamini to Ms
Marimutho and left him with her to complete
the application for
finance. The only conversation he heard between them was Ms Marimutho
asking Mr Dlamini in English whether
he was Mr Dlamini. They were
together for 25 minutes. He alleged that it was neither his function
to explain the agreement to Mr
Dlamini nor to complete the forms for
applying for credit and concluding the credit agreement. Besides, Mr
Dlamini had not brought
a copy of the contract with him when he
returned the motor vehicle.
[14] Mr Mthetwa
studiously avoided accepting any responsibility for interpreting and
explaining the terms of the agreement to Mr
Dlamini. Even if Mr
Dlamini did not bring the agreement, it was a standard credit
agreement. Mr Mthethwa had earlier testified
that Starlight was an
agent for several banks including Standard Bank. The probabilities of
Starlight not having a standard term
credit agreement for Standard
Bank are remote. It should at least have had its own copy as a record
of the transaction for which
it received R15 000 as deposit but
reflected only R13 000 in the agreement.
[15] There is no evidence
that Ms Marimutho spoke IsiZulu. Considering that Mr Mthetwa was the
salesman and the person who spoke
IsiZulu at Starlight the
probabilities favour Mr Dlamini’s version that only Mr Mthetwa
communicated with him.
[16] Mr Mthetwa confirmed
that Mr Dlamini had towed the vehicle back to the dealership. Mr
Dlamini was angry and informed him that
he did not want that or any
other vehicle that Starlight offered him. Mr Mthetwa surmised that Mr
Dlamini might change his mind
in due course. However, he conceded
that nothing from what Mr Dlamini said or did suggested that Mr
Dlamini might change his mind
and return to the dealership.
[17] The vehicle was
repaired by the in-house mechanic employed by the dealership. This
was usually done for all defective vehicles
in the dealership.
Authority from the Bank as the owner was not specifically sought to
repair the vehicle.
[18] Unsurprisingly, Mr
Mthetwa denied that Mr Dlamini demanded the return of his deposit of
R15 000. To admit the demand Mr Mthetwa
would have had to explain why
Starlight or the Bank had not refunded the deposit. As the salesman,
Mr Mthetwa earned commission
income only. The termination of the
agreement meant that he and Starlight would lose their commission.
[19] In response to
questions from the court, Mr Mthetwa testified for the first time
that when Mr Dlamini returned the vehicle
he took Mr Dlamini aside
and informed him that he should notify the Bank of the termination of
the agreement and that if he could
not see what was in the agreement
then he should get his child to read it for him. This was vital
evidence that he should have
given in chief. The Bank knew that Mr
Dlamini’s defence was that he was not aware that he had to
notify it in any prescribed
manner. If Mr Mthetwa was being truthful
about advising Mr Dlamini as he alleged, he would have given this
evidence in chief. Coming
as it did in response to questions from the
court, it is an afterthought and contrived.
[20] However, not all of
Mr Mthetwa’s evidence about advising Mr Dlamini is false. He
acknowledges that Mr Dlamini could neither
read nor see the terms of
the agreement.
[21] The Bank’s
designated agent, Ms Marimuthu, the only person authorised to enter
into the contract with Mr Dlamini, failed
to testify. At the end of
the Bank’s case there was no evidence that anyone explained the
terms of the agreement to Mr Dlamini.
More specifically, no one
informed him on signing the agreement and especially when he
terminated it, that he had to notify the
Bank by telefax. No one
established whether Mr Dlamini knew what it means to fax.
[22] According to Mr
Dlamini all he was told about the Standard Bank documentation was
that it was about the sale of the vehicle
and that he would be
required to pay an instalment with effect from the 1
st
of
July 2010. His answering affidavit to the application for summary
judgment is vague about the documents he signed. He understood
that
they were necessary to enable him to get the money to purchase the
vehicle and that he was required to pay instalments. That
was the
information that was imparted and understood by Mr Dlamini at the
point of the sale.
[23] Mr Dlamini is
functionally illiterate and does not understand English. This is as
obvious to me as it was to Mr Mthetwa. Mr
Dlamini completed schooling
at standard one. At 52 years, he is an unsophisticated African male.
He had difficulty in the witness
stand engaging with the documents.
He had become so excited about the purchase of a vehicle that he paid
little attention to the
repayment plan. He relied on the Bank to
deduct reasonable instalments. He did not expect the Bank to deduct a
high amount that
left him without the means to support himself, his
wife and his two little children. He expected to discover what the
amount of
those instalments would be when the Bank deducted its first
instalment from his account. He trusted his bank. On discovering that
he bought a defective vehicle he returned it intuitively to the
person who sold it to him.
[24] Initially when he
testified, Mr Dlamini tended to deny almost everything that was put
to him, including facts that were common
cause or the basis of his
defence. I warned him that it did not assist him to deny facts that
he knew to be true and that I could
find him to be evasive.
Thereafter, he made a conscious effort to give a considered response
to questions put to him. His illiteracy,
lack of sophistication and
general discomfort at being in a courtroom rather than deliberate
mendacity caused him to lapse into
the easy option of simply denying
everything.
