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2009
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[2009] ZAGPJHC 41
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Firstrand Bank Limited v Maleke; Firstrand Bank Limited v Motingoe and Another; Peoples Mortgage Ltd v Mofokeng and Another; Firstrand Bank Limited v Mudlaudzi (637/2009, 638/09, 09/8830, 09/8941) [2009] ZAGPJHC 41; 2010 (1) SA 143 (GSJ) (20 August 2009)
Links to summary
IN THE SOUTH
GAUTENG HIGH COURT
(JOHANNESBURG)
In the matter
between:
Case
No. 637/2009
FIRSTRAND
BANK LIMITED
Plaintiff
and
MALEKE:
R
.L.
Defendant
Case
No. 638/09
FIRSTRAND
BANK LIMITED Plaintiff
and
MOTINGOE
: S.K. First
Defendant
MOTINGOE: L.
J. Second Defendant
Case No.
09/8830
PEOPLES
MORTGAGE LTD Plaintiff
and
MOFOKENG M.M.
First Defendant
ZULU
P.J.T. Second Defendant
Case No 09/8941
FIRSTRAND
BANK LTD. Plaintiff
and
MUDLAUDZI
P.W.
Defendant
___________________________________________________________________________
JUDGMENT
___________________________________________________________________________
C.J. CLAASSEN
J
[1] On
Tuesday 26 May 2009
,
there came before me four applications in the unopposed Motion Court
2. The applications were of similar nature making it convenient
to
deal with them simultaneously in one judgment.
[2] The
similarity of these applications is indicated by the following
characteristics:
1. The
applicants
were banking institutions and registered credit providers pursuant to
the provisions of the National Credit Act No. 34 of 2005
(“The
Act”).
2. The
defendants were all private individuals
and historically disadvantaged persons
1
.
3. In
each case, application for default judgment pursuant to the
provisions of Rule 31(5) of the Uniform Rules of Court, was placed
before the Registrar of this court.
4. The
Registrar referred each application to open court, as the amount
claimed fell within the jurisdiction of the Magistrates’
Court.
5. Each
claim was based
on
a loan agreement of money secured by a mortgage bond registered over
immovable property. Thus the underlying agreements constituted
credit
agreements as defined in section 8 of the Act.
2
6. In
each case
,
the plaintiffs applied for payment of the accelerated outstanding
balance due on the loan agreement together with an order declaring
the immovable property executable and costs on an attorney and client
scale.
7. In
each case, the plaintiffs averred that they had complied with the
provisions of sections 129 and 130 of the Act.
8. In
each case, service of the summons was affected at the chosen
domicilium
address being the property which had been hypothecated as security
for the loan.
9. In
each instance the property was used as the defendants’
residence.
10. The
actual arrears of instalments triggering the entitlement to claim the
accelerated outstanding balance were relatively small
amounts varying
between R2000 and R5000 except in the Peoples Mortgage Ltd. case
where an amount of R76 036.91
3
was alleged to be in arrear.
11. In
each instance the summons advised the defendants
that
section 26(1) of the Constitution of Republic of South Africa
accorded everyone the right to have access to adequate housing
and
should the defendant’s claim that the order for execution will
infringe that right, they are to place information supporting
such
claim before the court. In none of the cases did any of the
defendants place any such information before the court.
[3]
The
National Credit Act has
been the subject of a series of recently
reported cases
4
The common denominator expressed in these cases is that the Act is
a piece of consumer legislation which introduces new forms
of
protection for debtors in South Africa, both rich and poor. It seeks
to balance the inequalities arising from unequal bargaining
power
between the large credit providers on one hand and the credit seekers
on the other. This much is evident from the preamble
5
to the Act and its purposes as set out in section 3 thereof.
6
The Act is further designed to render assistance and protection to
the previously disadvantaged section of our population who may
wish
to enter the property market.
7
The Act levels the playing field between a relatively indigent and
unsophisticated consumer and a moneyed and well-advised credit
provider, and to limit the financial harm that the consumer may
suffer if he/she is unable to perform in terms of the credit
agreement.
8
I also, respectfully, agree with the succinct and insightful overview
of the Act as set out by Bertelsmann J in
Absa
Bank Limited v Myburgh
supra
.
9
[4]
In
the applications before me, the Registrar referred the matters to
open court in terms of Rule 31(5)(b)(vi)
10
of the Uniform Rules of Court. This is in line with a rule of
practice laid down by the full court of this Division in the case
of
Nedbank
Limited v Mortinson
[2005] ZAGPHC 85
;
2005 6 SA 462
WLD at 473, paragraph [33.2] where the following was
stated:
“
All
applications for default judgment where the creditor seeks an order
declaring specially hypothecated immovable property executable,
where
the amount claimed falls within the jurisdiction of the magistrate’s
court, shall be referred by the Registrar for
consideration by the
Court in terms of Rule 31(5)(b)(vi).”
