National Credit Regulator v Nedbank Limited and Others (19638/2008) [2009] ZAGPPHC 100; 2009 (6) SA 295 (GNP) ; [2009] 4 All SA 505 (GNP) (21 August 2009)

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[2009] ZAGPPHC 100
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National Credit Regulator v Nedbank Limited and Others (19638/2008) [2009] ZAGPPHC 100; 2009 (6) SA 295 (GNP) ; [2009] 4 All SA 505 (GNP) (21 August 2009)

IN
THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG, PRETORIA)
Case
No: 19638/2008
Date
heard: 02/03/2009
Date
of judgment: 21/08/2009
In
the matter between:
THE
NATIONAL CREDIT
REGULATOR
..............................................
Applicant
and
NEDBANK
LIMITED
..............................................
First
Respondent
FIRSTRAND
BANK LIMITED
..............................................
Second
Respondent
STANDARD
BANK OF SOUTH AFRICA LIMITED
.................
Third
Respondent
ABSA
BANK
LIMITED
...........................................................
Fourth
Respondent
THE
CREDIT PROVIDERS' ASSOCIATION
...........................
Fifth
Respondent
THE
FURNITURE TRADERS ASSOCIATION
........................
Sixth
Respondent
RETAIL
MOTOR INDUSTRY ASSOCIATION
...................
Seventh
Respondent
THE
MINISTER OF JUSTICE AND CONSTITUTIONAL
DEVELOPMENT
..........................................
Eighth
Respondent
THE
MINISTER OF TRADE AND INDUSTRY
........................
Ninth
Respondent
THE
DEBT COUNSELLORS ASSOCIATION OF SOUTH
AFRICA
..............................................
Tenth
Respondent
ONECOR
(PTY)
LTD
.........................................................
Eleventh
Respondent
JOAHN
ERIK
JUSELIUS
.....................................................
Twelfth
Respondent
JUDGMENT
DU
PLESSIS J:
The
applicant, the National Credit Regulator established under section
12 of the
National
Credit Act, 34 of 2005
("the
Act"), seeks a number of declaratory orders aimed at clarifying
interpretational difficulties that those who work
with the Act
experience in practice. The applicant has joined as respondents the
major South African banks, two organisations
whose members are
credit providers in terms of the Act and the members of the national
executive who have an interest. The eleventh
respondent is a credit
provider who was joined at its request. The twelfth respondent is a
debt counsellor in terms of the Act
and he was also joined at his
request. The first to sixth and also the eleventh respondents have
launched counter applications
in which they respectively seek
different declaratory orders. The first to sixth
1
,
eleventh and twelfth respondents briefed counsel to appear on their
behalf.
In
his answering affidavit the twelfth respondent questioned the
applicant's
locus
standi
to bring
this application and the court's power to grant the declaratory
relief. In argument, however, all the parties were
agreed that the
applicant has the necessary
locus
standi
to seek
the relief and that this court has the power to grant the
declaratory orders sought. (See section 16(1)(b)(ii) of the
Act.) I
should point out that the relief sought relate to real issues that
have arisen in practice.
Overview
of
Part D
of Chapter
4
Most
of the declaratory orders sought originate from difficulties with
the practical application of
Part
D
of Chapter 4 of
the Act. Before I deal with the specific problems that arise in
practice, a brief overview of the relevant sections
of
Part
D
will be
helpful.
Part
D
introduces into
our law the concepts of "over-indebtedness" and "reckless
credit" that are applicable to certain
specified credit
agreements.
2
Both these concepts are carefully defined in the Act.
3
For present purposes, however, their meanings may be taken to be
self evident.
Part
D
also provides
for mechanisms to prevent reckless credit.
4
In
terms of section 83 a court may "in any court proceedings in
which a credit agreement is being considered ... declare
that the
credit agreement is reckless Having made such a declaration,
the court has certain powers set out in section 83(2),
(3) and (4).
One of the powers, to be exercised in specified circumstances, is to
"suspend the force and effect of the credit
agreement".
Section 84 specifies the effect of such a suspension.
A court
may also, under section 85(b) declare that a consumer
5
is over-indebted. It may then make certain orders to relieve the
over-indebtedness. The orders that the court can make are specified

in section 87.
The
Act also provides for the registration of "debt counsellors"
as part of the "consumer credit industry regulation"

structure.
6
Section 86 introduces a procedure whereby a consumer "may apply
to a debt counsellor ... to have the consumer declared
over-indebted".
7
It is this procedure (applications to debt counsellors to be
declared over-indebted) that causes most of the practical problems

that the parties seek to address by way of the present application.
I shall presently set out in detail the procedure provided
for in
the Act. Before I do that, I must point out that, if it is alleged
in the course of any court proceedings that a consumer
is
over-indebted, the court may, in stead of declaring the consumer
over-indebted, refer the matter to a debt counsellor.
8
Applications
to debt counsellors for debt review.
I
have pointed out that a "consumer may apply to a debt
counsellor ... to have the consumer declared over-indebted".
9
A debt counsellor who receives such an application must, among
other necessary steps, notify all credit providers that are
listed
in the application.
10
The debt counsellor must take certain other preliminary steps.
11
The consumer and each credit provider listed in the application
must "comply with any reasonable request by the debt
counsellor to facilitate the evaluation of the consumer's state of
indebtedness and the prospects for responsible debt
re-arrangement".
12
The consumer and the credit providers are also enjoined to
"participate in good faith in the review and in any
negotiations
designed to result in responsible debt
re-arrangement'.
13
Having
notified the relevant credit providers and having gathered the
necessary information, the debt counsellor must "determine,
in
the prescribed manner and within the prescribed time ... whether the
consumer appears to be over-indebted"
14
and, "if the consumer seeks a declaration of reckless credit,
whether any of the consumer's credit agreements appear to
be
reckless".
15
Section
86(7) provides for three possible findings that the debt counsellor
could make. First, if the debt counsellor "reasonably
concludes
that ... the consumer is not over-indebted, the debt counsellor must
reject" the consumer's application to be
declared
over-indebted.
16
In such event "the consumer, with leave of the Magistrate's
Court, may apply directly to the Magistrate's Court, in the

prescribed manner and form, for" an order to the effect that
one or more of his or her credit agreements are reckless and
for an
order that his or her obligations be re-arranged.
17
(It is of note that section 86(7)(c) specifies the manner in which
obligations may be re-arranged.)
In the second place, the
debt counsellor might find that, although the consumer is not
over-indebted, he or she is "nevertheless
experiencing, or is
likely to experience, difficulty satisfying" in time all his or
her obligations under credit agreements.
In such event the debt
counsellor "may recommend that the consumer and the respective
credit providers voluntarily consider
and agree on a plan of debt
re-arrangement".
18
(I shall refer to this possibility as "a voluntary
re­arrangement".)
The third possible finding that the
debt counsellor could make on the consumer's application to be
declared over-indebted is that
the consumer is indeed over-indebted.
If that is the finding, the debt counsellor "may issue a
proposal recommending that
the Magistrate's Court makes either or
both of the following orders ..."
19
:
An order "that one or more of the consumer's credit agreements
be declared to be reckless credit, if the debt counsellor
has
concluded
20
that those agreements appear to be reckless".
21
Having found that the consumer is over-indebted, the debt counsellor
may also recommend that the Magistrate's Court makes an
order that
"one or more of the consumer's obligations be re-arranged"
in one of a number of specified ways.
22
(I shall refer to this as "a re-arrangement by the court".)
I
return to the second possible finding that the debt counsellor could
make, that is that "the consumer is not over-indebted,
but is
nevertheless experiencing, or is likely to experience, difficulty
satisfying all the consumer's obligations under credit
agreements in
a timely manner".
23
If the debt counsellor makes such a finding and "the consumer
and each credit provider concerned accept" the debt
counsellor's proposal for a voluntary re-arrangement, "the debt
counsellor must record the proposal in the form of an order,
and if
it is consented to by the consumer and each credit provider
concerned, file it as a consent order in terms
of
section 138".
24
(For present purposes it is sufficient to state that section 138
provides that a court can make a consent order without hearing
any
evidence.) If the requirements for a consent order do not apply,
the "debt counsellor must refer the matter to the
Magistrate's
Court with the recommendation" for a voluntary
re-arrangement.
25
In terms of section 87(1)(a) the Magistrate's Court whereto the
matter has been referred, "must conduct a hearing and
... may
reject the recommendation The court may also make "an
order declaring any credit agreement to be reckless,
and an order
contemplated in section 83(2) or (3) ...".
26
The court may in addition make an order re-arranging the consumer's
obligations "in any manner contemplated in section

