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[2011] ZAKZDHC 64
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First Rand Bank Ltd t/a Wesbank v Pillay (11978/2010) [2011] ZAKZDHC 64 (8 December 2011)
REPORTABLE
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
CASE NO. 11978/2010
In the matter between:
FIRSTRAND BANK LIMITED
t/a WESBANK
…........................
PLAINTIFF
and
GEAN KUNDASAMI PILLAY
…............................................
DEFENDANT
In the matter between:
GEAN KUNDASAMI PILLAY
…..............................................
APPLICANT
and
FIRSTRAND BANK LIMITED
t/a WESBANK
…................
RESPONDENT
JUDGMENT
Delivered
on 08 December 2011
SWAIN J
[1] Two applications
serve before me. In the first application Firstrand Bank Limited t/a
Wesbank (the plaintiff) seeks summary
judgment against one Gean
Kundasami Pillay (the defendant) for an order authorising the Sheriff
of the Court to take possession
of and deliver to the plaintiff a
certain motor vehicle, which it is common cause is the subject of an
instalment sale agreement
(the Agreement) concluded between the
plaintiff and the defendant. Ancillary relief sought by the
plaintiff, is that the plaintiff’s
claim for damages, allegedly
suffered as a consequence of the defendant’s breach of the
Agreement, be adjourned
sine die
, pending the return of the
vehicle to the plaintiff, the subsequent valuation and sale thereof
and the calculation of the amount
to which the applicant is entitled
in terms of the Agreement. I will refer to the parties in the manner
in which they are cited
in the summary judgment proceedings, when
dealing with the application brought by the defendant, in due course.
[2] The sole basis upon
which the defendant initially resisted the claim of the plaintiff for
summary judgment, was that the defendant
had applied for debt review
in terms of Section 86 of the National Credit Act No. 34 of 2005 (the
Act) which application was pending
in the Pinetown Magistrates’
Court, at the time the plaintiff purported to terminate the debt
review process on 14 July 2010,
in terms of Section 86 (10) of the
Act. The defence advanced, based as it was upon the decision in
Wesbank, a division
of Firstrand Bank Limited
v
Papier (National
Credit Regulator as amicus curiae)
2011 (2) SA 395
(WCC)
was that the plaintiff
was not entitled to terminate the debt review process, at a time when
the defendant’s application for
a debt rearrangement order, was
pending before the Pinetown Magistrates’ Court.
[3] In the light of the
subsequent decision by the Supreme Court of Appeal in the case of
Collett v Firstrand
Bank Limited
2011 (4) SA 508
(SCA)
in which it was held that
a credit provider may terminate a debt review in terms of Section 86
(10) of the Act, even after the matter
has been referred to the
Magistrates’ Court for a rearrangement order in terms of
Section 87 of the Act, this defence raised
by the defendant was no
longer valid.
[4] As a consequence, the
defendant launched the further application, which serves before me,
in which the following relief is sought
by the defendant.
[4.1] That the
defendant’s application for debt review under Section 86 of the
Act, in so far as it relates to the plaintiff,
be resumed in terms of
Section 86 (11) of the Act, on such conditions as this Court deems
just and
[4.2] The plaintiff’s
application for summary judgment be removed from the Roll before this
Court, and the Registrar be directed
not to re-enrol such
application, until such time as the defendant’s application, in
terms of Section 87 of the Act, has
been finalised and the
Magistrates’ Court has excluded the plaintiff from any order
made by it, or the defendant defaults
on any order made by the
Magistrates’ Court.
[5] The allegation made
by the plaintiff in its particulars of claim,
that by reason of the
defendant’s breach of the Agreement, in failing to pay the
requisite instalments in terms of the Agreement,
the plaintiff had
elected to cancel the Agreement and notified the defendant of its
election to do so, was not disputed by the
defendant in her affidavit
opposing summary judgment. In addition, the plaintiff alleged in its
affidavit opposing the relief sought
by the defendant in the
application, that
“service of the summons constituted a
clear indication to the applicant that the respondent considers the
Agreement cancelled”.
No replying affidavit was
filed by the defendant in which this assertion was disputed. Indeed,
it is common cause on the papers
that the defendant was and remains
in breach of her obligations, in terms of the agreement to make
payment of the requisite instalments.