[25] On these facts I
find firstly that Mr Dlamini terminated the agreement by returning
the vehicle because it was so defective
that it could not be driven.
A voluntary surrender is usually triggered by a consumer’s
inability to comply with the credit
agreement. Not a whiff of
evidence suggested that Mr Dlamini was unable to pay for the vehicle
or that he returned it for any reason
other than it being incapable
of being driven The Bank failed to establish a factual basis for any
finding that the termination
was a voluntary surrender. Mr Dlamini’s
mere non-compliance with the procedural formality of faxing notice of
termination
does not lead to the inference that he terminated the
agreement by voluntarily surrendering the vehicle.
[26] Secondly, the Bank
and its agents caused Mr Dlamini to enter into a credit agreement
without reading, interpreting and explaining
the material terms to
him which he did not know and understand. Could he nevertheless in
law be held to have assented to the agreement
by virtue of his
signature?
[27]
Turning to the law, the Bank relied on the common law principles of
quasi-mutual consent and
caveat
subscriptor
and
the cases in which these principles were invoked.
1
However,
when the NCA applies, the constitutional right to equality comes to
my mind immediately. The Preamble to the Constitution
and to the NCA
connect them. What then is the interface between the Constitution,
NCA and the common law principles of
caveat
subscriptor
and
quasi
mutual
consent?
[28]
In its Preamble the Constitution recognises the injustices of our
past. It commits to healing the divisions of the past, establishing
a
society based on democratic values, social justice and fundamental
human rights, and to improve the quality of life of all citizens.
The
founding values of the Constitution include human dignity, achieving
equality, advancing human rights and non-racialism.
2
The
right to equality declares everyone equal before the law and has the
right to equal protection and benefit of the law.
3
Discrimination
whether direct or indirect on a listed or proven ground is
prohibited.
[29]
Academics Fredman
et
al
observe:
‘
In
many countries, equality legislation initially sought to free
individuals from the negative effects of these group characteristics,
believing that in a colour-blind and gender-neutral world individuals
could thrive and develop their potential free from stereotypical
assumptions. But this view of equality was narrowly circumscribed. It
was a relative principle dependent upon identifying an appropriate
comparator. It also operated symmetrically so that the benefits
provided to a disadvantaged group could be challenged as a violation
of the principle of equality. Moreover, it assumed that the only
legitimate role of state action was negative, to stop discrimination,
rather than requiring positive steps and measures to be taken to
remedy disadvantage. The failure of this formal view of equality
to
address deeply entrenched and complex patterns of group disadvantage
led to sustained criticism by feminist and other writers,
and to
calls for formal equality to be replaced with substantive equality.
Substantive equality, unlike formal equality, requires
attention to
context, the intersection of different grounds of disadvantage,
difference, and positive obligations upon the state.
4
[30]
Our Constitutional Court (CC) has repeatedly endorsed the substantive
approach to equality.
5
Likewise,
national legislation contemplated in the equality clause aimed at
preventing or prohibiting unfair discrimination
6
must
also be interpreted in ways that achieve substantive effect.
Therefore
achieving equality, non-discrimination and human rights through
legislation are policy objectives flowing from the Constitution
itself.
[31] One category of
legislation promulgated includes the obvious examples of the
Promotion of Equality and Prevention of Unfair Discrimination Act 4
of 2000
and the
Employment Equity Act 55 of 1998
. These Acts target
specific groups of people discriminated on recognised grounds of
discrimination. As the learned authors Fredman
and others point out,
substantive equality looks beyond the recognised grounds to context
and positive obligations. Accordingly,
the legislature did not stop
with this category in pursuit of its transformative agenda.
[32]
Another category of legislation includes the NCA, the Consumer
Protection Act 68 of 2008 (CPA) and even the Companies Act 71
of 2008
(the CA) which ‘promote(s) compliance with the Bill of
Rights…in the application of company law.’
7
Socio-economic
status and illiteracy are not listed grounds of discrimination.
Discrimination on these grounds is often indirect
and therefore
harder to diagnose and prove. Hence the NCA and CPA are but two
statutes on a raft of national legislation aimed
specifically at
consumers to reverse historical socio-economic inequalities and
adjust the imbalances.
[33] The preamble of the
NCA begins:
‘
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 regulate credit
information; … to establish national norms and standards
relating to consumer credit; …’
[34]
Section 3 elaborates that the purposes of the NCA are to promote and
advance the social and economic welfare of South Africans,
to promote
a fair transparent, competitive, sustainable, responsible, efficient,
effective and accessible credit market and industry,
and to protect
consumers by, amongst other things, promoting equity in the credit
market by balancing the respective rights and
responsibilities of
credit providers and consumers.
8
Importantly,
its purpose is also to address and correct:
‘
.
. . imbalances in the negotiating power between consumers and credit
providers by -
providing
consumers with education about credit and consumer rights;
providing
consumers with adequate disclosure of standardised information to
enable them to make informed choices; and
providing
consumers with protection from deception and from unfair or
fraudulent conduct by credit providers and credit bureaux
9
.’