The
need for the aforesaid rule of practice arose from the
judicial
concern that execution orders, where small amounts are claimed,
require judicial oversight and scrutiny, prior to such
orders being
granted.
APPLICANTS’
PAPERS
[5]
The
reason for reserving my judgment in these four similar unopposed
applications, arises from my concern that an injustice may
be done to
the absent defendants, if the orders declaring their immovable
properties executable, are granted. This concern arises
from the
following facts and circumstances which appear from the Applicants’
own papers:
All
the defendants are historically disadvantaged individuals falling
within the definition of the Act. The dates of birth gathered
from
the mortgage bonds are as follows: Maleke 1939; Motingoe 1966 and
1967; Mofokeng 1943 and 1961; Mulaudzi 1962. All of them
were born
substantially before 1993 and t
herefore,
laboured under the disadvantages of the previous dispensation. It is
quite evident that the Act extends particular protection
to
individuals such as the defendants.
The
defendants had been paying instalments in reduction of the bonds
,
respectively, for periods of 17 years, 14 years, 19 years and 13
years, prior to falling into arrears. The significance of these
facts is that the defendants have of necessity acquired a valuable
equity in the increased market value of the properties. The
court
must be astute to take cognisance of this fact and the consequence
of granting default judgment: the loss of such equity
to the
defendants!
The
relatively small loans required to purchase the immovable properties
as stated in the bond documents, indicate that the capital
growth
accumulated over the years since the loans had been granted, must
have made the properties significantly more valuable
than the
outstanding balances: Maleka loan R38510.00 – o/b R16 948.89:
Motingoe loan R72000.00 – o/b R81 642.52:
Mofokeng loan
R33500.00 – o/b R76 036.91: Mudlaudzi loan R72000-00 –
o/b R44 403.20.
The
applicants’ papers disclose that the arrears were relatively
minor. Agreement after negotiation between the parties
(eg extending
the remaining period of the bond and reducing the monthly
instalment), alternatively reliance on the protection
afforded the
defendants in ss 85 and 86, could easily have resulted in a
satisfactory solution whereby the applicants ultimately
receive full
payment of the bonds and the defendants retain their homes. This
would have been possible due to the minor arrears,
which are: Maleka
R4189.62; Motingoe R4969.37; Mofokeng Arrears inconclusively proved;
Mudlaudzi R2358.93. These arrears are
trifling in their amounts and
significance to the applicants. The prejudice which would be
suffered by the defendants in potentially
losing their properties
would be disproportionately large compared to the minor prejudice to
the applicants in being denied immediate
payment of the outstanding
balances on the bonds. A delay in the payment of the full
outstanding balances due to a refusal to
grant the execution orders,
would not harm them in any way, whereas such execution would
constitute a permanent setback to the
relatively indigent and
historically disadvantaged defendants.
The
monthly instalments due on the respective bonds were R245.00,
R876.00 and 937.80
,
except in the Peoples Mortgage case where the monthly instalment is
unknown. These relatively small monthly instalments are
indicative
that the defendants all fall within the category of “low
income persons” as contemplated in s 13(a)(ii)
of the Act.
Although this section imposes a duty upon the National Credit
Regulator to promote a fair credit market, the courts
are to reflect
in their judgments the pursuit of the same ideal.
The
letters of demand sent to the defendants in terms of s 129 of the
Act
do
not expressly warn the defendants that their homes will be sold in
execution, potentially leading to the loss thereof due to
their
eviction, should they fail to respond to such letters. This is so,
presumably, because the Act does not require such letters
to contain
a warning of this nature. The absence of such a warning does,
however, place an additional burden of careful oversight
on the
court, before granting judgment. A relevant consideration in this
regard is that historically disadvantaged persons who
are
unsophisticated may not sufficiently appreciate this danger upon
receipt of the letters of demand. Their failure to refer
their
matters to a debt counsellor, may, therefore, be the result of this
lack of understanding. Because of this potential threat,
the courts
are to be particularly vigilant in avoiding injustices which may be
perpetrated in the application of the provisions
of the Act in order
to prevent, as far as is possible, “unfair …. conduct
by credit providers”
11
.
The absence of the defendants before court does not diminish but
rather increases this duty resting upon the courts.