It is therefore clear that as
at the date of issue of summons, being 12 October 2010, the plaintiff
was entitled to exercise its
election to cancel the agreement, the
debt review process having been terminated by the requisite notices
in terms of Section 86
(10) of the Act, being delivered on or about
14 July 2010.
[6] I therefore raised
with Mr. Hoar, who appeared for the defendant, whether in the light
of the cancellation of the agreement
by the plaintiff and the only
substantive relief sought by the plaintiff in the summary judgment
application, being the return
of the vehicle, as a consequence of
such cancellation, there could be any grounds to order that the debt
review resume in terms
of Section 86 (11) of the Act. In other words,
the cancellation of the Agreement had as its inevitable consequence,
that there
could no longer be any rearrangement of the defendant’s
obligation, to make payment in terms of the cancelled Agreement.
Although I could envisage the possibility of the defendant, seeking a
resumption of the debt review process, when the plaintiff
sought
payment of any shortfall by the defendant in terms of the Agreement,
after re-possession and sale of the vehicle, that had
not yet
occurred.
[7] Mr. Hoar’s
response to this was to submit that the case made out by the
defendant, was that the plaintiff had failed to
participate in good
faith, in the debt review process. I comprehend that such a
submission finds it genesis in Section 86 (5) (b)
of the Act, which
provides that the consumer and credit provider must participate in
good faith, in the debt review and in any
negotiations designed to
result in responsible debt rearrangement, as well as the decision of
Blignault J in the case of
Mercedes Benz
Financial Services S A v Dunga
2011 (1) SA 374
(WCC) at pg 386 para 48 and pg 387 para 52
Mr. Hoar’s argument
then proceeded, that if I granted an order in terms of Section 86
(11), that the debt review resume, such
resumption would have the
legal effect that the parties would be placed in the positions they
were in at the time the debt review
was terminated. In other words,
the cancellation of the agreement by the plaintiff would be of no
force and effect and the agreement
would be re-instated. Whether the
defendant has established on the papers, that the plaintiff failed to
participate in good faith,
in the debt review process, I will
consider in due course, but at present the provisions of the Act must
be examined, to decide
on the validity of Mr. Hoar’s
submission.
[8] At the hearing of the
matter I referred Mr. Hoar to the decision of Wallis J in
B M W Financial
Services (S A) (Pty) Ltd. v Donkin
2009 (6) SA 63
(KZD)
where the learned Judge
held that a cancelled instalment sale agreement, cannot be
re-instated as a result of a debt rearrangement
flowing from a court
order under Section 85 of the Act. Mr. Hoar’s response was that
the case was distinguishable, on the
grounds that the Court was
concerned there with the provisions of Section 85, and not a
resumption of the debt review process,
in terms of Section 87 (11) of
the Act. It is therefore necessary to examine what was decided in
Donkin.
[9] In reaching the
conclusion he did in Donkin, Wallis J analysed the provisions of
Section 86 (7) (c) (ii) of the Act, in the
context that the
cornerstone of the argument, presented to him in support of the
re-instatement of the instalment sale agreement,
was that the
provisions of this Section all pre-supposed the continued existence
of the credit agreement in question (at pg 77
F). The argument
proceeded that one can only extend the period of the agreement and
reduce the amount of each payment due, if the
agreement itself is
extant.
In addition, the provisions of the sub-paragraphs of
the Section, which provide for postponing the dates on which payments
are
due under the agreement, extending the period of the agreement
and postponing the dates on which payments are due and re-calculating
the consumer’s obligations, are only feasible as possible means
of debt rearrangement, if the credit agreement continues
to exist (at
pg 77 G). The argument accordingly was that where the credit provider
has cancelled the agreement, it was necessarily
implicit in these
provisions that, in the course of a debt rearrangement, the cancelled
agreement can be re-instated (at pg 77
H).
[10] Wallis J however
held that although these provisions of the Act were
“particularly
attuned to an agreement such as an instalment sale agreement”
the implication contended for could only arise if that
were the only situation covered by these provisions (at pg 77 (i) –
78A). On examining the purposes of the Act, Wallis J concluded that
the process of debt restructuring was not restricted to circumstances
where there were ongoing payment obligations by the consumer, but
that
“all the debts of an over-indebted consumer can be
the subject of a debt review and a debt rearrangement”
(at
pg 79 A).
[11] I agree with the
conclusion of Wallis J in this regard. The act clearly never had as
its exclusive objective, debt review and
debt rearrangement of
agreements
“where the consumer commits himself or
herself to making regular payments to the credit provider in
discharge of his or her
obligations”
(at pg 78 A).