86(7)(c)(ii)".
27
In brief, section 86(8) provides for a procedure whereby a
voluntary re-arrangement can be converted into a re-arrangement
by
the court.
Section
86(10) provides for a credit provider to withdraw from the debt
re­arrangement ("debt review") process.
Under section
87(11) a Magistrate's Court may, however, in certain circumstances
order the debt review to resume.
I
shall now consider each of the declaratory orders sought, but not
necessarily in the order that they appear in the notice of
motion
and the counter applications.
Consideration
of the relief sought
The
applicant's prayer 1.15: On a proper interpretation of section
86(8)(b), it applies in the circumstances contemplated in
section
86(7)(c).
I
have pointed out that a consumer's application to a debt counsellor
to have the former declared over-indebted can, according
to section
86(7), have three possible outcomes:
The
debt counsellor may find that the consumer is not over-indebted
(finding 1).
The
debt counsellor may find that, although the consumer is not
over-indebted, he or she is experiencing, or is likely to

experience, difficulties satisfying his or her obligations (finding
2).
•
The
debt counsellor may find that the consumer is over-indebted (finding
3).
If
the debt counsellor makes finding 1, he or she must reject the
application but the consumer may approach the Magistrate's
Court
for relief.
28
If the debt
counsellor makes finding 2, he or she must initiate a process aimed
at a voluntary debt re-arrangement plan.
29
If he or she makes finding 3, the debut counsellor must "issue
a proposal recommending that the Magistrate's Court"
make an
appropriate order.
30
Following
finding 3, section 86(7) thus requires of the debt counsellor to
seek an order from the Magistrate's Court. There
is, however, no
express provision in the Act as to how the recommendation comes
before the Magistrate's Court. There is also
no provision as to the
procedure that the court must adopt upon receipt of a
recommendation. That is one part of the problem
that the applicant
seeks to address with the order quoted above.
The
rest of the applicant's problem stems from section 86(8)(b). Section
86(8) provides:
"If
a debt counsellor makes a recommendation in terms of subsection (7)
(b)
31
and—
the
consumer and each credit provider concerned accept that proposal,
the debt counsellor must record the proposal in the form
of an
order, and if it is consented to by the consumer and each credit
provider concerned, file it as a consent order in terms
of section
138; or
if
paragraph (a) does not apply, the debt counsellor must refer the
matter to the Magistrate's Court with the recommendation."
The
problem is this: Section 86(8)(b) provides for a recommendation in
terms of section 86(7)(b) (a case of finding
2)
to be referred
to the Magistrate's Court. Section 86(8)(b), however, makes no
provision for a recommendation
32
following finding
3
to be referred
to the Magistrate's Court. That, the applicant contends, is a
hiatus that can and must be cleared by a proper
interpretation of
section
86(8)(b).
The
first to sixth respondents agree that there is a hiatus, but
contend that it goes somewhat further than contended for by
the
applicant. They accordingly seek a somewhat wider declaratory
order. I shall deal with that in due course. The eleventh

respondent does not oppose the order that the applicant seeks.
The
twelfth respondent contends that the omission from section 86(8)(b)
of a reference to section 86(7)(c) (finding 3) is deliberate.
He
opposes the order sought.
Following
on a finding in terms of section 86(7)(c) that the consumer is
over-indebted (finding 3), the debt counsellor must issue
a proposal
for the Magistrate's Court to make an order. It follows by necessary
implication that the debt counsellor "must
refer the matter to
the Magistrate's Court with the recommendation".
33
Accordingly I conclude that the very words of section 86(8)(b) are
necessarily implied by section 86(7)(c).
Is it in the
circumstances appropriate or necessary to grant the declaratory
order? To answer that question, reference must be
made to section
87(1) that provides:
"If a debt counsellor makes a proposal
to the Magistrate's Court in terms of section 86(8)(b), or a
consumer applies to
the Magistrate's Court in terms of section
86(9)
34
,
the Magistrate's Court must conduct a hearing and, having regard to
the proposal and information before it and the consumer's
financial
means, prospects and obligations, may—
reject the
recommendation or application as the case may be; or
make—
(i)
an
order declaring any credit agreement to be
reckless, and an
order contemplated in section 83 (2) or (3),
if the
Magistrate's Court concludes that the agreement is
reckless;
(ii)
an
order re-arranging the consumer's obligations in
any manner
contemplated in section 86 (7) (c) (ii); or
(iii)
both
orders contemplated in subparagraph (i) and (ii)."
It
is in the present context important to note that section 87(1)
requires of the Magistrate's Court to "conduct a hearing"

and to make the relevant orders "having regard to the proposal
and information before it and the consumer's financial
means,
prospects and obligations". Because section 87(1) refers only
to section 86(8)(b) (finding 2) and section 86(9)
(a direct
application following finding 1), some might argue that the
requirement to conduct a hearing does not apply to matters
that are
referred to the Magistrate's Court under section 86(7)(c) (finding
3, that the consumer is over-indebted).
For
the twelfth respondent it was submitted that the legislature
deliberately did not require a hearing in regard to matters

referred to it under section 86(7)(c) (following finding 3, that
the consumer is over-indebted). The argument was developed
as
follows: Matters in which the consumer is over-indebted are by
nature urgent. Such matters have, under section 86, been
considered
by a debt counsellor before they come to the Magistrate's Court. In
the circumstances a requirement that the Magistrate's
Court must
conduct a hearing is unnecessary and undesirable.
I
cannot agree with the argument advanced for the twelfth respondent.
In my view section 86(7)(c) requires cases of over-indebtedness
to
be referred to the Magistrate's Court so as to ensure judicial
oversight of the entire process. A Magistrate's Court can
only
provide such oversight if it conducts a hearing and has regard to
at least the matters referred to in section 87(1). It
follows that
by
necessary
implication the procedure set out in section
87(1)
applies also
to cases coming before the Magistrate's Court under section
86(7)(c). In order to avoid any misunderstanding in
that regard,
the declaratory order must be made.
As
regards the argument that matters of over-indebtedness are by
nature urgent and require speedy resolution, I agree with the
basic
submission. The same, however, applies to cases where the consumer
approached the court directly (section 86(9), and
cases where the
consumer is experiencing or is likely to experience difficulty
meeting his or her obligations (section 86(7)(b)).
I can find no
valid reason for distinguishing between the different procedures
once the matter goes to the Magistrate's Court.
The
first to sixth respondents submitted that the provisions of section
86(8)(a)
35
should also apply to cases where the consumer was found to be
over-indebted (finding 3). I do not agree. A finding of
over-indebtedness
(section 86(7)(c), sets in motion a debt
re-arrangement process that is not voluntary. Should the parties
thereafter settle
the matter and agree on a re-arrangement plan,
nothing prevents them from seeking a consent order. For that
purpose, section
86(8)(a) is unnecessary.
In
the result an order in terms of prayer 1.15 must be granted.
The
applicant's prayer 1.4: "In discharging his or her duties
under section 87 of the Act the relevant magistrate fulfils
an
administrative as opposed to a judicial role and consequently he or
she must: (1) comply with the relevant provisions of
the
Constitution and the Promotion of Administrative Justice Act, 2000
("PAJA"); (2) devise appropriate procedures
which will
facilitate an inexpensive, fair and expeditious hearing in terms of
section 87 of the Act."
The
essential question that this relief raises is whether a
Magistrate's Court to whom a matter has been referred under section

