About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, East London Local Court
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, East London Local Court
>>
2011
>>
[2011] ZAECELLC 13
|
|
Dwenga v First Rand Bank Ltd and Others (EL 298/11, ECD 298/11) [2011] ZAECELLC 13 (29 November 2011)
23
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE, EAST LONDON CIRCUIT LOCAL DIVISION)
CASE NO. EL 298/11
ECD 298/11
In
the matter between
QAQAMBILE
LIQAQAMBILE DWENGA
….........................................
Applicant
and
FIRST
RAND BANK LIMITED
…..................................................
First
Respondent
THE
SHERIFF OF THE ABOVE HONOURABLE
COURT
…......................................................................................
Second
Respondent
THE
REGISTRAR OF DEEDS
…..................................................
Third
Respondent
CARL
ARNOLD THEODORE BURGER
…..............................
Fourth Respondent
JUDGMENT
HARTLE, J:
[1] The applicant
seeks an order rescinding a default judgment granted against him
under case number EL 140/09, ECD 440/09. The
claim in the action
arises upon his indebtedness to the first respondent under a mortgage
loan.
[2] He seeks a
further order setting aside the sale in execution in respect of the
property which the fourth respondent purchased
at a public auction on
11 February 2011. It is his primary residence and the subject matter
of the mortgage in favour of the first
respondent.
[3] Registration of
transfer of the property to the fourth respondent is in process.
Although the applicant did not seek any order
staying transfer
pending the final disposal of the present application, the first
respondent has “
out of respect for the
authority of (
this
)
Court
”
instructed its attorneys not to
proceed with the registration in the meantime.
[4] It appears from
annexure “C” to the applicant’s founding affidavit
that default judgment was granted by the
Registrar, Grahamstown, on 7
July 2009. The full order reads as follows:
“
Having read
the Plaintiff’s Summons, the Written Application for Default
Judgment and other documents
1
filed of record
AND
Defendant
being in default
IT IS ORDERED:
That judgment by
Default be and is hereby granted in favour of the Plaintiff against
the Defendant for:
Payment of the
amount of R858 554.74 (EIGHT HUNDRED AND FIFTY EIGHT THOUSAND RAND
FIVE HUNDRED AND FIFTY FOUR RAND AND SEVENTY
FOUR CENTS);
b) payment of
interest on the capital sum aforesaid at the rate 14.45% per annum,
calculated and compounded monthly in arrears from
1 January 2009, to
date of payment, both dates inclusive
(sic)
;
An Order declaring
the property known as Erf 20495 East London, Buffalo City Local
Municipality, Division of East London, Province
of the Eastern Cape,
in extent 1000 square metres, held under Deed of Transfer No.
T3157/2007 to be specially executable;
3. Costs of suit on
the scale as between Attorney and Client, including collection
commission as provided for in the bond, to be
taxed.”
[5] The amount for
which judgment was entered constituted the full balance owing under
the mortgage loan – ostensibly as at
5 January 2009
2
- as opposed to
instalments due but unpaid.
[6] In this regard,
clause 16 of the bond stipulates that if the applicant fails to pay
any amount due in terms of the bond, then,
at the option of the first
respondent, all amounts whatsoever owing to it by him “
shall
forthwith be payable in full
”
and
that it would thereupon be entitled - among the exercise of other
rights available to it in terms of the bond - to institute
proceedings for the recovery thereof and for an order declaring the
property executable. According to the brief legend referred
to in the
simple summons, the amount was claimed on the basis that it
represented “
…
the
principal debt together with finance charges thereon… due and
owing by the Defendant to the Plaintiff as at 5 January
2009 under
Mortgage Bond No. B 4135/2007… which amount (became) payable
in terms of Clause 16 of the said Bond by reason
of the Defendant’s
failure to pay either punctually or at all the instalments that fell
due under the said bond, notwithstanding
demand.”
[7] What “
demand
”
had preceded does
not appear from the summons. The first respondent put up a copy of a
notice, annexure “RF 6” to its
answering affidavit, which
it contextualized as its purported compliance with the provisions of
section 129(1)(a) of the National
Credit Act, No 34 of 2005 (“NCA”)
at the time, but this document could not have been included as an
annexure to the
summons. The process itself refers only to annexures
“A” and “B”, the mortgage bond and
certificate of
balance respectively
3
.
[8] The applicant
alleges that he only became aware of the judgment on or about 14
February 2011 when he was so advised by his attorneys.
Neither had he
before had sight of the summons. A few days earlier he was confronted
by the fourth respondent who informed him
of his acquisition of the
property at the sale in execution. A timely mandate to his attorneys
led to an investigation of the circumstances
under which the judgment
had been granted, and a copy of the court file was produced. Despite
the summons not having come to his
notice before, he accepts,
however, that service thereof was properly effected in accordance
with the rules of this court at his
elected
domicilium
referred
to in
the
mortgage agreement. According to the third respondent’s return,
it was affixed to the door of the applicant’s property
on 21
February 2009.