[12] In my view, whether
a debt review takes place in terms of Section 86 of the Act, via an
order granted by the Court in terms
of Section 85 (a) of the Act, or
via an order granted by the Court in terms of Section 86 (11) of the
Act, for the debt review
to resume, the provisions of Section 86 (7)
(c) of the Act, read in the context of the Act as a whole, do not
support any inference
being drawn, that such referral has the effect
of re-instating a cancelled agreement.
[13] In this respect and
to this extent, the reasoning in Donkin is not distinguishable on the
facts of the present case. Where
however a distinction may arise, is
in respect of the following dictum of Wallis J at pg 80 A – B
“
All of this
makes it clear that the process of debt review and debt rearrangement
involves looking at the global picture of the
consumers’
obligations at the time of such debt review and debt rearrangement.
What follows from this is that, if a particular
agreement has been
cancelled prior to the debt review or debt rearrangement process, the
obligation that falls for consideration
in that process is the
obligation as it existed after such cancellation, not the obligation
while the agreement was still
extant
”.
[14] In the present case
the cancellation took place after the debt review process had
commenced and been terminated in terms of
Section 86 (10) of the Act,
but before any resumption in terms of Section 87 (11) of the Act.
[15] In Dunga, Blignault
J regarded the effect of a resumption
order in terms of Section
86 (11) of the Act as
“
The debt
review will then continue in terms of Section 86 (10) from the point
where it was terminated, until an order is made in
terms of Section
86 (7)”
(at
pg 385 D).
[16] Blignault J also
referred to the ordinary meaning of the word
“resume”
in Section 86 (11) of the Act in context and by
reference to the Concise Oxford Dictionary to mean
“to
continue after an interruption”
(at pg 385 A).
[17] That the debt review
is to continue from the point where it was terminated, does not in my
view lead to the necessary inference
that it was the Legislature’s
intention, that any lawful steps taken by the credit provider, during
the interruption, to
cancel the agreement, must have as its
consequence, re-instatement of the agreement.
[18] In this regard it is
instructive that in terms of Section 129 (3) (a) of the Act, a
consumer may
“re-instate”
a credit
agreement that is in default, by paying to the credit provider all
amounts that are overdue, together with the credit provider’s
permitted default charges, and reasonable costs of enforcing the
agreement up to the time of re-instatement,
“at any time
before the credit provider has cancelled the agreement”
,
subject to the provisions of sub-section 4.
Consequently, before cancellation the consumer may deprive the credit
provider of an
accrued right to cancel the agreement, by making
payment of the specified amounts (Donkin at pg 76 A – B).
Section 129 (4)
(c) provides that a consumer may not re-instate a
credit agreement after
“the termination thereof in
accordance with Section 123”.
Section 123 of the
Act provides that a credit provider may terminate a credit agreement
before the time provided in that agreement
“only in
accordance with this Section”.
Section 123 (2)
provides that if a consumer is in default under a credit agreement,
the credit provider may take the steps set out
in part C of Chapter
6, to enforce and terminate that agreement.
[19] The Act consequently
only expressly recognises a single mode of
“re-instating”
an agreement, namely by making payment of the amounts
specified in terms of Section 129 (3) (a) and precludes such
re-instatement,
where the agreement has been cancelled in terms of
the Act. In my view, the following dictum of Wallis J (at pg 80 G –
H)
is of equal application where the debt rearrangement flows from an
order in terms of Section 86 (11), to resume the debt review
process.
“
It follows
that the defendant’s contention, that a cancelled instalment
sale agreement, such as her agreement with the plaintiff,
can be
reinstated as a result of a debt rearrangement flowing from a court’s
order under Section 85 of the N C A, cannot
be sustained. The N C A
does not itself expressly provide for such re-instatement and all the
textual and contextual indications
point in the opposite direction”.
In the absence of an
express provision in the Act, providing for the re-instatement of an
agreement, which has been lawfully cancelled,
on the grant of an order
to resume the debt review process in terms of Section 86 (11), there
can be no basis for the implication
of such a consequence in terms of
the Act. Interference in the contractual relationship between the
parties, to such an extent,
would have to be expressly provided for
in the Act.