[35] Section 2 of the NCA
requires the Act to be interpreted in a manner that gives effect to
the purposes of s 3. Section 2(6)
acknowledges that a person is
historically disadvantaged if that person is one of a category of
natural persons who, before the
Interim Constitution of the Republic
of South Africa, 1993 came into operation, were disadvantaged by
unfair discrimination on
the basis of race.
[36] Section 121 applies
to an instalment agreement entered into at any place other than the
registered business premises of the
credit provider. Furthermore, the
section gives a consumer the right to terminate the credit agreement
within five business days
after the date on which it was signed by
the consumer, by firstly, delivering a notice in the prescribed
manner to the credit provider;
and secondly, tendering to return any
money or goods, or paying in full for any services received by the
consumer.
[37] When a credit
agreement is terminated in terms of s 121, the rights of the credit
provider and consumer are balanced by subsecs
(3)(a) and (b) as
follows:
‘
.
. . the credit provider -
‘
(a)
must refund any money the consumer has paid under the agreement
within seven business days after the delivery of the notice
to
terminate; and
(b)
may require payment from the consumer for—
the
reasonable cost of having any goods returned to the credit provider
and restored to saleable condition; and
a
reasonable rent for the use of those goods for the time that the
goods were in the consumer’s possession,….’
[38] Clause 10.6 of the
agreement paraphrases s 121(1), (2) and (3)(b) of the NCA but
studiously excludes any reference to subsec
(3)(a) which gives the
consumer the right to a refund from the credit provider. Subsection
(3)(b) clearly favours the Bank; the
consumer has to pay the Bank.
Subsection (3)(a) which favours the consumer because the Bank must to
pay the consumer is omitted.
[39]
Rescission of an agreement referred to in the heading of s 121
of the NCA and termination of an agreement at the instance of the
consumer under s 122 of the NCA have distinctly different causes and
consequences. Rescission aims to restore the contracting parties
to
the status ante quo. In other words the agreement is revoked or
withdrawn. Termination retains and enforces the agreement. The
remedy
to which Mr Dlamini was entitled when he discovered that the Bank’s
agent sold him a vehicle that could not be driven
at all
was
a refund in terms of subsec (3)(a)
.
[40]
Despite
the agreement being silent about rescission and a refund the Bank
does not deny that Mr Dlamini has a right arising from
the NCA to
rescind the agreement. Clause 8 of form 20.2 which reg 30 of the NCR
prescribes for small agreements, is headed ‘
Consumer’s
right to rescind the agreement (
if
applicable
)’.The
Bank does not deny that it is applicable
.
However,
the Bank
contends that he may only
invoke the right to rescind after he delivered a notice to rescind in
terms of reg 37 of the NCR. If such
notice was important to the Bank
then it should have included it in the agreement as a material
procedural step not only to surrender
but also to claim a refund. It
should also have ensured that Mr Dlamini was aware of it.
[41]
Non-disclosure of s 121(3)(a) violates the right of consumers to
education and information in terms of s 3. The Bank’s
selection
of what parts of s 121 of the NCA it should record in the agreement
and what it should exclude is deliberate and deceptive.
The heading
of s 121 highlights its purpose as the ‘
Consumer’s
right to rescind credit agreement’. Instead of informing the
consumer of this right, the Bank pitches it
as an onerous bundle of
obligations on the consumer to pay the Bank the costs of renting and
recovering the vehicle. Projecting
the consumer’s obligations
whilst understating his rights discourages rescission which is the
consumer’s statutory
right.
[42] Disclosure of only
subsec (3)(b) creates the impression that consumers have no choice
but to pay the Bank even when the Bank
sells them defective vehicles.
Such non-disclosure and selective disclosure is designed to deceive
consumers. Such deception conflicts
with the letter and spirit of the
NCA. Above all, it reinforces the patterns of inequality and inequity
that persist in South Africa.
[43] The Bank could not
have misunderstood Mr Dlamini’s reasons for returning the
defective vehicle. Any doubt it had should
have dissipated once it
knew that it could not gainsay the fact that Starlight sold Mr
Dlamini a seriously defective vehicle.
[44] The Bank gave
Starlight no mandate to report vehicles that were returned within
five days in terms of the termination clause
10.6. Such a business
practice makes credit transactions unduly onerous and a veritable
trap for poor, illiterate and disadvantaged
people who intuitively
would return defective goods to a supplier and ask for a refund.
[45] Given the importance
of the notice to the Bank of the basis of the termination, the Bank
should have mandated its agent to
assist consumers like Mr Dlamini to
fax the notices. Even if the Bank and its agents provided this
service at a fee it would have
been far cheaper than litigating to
determine the basis of the termination. Imposing such a duty on the
agents would also acknowledge
the potential conflict of interest
between an agent that sells defective vehicles and the consumer.
Although the legal obligation
to notify the Bank rested on Mr
Dlamini, the Bank cannot absolve Starlight of its duty to act in good
faith to notify the Bank
in the ordinary course of commercial
practice. The Bank should hold its agent accountable for not
reporting immediately that the
vehicle was towed back and that it
could not be driven.