OTHER
CONSIDERATIONS
[6] There
are further general con
siderations
which are relevant to a proper adjudication of the applications for
default judgments, which do not necessarily appear
from the
applicants’ papers. These are:
The
protection afforded consumers in the Act
who are faced with letters of demand addressed to them in terms of
section 129, are not generally known to a large portion of
the
public, in particular historically disadvantaged persons. Such
ignorance may often be the cause of their failure to respond
to such
letters and utilise these protective measures.
Nor
would they appreciate the fact that once the credit provider has
taken
steps to enforce the agreement, their right to respond to the
invitation to approach an alternative dispute resolution agent,
the
consumer court, the ombud with jurisdiction or a debt counsellor,
lapses.
12
Had the defendants been made aware of this fact, they may very
well have applied to a debt counsellor to assist them in order
to
restructure the debt and thus prevent the loss of their homes.
Another
reason for not responding to the letters and/or the summons, may
also be the lack of funds to seek legal advice.
It
is, however, a well known fact that historically disadvantaged
persons are not always aware of the fact that free legal advice
is
available to them to assist in their defence. The institutions
concerned are the Legal Aid Board, the Legal Resources Centre,
and
the law clinics at local universities.
Even
if the historically disadvantaged defendants were aware of the
availability of free legal advice, the “means”
test
applied by these institutions may disenfranchise them from obtaining
free legal advice. Once it is known that the defendants
own
immovable property, they may be denied free legal advice. Thus,
despite any attempts on their part to defend their rights
with the
assistance of legal representation, such attempts may come to
nought.
T
he
prospect of litigating in the High Court may have deterred them from
opposing the plaintiffs’ claims. It is a well known
fact that
litigation in the High Court is more expensive than litigation in
the Magistrates’ Court.
13
The fear of being mulcted in legal costs may deter them from
reacting to the letters of demand.
Where,
as in these four cases, attorney and client costs are claimed,
one would expect a normal defendant to attempt to limit the cost
implications by defending the claims, even if they had to appear
in
person, and place before the court facts and circumstances which
would assist the court to adjudicate the cases in a fair
and
equitable manner, before granting default judgment. However, it is
unlikely that previously disadvantaged defendants would
appreciate
the significance of claims for attorney and client costs. They
cannot be expected to know that they can ask the court
to reduce the
costs because the amount claimed falls within the jurisdiction of
the Magistrates’ Courts, nor is it likely
that they would be
aware of the remedy to reduce the costs provided for in Rule 69(3)
14
of the Uniform Rules of Court. It would place a too high standard of
sophistication on the historically disadvantaged to expect
them to
“know the law” and appreciate all these legal niceties.
The
fact that the courts
mero
motu
protect the interests of defendants in default by reducing the costs
where the claim falls within the Magistrates’ Court
jurisdiction
15
,
is indicative of the courts’ acceptance of a duty to apply a
standard of fairness without being prompted to do so. This
duty is
all the more applicable when cases falling under the Act, are
adjudicated in view of the purposes of the Act set out
in s 3 supra.
Granting the execution orders in such cases would, in effect,
bedevil or terminate the defendants’ “access
to credit
16
placing them in a position where they are in future denied adequate
housing.
[7
] In
my view, it is incumbent on the courts to determine whether or not
one or more of the considerations mentioned in the previous
paragraph, are relevant to any applications for default judgment in
addition to such facts appearing from the plaintiffs’
own
papers. Should one or more of these circumstances apply, a grave
injustice could be perpetrated by disregarding these considerations.
They flow from a consideration and application of the purposes and
spirit of the Act.
EVALUATION
[8]
In
the present cases, all the defendants fell into arrears only
recently. It must, therefore, be accepted that they dutifully paid
the monthly instalments for many years. In my view it is an
inescapable inference that the market value of their homes would have
increased during the interim periods since they first applied for the
bonds. Although there is no evidence before me of the current
market
value of the properties encumbered to the plaintiffs, common sense
would dictate that the inherent value of these homes
must have
increased substantially over the thirteen to nineteen years since the
defendants bought their homes. In these circumstances
it seems to me
blatantly unfair and unjust that a credit provider should be afforded
the benefit of this capital growth in an immovable
property in
circumstances where the arrears were relatively minor. Upon
execution, the execution creditor gains a manifest advantage
in that
a home with a value substantially in excess of the outstanding
balances owed, will more readily be sold and thus ensure
the recovery
of such outstanding amounts. The court should take into account that
the defendants made an investment in their respective
immovable
properties many years ago expecting to benefit from the capital
growth. If they now have to lose the properties due to
a sale in
execution resulting from relatively minor arrears, whatever capital
growth they may have earned, would be lost. I accept
the principle
that a sale price achieved at a sale in execution which is in excess
of the outstanding balance owed on the bond,
should normally revert
to the debtor. This principle, however, does not fully protect the
interests of the execution debtor. There
is no incentive for the
credit provider to obtain a bid in excess of the outstanding balance.