[9] The primary
basis upon which the applicant contends he is entitled to the relief
sought is that, as at the dates when both the
summons was served and
judgment was entered by the Registrar respectively, he was not in
arrears with his bond. On the contrary,
he was in credit. He explains
that due to the tentative nature of his business – he leases
machinery and undertakes building
construction to provincial
government departments which invariably fail to pay him promptly - a
custom had developed whereby the
first respondent would overlook his
tardy payment of instalments under the bond. The account would be in
arrears for a short period
only, because he would redress the
situation with a “
lump
sum payment
”
as
soon as he, in turn, received payments from the recalcitrant
government departments. Mostly these payments would bring the bond
account into credit.
[10] At the
beginning of February 2009, he received a call from one
Michelle
,
an employee of the first respondent, to advise him that his bond was
in arrears in the sum of R63 218.48. No mention was made
that legal
proceedings had been instituted or that the first respondent had
elected at its option to foreclose the mortgage
4
.
He informed her - as was now the pattern - that he would make a
payment into the account as soon as he was in receipt of funds.
On 18
February 2009 – and whilst he was working away in Kokstad –
the promised funds materialized. He immediately paid
a sum of R72
482.33 into the account. Therefore, by 21 February 2009 when the
summons was served, the account would have been in
credit in the sum
of R9 263.85. (I interpose to mention that this is not in dispute)
5
.
This payment was made as per his separate arrangement with
Michelle
and was not
foreshadowed by any formal demand. On the contrary, he says that he
wished by the fulfillment of his undertaking to
the first respondent
to avert litigation.
[11] In addition, a
further amount of R30 000.00 was paid into the bond account on 30
June 2009. The effect of this was that on
7 July 2009, when the
Registrar granted default judgment, the account would again have been
in credit in the sum of R12 694.92.
(This figure is in dispute but
for the reasons which follow this is not of any consequence)
6
.
[12] A further
ground on which he relies for the rescission is an absence of a
notice in terms of section 129(1) of the NCA preceding
the issue of
summons. He attached two such notices which were indeed addressed to
him at “
P
O Box 604, East London, 5200
”
,
the first of which followed after the issue of the summons (dated 15
April 2009), and the second after the date of the default
judgment
(dated 12 August 2009). He alleges that on neither of these dates
either was he in arrears with his bond account
7
.
Being unaware that judgment was granted against him, he continued in
2010 – against odds and in an embattled financial year
–
to make payment into the account. This period was characterized by
frequent contact from the first respondent’s call
department to
remind him of his arrears situation. By the end of the year he had
managed to reduce the arrears to a sum of R47
286.54, but was not
overly anxious about this because a large payment due to him in the
sum of R682 068.38 was anticipated in January
2011. Therefore, when
one
Delicia
of the first
respondent’s Cape Town office contacted him on 13 December 2010
regarding the state of his account and warned
him that the property
would be sold in execution, he was not concerned about her threat.
This was because he was confident that
he would be able to bring up
the arrears upon receipt of the funds due to him. He had no inkling
that judgment had in the meantime
being entered against him.
[13] The first
respondent opposes the application. It submits that the applicant -
despite his protestations to the contrary - was
aware that judgment
had been taken against him and that it was against this background
that all subsequent discussions concerning
the payment of the arrears
had taken place. Furthermore, he had over a period since the grant of
the mortgage loan regularly defaulted
on the periodic instalments and
it was entitled in the circumstances to invoke the acceleration
clause and claim the full amount
outstanding in terms of the bond
agreement. Once it had done so (I understand this to mean a reference
to foreclosing on the bond),
any payments received from him were
relevant only to “
indulgences
”
shown by it to him.
Therefore, his “
reliance
”
on arrangements made
with it from time to time was misplaced. This is because clause 19 of
the bond clearly provides that any failure
by it to exercise its
rights in terms of the agreement and any indulgence allowed to him
could not have operated as a “
waiver
or abandonment
”
by
it of its rights in terms thereof.
[14] It referred to
an extract from its computer records relating to calls made to and
received from the applicant which confirm
the haphazard maintenance
of his account right up until 10 February 2011, but it deals only
briefly with the situation which pertained
prior to the institution
of the action
8
.
(The records incidentally give credence to the applicant’s
version that he kept the first respondent abreast of his financial
constraints and often delayed payment subject to the availability of
funds through his business pursuits, albeit that most of the
calls in
this connection were at the bank’s initiative rather than his
own).