[20] Consequently, the
defendant’s right to retain possession of
the vehicle was
terminated by the cancellation of the instalment sale agreement by
the plaintiff having complied with the provisions
of Section 123,
read with Section 129 of the Act, and having furnished the defendant
with the notices required in terms of Section
129 (1) (a) and Section
86 (10) of the Act. This right cannot be restored to the defendant by
an order directing that the debt
review process be resumed (Donkin pg
80 H). Any claim in terms of Section 86 (11) of the Act for the
resumption of the debt review,
can only arise in respect of any claim
the plaintiff may advance in the future, for the payment of any
shortfall in the amount
owed by the defendant in terms of the
cancelled agreement, after determination of the value of the
re-possessed vehicle. The danger
that a credit provider may
accordingly elect to cancel the agreement, after termination of the
debt review process in terms of
Section 86 (10), in order to prevent
being involved in the process of debt restructuring, in the event of
a resumption of the debt
review process being ordered in terms of
Section 86 (11), may be more apparent than real, because as pointed
out by Wallis J in
Donkin at pg 80 D – E
“
In many
instances of debt rearrangement one would anticipate that the
underlying credit agreement would be terminated and the goods
restored to the credit provider against an agreement to pay a
diminished surrender value over a specified period of time”.
In any event, even if the
restoration of the goods is not accompanied by an agreement to pay a
diminished surrender value, the consumer
would be able to seek debt
review in respect of any claim advanced by the credit provider, for
any shortfall, after realisation
of the value of the goods.
[21] I am in addition not
satisfied that the defendant has established that the plaintiff
failed to participate in good faith in
the debt review process.
[22] The gravamen of the
defendant’s complaint is that:
[22.1] The plaintiff had
at no stage attempted to negotiate a suitable debt restructuring
arrangement with the defendant and had
caused unnecessary delays in
the Section 87 application, and then sought to rely partially upon
such delay, to terminate the debt
review process.
[22.2] The plaintiff’s
contention that the proposed restructuring order would reduce its
security under the instalment sale
agreement, as the vehicle will
depreciate over the proposed restructuring period, was without
validity because if the vehicle was
re-possessed and sold at a forced
sale it would realise substantially less than what it was worth. The
plaintiff would then be
left with a substantial shortfall on the
vehicle which it would have to recover from the defendant, without
any security for that
amount. The defendant would however be deprived
of the use of the vehicle and without a vehicle to commute to and
from work the
defendant may lose her job, further prejudicing all her
creditors.
[23] The response of the
plaintiff was as follows:
[23.1] Following the
defendant’s application for debt review,
payments by the defendant
ceased. The defendant’s arrears consequently escalated from
R3,884.31 to R39,746.87.
[23.2] At the hearing for
debt restructuring the proposal for payment by the defendant would
mean that the debt would take over
one hundred and eighty months,
that is fifteen years, to be paid in full.
[23.3] The
counter-proposal by the plaintiff was that the debt be settled by
instalments of R3,818.03 over eighty four months and
that the
interest be fixed at 11.01 per cent. This counter proposal was
however rejected by the debt counsellor. The plaintiff
asserts that
the counter proposal was reasonable, in that it would have permitted
the defendant to pay a lower instalment, thereby
making her financial
affairs more manageable, but still entitle the plaintiff to retain
some security in the goods as it diminished
in value.
[23.4] It was for this
reason that the plaintiff decided to terminate the debt review
proceedings.
[24] As pointed out above
the defendant filed no replying affidavit
and there is no evidence
to gainsay the plaintiff’s assertion that the defendant’s
proposal would have taken fifteen
years to excuss the debt. The
security of the plaintiff flowing from its ownership of the vehicle
would obviously have been drastically
diminished long before
settlement of the debt. The plaintiff’s counter proposal that
the debt be repaid over a further period
of seven years, was not in
my view unreasonable and its rejection without any further proposal
from the defendant, refutes any
suggestion by the defendant, that the
plaintiff failed to participate in good faith, in the debt review. It
may be said that the
plaintiff as
“
the credit
provider on good grounds concludes that the proposed restructuring
will not lead to the ‘satisfaction by the consumer
of all
responsible financial obligations’ (Section 3 (g) and (i)) or a
rearrangement as contemplated by Section 86 (7) (C)”
and as a consequence
“
the court
considering the resumption of the debt review may well refuse to
sanction its resumption”.
Collett at pg 517 G
[25] A further issue
raised by the plaintiff is that the defendant, in seeking a
resumption of the debt review process, has failed
to disclose
“sufficient information on which the request for a
resumption of the debt review”
may be considered.
Collett at pg 519 A
[26] In this regard the
plaintiff alleges that the defendant has failed to disclose her total
liabilities, her current monthly commitments
in respect of
liabilities, her income required, living expenses and dependants, if
any. It should however be borne in mind, that
only the debt review in
respect of the plaintiff’s claim was terminated, and the debt
review of other creditors’ claims
would remain unaffected. Be
that as it may, in my view, the information that should have been
placed before this Court were details
of any proposal by the
defendant, to repay the debt owed to the plaintiff, together with
sufficient supporting information of the
defendant’s financial
affairs, in order to enable this Court to assess the reasonableness
of the proposal made by the defendant.