In these circumstances, the defendants’
only hope would be that
the excess over the debt due to the creditor, realised upon execution
would be sufficient to substitute
the lost home with another. This
hope must, as of necessity, be a faint one. It is common knowledge
that the value of immovable
property tends to increase over the
years. It is not realistic to argue that a substitute home of equal
size and value as the one
purchased many years ago, would be found.
In addition, any excess which may revert to the execution debtor
would be less than the
current price of a home of equal size and
value. It therefore, goes without saying that the sale in execution
of the defendants’
homes in these cases before me, would harm
the defendants in a very material and substantial way. In cases such
as these where
the bond instalments had been paid over a long period
of time and the arrears are relatively minor, the advantage to the
credit
provider is therefore substantial whereas the disadvantage to
the consumer is disproportionately large.
[9
] It
would seem to me that the circumstances in each of the applications
before me call for some form of intervention to protect
the interests
of the historically disadvantaged defendants. The papers indicate
that they obviously fall into the category of “low
income
communities”, judged by the small monthly instalments payable
to the credit providers. This is further confirmed by
the small sizes
of the properties as reflected in the descriptions thereof contained
in the mortgage bonds.
17
The courts should, in such circumstances, be particularly astute to
protect the rights of historically disadvantaged persons when
it
comes to the application of the provisions of the Act.
[
10] The
courts are also duty bound to consider the constitutional
implications of s 26 of the Constitution when applying the provisions
of the Act. Section 26 of the Constitution reads as follows:
“
26(1) Everyone has the
right to have access to adequate housing.
(2) The State must take
reasonable legislative and other measures, within its available
resources, to achieve the progressive realization
of this right.
(3) No-one may be evicted from
their home, or have their home demolished, without an order of court
made after considering all the
relevant circumstances. No legislation
may permit arbitrary evictions.”
[11]
It
was held by Mokgoro J in
Jaftah
v Schoeman and Others; Van Rooyen v Stoltz and Others
[2004] ZACC 25
;
2005
2 SA 140
CC at page 155 as follows:
“
[29] Section
26 must be seen as making that decisive break from the past. It
emphasizes the importance of adequate housing and in
particular
security of tenure in our new constitutional democracy. The indignity
suffered as a result of evictions from homes,
forced removals and the
relocation to land often wholly inadequate for housing needs has to
be replaced with a system in which
the State must strive to provide
access to adequate housing for all and, where that exists, refrain
from
committing
people to be removed unless it can be justified”.
[12
] Mokgoro
J stated further, in paragraph [34] that, at the very least, any
measure which permits a person to be deprived of existing
access to
adequate housing, limits the rights protected in s 26(1). If
execution is ordered in the present applications, the defendants
may
very likely be deprived of obtaining other adequate housing if they
were subsequently evicted. Even if the sale in execution
realizes an
amount in excess of the debt owed, such amount would not in these
cases assist the defendants to buy immovable property
of equal size
and value. They will not only be put “at the back of the
queue”
18
but also rendered homeless. In this regard Mokgoro J stated in [43]:
“
[43] However,
it is clear
that there will be circumstances in which it will be unjustifiable to
allow execution. The severe impact that the execution process
can
have on indigent debtors has already been described.
There
will be many instances where execution will be unjustifiable because
the advantage that attaches to a creditor who seeks executions
will
be far outweighed by the immense prejudice and hardship caused to the
debto
r….
[13
] Mokgoro
J came to the conclusion that the appropriate remedy to ensure the
prevention of unjustified execution against immovable
property is
appropriate judicial oversight prior to such execution being levied.
In this regard she held as follows at page 162
A:
“
[56] …If
there are
other
reasonable ways in which the debt can be paid
an order permitting a sale in execution will ordinarily be
undesirable. If the requirements of the Rules have been complied with
and if there is no other reasonable way by which the debt may be
satisfied, an order authorizing a sale in execution may ordinarily
be
appropriate
unless
the ordering of that sale in the circumstances of the case would be
grossly disproportionate
.
This would be so if the interests of the judgment creditor in
obtaining payment are significantly less than the interests of the
judgment debtor in security of tenure in his or her home,
particularly
if the sale of the home is likely to render the judgment debtor and
his or her family completely homeless
.
[57] It is
for this reason that the
size
of the debt will be a relevant factor for the court to consider
.
It might be quite unjustifiable for a person to lose his or her
access to housing where the
debt
involved is trifling in amount and significance to the judgment
creditor
.