[15] In addition it
refutes that the issue of summons was not preceded by a valid section
129(1) notice. In substantiation of its
denial in this regard, it
attached to its answering affidavit a notice dated 26 November 2008,
addressed to the applicant at “
9
Culloden Road Street
(sic)
,
Haven Hills, East London, 5200
”
,
9
the contents of
which are set out below:
“
NOTICE IN
TERMS OF
SECTION 129(1)
OF THE
NATIONAL CREDIT ACT 34 OF 2005
”
Home Loan Account
Account No. 3-000-011-235-815
Loan Amount
R800,000.00
Current Outstanding
Balance R837,635.89
Amount in arrears
R32,484.94
You are hereby
advised that your Home Loan account is in arrears in the amount as
set out above and as a result thereof, your access
to credit with the
Bank has been suspended. Your attention is drawn to the fact that
interest
14.95%
nominal
per annum and compounded monthly ll be charged on the daily
outstanding balance. You are encouraged to immediately pay the
arrears so as not to tarnish your credit record.
Please take note
that should you not rectify the arrear status to your account within
20 business days from date delivery hereof,
the Bank will notify the
Credit Bereau of such default. Maintaining a healthy credit record is
important for your future credit
requirements with the Bank or any
other institution and therefore we encourage you to respond to this
notice as a matter of urgency.
In terms of the
National Credit Act, 34 of 2005
, you have the right to approach a
debt counsellor, however, should you choose to exercise this right
you are not to incur any further
charges under any credit facility
nor enter into any further credit agreement other than a
consolidation agreement or an agreement
rearranging your obligations
to the Bank.
In the event that
you are experiencing financial difficulties in maintaining your
repayments or should you have any queries regarding
the arrears on
your Home Loan account, please do not hesitate to call
Sizwe
Ntshalintshali 011 – 352 3845
.
Should you fail to
reply to this notice or to contact a debt counselor within 10
business days from date of delivery hereof, the
Bank will institute
legal proceedings for the recovery of the arrears.”
(Sic)
[16] The letter is
signed by the “
Head
of Arrears, FNB Shared Services – Credit Risk Management
”
.
It is apparent from a sticker affixed to the copy that it was posted
to the applicant’s
domicilium
by registered mail.
A receipt number is endorsed on the sticker. I need mention that the
applicant alleges that he first had sight
of it only upon reading the
first respondent’s answering affidavit, but I will assume for
purposes of deciding this matter
that the notice was properly
dispatched to him at his elected
domicilium
10
.
It is the contents of the notice and its efficacy in the
circumstances which I have a problem with. I return to deal with this
aspect below.
[17] A court is
entitled to set aside a judgment granted in default of appearance
“
upon good cause shown
”.
[18] The
requirements for such an application are:
(a) the applicant
must give a reasonable explanation for his default,
(b) his application
must be
bona fide
and not made with the intention of delaying
the plaintiff’s claim; and
(c) he must show
that he has a
bona
fide
defence
to the claim
11
.
[19] Good cause is
shown when there is evidence of a substantial defence and a
bona
fide
and
presently held desire on the part of the applicant to raise the
defence concerned.
[20] The court has a
wide discretion in evaluating “
good
cause
”
in
order to ensure that justice is done
12
.
For this reason it has refrained from attempting to frame an
exhaustive definition of what would constitute sufficient cause to
justify the grant of an indulgence, as any attempt to do so would
hamper the exercise of its discretion
13
.
[21] Although an
acceleration clause, including
a
Lex commissoria,
in
a mortgage agreement, has been held to be perfectly permissible and
justifiable in a commercial context
14
,
to my mind it is self evident that the principal obligation to which
it is accessory – which is in the nature of a credit
agreement
- must necessarily yield to the relevant provisions of the NCA
pertaining to the enforcement of the foreclosure remedy
which avails
the mortgagee in the case of the mortgagor’s default under the
bond. Mortgage bonds typically contain clauses
empowering the
mortgagee to foreclose the mortgage. It is usually stated that in the
event of a breach by the debtor of his duties
under the principal
obligation, the capital amount of the bond, together with interest
and all other payments will become due and
payable and that the
mortgaged property may be declared executable by the court for the
satisfaction of the mortgagee’s claim.
Cancellation, or
termination, is also necessarily implied thereby. But cancellation is
in my view not an act which the mortgagee
performs unilaterally and
at its whim.
15
It is in itself the
enforcement of a debt within the meaning contemplated in the NCA.
16
[22] In the first
instance the NCA requires that certain procedural steps relative to
that specific remedy of enforcing the entire
agreement are taken
before a court can be approached for an order in such terms. This is
the “
first
step
”
in
this regard.
17
The latter
requirement – i.e. compliance with the provisions of
section
129
(1) (b) and
130
(1) (b) - is a “
critical
cog of a plaintiff’s cause of action
”
.
18
Accordingly a
failure to comply with the peremptory requisites for commencing legal
proceedings under a credit agreement must, of
necessity, preclude a
credit provider from enforcing its claim even where - such as in the
present instance - the applicant unabashedly
admits that he was tardy
with his payments on a regular basis.
[23] Secondly, the
NCA allows for re-instatement of a credit agreement before
cancellation thereof
19
and precludes the
determination of commenced proceedings under circumstances where,
inter
alia
,
the consumer has brought his payments under the credit agreement up
to date.