[46]
Another two consumer rights are important in the context of this
case. The first is the consumer’s
right
to information in an official language in terms of s 63 of the NCA.
Section
63(1)
gives consumers a right to receive any document that is required in
terms of the NCA in an official language that the consumer
reads or
understands, to the extent that is reasonable having regard to usage,
practicality, expense, regional circumstances and
the needs and
preferences of the population ordinarily served by the person
required to deliver that document.
[47] The second is
the
right
to information in plain and understandable language in terms of s 64
of the NCA. Subsection
(1)(b)
requires the producer of a document that is required to be delivered
to a consumer in terms of the NCA to provide that document
in the
prescribed form, if any, for that document, or in plain language. For
the purposes of the NCA, a document is in plain language
if it is
reasonable to conclude that an ordinary consumer of the class of
persons for whom the document is intended, with average
literacy
skills and minimal credit experience, could be expected to understand
the content, significance and import of the document
without undue
effort, having regard to, the organisation, form and style of the
document, and the vocabulary, usage and sentence
structure of the
text.
10
[48] Strictly interpreted
neither s 63 nor s 64 of the NCA assists an illiterate consumer.
Purposively interpreted they embody the
right of the consumer to be
informed by reasonable means of the material terms of the documents
he signs. What is reasonable and
material varies depending on the
circumstances of each case. Amongst other things, the industry,
regional circumstances or geographical
location, price, nature of the
goods and services and class of consumers likely to contract for them
are relevant to determining
what are reasonable means and material
terms. Purposively interpreted, the credit provider bears the onus to
prove that it took
reasonable measures to inform the consumer of the
material terms of the agreement.
[49] This transaction
arose at a second hand car dealership in Pinetown, KwaZulu Natal.
IsiZulu is the predominant African language.
In the nature of such a
business the Bank must anticipate that it will be dealing with
historically disadvantaged persons. It enters
into contracts in terms
of which vehicles are returned for repairs and re-collection, for
defects or as voluntary surrender because
of the consumer’s
inability to pay the instalments. Establishing at the earliest
opportunity what the basis is for the termination
of an agreement is
therefore important in the second hand car dealership industry. From
the consumer’s perspective the circumstances
in which he is
entitled on termination to a refund, or obliged to pay the Bank, are
also important. Accordingly, the Bank should
have had better measures
in place to ensure that its historically disadvantaged customers are
aware of their rights and responsibilities.
Pitched as consumer
rights, ss 63 and 64 impose the onus on credit providers to inform
their consumers of their rights and responsibilities.
Relying on
agents whose interests as second hand car dealers conflicted with
consumers’ interests needed better control of
the agent to
avoid any finding that the Bank was complicit.
[50] Where possible, the
Bank should also take reasonable steps to facilitate compliance by
consumers with their responsibilities.
In this case, the Bank simply
had to have Mr Mthetwa interpret the material terms of the agreement
when he sold the vehicle to
Mr Dlamini or at the latest when Mr
Dlamini returned the vehicle.
[51] Regulation 30 of the
NCR picks up the themes in ss 63 and 64 of the NCA of consent,
clarity and certainty in the form and style
of credit agreements.
Regulation 30(1) prescribes that:
‘
A
document that records
a
small credit agreement must contain
all
the
information as reflected in Form 20.2.’
The agreement in this
case does not disclose that Mr Dlamini had a right to rescind it.
Furthermore, reg 30
(2) states that:
‘
The
information listed in Form 20.2 may be disclosed in the order of
choice of the credit provider.’
I understand this to mean
that the consumer may choose the order in which the terms of the
agreement are recorded. Presumably this
clause is aimed at vesting
the consumer with this prerogative so that the credit provider does
not conceal important clauses in
obscure parts of the agreement.
However, if consumers are uninformed of their rights and
responsibilities and what agreements should
contain, they cannot know
how to order the information prescribed in Form 20.2. Furthermore,
when the gap in the bargaining relationship
between the consumer and
the credit provider is huge (as in this case) the consumer may be
reticent about exercising this prerogative.
[52] Form 20.2 prescribes
the content of a small agreement. Although it merely offers the
headings and brief references to particular
sections of the NCA, its
style and format is designed as a short document spanning over about
two pages. In this case the form
of the credit agreement presents a
two-page A4 size document in size eight font. Part B of the agreement
which incorporates the
terms and conditions, an acceptance form and
an authority to release goods form is seven pages. The terms and
conditions span over
five pages incorporating 18 main clauses with
several sub-clauses. Clause 1 is a list of definitions usually found
in complex agreements
and legislation.
[53]
For lawyers and lay persons alike, the form of the Bank’s
standard agreement is an unappetising formidable read. For
a labourer
like Mr Dlamini who did not read, write or understand English there
might just as well have been no written agreement
at all. Mr Dlamini
was in a worse position than the purchaser who signed one page of an
agreement but who was sued in terms of
a clause appearing on the
reverse of that page which had not been sent to him.
11
[54] A
credit agreement is also unlawful if it purports to waive any common
law rights that apply to the credit agreement.