86 fulfils a judicial or an administrative function.
Sections
86 and 87 of the Act consistently refer to the "Magistrate's
Court" and not to "the magistrate"
or "a
magistrate". In my view that in itself goes a long way towards
providing an answer to the question posed (See
the instructive
reasoning of Coetzee J in
Briel
v Van Zyl; Rolenyathe v Lupton-Smith
1985 (4) SA 163
(T)
at
167C to 168G). I have not been referred to authority where a court,
as opposed to a person who may sometimes preside in a
court, was
held to perform an administrative function. There is in my view no
reason to infer that, by having a matter referred
to a court, the
purpose of the Act really is to have it referred, not to a court
but to an administrative tribunal or functionary.
On the contrary.
Section
1 of PAJA defines administrative action. PAJA excludes from that
definition "the judicial functions of a judicial
officer of a
court referred to in section 166 of the Constitution". The
Magistrate's Court is one of the courts referred
to in section 166
36
of the
Constitution
of the Republic of South Africa, 1996.
It
follows that for the purpose of the present inquiry, the question
is whether the judicial officer (magistrate) who presides
in a
Magistrate's Court whereto a matter has been referred performs a
judicial function when he or she deals with the matter.
It
must be borne in mind that, apart from requests for consent orders,
matters that are referred to the Magistrate's Court under
sections
86 and 87 will in many, if not most, cases be contentious. While
either the consumer or one or more of the credit
providers might
agree with the debt counsellor's proposal, it is probable that
either or both might not so agree. In applications
under section
86(9) the very reason for the application is a rejected contention
that the consumer is over-indebted.
A
magistrate dealing with a matter referred to the Magistrate's Court
is called upon to make a number of possible findings on
contentious
matters. He or she must decide whether to accept or reject the debt
counsellor's recommendation in respect of the
consumer's
application.
37
That of necessity involves a finding as to whether the consumer is
over-indebted or not. If it is
found
that the consumer is over-indebted, the magistrate will have to
consider whether the consumer's obligations must be re-arranged.
38
The magistrate will then also have to consider how, having regard
to the provisions of section 86(7)(c)(ii)(aa) to (dd), the

re-arrangement is to be structured.
Each
of the findings mentioned involves a consideration of the relevant
evidence, the making of factual findings, a consideration
of the
relevant statutory and other legal provisions, rules and principles
and, finally an application of the law to the facts.
The findings
will in most cases be aimed at resolving one or more disputes
between two or more parties. To resolve disputes,
and generally to
make findings based on the application of law to the facts, are the
essential elements of a judicial function.
(See
Old
Mutual Life Assurance Co (SA) Ltd v Pension Fund Adjudicator
2007
(3) SA 458
(C)
at
para. 12.)
I
conclude that in discharging his or her duties under section 87 of
the Act the relevant magistrate fulfils a judicial role.
Prayer 1.4
must accordingly be dismissed.
The
applicant's prayer 1.2: In circumstances where section 86(8)(b) of
the Act applies, a debt counsellor is obliged to refer
his or her
recommendation to a Magistrates' Court and the magistrate to whom
the matter is allocated is in terms of section
87 obliged to
conduct a
hearing
and make an order contemplated in either section 87(1)(a) or
section 87(1)(b) of the Act.
In
the course of considering the previous two orders sought, I have
already dealt with the central question that this prayer
poses. If
the parties concerned are unable to agree on a voluntary
re-arrangement, the debt counsellor "must", in
terms of
section 86(8)(b) refer the matter to the Magistrate's Court. For
the reasons already stated, the same applies when
the debt
counsellor finds that the consumer is over-indebted. Also for the
reasons already stated, the Magistrate's Court must
conduct a
hearing.
Although
section 87(1) provides that the Magistrate's Court "may"
act either in terms of section 87(1)(a) ("reject
the
recommendation or application") or in terms of section
87(1)(b) (grant the orders mentioned in the subsection), the
orders
mentioned in section 87(1) are the only ones that the Magistrate's
Court can make. That is so because the Magistrate's
Court is may
only decide matters "determined by an Act of Parliament".
Put differently, a Magistrate's Court only
has such powers as have
been conferred upon it by an Act of Parliament.
39
In
order to address a concern raised on the second respondent's behalf,
I wish to make it plain that the relief to be granted
in regard to
prayer 1.2 does not in any way deal with the form that the hearing
must take or with the procedure that the Magistrate's
Court must
adopt.
An
order in terms of prayer 1.2 must be granted.
The
applicant's prayer 1.3: The power of a Magistrates' Court to
conduct a hearing in terms of section 87 of the Act and to
make
appropriate orders in consequence thereof is derived from section
87 read with section 86 of the Act and is not derived
from the
Magistrates' Courts Act, 32 of 1944
.
This
prayer and prayer 1.1 address the following essential issue: What
procedure is to be followed when a matter is referred
to the
Magistrate's Court under
sections 86
and
87
. The respondents, on
the one hand, contend that the Rules of the Magistrates' Courts
("the Rules") must be followed.
In order to reflect that
contention, the first to sixth respondents seek a different
declaratory order that I shall deal with
in due course. The
applicant, on the other hand, contends that the
Magistrates'
Courts Act, 32 of 1944
and
the Rules do not apply. I shall first deal with the narrow issue
that the applicant's prayer 1.3 raises, namely from which
act does
the Magistrate's Court derive the relevant powers?
It
has long been settled law that Magistrates' Courts are a creature
of statute and as such "have no inherent jurisdiction
.... The
jurisdiction of magistrates' courts must be deduced from the four
corners of the statute under
which
they are constituted".
40
This proposition predates our Constitution and needs some
adjustment to reflect the legality principle
41
in and supremacy of the Constitution.
42
In terms of section 166(d) of the Constitution the Magistrates'
Courts are part of the country's judicial system. Section 170
of
the Constitution provides that "Magistrates' Courts ... may
decide any matter
determined
by an Act of Parliament
"
(My emphasis). Accordingly, the proposition must now be stated to
be that the jurisdiction of the Magistrates' Courts
must be deduced
from an Act of Parliament.
There
is in my view no doubt that the powers under discussion are derived
from the Act. That is confirmed by
section 29(1)
of the
Magistrates' Courts Act that
provides that "Subject to the
provisions of this Act and the
National Credit Act, 2005
, the
court, in respect of causes of action, shall have jurisdiction in"
a variety of matters that are listed in the section.
(The
underlining is mine.)
For
the respondents it was argued, with reference to
Rutenberg
v Magistrate, Wynberg and Another,
43
that the
Magistrates' Courts derive the power in question from the Act, but
always through its constituting act, the
Magistrates' Courts Act. In
view of the provisions of the Constitution that I have referred to,
such a construction seems to me to be unnecessarily cumbersome.
The
conclusion that the power is derived from the Act, however, does
not entitle the applicant to the order it seeks. While
the order,
as it stands might be a correct statement of the law, it does not
address the dispute between the parties, that
is, whether the
Magistrates' Courts Act and
the Rules apply to matters referred to
the Magistrate's Court under
sections 86
and
87
. The real issue is
apparent from the first to sixth respondents' counter application
wherein the following declaratory order
is sought:
"The
power of a Magistrate's Court to conduct a hearing in terms of
section 87of
the Act and to make appropriate orders in consequence
thereof is derived from section 87 read with section 86 of the Act,
and
the Magistrates' Court Act and the Rules govern the procedure
by which it may conduct itself in so doing".
I
shall later deal with the counter application. I now proceed to the
question whether the Magistrates' Court Act and the Rules
apply to
referrals in terms of section 86.
For
the applicant Mr Loxton submitted that by requiring of a debt
counsellor to "refer"
44
a "recommendation"
45
to the Magistrate's Court, the Act's purpose was to create a
sui
generis
procedure
not governed by the Magistrates' Court Act and the Rules. That
purpose, counsel submitted, can be inferred from the
use in the Act
of the word "refer" as opposed to "apply", the
word used in section 86(9). Counsel for the
twelfth respondent
argued to the same effect.
Counsel
for the first to sixth respondents pointed out that the consumer's
application to the debt counsellor in terms of section
86(1) of the
Act initiates the entire debt review process. According to the
argument, the consumer's initial application is
referred to the
Magistrate's Court in a "seamless progression".
Accordingly, the argument concluded, the consumer
is the applicant
in the matter before the Magistrate's Court and his or her initial
application must comply with the Rules.
It is convenient first to
deal with the argument for the respondents.
The
immediate difficulty with the respondents' argument is that the
consumer's application in terms of section 86(1) is made
to the
debt counsellor and not to the court. Moreover, it is not the
consumer who determines whether his application is to
be referred
to the court and what information is to be put before the court:
The debt counsellor refers "the matter"
46
to the court with his or her recommendation. The procedure is not
one whereby the consumer, as
dominus
litis
applies to
the court and decides what evidence to put before the court. The
consumer is not the "gedingvoerder" or
"master of
the suit".
47
I
conclude that the referral of a matter to the Magistrate's Court
under section 86, 86(8)(b) in particular, constitutes an