20
[24] The relevant
provisions of
section 129
provide as follows:
“
129. Required
procedures before debt enforcement.
—
(1) If
the consumer is in default under a credit agreement, the credit
provider—
(
a
)
may draw
21
the default to the
notice of the consumer in writing and propose that the consumer refer
the credit agreement to a debt counsellor,
alternative dispute
resolution agent, consumer court or ombud with jurisdiction, with the
intent that the parties resolve any dispute
under the agreement or
develop and agree on a plan to bring the payments under the agreement
up to date; and
(
b
)
subject to
section 130
(2), may not commence any legal
proceedings to enforce the agreement before—
(i)
(i) first providing
notice to the consumer, as contemplated in paragraph (
a
)….;
and
(ii) meeting any
further requirements set out in
section 130.
(2) ….
(3) Subject
to subsection (4)
22
,
a consumer may—
(
a
)
at any time before the credit provider has cancelled the agreement
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;
and—
(
b
)
…
.
(4)
…
.”.
[25] This section
must of necessity be read with the provisions of the ensuing
section
130
, which give perspective to the need for the notice and the
circumstances under which the credit provider can or cannot proceed
to the next step. It also provides the subtext under which commenced
proceedings can be determined relative to the prescribed notice.
These are the following:
130. Debt
procedures in a Court.
—(1) Subject to subsection
(2), a credit provider may approach the court for an order to enforce
a credit agreement
only if, at that time, the consumer is in default
and has been in default under that credit agreement for at least 20
business
days and—
(
a
) at least
10 business days have elapsed since the credit provider delivered a
notice to the consumer as contemplated in ….
section 129
(1)…;
(b) in the case of a
notice contemplated in
section 129
(1), the consumer has—
(i)
(i) not responded to
that notice; or
(ii) responded to
the notice by rejecting the credit provider’s proposals; and
(
c
)
….
(2) …..
(3) Despite
any provision of law or contract to the contrary, in any proceedings
commenced in a court in respect of a
credit agreement to which this
Act applies, the court may determine the matter only if the court is
satisfied that—
(
a
) in the
case of proceedings to which sections 127, 129 or 131 apply, the
procedures required by those sections have been complied
with;
(
b
) ….
(
c
) that the
credit provider has not approached the court—
(i) during the time
that the matter was before a debt counsellor, alternative dispute
resolution agent, consumer court or the ombud
with jurisdiction; or
(ii) despite the
consumer having—
(
aa
) ….
(
bb
) agreed
to a proposal made in terms of section 129 (1) (
a
)
and acted in good faith in fulfilment of that agreement;
(
cc
) complied
with an agreed plan as contemplated in section 129 (1) (
a
);
or
(
dd
) brought
the payments under the credit agreement up to date, as contemplated
in section 129 (1) (
a
).
(4) In any
proceedings contemplated in this section, if the court determines
that—
…
..
(
b
) the
credit provider has not complied with the relevant provisions of this
Act, as contemplated in subsection (3) (
a
), or has
approached the court in circumstances contemplated in subsection
(3) (
c
) the court must—
adjourn the matter
before it; and
(ii) make an
appropriate order setting out the steps the credit provider must
complete before the matter may be resumed;
(
c
)
….
(
d
)
….
(
e
)
…..
”
[26] The main aim of
the default notice is to notify the consumer of the possible
assistance at his disposal before legal action
will be taken
23
.
It
inter
alia
encourages
him to approach a debt counsellor as soon as possible to assist him
to develop and agree on a plan to bring the arrear
payments under the
credit agreement up to date. This is in line with the purpose of the
NCA,
inter
alia,
to
provide for a consistent and harmonious system of debt restructuring,
enforcement and judgment that places priority on the eventual
satisfaction of all responsible consumer obligations under credit
agreements
24
.
Taylor
25
suggests that the
legislature intended the eventual compliance with the contractual
obligations by the consumer by whatever means
possible.
[27] Self-evidently,
therefore, it is critical that the notice should provide the consumer
with sufficient information to allow
him or her to exercise any of
the rights described in section 129(1)(a) to achieve such purpose. It
should in my view also - as
a basic premise - properly call attention
to the nature and extent of the default and the proposed enforcement
thereby, for how
else can the consumer meaningfully “
respond
to (
the
)
notice
”
as
section 130(1)(a)(i) requires of him to do. “
Respond
”
is not defined, but
against the objectives which I have outlined above, the reaction
sought to be invoked is one whereby the consumer
endeavours to fulfil
his obligations under the credit agreement either by bringing his
payments thereunder up to date or coming
to a suitable arrangement in
this regard.
[28] The notice
should be crafted in plain and understandable language, to inform the
consumer how to go about avoiding the agreement
from being cancelled
and/or legal action being taken
26
.
In my view it should also call attention to the alleged breach
justifying foreclosure under the mortgage agreement and warn of
the
serious consequences in this regard.