12
The
above rights and protections for consumers under the NCA develop and
ameliorate the potentially harsh impact on consumers of
the common
law principles of
caveat
subscriptor
and
quasi-mutual consent relied on by the Bank. These principles mean
that a person who signs a document is taken to have assented
to what
appears above his signature.
13
The
cases show that mutual consent is absent when a party is unaware of
the terms of the agreement. A party may be unaware because
the
agreement contains terms that were not expected or were not
disclosed. Or a party may be misled,
14
misinformed
15
or not
informed; or the form and getup of the agreement is inaccessible.
16
[55]
In the three appellate decisions to which Mr Broster helpfully
referred me, the court found that there was no consent by the
signatories because their errors were justifiable. However, the
uncertainty of how the common law principles are applied is evident
in
Brink
v Humphries and Jewell (Pty) Ltd 2005(2) SA 419 (SCA)
and
Sonap
Petroleum (SA) (Pty) Ltd v Pappadogianis
[1992] ZASCA 56
;
1992
(3) SA
234
(A) 240J-241D. In
Brink
v Humphries
the
minority disagreed with the majority on findings of fact and
consequently the inferences to be drawn from them. The minority
found
that the signatory failed to discharge the onus of showing that his
error was justifiable. In
Sonap
Petroleum v Pappadogianis
the
appellate court disagreed with the findings of fact of the trial
court. The trial court was under the impression that the signatory
had not read the document presented to him. In contrast, the appeal
court unanimously believed that the signatory was misled, that
the
other party was alive to the real possibility of a mistake and that
he had a duty to speak but chose instead to snatch a bargain.
17
The
NCA minimises the casuistry, unpredictability and uncertainty of
judicial opinion by setting the norms and standards for the
communication and form of valid credit agreements.
[56] Nevertheless the
common law remains relevant. Case law developed the test for consent
to be:
‘
(D)id
the party whose actual intention did not conform to the common
intention expressed, lead the other party, as a reasonable
man, to
believe that his declared intention represented his actual
intention?’
18
The NCA does not dispense
with this test. The norms and standards it prescribes for a valid
agreement readjusts and clarifies the
rights and responsibilities of
the parties, the onus of proof and consequently, the statutory
context in which the common law test
applies.
[57] Mr Dlamini’s
defence is not that he did not intend to conclude the agreement but
that he did not know that he had to
notify the Bank in a prescribed
manner of his intention to rescind it. Knowing about this formality
would not have stopped him
from signing the agreement. Therefore, his
failure to comply with a purely procedural obligation was not due to
an unwillingness
to comply but rather an unawareness of such an
obligation.
[58] In
Davids
en Andere v ABSA Bank Bpk
2005 (3) SA 361
(C)
(headnote) in which the appellants alleged that they had signed deeds
of suretyship in the
bona fide
but
mistaken belief that it encapsulated a prior oral agreement limiting
the liability of the appellants, the full bench held that
a
reasonable person in the position of the bank official would have
explained the nature and content of the deeds to the appellants
so as
to ensure that they reflected the appellants’ true intention.
The bank official failed to do so. Consequently, he could
not have
been misled into believing that the deeds reflected the appellants’
true intention. The court further held that
public interest demanded
that a complicated document be explained to the signatory especially
if signing could result in drastic
consequences.
[59] In
Home
Fires Transvaal CC v Van Wyk and Another
2002
(2) SA 375
(W) at 381 a full bench held:
‘
A
party will not be held bound by his signature to a contract which he
has not read, where the other party knew that he had not
done so, was
not misled by the signature and only had himself to blame for the
other’s ignorance of the contents of the document.
(See
Van
Wyk v Otten
1963 (1) SA 415
(O) at 418A-419H;
Payne
v Minister of Transport
1995 (4) SA 153
(C) at 159G-160I’
[60] In
Diners
Club SA (PTY) Ltd v Thorburn
1990 (2) SA 870
(C) a full court remarked that:
‘
A
signatory can be misled by the form and appearance of the document
itself . . .’
19
Reflecting on problems
with exemption clauses Lord Denning remarked in
George Mitchell
(Chesterhall) Ltd v Finney Lock Seeds Ltd
(1983) QB 284
296 –
297,
1983 (1) ALL ER 108
(CA) 113:
‘
They
were printed in small print on the back of tickets and order forms
and invoices. They were contained in catalogues or timetables.
They
were held to be binding on any person who took them without
objection. No one ever did object. He never read them or knew
what
was in them. No matter how reasonable they were, he was bound. All
this was done in the name of ‘freedom of contract’.
But
the freedom was all on the side of the big concern which had the use
of the printing press. . . . Faced with this abuse of
power, by the
stronger against the weak, by the use of the small print of the
conditions, the judges did what they could to put
a curb on it.’
[61]
Similarly, in
Diners
Club SA (Pty) Ltd v Livingstone and Another
1995
(4) SA 493
(W) at 495-496 the Witwatersrand Local Division observed
that the whole get-up of an enrolment form was misleading. A series
of
conditions were printed in ‘incredibly small print, not
designed to be read without the aid of magnifying equipment’.