extraordinary procedure
48
created by the
Act. The procedure is out of the ordinary because it concerns a
lis
or suit between
the consumer and his or her credit providers but the initiative to
refer
it to the court is taken by a third party, the debt counsellor who
acts as
pro forma
applicant. I say
that the procedure concerns a suit because, by applying to be
declared over-indebted, the consumer is seeking
at least a
re-arrangement of one or more of his or her obligations. That
entails, or may entail, a failure to comply with the
terms of
agreements with credit providers. Other issues may also arise. The
procedure also is out of the ordinary because the
debt counsellor
is by law required, in given circumstances, to refer the matter to
the Magistrate's Court or, put differently,
to apply to the court.
Does
it follow from the fact that the procedure is created by the Act and
is out of the ordinary that the
Magistrates' Courts Act and
the
Rules do not apply? As a general proposition, court rules are
promulgated to regulate the conduct of proceedings of the court
in
question.
49
Since the enactment of the
Rules
Board for Courts of Law Act, 107 of 1985
rules
for the Magistrates' Courts are made, amended and repealed by the
Rules Board for Courts of Law that exercises the power,
subject to
requirements contained in the said act, "with a view to the
efficient, expeditious and uniform administration
of justice".
50
Put differently, the Rules prescribe the manner in which matters are
brought before the court and the manner in which the court
then
deals with them. I shall assume without finding that Parliament may
by way of legislation prescribe procedures that differ
from the
Rules. Where, however, there is no such prescription, the relevant
rules of the Magistrate's Court must be followed.
The
consumer's initial application must be in a form prescribed by
regulation.
51
A consumer who applies directly to the Magistrate's Court under
section 86(9) must also do so "in the prescribed manner
and
form".
52
Section 86(8)(b)
53
obliges a debt counsellor to refer certain matters to the
Magistrate's Court but does not prescribed any procedure. It
follows
that in such cases the
Magistrates' Courts Act and
the
Rules apply. Counsel for the respondents submitted, and I agree,
that the debt counsellor's referral constitutes an application
to
the court.
54
The appropriate rule to follow therefore is
Rule 55
of the Rules
that deal with applications to the Magistrates' Courts. The
appropriate form to follow is Form "No. 1 (Notice
of
Application (General Form)" that appears in Annexure 1 to the
Rules. In this regard it is useful to bear in mind that
"the
forms contained in Annexure 1 may be used with such variation a
circumstances require".
55
In
the result I propose to make an order in accordance with prayer 1.3
of the first to sixth respondents' counter application.
Applicant's
prayer 1.1: "A referral of a recommendation by a debt
counsellor to a Magistrate's Court in terms of section
86(8)(b) of
the Act does not constitute an application for the purposes of the
Magistrates' Courts Act, 32 of 1944
or the Rules of Court
promulgated thereunder and consequently a debt counsellor referring
such a recommendation to a Magistrate's
Court in terms of that
section is not required to comply with the
Magistrates' Courts Act
or
the Rules.
For
reasons that have been given above, this order must be refused. In
terms of prayer 1.1 of their counter application the
first to sixth
respondents seek an order in the following terms:
"A
matter referred by a debt counsellor to a Magistrate's Court under
section 86(8)(b) of the Act is an application within
the meaning of
sections 86 and 87 of the Act and falls to be treated as such in
terms of Rule 55 of the Rules."
Also
for the reasons already given an order in these exact terms cannot
be granted. I propose to make an order in the following
terms:
"A
referral by a debt counsellor to a Magistrate's Court under section
86(8)(b) (and
section 86(7)(c))
of the
National Credit Act, 2005
is
an application within the meaning of the
Magistrates' Courts Act,
1944
and the Rules of the Magistrates' Courts and falls to be
treated as such in terms of
Rule 55
of the Rules."
The
applicant's prayer 1.5: "The Rules relating to costs and the
principles which apply generally to the award of costs
in
applications made under such Rules do not apply to hearings
conducted in terms of section 87 of the Act and in particular,
the
general rule that costs follow the result does not apply to a debt
counsellor whose recommendation is rejected by a Magistrates'

Court".
In
view of what I have stated above, a debt counsellor who refers a
matter to the Magistrate's Court is the applicant in the

proceedings before the Magistrate's Court. Viewing the matter
formalistically, the debt counsellor's application might be said
to
be unsuccessful if the court does not follow his or her
recommendation. It has happened in practice that magistrates have

order debt counsellors in such circumstances to pay the costs of
the application. It is such adverse costs orders that the
applicant
seeks to address by way of its prayer 1.5.
Rule
33 of the Rules deal extensively with costs. I quote only Rule
33(1): "The court in giving judgment or in making any
order,
including any adjournment or amendment, may award such costs as may
be just". By way of their counter application
the first to
sixth respondents seek the following order:
"Rule
33 of the Magistrates' Courts Rules is applicable to applications
under
section 86
and
87
of the
National Credit Act, 2005
".
I
shall address costs orders adverse to debt counsellors in the
following paragraphs. For the reasons that I have given, a referral

to the Magistrate's Court constitutes an application in terms of
the
Magistrates' Courts Act and
the Rules. The principles relating
to costs in respect of applications therefore also apply to the
procedure under consideration.
Subject to what I say about costs
orders adverse to debt counsellors, an order must be made in
accordance with the first to
sixth respondents' counter
application.
A
debt counsellor who refers an application to the court under
section 86(8)(b)
(and
86
(7)(c)) is not a litigant in the ordinary
sense. By referring a matter to the court and by making a
recommendation, he or she
fulfils a statutory obligation. There is
ample authority for the proposition that a statutory functionary
who, in the process
of fulfilling his or her statutory function, is
involved in court proceedings, is not ordinarily ordered to pay the
costs of
any other party. Adverse costs orders against such
functionaries are ordinarily only made where the functionary acted
improperly
or with
mala
fides.
56
The practical
problems that prompted the applicant to seek the order under
consideration probably resulted from a failure to
apply this
salutary principle.
In
the result I propose to make an order in accordance with the one
that the first to sixth respondents seek, but to add the following

introductory words:
"Bearing
in mind that the debt counsellor fulfils a statutory obligation,
The
applicant's prayer 1.6: "Service of any recommendation or
other document contemplated in sections 86 or 87 of the Act
may,
with the agreement of the affected parties, be by way of fax or
email."
A
debt counsellor who receives an application under section 86(1)
must, pertaining to notification, "notify, in the prescribed