[29] A quick glance
at the default notice on which the first respondent relies for its
compliance with section 129(1)(a) will immediately
demonstrate that
it is defective in several material respects. In the first instance
it does not adequately warn that the default
sought to be remedied
thereby relates to the repeated arrears on the basis of which clause
16 is sought to be invoked.
27
Further: it only
offers a single proposal limited to the referral to a debt
counsellor
28
;
it fails to state what the intent of that proposal is or why it is
critical; the reference to the minimum period of twenty (20)
days
referred to in section 130(1) is only given significance in the
context of explaining to him that the first respondent will
“
notify
the Credit Bureau of such default
”
;
he is invited only to “
reply
”
to the notice, which
is not the same as asking him to “
respond
”
as is required by
section 130(1)(b)(i) and therefore ambiguous; and finally the
consequence (of the failure to “
reply
”
)
is limited to the institution of legal proceedings for the “
recovery
of arrears
”
,
a vastly different enforcement than the one envisaged by the summons
which later ensued. Generally the notice conveys absolutely
no sense
of urgency at all
29
and is totally
ineffective for its purposes, most especially a foreclosure of the
bond due to the applicant’s repeated failure
to pay the
periodic instalments.
[30] In order to
demonstrate its deficiency, it is significant by way of comparison to
advert to the warning expressed in the other
two notices which were
posted to the applicant’s P O Box address after the issue of
summons. Each of these concludes with
the following injunction:
“
Should you
fail to reply to this notice within 10 business days of date of
delivery, by
not making a
deposit to pay the arrears
30
and bring the
account up to date or
not contacting us
in order to make a repayment arrangement or
not approaching a
debt counselor for assistance in this matter,
the bank will
institute legal proceedings, without any further notice, for
recovery, of the full outstanding balance in terms of
the mortgage
agreement.”
[31] Whilst there
may have been a sound basis for the first respondent to exercise its
right to cancel the contract and recover
the full outstanding
balance, such enforcement is not unequivocally heralded by the
section 129(1)(a) notice, leaving aside its
other deficiencies. The
notice may well have achieved the objective of drawing the
applicant’s attention to his default (limited
to the arrear
amount of R32 484, 94), but it does not go far enough in my view by
calling attention to the consequences envisaged
by clause 16 of the
bond or that the enforcement intended by the notice was foreclosure.
Mr.
Cole
’
s
argument that the summons stood as the notice to the applicant of the
invocation of clause 16 overlooks the peremptory nature
of section
129 (1) (a), which requires the applicant to have first been warned,
by the prescribed notice, of the first respondent’s
intention
to enforce even its foreclosure remedy.
[32] In my view,
therefore, the applicant’s submission that the first respondent
failed to comply with the provisions of section
129(1)(a) - thus
resulting in an absence of a complete and proper cause of action -
has merit, albeit for a different reason than
the one contended for
by him. Further it appears that if the first respondent had asserted
- at the time of the default judgment
application - that it had so
complied with the relevant provisions of the NCA, such averment too
would have been erroneous.
31
[33] But even
overlooking the defects in the purported notice, the applicant
“
responded
”
to it (albeit
unwittingly) after its dispatch and before the service of summons on
him by redressing the specific arrears which
it called upon him to
effect payment of. It is common cause, as I indicated above, that as
at the date of the service of the summons,
the payment by the
applicant just before this resulted in his bond account being “
in
credit
”
32
.
Mr.
Crisp
on behalf of the
applicant contends that, as a result, the notice was no longer valid
once the applicant brought his arrears up
to date. The payment would
have impaired its effectiveness as a platform for the continued
enforcement of the proceedings relating
to the default sought to be
remedied thereby. As was observed by Gautschi AJ in
Starita
(aka Van Jaarsveld) v ABSA Bank Ltd & another
33
there is no time
period specified in the NCA for the continued validity of a section
129 notice, nor can one be implied. Its ongoing
validity depends on
the facts of the case. For instance, if the arrears specified in the
notice are fully extinguished after notice
has been given, it cannot
then be utilized for any legitimate purpose if further arrears occur
thereafter. It has run its course
so to speak and no longer has any
efficacy.
[34] I fully align
myself with this reasoning. In the present matter the applicant fully
extinguished the arrears and left something
in reserve more than
adequate to cover costs and charges.
34
The payment may have
been too late to avert the issue of the summons in its entirety, but
the process could only have remained extant
thereafter in order for
the first respondent to have recovered its costs of issuing the
summons. Therefore, by the time the application
for default judgment
was placed before the Registrar for her consideration, it could
similarly not be asserted that the applicant
was in default of
payment of the arrears he had been called upon by the purported
notice to remedy, because he had fully purged
those. Further, not
only would the agreement have been automatically
35
re-instated by the
payment before the service of the summons, pursuant to the provisions
of section 129(3), but the provisions of
section 130(3)(c)(dd) of the
NCA would in my view have precluded the further enforcement of the
proceedings.