20
The
court opined that there was a duty on Diners Club to have drawn to
the defendant’s attention the provisions of the enrolment
form
which imposed personal liability on him. Its failure to do so
reasonably led to the defendant signing the enrolment form ignorant
of incurring personal liability.
[62]
In
Mercurius
Motors v Lopez
[2008] ZASCA 22
;
2008
(3) SA 572
(SCA) the conditions on which the appellant relied had not
been brought to the attention of the respondent. Furthermore, the
style
and format of the lease agreement on which the cause of action
was founded was misleading and framed in small print which was not
easily accessible. Having regard to the item lost (a Jeep) and the
amount of the claim (R245 000) it seems that the claimant Mr
Lopez
was educated, literate and economically well off.
21
Nevertheless
the Supreme Court of Appeal found that he had been misled by the form
of an agreement.
[63]
In contrast,
Van
Zyl v Kotze
2007
JOL 19893
(T) differs from the facts of this case. There a full court
found that the appellant failed to discharge the onus of proving her
defence of common mistake which arose from her own negligence in that
she failed to read the contract. Mr Dlamini’s situation
is
distinguishable from that appellant. To begin with, the appellant was
a relatively successful business woman who ran guest houses.
Furthermore, she had been involved in a number of property
transactions over a decade. The respondent in that case was a dentist
and former neighbour of the appellant before emigrating. As the
agreement related to the payment of occupational interest in a
property transaction the appellant was either at an advantage or on
par with her opponent as far as literacy and social and economic
standing went.
[64]
Applying the common law principles of
caveat
subscriptor
and
mutual consent, the Bank cannot hold Mr Dlamini bound to the
agreement. The unpalatable form and get-up of the agreement would
have been immaterial to Mr Dlamini because of his illiteracy. That
was all the more reason why the Bank should have ensured that
its
agents explained the material terms to Mr Dlamini. As Mr Dlamini was
ignorant of the prescribed notice requirements of the
agreement,
there was no mutual consent as regards this term. Accordingly, Mr
Dlamini’s defence succeeds under the NCA and
the common law.
[65]
The validity of the entire agreement is an issue that neither party
addressed. A credit agreement must not contain an unlawful
provision.
22
A
provision is unlawful if its effect is to defeat the purposes or
policies of the NCA or deceive the consumer
23
or
if it directly or indirectly purports to waive or deprive a consumer
of a right set out in the NCA or set aside or override the
effect of
any provision of the NCA.
24
[66]
As stated above the selective disclosure of Mr Dlamini’s s 121
rights in terms of the NCA as a consumer to rescind the
agreement was
deceptive. Furthermore, the breach of his ss 63 and 64 rights in
terms of the NCA to be informed of the contents
of the agreement and
his rights to an agreement that complies in form with reg 30
skewed
the agreement in favour of the Bank. Distorting the balance created
in the NCA in this way in the agreement is unlawful.
It defeats the
purpose and policy of the NCA and
renders
the entire agreement unlawful.
[67]
An unlawful provision in any credit agreement is void.
25
The
court must sever the unlawful provision from the agreement, or alter
it to render it lawful, if it is reasonable to do so.
26
If the
unlawfulness was confined only to not recording fully and
communicating clause 10.6 of the agreement to Mr Dlamini, then
clause
10.6 could have been altered to render it lawful. However, when the
form and get-up of the agreement is inconsistent with
the NCA and its
regulations, and the Bank has not interpreted, translated or
explained its material terms, severance is not an
option. The entire
agreement must be set aside.
[68] Turning to the
jurisdiction of the court, Mr Luthuli who represented Mr Dlamini
challenged the Bank’s non-compliance
with the jurisdictional
prerequisite of giving proper notice in terms of s 129 of the NCA of
its intention to enforce the agreement.
The Bank denied that these
proceedings amount to enforcement. On its behalf Mr Broster submitted
that s
s 127 and 129 of the NCA would apply only
after the nature and extent of Mr Dlamini’s liability was
determined. That would
be once the basis of the termination of the
agreement is determined in this action.
Hence delivery of its
notice in terms of s 129 the NCA demanding payment in terms of the
agreement was not a prerequisite for this
application.
So
Mr Broster submitted.
[69] The clearest
evidence that the Bank intended to enforce the agreement is its
despatching of the s 129 notice, incorrectly addressed
as it was. The
fact that Mr Dlamini did not receive it does not negate the Bank’s
intention. That the remedies claimed in
this action is not for
payment in terms of the agreement does not strip it of its character
and effect as enforcement proceedings.
Determining the basis of the
termination of the agreement w
ould be academic
unless it was to enforce the agreement. There would be no purpose in
issuing a s 129 notice and instituting this
action if recovery of the
debt was not the Bank’s goal. As a tactic instituting action
could intimidate a consumer into complying
with the Bank’s
demand. This action merely separated liability from quantum.
Confirmation of the Bank’s intention to
separate this action
from determining quantum emerged on the morning of the hearing when
the parties informed the court that the
quantum of damages was being
held over pending this action. Non-service of the notice means that
the Bank has failed to comply
with a jurisdictional prerequisite. For
this reason alone the Bank should fail.