manner and form"
57
all the relevant credit providers and every credit bureau of the
application. The manner and form of this notification have
been
prescribed in the Regulations
58
and need not detain us. As regards notice to affected parties of
the referral (application) to the Magistrate's Court, there
is no
provision in the Act. In view of what I have already stated, the
referral (application) is governed by the Rules and
must be served
on affected parties in terms of the Rules. There is, however, no
reason in law why all or some of the affected
parties cannot agree
to waive service in terms of the Rules and to agree on a different
form of notification. I have been informed
that there are
magistrates who hold the view that the parties to an application
cannot agree on a form of service different
from that prescribed by
the Rules. With that I cannot agree and in view thereof the order
sought in terms of prayer 1.6 must
be made.
In
their counter application the first to sixth respondents seek an
order in the following terms:
"Rule
9 of the Magistrates' Courts' Rules is applicable to the service of
documents for the purpose of the reference and
hearing contemplated
in
sections 86(8)(b)
and
87
of the
National Credit Act&quot
;.
For
reasons
already stated, this proposition is also correct and for the sake of
clarity, this must also be reflected in the order
that is granted.
In
the result, I propose to grant an order in the following terms:
"Rule 9 of
the Magistrates' Courts' Rules pertaining to service are applicable
to the service of process, any recommendation
and other documents
for the purpose of the referral and hearing contemplated in
sections 86(7)(c)
,
86
(8)(b) and
87
of the
National Credit Act, 2005
but Service of any such documents may, with the agreement of the
affected parties, be by way of fax or email."
The
applicant's prayer 1.7: "A debt counsellor who refers a
proposal to a Magistrates' Court in terms of
section 86(8)(b)
is
entitled to adduce evidence and advance argument in support of his
or her recommendation in any hearing under
section 87
"
The
first to sixth respondents contend that an order in the following
terms will better reflect the role of the debt counsellor:
"A
debt counsellor who refers a proposal to a Magistrate's Court in
terms of
section 86(8)(b)
of the
National Credit Act has
a duty to
assist the court and should be available and able to render such
assistance by way of furnishing evidence as to the
proposal as
referred by him or to answer any queries raised by the Court."
If
regard is had to the debt counsellor's functions in terms of
section 86
, his or her role is that of a neutral functionary who
does not seek to advance any particular party's cause. In view
thereof,
the order that the respondents seek is indeed more
reflective of the debt counsellor's role. There is, however, no
reason why
the debt counsellor should not make submissions
regarding his or her proposal. In view of the investigation that he
or she
undertakes in terms of
section 86
, the debt counsellor will
have knowledge of the relevant facts and submissions to explain the
proposal will no doubt assist
the court.
In
order more accurately to reflect to provisions of the Act and the
remarks I have made, I propose to make an order as follows:
"A
debt counsellor
who refers a matter to the Magistrate's Court in terms of
sections
86(7)(c)
and
86
(8)(b) of the
National Credit Act, 2005
has a duty
to assist the court and should be available and able to render such
assistance by way of furnishing evidence or
making submissions as
to his or her proposal or to answer any queries raised by the
Court."
The
applicant's prayer 1.8: "Any Magistrates' Court to which a
debt counsellor elects in terms of section 86(8)(b) of the
Act to
refer a recommendation for hearing under section 87 has
jurisdiction to conduct such hearing."
The
relief that the applicant seeks by way of this order is premised on
its contention that the
Magistrates' Courts Act does
not apply to
the procedure under consideration. I have already found otherwise.
Accordingly, the question of jurisdiction must
be decided with
reference to the
Magistrates' Courts Act.
>
The
general rule regarding jurisdiction "is
actor
sequitur forum rei.
The
plaintiff (or applicant) ascertains where the defendant
(respondent) resides, goes to his forum, and serves him with the

summons (notice of motion) there".
59
Having regard
to this general rule, an applicant must bring his or her
application in the Magistrate's Court that has jurisdiction
in
respect of the person of the respondent.
60
If there are more than one respondent, the application must
ordinarily be brought in a Magistrate's Court
61
that has jurisdiction over all the respondents.
I
have held that in the debt review proceedings under
section
86(7)(c)
,
86
(8)(b) and
87
the debt counsellor who refers the matter
to the Magistrate's Court is the applicant. The consumer and his or
her credit providers
are the respondents. The practical problem that
the applicant points out is that there are many cases in which one
Magistrate's
Court will not have jurisdiction in respect of the
person of all the respondents.
In
my view the problem that the applicant points out is more apparent
than real. Section
28
of the
Magistrates' Courts Act deals
with the court's jurisdiction in
respect of persons. In
section 28(1)
the grounds upon which a court
will have jurisdiction in respect of a person are listed. Presently
of importance is the introductory
part of
section 28(1)
that reads:
"Saving any other jurisdiction assigned to a court by this Act
or by any other
law
, the persons
in respect of whom the court shall have jurisdiction shall be the
following and no other...". (The underlining
is mine.) The
answer to the applicant's perceived problem lies, in my view, in
the underlined words. In terms of section 86(8)(b)
of the Act the
debt counsellor must refer the matter to "the Magistrate's
Court" as opposed to "a Magistrate's
Court". The
express purpose of the Act is that the debt counsellor must refer
the matter to a particular Magistrate's
Court, not any Magistrate's
Court of his or her choice. I agree with Mr Van Loggerenberg who
appeared for the first respondent
that the appropriate Magistrate's
Court is the one having jurisdiction in respect of the person of
the consumer. That is so
because the essential purpose of the debt
review procedure is to protect the consumer who is over-indebted or
to whom reckless
credit was granted. If the relevant Magistrate's
Court does not in terms of section 28 of the Magistrate's Court Act
have jurisdiction
over the person of all the relevant credit
providers, it does not follow that no Magistrate's Court has
jurisdiction to deal
with the matter. To hold otherwise would
defeat the purpose of the Act, namely to have debt review
proceedings dealt with by
the Magistrates' Courts.
To
summarise:
In
order to give effect to the express purpose of the Act in respect
of debt review procedures, the term "the Magistrate's
Court"
where it appears in sections 86(7)(c), 86(8)(b) and 87 of the Act
must be interpreted to mean "the Magistrate's
Court having
jurisdiction in respect of the person of the consumer".
The
relief sought in the applicant's prayer 1.8 must accordingly be
refused.
The
applicant's prayer 1.9: "There is no monetary limit upon the
jurisdiction of the Magistrates' Courts to hear a referral
under
section 87
of the
National Credit Act, 2005
".
The
first to sixth and the eleventh respondents consent to the order
albeit that they differ as to the reasons why it should
be granted.
I have held that the power to deal with referrals under section 86
of the Act is derived from the Act. The Magistrates"
Courts
Act and the Rules govern the procedure to be followed because the
Act makes no provision for it. It is in the Act, therefore,
that
limits to the jurisdiction of the Magistrate's Court must be
sought.
The
Act expressly provides that matters be referred to the Magistrate's
Court and makes no mention of a monetary limit to that
court's
jurisdiction. In the circumstances there is no basis for holding
that there is a monetary limit to the relevant jurisdiction
of the
Magistrate's Court. To hold otherwise would defeat the purpose of
the Act.
The
applicant's prayer 1.11: "Where a debt counsellor refers a
recommendation to a Magistrates' Court that it find that
a credit
agreement is reckless, or a consumer makes an application to such
court in terms of section 86(9), and the court finds
that the
credit agreement concerned is reckless, it may make an order under
section 87(1)(b)(i) read with section 83(2)(a)
setting aside all or
part of the consumer's obligations under the credit agreement and
may in terms of such order reduce the
total amount payable under
such agreemen
t.
In
terms of their counter application the first to sixth respondents
seek the following order:
"Where
a debt counsellor refers a recommendation to a Magistrate's Court
that it find that a credit agreement is reckless,
or a consumer
makes an application to such court in terms of
section 86(9)
of the
National Credit Act, 2005
, and the court finds that the credit
agreement concerned is reckless:
upon
the grounds that the credit provider has not complied with
sections
80(1)
2>
62
and
80
(1)(b)(ii)
2>
63
,
the Court may make the orders contemplated in
section 83(2)
;
upon
the grounds that the credit provider has not complied with
80(1)(b)(ii), and the consumer is found to be over-indebted
at the
time of those court proceedings, the Court may make the orders
referred to in
sections 83(3)(b)(i)
and (ii)".
The
applicant concedes that an order in accordance with the
respondents' counter application should issue. There are, however,