[35] Mr
Cole
(for the first
respondent) contended that this defence could not avail the applicant
because the payment made by him, although it
addressed the arrears,
was not adequate to meet payment of the full amount claimed. This
argument may well have been a sound one
if the notice had adequately
warned that the “
foreclosure
”
remedy was what was
sought to be enforced thereby, but as indicated above it failed
woefully to call such consequence to the applicant’s
attention.
Absent proper notice as a peremptory requisite for the enforcement of
a foreclosure remedy, cancellation was not permissible
and therefore
it still remained open for the agreement to be reinstated by the
applicant’s payment on 18 February 2010.
36
[36] In conclusion
therefore I am satisfied that the applicant has demonstrated that he
has a substantial defence to the first respondent’s
claim.
[37] As for his
explanation for his default of appearance, I find no reason not to
accept his word in this regard. The first respondent
sneered at the
suggestion that he could have been in the dark as to the fact of the
judgment, but its own data records are consistent
with the absence of
such a discussion having taken place between the applicant and its
employees, except towards the end when there
was a reference to the
sale in execution which the applicant explained he was not concerned
about. Indeed it is doubtful that the
first respondent itself was
aware that judgment had been entered against the applicant, given
that it continued to forward section
129 (1) (a) notices to him, both
after service of the summons had been effected and even after
judgment had been entered by the
Registrar. Further, if the applicant
was indeed aware that judgment had been entered, it is improbable
that he would not earlier
have sought the setting aside thereof when
he was in a good place so to speak and, on his understanding of the
situation, ahead
with his payments at the time.
[38] Further, he
demonstrated in my view by the payments made by him as and when he
had funds at his disposal a real desire to avoid
the loss of his
home. This is exactly the aim of the NCA,
inter
alia
,
to promote the cause of the consumer by giving him a meaningful
opportunity to bring his payments up to date. Similarly, upon
discovering the fact that the judgment had been entered against him,
he wasted no time in instructing his attorneys to investigate
how
this had come to pass and sought to rescind the judgment as soon as
possible thereafter. In the circumstances I cannot find
that his
application is made with the intention of simply delaying the first
respondent’s claim. Although the first respondent
was perfectly
at liberty to exercise its rights under the bond agreement – by
properly invoking the acceleration clause upon
appropriate notice in
terms of section 129(1)(a) – Mr.
Cole
’
s
criticism of him as a “
recidivist
non payer
”
,
is not a basis to disqualify him from asserting his defence in the
peculiar circumstances of the matter where the notice relied
on as
the pre-litigation requisite bore no correlation with the breach
identified thereby.
[39] In the premises
the applicant is entitled to an order rescinding the judgment. In the
view I have taken it is, therefore, unnecessary
for me to have regard
to the further contention of the applicant that it was not competent
for the Registrar to have declared the
property executable as
offering a basis to reconsider her judgment. In any event the order
which I propose to make will result
in the automatic setting aside of
the attachment of the property and consequent sale in execution
37
.
The applicant should further be granted leave to defend the action
although, for the reasons outlined above, the first respondent
will
in my view be unable to resuscitate the 26 November 2008 default
notice.
[40] In the result I
make the following order:
the default
judgment granted by the Registrar, Grahamstown, on 7 July 2009
under case number El 140/09; ECD 440/09 is set aside
- as also the
consequent sale in execution of the property (Erf 20595, East
London, Buffalo City Municipality held under Deed
of Transfer No. T
3157/2007) to the fourth respondent pursuant thereto;
the applicant is
granted leave to defend the action; and
the first
respondent is directed to pay the costs of the application.
________________________
B C HARTLE
JUDGE OF THE HIGH
COURT
Date
of Application : 26 July 2011
Date
judgment delivered : 29 November 2011
Counsel for the
Applicant : Advocate Oswald Crisp
Instructed by : B
Bangani Attorneys
Room 1, 2
nd
Floor
Clark House
60 Terminus Street
EAST LONDON
(REF. B BANGANI)
Counsel for the
First Respondent : Advocate Shaun Cole
Instructed by :
Changfoot-Van Breda
57 Recreation Road
Southernwood
EAST LONDON
(REF. N J
RISTOW/CP/SPI11/0158)
Appearance for
Second, Third
and Fourth
Respondents : Nil
1
It
is not apparent what these documents were.
2
This
is the amount which the applicant owed according to the certificate
of balance attached to the summons, marked annexure “B”.
3
This
conclusion is consistent with the averment in the first respondent’s
answering affidavit that whereas the applicant
had put up a copy of
the summons “
without the annexures
”, it was
annexing “
RF 1
”, a copy of the summons “
including
the annexures thereto
’. Those annexures, in turn, are
limited to the mortgage bond and certificate of balance aforesaid.
4
The
summons forming the subject matter of the judgment was ostensibly
signed by the issuing attorney on 16 February 2009, and
issued by
the Registrar, East London, on 17 February 2009.