[70] An aspect of
jurisdiction that the court raised and which the parties now concede
is that this action falls within the jurisdiction
of the civil
regional court as the underlying amount is less than R300 000.
Section 127(8)(a) of the NCA relied on by the Bank
as the basis for
this action specifically directs the Bank to commence proceedings in
the Magistrates’ Courts. It remains
unexplained why the Bank
instituted proceedings in this court. The lack of jurisdiction on
this ground can be remedied by an appropriate
order for costs if
necessary and by alerting the litigants that they do not have to pay
attorney-client costs on the High Court
scale.
[71] The relief the Bank
claimed in this action is strange considering the circumstances. Mr
Dlamini unequivocally terminated the
agreement orally and in writing.
He ended the agreement orally within four days of purchasing the
vehicle and in writing in October
after he secured legal assistance.
He informed Starlight that the reason for returning the vehicle was
that it could not be driven.
[72] On 16 September 2010
the Bank’s debt collector and tracing agent, Mr Leon William
van den Burgh, repossessed the vehicle
from Starlight. He attested to
an affidavit from which the Bank would have known that the vehicle
had been left with Starlight
by September 2010. The Bank might not
have known the reasons but it must have known of the termination or
anticipated it before
Mr van den Burgh’s report because since
June, Mr Dlamini paid nothing towards his purchase. The report
recorded other reasons
Mr Dlamini allegedly gave for the termination
than those he gave at the trial. But as Mr van den Burgh did not
testify none of
those reasons count. So by the time the Bank issued
summons on 3 March 2011 it was well aware that the agreement had been
terminated
and the vehicle repossessed. Consequently, this action for
confirmation of the termination and the return of the vehicle was
wholly
unnecessary. Why the Bank framed its relief in these terms
remains unexplained. Penalising and intimidating Mr Dlamini are aims
that cannot be excluded.
[73] Once the agreement
was terminated for whatever reason, the Bank had to sell the vehicle
to mitigate losses. Its decision not
to sell the vehicle pending this
action is also unexplained. If the losses were for Mr Dlamini’s
account the Bank would have
seriously prejudiced him by not reselling
the vehicle for more than two years.
[74] The way in which the
Bank conducted this litigation is equally puzzling.
It
was only at the pre-trial that the Bank conceded that the vehicle had
been returned. Only after discussions on the morning of
the trial did
it become apparent that what the Bank actually wanted was a
determination as to whether the termination was a rescission
or
voluntary surrender. This clarification seems to be an afterthought
to rescue the action from being dismissed with costs. Mr
Luthuli
graciously acquiesced in the trial proceeding for this determination
in the interest of finality. Mr Dlamini had already
incurred trial
costs including the costs of an interpreter.
[75] Pre-trial
preparation was also inadequate. Rescission as the reason for the
termination should have been obvious to the Bank
at the pre-trial
conference. At the conference, the parties were expected to discuss
the witnesses they would call and ways of
curtailing the proceedings.
Apart from admitting that the Bank had regained possession of the
vehicle no other material admissions
were recorded. Mr Luthuli
requested further particulars for trial. In response, the Bank denied
knowing who assisted Mr Dlamini.
It refused to admit that Mr Mthetwa
assisted Mr Dlamini to enter into the agreement; that the agreement
was in English which Mr
Dlamini did not understand; and that Mr
Mthetwa did not read and interpret the agreement to Mr Dlamini. The
Bank denied any knowledge
of the date on which the vehicle was
returned or how it was returned to Starlight. As the Bank did not
know who assisted Mr Dlamini
and as it could not make the admissions
sought, it should have been clear that it would not be able to
discharge its onus under
the NCA of informing Mr Dlamini of the terms
of the agreement.
[76]
Cumulatively considering the unexplained tactics the Bank employed,
this action is heavy handed intimidation in response to
Mr Dlamini
seeking to enforce his right to rescind the agreement and claim a
refund. The Bank’s conduct in initiating and
pursuing this
action is unlawful for the further reason that it is irrational. The
unlawfulness on all the grounds established
above is a breach of the
right to equality in s 9(1) of the Constitution.
The
Bank conducted this transaction oblivious of the purposes of the NCA.
Notwithstanding the manifest inequality in its relationship
with its
bargaining counterpart it sought to snatch an advantage.
[77]
In passing I note that the CPA assented to on 24 April 2009 commenced
on 31 March 2011. Although the agreement in this case
was terminated
before the general effective date of the CPA, i.e. 31 March 2011
the Bank, like most large corporations that invest in
corporate social responsibility projects, had to be aware of the
purposes
of the CPA which was already in the public domain.
The
purposes of the CPA are:
‘
. . .
to
promote and advance the social and economic welfare of consumers in
South Africa by—
.
. .