typing errors in the relief that the respondents seek. In paragraph
(a) of the order "
section 80(1)
" should read "
section
80(1)(a).
I explain.
For
reasons that I have set out earlier, the Magistrate's Court has in
relation to debt restructuring no power beyond that provided
for in
the Act. When a matter has been referred to the Magistrate's Court
in terms of section 86(8)(b) or section 86(7)(c),
64
the court has the power to "declare any agreement to be
reckless".
65
The same applies to applications by the consumer in terms of section
86(9).
66
In terms of section 87(1)(b)(i) the court may then make "an
order contemplated in section 83(2) or (3)".
67
The
first power that the court has in terms of section 87(1)(b)(i) is
to make an order in terms of section 83(2) which provides:
"If
a court declares that a credit agreement is reckless in terms of
section 80 (1) (a) or 80 (1) (b) (i), the court may
make an order—
setting
aside all or part of the consumer's rights and obligations under
that agreement, as the court determines just and reasonable
in the
circumstances; or
suspending
the force and effect of that credit agreement in accordance with
subsection (3) (b) (i)."
It
is this power that the respondents sought to reflect in paragraph
(a) of the order. As is apparent from the introductory
part of
section 83(2) the reference to "section 80(1)" in
paragraph (a) of the order should read "section 80(1)(a)".

Similarly, the reference to section 80(1 )(b)(ii) should be
"section 80(1)(b)(i)'. I shall amend the order accordingly.
Paragraph
(b) of the order sought correctly reflects the provisions of
section 83(3) which embodies the second power granted
in terms of
section 87(1)(b)(i).
All
this may well be confusing. At the risk of making the confusion
even worse, I would stress the following: The Magistrate's
Court
that finds any credit agreement reckless only has the powers
provided for in the Act. It does not have a general power
to
interfere with the contractual obligations and rights of any party
to a credit agreement. The order that I propose to issue
seeks no
more than to paraphrase the relevant powers that the Act gives to
the Magistrate's Court.
The
applicant's prayer 1.12: "A magistrates' Court making an order
in terms of section 87 may, with the consent of the
consumer and
pursuant to a recommendation by the debt counsellor, issue an order
of the nature contemplated in rule 65J
68
of the Rules, attaching the emoluments of the consumer and obliging
him or her to make periodic payments to the credit provider."
The
powers of the Magistrate's Court upon a referral are to be found in
the Act. There is no provision for the making of an
order in terms
of
section 65J
of the
Magistrates' Courts Act that
deals with
emoluments attachment orders. The order sought must accordingly be
refused.
The
applicant's prayer 1.14: "A failure to conclude negotiations
arising from a proposal or counterproposal made by a credit

provider in response to a recommendation or proposal by a debt
counsellor in terms of section 86(7)(a)
69
or (b)
70
of the Act does not preclude such debt counsellor from exercising
his or her powers under section
86(8)"
The
first to sixth respondents seek an order in the following terms:
"The debt
counsellor may not refer a recommendation or a proposal made in
terms of section 86(7)(b) or (c) of the Act to
the Magistrate's
Court unless and until he reasonably concludes that any
negotiations being conducted are not in good faith,
have terminated
or are unlikely to result in a responsible debt re-arrangement."
In
order to consider the issue raised by the relief sought here, a
brief overview of the process will be helpful. When a debt

counsellor receives a consumer's application to be declared
over-indebted, the debt counsellor must assess the consumer's
position. The consumer and credit providers must assist in this
assessment process.
71
Within the prescribed time
72
the debt counsellor must determine whether the consumer appears to
be over-indebted or not. In terms of Regulation 24(6) the
debt
counsellor must make the determination within 30 business days
after receiving the consumer's application. If the counsellor

determines that the consumer is not over-indebted the application
is rejected.
73
If the counsellor concludes that the consumer is over-indebted, the
former may issue a proposal and refer that to the Magistrate's

Court. If the debt counsellor concludes that the consumer is not
over-indebted "but is experiencing,
or
is likely to experience, difficulty satisfying all the consumer's
obligations" the counsellor "may recommend that
the
consumer and the respective credit providers voluntarily consider
and agree on a plan of debt re-arrangement".
74
I have termed this possibility "voluntary re-arrangement".
From
the above analysis it follows that the Act provides for
negotiations only in the event of a finding that the consumer is

not over-indebted but is experiencing, or is likely to experience,
difficulty satisfying all his or her obligations in time.
Nothing
prevents the debt counsellor, the consumer and credit providers
from entering into negotiations in the case of an over-indebted

consumer whose matter has been referred to the court. Such
negotiations, however, are not prescribed by the Act. They are
settlement negotiations.
Section
86(8) provides:
"If
a debt counsellor makes a recommendation in terms of subsection
(7)
(b) and—
the
consumer and each credit provider concerned accept that proposal,
the debt counsellor must record the proposal in the form
of an
order, and if it is consented to by the consumer and each credit
provider concerned, file it as a consent order in terms
of section
138; or
if
paragraph (a) does not apply, the debt counsellor must refer the
matter to the Magistrate's Court with the recommendation."
From
section 86(8)(b) it is clear that the debt-counsellor may only
refer a case of voluntary re-arrangement to the court "if

paragraph (a) does not apply". Put differently, the debt
counsellor may only refer the matter to the court if the process
of
voluntary re-arrangement did not culminate in an agreement by the
consumer and each credit provider.
The
question as to when it can be said that the consumer and each
credit provider do not agree to the voluntary re-arrangement
is one
of fact to be decided in each case. What, however, is in my view
clear is that the debt counsellor may only refer a
case of
attempted voluntary debt re-arrangement to the court if he or she
is satisfied that no agreement has been reached,
either because a
party has rejected the proposed re-arrangement or because there is
no reasonable prospect that an agreement
will be reached. Put
differently, the debt counsellor may only refer a case of attempted
voluntary re-arrangement to the court
if he or she is satisfied
that negotiations have been concluded or are leading nowhere. The
order that the applicant seeks
cannot be made.
I
need to address an issue that has been raised. In terms of section
86(10) certain credit providers can "at any time at
least 60
business days after the time on which the consumer applied for the
debt review". I have been informed that credit
providers delay
the negotiation process with a view to exercising their rights
under section 86(10). If a debt counsellor concludes
that a credit
provider is not negotiating in good faith, he or she will on that
basis also conclude that negotiations are leading
nowhere. A note
of warning might be appropriate: Debt counsellors should be careful
before reaching such a conclusion and it
will probable be advisable
to inform the relevant credit provider that it is the view of the
debt counsellor that the former
is not negotiating in good faith
and that the matter will be referred to the court. Hasty and
unreasonable conclusions on the
part of the debt counsellor might
result in adverse costs orders.
As
regards the counter application, I deem it unwise to issue such an
order. It attempts, albeit adequately my view, to define

circumstances under which it could be said that no agreement has
been reached. As that will depend on the facts of each case,
a
definition should not be attempted.
As
regards prayer 1.14 the application and counter application must be
refused.
Prayer
1.13: "The reference in section 86(2) to the taking of a step
in terms of section 129 to enforce a credit agreement
is a
reference to the commencement of legal proceedings mentioned in
section 129(1)(b) and does not include steps taken in
terms of
section 129(1)(a)
of the
National Credit Act, 2005
".
In
terms of
section 86(2)
an application in terms of
section 86(1)
"may not be made in respect of, and does not apply to, a
particular credit agreement if, at the time of that application,