5
What
the first respondent disputes, however, is that the amount paid
constituted full payment of the amount claimed in the summons.
6
The
first respondent contends that “
the
bond account went into arrears
(immediately
after the payment)
”
and that, as at
6 July 2009, there was a “
short-payment
”
of R2 700.00
7
The
first respondent disputes this, but on the view which I take below
nothing turns on this.
8
In
this regard the first respondent contends that the applicant had
“
repeatedly
” been in default after the bond was
registered, going “
in and out of arrears on several
occasions during 2007, 2008 and 2009
”. Further, whilst he
had made payment arrangements with it, he had not adhered thereto,
resulting in the account being
in arrears in the sum of R53 333.03
as at the date of the certificate of balance.
9
This
was the
domicilium
address selected by the applicant in the
bond.
10
It
would not avail the applicant to say that the notice was not
“
delivered
”
to
him within the meaning envisaged by section 130(1)(a) of the NCA.
Provided the notice has been delivered in accordance with
one of the
six methods referred to in section 65(2) - on the face of it this
appeared to be the case
in casu
–
it is not necessary to prove that it came
to his notice. Actual receipt of the notice is the consumer’s
responsibility and
not that of the credit provider. (See
Rossouw
& Another v First Rand Bank Ltd t/a FNB Homeloans (formerly
First Rand Bank of South Africa Ltd
)
2010 (6) SA 439
(SCA) at par [32]). The notice therefore needn’t
reach the consumer for it to be effective
11
Grant
v Plumbers (Pty) Ltd
1949 (2) SA 470
O at
476 – 477.
De Witts Auto Body Repairs v
Fedgen Insurance Company
1994 (4) SA 705
E
at 708 H – 709 D.
12
See
Waal v Prinswil Beleggings
1984 (1) SA 447
T.
13
See
also
Abraham v City of Cape Town
1995 (2) SA 319
C at 321 I – J.
14
Absa
Bank Ltd v Ntsane and Another
[2006] ZAGPHC 115
;
2007 (3)
SA 554
(T) at 565 D – F;
Nedbank
Ltd v Fraser & another and other cases
2011
(4) SA 363
(GSJ) at par [37]
et seq.
See also
Boland
Bank v Pienaar and Another
1988 (3) SA
618
(AD) as an example of how reliance on a foreclosure clause is
respected despite the seeming iniquity of a mortgagor being able
and
willing subsequently to purge his default.
15
For
this reason I believe that the interpretation by
Bertelsmann
J in
Absa Bank v
Ntsane, supra
, at 565 E - F that
acceleration happens
“
automatically”
and that the decision to accelerate payment
precedes the debt enforcement needs necessarily be reviewed to bring
it in line with
the provisions of the NCA. Acceleration and the
concomitant termination is in my view the debt enforcement.
16
See
The
National Credit Act Explained
, J M Otto
at pages 103 –
104 where the author opines that enforcement is credit providers
“
using any of their remedies
”, including the
implementation of a
lex commissoria
, otherwise the consumer
would be left without protection against cancellation by the credit
provider for this “
serious
” remedy which “
goes
against the grain of the Act
”. The effect of this is that
the credit provider is required to send a default notice not only
when it chooses to claim
the amount due (i.e. the arrear instalments
due and payable), but also where it is intent on cancelling the
contract, claiming
return of any goods involved or claiming damages
instead of performance. This is an argument which found favour in
Absa Bank Ltd v De Villiers & another
2009 (5) SA 40
(C).
The court held that that the use of the word “
enforce”
was intended by the NCA to be used in a wide sense, namely the
exercise of any of its contractual remedies by the credit provider.
See also
Nedbank Limited v National Credit Regulator
2011 (3)
SA 581
(SCA) at 589 A – B in which the latter judgment was
followed.
17
Nedbank
Limited v National Credit Regulator, supra
, at 590 C
18
Rossouw
& another v First Rand Bank
supra
at par [38].
19
Section
129(3) of the NCA.
20
Section
130 (3) (c) (ii) (dd) of the NCA.
21
In
Nedbank Limited v National Credit Regulator, supra
, at 586 F
– 587 A the court confirmed that despite the use of the word
“
may
”, the notice referred to in the section is
indeed a “
mandatory requirement prior to litigation to
enforce a credit agreement
.” See also
Absa Bank Ltd v
Prochaska t/a Bianca Cara Interiors
2009 (2) SA 512
(D) at
paragraph 27.
22
None
of which provisions are relevant for present purposes.
23
LAWSA
Vol 5(1), 2
nd
Edition at par 143.
24
Section
3(i) of the NCA.
25
(2009)
42 De Jure 103 – 105.
26
BMW
Financial Services (South Africa) (Pty) Ltd v Dr MB Mulaudzi
2009 (2) SA 348
(B) at 351 B.