(c)
promoting fair business practices;
(
d
)
protecting consumers from—
unconscionable,
unfair, unreasonable, unjust or otherwise improper trade practices;
and
deceptive,
misleading, unfair or fraudulent conduct;
(
e
)
improving consumer awareness and information and encouraging
responsible and informed consumer choice and behaviour;…’
27
[78]
Institutions such as the Bank should welcome the framework proffered
by the NCA and the CPA for bridging the socio-economic
inequalities
substantively and for reforming the credit industry, if for no reason
but that sustained inequalities and need lead
to unrest and social
instability which is not good for business. Even though the CPA was
not effective when the Bank sold the vehicle
to Mr Dlamini it should
have voluntarily acknowledged that as goods sold in terms of a credit
agreement, s 5(2)(d) of the CPA would
have applied to the sale. It
should have been clear when the Bank issued summons on 3 March 2012
that consumer relations was no
longer business as usually practised
over its 150 year history in South Africa. Disappointingly, the Bank
remained unresponsive
to the CPA and its aspirations before it became
enforceable.
My interpretation and
application of the provisions of the NCA above are fortified by the
CPA.
[79] In conclusion, if
the parties had applied themselves properly at the rule 37 pre-trial
conference, the trial time could have
been shortened by at least a
day. As stated above, Ms Ndlela’s evidence could easily have
been dispensed with altogether.
At the conference they could have
exhausted settlement negotiations and avoided wasting three hours of
court time on the morning
of the trial resulting in the trial
commencing only at 13h00. As a result of the parties’ poor
pre-trial preparation this
matter which was set down on the expedited
roll for one day had to be adjourned to continue the following week,
at great inconvenience
to the court.
[80] The order I grant is
the following:
The defendant Mr Dlamini
rescinded the credit agreement with the plaintiff Standard Bank.
Standard Bank shall pay
the costs of the action.
___________
D.PILLAY J
Date of Hearing: 06 August 2012 and
14 August 2012
Date of Judgment: 23 October 2012
APPEARANCES
Counsel for the Applicant: Adv J. P.
Broster
Instructed by: Easton-Berry
Incorporated
4
TH
Floor Corporate Place
9 Gardiner Street
Durban
Counsel for the Defendant: Mr Luthuli
Instructed by: A P Shangase and
Associates
Suite 501
5
th
Floor
397 Anton Lembede
Durban
4000
1
Brink
v Humphries & Jewell (Pty) Ltd
2005(2)
SA 419 (SCA);
George v Fairmead (
Pty)
Ltd 1958(2) SA 465 (A)
at 471
;
National and Overseas Distributors Corp (Pty) Ltd v Potato Board
1958(2) SA 473 (A) at 479;
Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis
1992(3) SA 234 (A) at 239I –
240B;
Hartley v Pyramid Freight (Pty)
Ltd t/a Sun Couriers
2007(2) SA 599
(SCA).
2
Section
1 of the Constitution of the Republic of South Africa, 1996..
3
Section
9(1) of the Constitution.
4
Catherine
Albertyn, Sandra Fredman, Judy Fudge ‘Introduction:
Substantive equality, social rights and women: A comparative
perspective’ (2007) 23
SAJHR
209 p 209.
5
For
example
Minister of Finance and Another
v Van Heerden
[2004] ZACC 3
;
2004 (6) SA 121
(CC)
para 146;
Pretoria City Council v
Walker
[1998] ZACC 1
;
1998 (2) SA 363
(CC) para 62.
6
Section
9(2) of the Constitution.
7
Section
7(a)
of the
Companies Act 71 of 2008
.
8
Section
3(d)
of the NCA.
9
Section
3(e)
of the NCA.
10
Section
64
(2) (b) & (c) of the NCA.
11
Home
Fires
Transvaal
CC v Van Wyk and Another
2002
(2) SA 375
(W)
at 381.
12
S
90
(2) (c) (i) of the NCA.
13
Brink
v Humphries & Jewell (Pty) Ltd
2005(2)
SA 419 (SCA) para 1;
George v
Fairmead (Pty) L
td 1958(2) SA 465 (A)
at 470C-E.
14
Brink
v Humphries & Jewell (Pty) Ltd
2005(2)
SA 419 (SCA)
para 11.
15
Sonap
Petroleum (SA) (Pty) Ltd v Pappadogianis
[1992] ZASCA 56
;
1992
(3) SA
234
(A) 240J-241D.
16
George
v Fairmead (Pty) L
td 1958(2) SA 456
(A) at 470C-E.
794d already
secured the relief sumerlker 1998 ()4 ()
17
Sonap
Petroleumv Pappadogianis
241E –
F – 242A-C
18
Supra
at 239 I – 240 B
19
At
875B-C.
20
At
495I.
21
See
also
CJ Pretorius
‘
Exemption
clauses and mistake
Mercurius Motors v
Lopez
v
[2008] ZASCA 22
;
2008 (3) SA 572
(SCA)’
2010 (73) THRHR 491
–502.
22
Section
90
(1) of the NCA.
23
Section
90
(2) (a) (i) & (ii) of the NCA.
24
Section
90
(2) (b) (i) & (iii) of the NCA.
25
Section
90
(3) of the NCA.
26
Section
90
(4) (a) of the NCA.
27
Section
3
(1) of the CPA.