the credit provider under that credit agreement has proceeded to
take the steps contemplated in
section 129
to enforce that
agreement".
Section 129
prescribes certain steps that a credit
provider must take before a debt is enforced.
Section 129(1)
provides:
"if
the consumer is in default under a credit agreement, the credit
provider—
may
draw 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
subject
to
section 130
(2), may not commence any legal proceedings to
enforce the agreement before—
(i)
first
providing notice to the consumer, as contemplated in
paragraph
(a), or in
section 86
(10), as the case may be; and
(ii)
meeting
any further requirements set out in
section 130.
""
All
the parties before this court agreed that this order must be made.
In the result I have not had full argument thereon. In
my view the
purpose of
section 86(2)
is to ensure that consumers do not apply
in terms of
section 86(2)
to be
declared
over-indebted only to frustrate a credit provider who has already
started to enforce a credit agreement under which
the consumer is
in default. While
section 129(1)(a)
envisages alternative dispute
resolution and "a plan to bring payments under the agreement
up to date", it does not
envisage general debt re­structuring
under
section 86
and
87
. Moreover, even the steps set out in
section 129(1)(a)
are preliminary to debt enforcement. I am not
satisfied that the parties are correct in their interpretation of
section 86(2).
In the absence of full argument, and in view thereof
that there are many other persons with an interest in this order, I
deem
it unwise
75
to say more than that. In the exercise of my discretion, the order
will not be granted.
Applicant's
prayer 1.10: "On a proper interpretation of
section 103(5)
read with
section 101(1)(b)
to (g) of the National Credit Act:
the
amounts contemplated in
sections 101(1)(b)
to (g) which accrue
while the consumer is in default may not exceed, in aggregate, the
unpaid balance of the principal debt
when the default occurred;
once
the total charges referred to in
section 101(1)(b)
to (g) equal the
amount of the unpaid balance, no further charges may be levied;
once
the total charges referred to in
sections 101(1)(b)
to (g) equal
the amount of the unpaid balance, payments made by a consumer
thereafter during a period of default do not have
the effect of
permitting the credit provider to charge further interest while
such default persists".
Section
103(5) of the Act provides as follows: "Despite any provision
of the common law or a credit agreement to the contrary,
the
amounts contemplated in section 101 (1) (b) to (g) that accrue
during the time that a consumer is in default under the
credit
agreement may not, in aggregate, exceed the unpaid balance of the
principal debt under that credit agreement as at the
time that the
default occurs." It is unnecessary to quote sections 101(1)(b)
to (g) that section 103(5) refers to. Section
101 deals with "cost
of credit" and in subsection 1(b) to (g) lists the admissible
components of such cost being
an initiation fee, a service fee,
interest, cost of credit insurance, default administration charges
and collection costs.
For
the respondents, other than the twelfth respondent, it was argued
that section 103(5) operates similar to the common law rule
of
in
duplum.
"The
effect of the
in
duplum
rule is
that interest stops running when the unpaid interest equals the
outstanding capital. When the debtor repays a part of
the interest
the quantum of the outstanding interest reduces below the amount of
the outstanding capital. Interest again runs
until it equals the
capital amount."
76
The respondents contend that if section 103(5) is interpreted in
conformity to the common law, then the effect of section 103(5)
is
only to create a moratorium on the payment of the cost of credit
while the consumer is in default. They further contend that
the
subsection does not affect the underlying obligation to make
payment. Once he or she purges the default, all the cost of
credit
may be levied again. The first to sixth respondents seek a
declaratory order to reflect their contention.
In
my view the respondents' contention flies in the face of the clear
wording of section 103(5). First, the subsection makes
it plain
that it applies despite "any provision of the common law"
which includes the
in
duplum
rule. In
the second place it is the amounts "that accrue" during
the default that "may not, in aggregate, exceed
the unpaid
balance". During the period of default no more than the stated
maximum can accrue. Put differently, the consumer's
indebtedness in
respect of cost of credit cannot grow
77
by more than the stated maximum.
An
order in terms of the applicant's prayer 1.10 must therefore be
made.
The
nature of the eleventh respondent's counter application is such
that it has been dealt with in the course of this judgment.
As
regards costs, all the parties have enjoyed mixed success and
defeat. Moreover, all acted in the public interest and in my
view no
costs order should be made.
In
the result the following order is made: It is declared that:
On
a proper interpretation of section 86(8)(b), it applies in the
circumstances contemplated in section 86(7)(c).
In
circumstances where section 86(8)(b) of the Act applies, a debt
counsellor is obliged to refer his or her recommendation
to a
Magistrates' Court and the magistrate to whom the matter is
allocated is in terms of section 87 obliged to conduct a hearing

and make an order contemplated in either section 87(1)(a) or
section 87(1)(b)
of the
National Credit Act,
2005
.
The
power of a Magistrate's Court to conduct a hearing in terms of
section 87of
the
National Credit Act, 2005
and to make appropriate
orders in consequence thereof is derived from
section 87
read with
section 86
of the said Act, and the
Magistrates' Courts Act, 1944
and the Rules of the Magistrates' Courts govern the procedure by
which it may conduct itself in so doing.
A
referral by a debt counsellor to a Magistrate's Court under
section
86(8)(b)
(and
section 86(7)(c))
of the
National Credit Act, 2005
is
an application within the meaning of the
Magistrates' Courts Act,
1944
and the Rules of the Magistrates' Courts and falls to be
treated as such in terms of
Rule 55
of the Rules.
Rule
33 of the Magistrates' Courts Rules is applicable to applications
under
section 86
and
87
of the
National Credit Act, 2005
.
Bearing
in mind that the debt counsellor fulfils a statutory obligation,
Rule 33 of the Magistrates' Courts' Rules is applicable
to
applications under
section 86
and
87
of the
National Credit Act,
2005
.
Rule
9 of the Magistrates' Courts' Rules pertaining to service are
applicable to the service of process, any recommendation
and other
documents for the purpose of the referral and hearing contemplated
in
sections 86(7)(c)
,
86
(8)(b) and
87
of the
National Credit Act,
2005
but service of any such documents may, with the agreement of
the affected parties, be by way of fax or email.
A
debt counsellor who refers a matter to the Magistrate's Court in
terms of
sections 86(7)(c)
and
86
(8)(b) of the
National Credit Act,
2005
has a duty to assist the court and should be available and
able to render such assistance by way of furnishing evidence or