In the absence of this
information, this Court is unable to assess the reasonableness of the
defendant’s request for a resumption
of the debt review
process, in respect of the debt owed to the plaintiff. On this ground
also the defendant’s application
for a resumption of the debt
review process must fail.
[27] A further defence
raised by the defendant to fend off the grant of summary judgment,
albeit not raised in the affidavit opposing
summary judgment, but in
the heads of argument filed by Mr. Hoar, was what was referred to by
him as
“a Shackleton defence”
by
reference to the decision in the case of
Shackleton Credit
Management v Microzone Trading 88
2010 (5) 112 (KZP)
[28] Albeit that the
defendant in her founding affidavit in the application had the
following to say
“
I accept
that should the Court find against me on the Section 86 (11)
application and refuse to order that the plaintiff’s
debt
review resume, I have no further defence to the plaintiff’s
claim for return of the vehicle, and that I will have to
then return
the vehicle to the plaintiff”
Mr. Hoar submitted in his
heads of argument, as a precursor to the raising of this defence the
following:
“
In the event
that the defendant’s application for an adjournment is refused,
the defendant intends and is left with no alternative,
by virtue of
the plaintiff’s conduct in this litigation to date, but to
raise a Shackleton defence”.
[29] The complaint
raised, was directed at a lack of personal knowledge of the facts
verifying the plaintiff’s cause of action
and the amount
claimed, on the part of the deponent to the affidavit, filed by the
plaintiff, in support of the application for
summary judgment.
[30] The passage
complained of reads as follows
“
The facts
herein contained are within my own personal knowledge and to the best
of my belief true and correct. I say this because,
in my capacity as
manager, I have been involved with the applicant’s claims in
this matter and have in my possession or under
my control all the
applicant’s files, documents, statements of account and the
like relating to the action”.
[31] In Shackleton,
Wallis J drew attention to the need in terms of
Rule 32 (2) for the
deponent to an affidavit filed in support of an application for
summary judgment, to have personal knowledge
of the facts, which she
or he verifies, in support of the plaintiff’s cause of action
and the amount claimed. If such information
on the part of the
deponent was due purely to hearsay, as would be the case where the
deponent obtained the information from another
person or
documentation, this requirement would not be satisfied.
Shackleton at 115 G –
H
[32] However, if it is
clear that the deponent to the affidavit, by virtue of the position
he occupies with the plaintiff, is able
during the course of his
duties to have acquired personal knowledge of the defendant’s
financial standing with the plaintiff,
this may be sufficient.
Shackleton at pg 118 B
– C
[33] The deponent in the
present case says that in his capacity as manager
“I
have been involved with the applicant’s claims in this matter”
and that the relevant documents are in his possession,
or under his control. In my view, the allegation is sufficient to
warrant
the assertion that the personal knowledge he possesses, was
not acquired exclusively from the documentation under his control.
There is accordingly no basis to this defence.
The order I make is the
following:
(a) The application
brought by the defendant for a resumption of the debt review enquiry
in terms
of
Section 86
(11) of the
National Credit Act No. 34 of 2005
and for the removal from the Roll
of the application for summary judgment by the plaintiff against the
defendant, is dismissed.
(b) Summary judgment is
granted in favour of the plaintiff against the defendant for:
(i) An order authorising
the Sheriff of the Court to take possession of and to deliver to the
applicant, the goods being
2008 Chevrolet Captiva
2.4 LT:
Chassis No.
KL1DC23F38B176987
Engine No. Z24SED026129
That judgment for the
amount of damages that the plaintiff may have suffered, together
with interest thereon, be postponed
sine die
, pending the
return of the vehicle to the plaintiff, the subsequent valuation and
sale thereof and the calculation of the amount
to which the
plaintiff is entitled.
The defendant is ordered
to pay the plaintiff’s
costs incurred in respect
of the application and the action, to date hereof.
___________
SWAIN J
Appearances: /
Appearances:
For the Plaintiff
/Respondent :
Mr. K. Gounden
Instructed by
:
Legator, McKenna Inc Durban
For
Defendant/Applicant :
Mr. S. Hoar
Instructed
by :
McKenzie Dixon
C/o Maxprop
Durban
Date of Hearing
:
25 November 2011
Date of Filing of
Judgment :
08 December 2011