27
The
amount in arrears is stipulated in the heading of the notice which
then goes on, in the body, to advise him that he is in
arrears “
in
the amount as set out above
.” The “
current
outstanding balance
” in the sum of R837 635, 89 is not
given any context, neither prominence nor significance. Nowhere is
it suggested that
possible foreclosure is on the cards.
28
There
are in fact four proposals envisaged by section 129 (1) (a).
29
For
example, he is “
encouraged
”, as opposed to being
admonished or warned, to pay the arrears, and then only so as not to
tarnish his credit record.
30
The
arrears referred to in both letters is again a reference to only the
outstanding amounts, R8 638.29 on 15 April 2009 and R7
570.89 on 12
August 2009 respectively. In these notices the applicant is,
however, sufficiently apprised that his failure to
take one of the
three steps outlined in the notice will result in the issue of
summons to recover the full outstanding amount
in terms of the bond,
as opposed to just the outstanding instalments.
31
The
summons went no further than broadly alleging compliance with
sections 129 and 130 without demonstrating a basis for this,
but the
conclusion is made on the assumption that the 26 November 2008 was
indeed placed before the Registrar.
32
I
also assume, in favour of the applicant that the credit, which was
not insubstantial, would have been more than sufficient to
meet the
first respondent’s “
permitted default charges and
reasonable costs of enforcing the agreement up to the time of the
re-instatement
” referred to in section 129 (3) of the NCA,
this after payment would have been apportioned in accordance with
the provisions
of section 126 (3) of the NCA.
33
2010
(3) SA 443
(GSJ) at paragraph [10].
34
See
fn 31 above.
35
See
the unreported judgment of Eksteen J in
Nedbank Ltd v Barnard
,
case no 1142/2008 (PE) - delivered on 1 September 2009 - at
paragraph 15, in which it was held that the consumer can
unilaterally
re-instate a credit agreement by paying to the credit
provider the arrears that are overdue plus sufficient amounts of
money
to cover the charges referred to in section 129 (3). Once this
has occurred the agreement is automatically re-instated. Nothing
in
the section requires a “
consultative process
”
with the credit provider before this happens. The mere fact that
such payments are made would be sufficient for the latter
to infer
the intention of the consumer to re-instate the contract.
36
An
issue I need not consider because of the conclusion reached herein
is whether a somewhat different situation may have pertained
if the
default notice properly called attention to the arrears equating to
the full outstanding balance. In
Nedbank Ltd
v Fraser, supra
, (at paragraph [41]) the
view was expressed that, notwithstanding reliance by the mortgagee
on a acceleration clause, a judgment
debtor could still redeem
immovable property from the execution process by making payment “
not
of the full sum of the judgment debt, interest and costs, but of the
overdue amounts of the arrears
together with default charges and legal costs of
enforcing the agreement up to the time of re-instatement”
,
but I doubt that this interpretation can be correct against the
accepted basis on which a foreclosure clause vests a mortgagee
with
the right to refuse to accept the late performance by the mortgagor.
(Also not on the score that re-instatement can occur
after
judgment because invariably by that date the
credit agreement would have been terminated, thus precluding
re-instatement within
the meaning envisaged in section 129(3) of the
NCA). If the mortgagee has commenced proceedings to give effect to
the more drastic
remedy of foreclosure, presumably only payment of
the full outstanding amounts, plus costs etc, would be adequate in
that event
to purge the breach justifying it. “
Re
-
instatement
”
as envisaged by section 129(3) is then a remote
prospect. On this basis the enforcement of an acceleration clause
appears inimical
to the express purpose of the NCA which is to
promote responsible consumer obligations. It does not appear to me
to be proper
that the consumer is at the mercy of a mortgagee who
can decide at whim after it has sought to rely on the acceleration
clause
whether to indulge him or not by accepting instalments and
holding off execution for as long as it feels so inclined. Such
“
arrangements
”
would
obviously fall outside of the confines and strictures of the NCA and
leave the consumer without the protection afforded
to him by the
Act. He would also be discouraged from bringing up the arrears if he
knew that it was open to the credit provider
at any stage to stop
“indulging” him, and then to proceed to execution. In
our country people are unfortunately not
model debtors who perfectly
manage to meet their obligations on due date strictly in accordance
with the letter of the contract,
but that does not appear to be a
reason to disqualify them from the protection of the Act in this
regard. It is the beacon of
re-instatement, and the legitimate
entitlement thereto, that keeps the hope alive in consumers that
they will weather the hard
times and keep their homes, and dignity
in the process.
37
Naidoo
v Somai
2011 (1) SA 219
(KZD) at 221 G – H. Once a
judgment has been rescinded the consequences thereof (for example
the issue of a writ in execution,
a writ of ejectment, the
attachment of property and ejectment from property), fall to be set
aside. The approach to be adopted
is obviously different if transfer
has already been effected. In that event re-transfer needs be
undertaken. (
Vosal Investments (Pty) Ltd v City of Johannesburg
2010 (1) SA 595
(SGJ) at 602 H).