making submissions as to his or her proposal or to answer any
queries raised by the Court.
There
is no monetary limit upon the jurisdiction of the Magistrates'
Courts to hear a referral under
section 87
of the
National Credit
Act, 2005
.
Where
a debt counsellor refers a recommendation to a Magistrate's Court
that it find that a credit agreement is reckless, or
a consumer
makes an application to such court in terms of
section 86(9)
of the
National Credit Act, 2005
, and the court finds that the credit
agreement concerned is reckless
upon
the grounds that the credit provider has not complied with
sections
80(1
)(a) and 80(1)(b)(i), the Court may make the orders
contemplated in
section 83(2)
;
upon
the grounds that the credit provider has not complied with
80(1)(b)(ii), and the consumer is found to be over-indebted
at the
time of those court proceedings, the Court may make the orders
referred to in
sections 83(3)(b)(i)
and (ii)
11.
On a proper interpretation of
section 103(5)
read with
section 101
(1 )(b) to (g) of the
National Credit Act, 2005
:
the
amounts contemplated in
sections 101
(1
)(b)
to (g) which accrue while the consumer is in default may not
exceed, in aggregate, the unpaid balance of the principal
debt when
the default occurred;
once
the total charges referred to in
section 101(1
)(b) to (g) equal
the amount of the unpaid balance, no further charges may be levied;
once
the total charges referred to in
sections 101
(1
)(b)
to (g) equal the amount of the unpaid balance, payments made by a
consumer thereafter during a period of default do not
have the
effect of permitting the credit provider to charge further interest
while such default persists
B.R.
du Plessis
Judge
of the High Court
On
behalf of the Applicant: Mothle Jooma Sabdia Inc.
1
st
Floor, West Wing
Duncan
Manor
Cnr.
Duncan & Brooks Street
BROOKLYN
PRETORIA
P.O.
Box 11147 Hatfield 0028
Adv.
C.D.A. LOXTON SC Adv. M.A. Chohan
On
behalf of the First to Sixth
Respondents:
Werksmans
Inc.
C/O
Edelstein Bosman 220 Lange Street Nieuw Muckleneuck PRETORIA
Adv.
M.D. Kuper SC Adv. J.M.A. Cane
On
behalf of the first
Respondent
Adv.
D.E Van Loggerenberg(SC
On
behalf of the
Second
Respondents:
Van
Hulsteyns Attorneys
C/O
Savage Jooste and Adams
141
Boshoff
Street
Nieuw
Mucklenuek
PRETORIA
Adv.
G. Farber (SC) Adv. N. Konstantinides
On
behalf of the
Fourth
Respondent:
Jay
Motohbi Inc.
C/O
Savage Jooste and Adams C/O Savage Jooste and Adams 141
Boshoff Street Nieuw Muckleneuck
PRETORIA
Adv. G.H. Meyer
On
behalf of the Fifth and
Sixth
Respondent:
Routledge
Modisa
C/O
Adams
&
Adams
1140 Prospect Street
Hatfield
Pretoria
On
behalf of the Eighth and
Ninth
Respondents:
The
State Attorney
8
th
Floor, Bothongo Heights 167 Andries Street PRETORIA
On
behalf of the
Eleventh
Respondent:
Coombe
& Associates
Cnr.
Watloo & Flamink Streets
Silverton
PRETORIA
Adv.
P.F. Louw SC
Adv.
S. Gouws
On
behalf of the
Twelfth
Respondent:
Booysens
& CO Inc.
C/O
Velile Tinto & Assoc.
Inc
Tinto House
Cnr.
Hans Strijdom & Disselboom Wapadrand Pretoria
Adv.
KJ. Kemp SC
1
Mr Kuper SC and Mr Cane appeared for
the first to sixth respondents, but the first respondent in addition
briefed Van Loggenberg
SC to appear on its behalf. Similarly, Mr
Farber SC and Ms Konstantinides appeared for the second respondent
and Mr Meyer for
the fourth respondent.
2
Section 78
excludes certain credit
agreements from the operation of
Part
D.
3
">
3
Sections 79
and
80
.
4
">
4
Sections 81
and
82
.
5
">
5
The term "consumer" is
defined in section 1 of the Act. It is for present purposes
sufficient to regard the person who
has received credit as the
consumer.
6
See the heading to Chapter 3 of the
Act and sections 45 to 47 that deal, among others, with the
registration of debut counselors.
7
Section 86(1).
8
Section 85(a).
9
Section 86(1).
10
86(4)(b)(i).
11
See section 86(3) and (4).
12
Section 86(5)(a).
13
Section 86(5)(b).
14
Section 86(6)(a).
15
Section 86(6)(b).
16
Section 86(7)(a).
17
Section 86(9) read with section
86(7)(c).
18
Section 86(7)(b).
19
Section 86(7)(c).
20
In addition to the finding that the
consumer appears to be over-indebted.
21
Section 86(7)(c)(i).
22
Section
86(7)(c)(ii).
23
Section
86(7)(b).
24
Section 86(8)(a).
25
Section 86(8)(b).
26
Section 87(1)(b)(i).
27
Section 87(1)(b)(ii) and (iii).
28
Section 86(7)(b) and
86(9).
29
Section 86(7)(b).
30
Section 86(7)(c).
31
A voluntary re-arrangement that
follows finding 2.
32
A recommendation for re-arrangement
by the court following finding 3.
33
The quoted words are those of
section 86(8)(b). On a literal reading of the Act, section 86(8)(b)
does not apply in the case of
finding 3.
34
That is an application directly to
the Magistrate's Court by a consumer who has been found not to be
over-indebted (finding 1).
35
Consent orders in cases of
successful voluntary re-arrangement.
36
Section 166(d) of the Constitution.
37
Section 87(1)(a).
38
Section 87(1)(b)(ii); 86(7)(c)(ii).
39
I shall discuss the aspect more
fully when I deal with the applicant's prayer 1.3.
40
Connolly v Ferguson 1909 TS
at
195. And see
Rutenberg
v Magistrate, Wynberg and Another
1997 (4) SA 735
(C)
at
750G to 751A;
Ndamase
v Functions 4 All 2004 (5) 604 (SCA)
at
para. 5.
41
Section 1(c) of the Constitution.
42
Sections 1(c) and 2 of the
Constitution.
43
1997 (4) SA 735
(C).
44
Section 86(8)(b)
45
Sections 86(7)(c) and 86(8)(b).
46
Section 86(8)(b) requires "the
matter" and not "the application" to be referred to
the
Magistrate's Court.
47
Hiemsta and Gonin: Drietalige
Regswoordeboek
(2
nd
ed.)
s.v.
"dominus
litis".
48
I advisedly do not use the terms
"sui generis"
or "unique"
because there are similar
proceedings. Interpreader proceedings
come to mind.
49
See the headings to the rules of the
Supreme Court of Appeal and to the rules of the Provincial Divisions
of the High Court in
Harms:
Civil Procedure in the Supreme Court,
Volume
2, p. 1003 and p. 1037.
Venter
v Du Plessis
1980 (3) SA 151
(T)
at
152A
50
Section 6 of the Rules Board for
Courts of Law Act.
51
Section 86(1).
52
The form prescribed is NCR Form 18.
It resembles Form 1 prescribed for applications under
the Rules.
53
And, as I have held above, section
86(7)(c).
54
From this it must not be inferred
that the debt counselor becomes a party to the proceedings in
the
ordinary sense. I shall deal with that aspect later.
55
There are exceptions that are
presently irrelevant. See Rule 1(2)(a).
56
Coetzeestroom Estate and G. M.
Co. v Registrar of Deeds
1902 TS 216
; Fourie v Celliers NO
1978 (4)
SA 163
(O)
at 166;
Die Meester v
Joubert en Andere
1981 (4) SA 211
(A).
57
Section 86(4)(b).
58
Regulation 24(2) and (5).
59
Sciacero & Co v Central South
African Railways
1910 TPD 119
at
121.
60
There are exceptions that are not
now relevant.
61
Other considerations sometimes apply
in the High Court.
62
For reasons that follow this should
read (section 80(1)(a).
63
This should read "section
80(1)(b)(i).
64
See the consideration of the
applicant's prayer 1.15 above and also the provisions of section
83(1).
65
Section 87(1)(b)(i) and also section
83(1).
66
See the introductory part of section
87(1).
67
Section 87(1)(b)(i).
68
This should read "
section 65J
of the
Magistrates' Courts Act, 1944
".
69
This should read (b). Subsection (a)
provides for the rejection (refusal) of the consumer's application.
70
This should read (c).
71
71
Sections
86(1)
and
(5).
72
">
72
The
introductory part of
section 86(7)(a).
73
Section
86(7)(a)
74
">
74
Section 86(7)(b).
75
">
75
I have not been referred to it and I
was unable to obtain a copy thereof, but I seem to recollect that I
have given a judgment
on this very point.
76
Commissioner for SA Inland
Revenue Service v Woulidga
2000 (1) SA 600
(C)
at
611J.
77
The Concise Oxford Dictionary.