However, this will depend on the circumstances of the case. As has
been pointed out above, it may often be difficult to conclude
that a
debt is insignificant. In this regard, it is important too to bear in
mind that there is a widely recognized legal and social
value that
must be acknowledged in debtors meeting the debts that they incur.
[58] Another
factor of great importance will be the circumstances in which the
debt arose. If the judgment debtor willingly put
his or her house up
in some or other manner as security for the debt, a sale in execution
should ordinarily be permitted where
there has not been an abuse of
court procedure.
The
need to ensure that homes may be used by people to raise capital is
an important aspect of the value of a home which courts
must be
careful to acknowledge.
[59] A final
consideration will be the
availability
of alternatives which might allow for the recovery of debt but do not
require the sale in execution of the debtor’s
home
.
At present, s73 of the Act provides for a judgment debtor to approach
a court with an offer to pay off a debt in instalments.
As pointed
out above, this
section
does not constitute sufficient protection for indigent debtors
because they are generally unaware of its potential to protect
them
and their inability (sic “ability?”) to invoke it.
However, the concept of paying off the debt in instalments
is
important and the practicability of making such an order must be ever
present in the minds of the judicial officer when determining
whether
there is good cause to order the execution. The balancing should not
be seen as all or nothing process. It should not be
that the
execution is either granted or the creditor does not recover the
money owed
.
Every effort should be made to
find
creative alternatives
which allow for debt recovery but which use execution only as a last
resort.
[60] In
summing up, factors that a court might consider, but to which a court
is not limited, are: The circumstances in which the
debt was
incurred; any attempts made by the debtor to pay off the debt; the
financial situation of the parties; the amount of the
debt; whether
the debtor is employed or has a source of income to pay off the debt
and any other factor relevant to the particular
facts of the case
before the court.” (Emphasis added)
[
14] In
Standard
Bank of South Africa Limited v Hales and Another supra
at 326 D – 327 G, Gorven J also considered the implications of
s 26 of the Constitution and the judgment by Mokgoro J in
the
Jaftah
case,
in relation to the question whether he should exercise his discretion
in the debtor’s favour not to order execution
but rather take
the conciliatory step contemplated in s 85(a) of the Act. Similar to
the applications before me, the debtors in
the case before Gorven J
also failed to respond to the invitation contained in the summons to
put facts before the court which
would indicate infringement of their
constitutional rights enshrined in s 26. Gorven J exercised his
discretion in favour of the
credit providers and against the debtors,
largely due to the fact that the debt in that case was not trifling
at all. The amount
claimed was R790 000.00 plus an additional sum
of R197 500.00.
19
That, of course, is a substantial distinguishing feature between the
case before Gorven J and the applications before me.
[15
] There
is also a final consideration which militates against the exercise of
my judicial discretion in favour of the plaintiffs,
and that is the
current economic climate. The court is entitled to take judicial
cognizance of the international melt-down and
the effect that it has
had on the debtors at the lower end of the market. The present
economic climate must have been a contributing
factor to the
defendants falling into arrears, something which may very well have
been beyond their control.
[1
6] For
the reasons set out above, I am of the view that the peculiar
circumstances of these four cases require me to exercise my
discretion against the plaintiffs by disallowing the orders declaring
the encumbered properties executable. That does not mean
that the
plaintiffs are precluded from seeking redress in another court. The
refusal to grant the execution order is in the nature
of an order
absolving the defendants from the instances.
OTHER
ALTERNATIVES WHICH WOULD ALLOW THE RECOVERY OF THE DEBT WITHOUT
LEVYING EXECUTION
[
17] The
facts in these matters before me would have been ideally suited for
the defendants to have been referred to a debt counsellor
as
contemplated in s 85(a) of the Act.
20
Such procedure would have constituted “other alternatives”
as contemplated by Mokgoro J supra. Why the defendants failed
to
utilise the remedies provided therein may be ascribed to any of the
considerations mentioned earlier in paragraph [6].
[18]
The
difficulty which arises in the case of applications for default
judgment, is that no allegations of over-indebtedness are before
the
court. In this regard, I respectfully agree with Masipa J in the
matter of
Standard
Bank of South Africa Limited v Panayiotts
supra
where the following is stated in paragraph [24]:
“
The
powers given to the court under s
85 arise ‘if it is alleged that the consumer under a credit
agreement is over-indebted’. Clearly, the mere allegation
of
over-indebtedness can never be sufficient. The test would be that
such over-indebtedness should be established on a balance
of
probability. This is supported by s 79(1) which refers to ‘the
preponderance of available information at the time a determination
is
made.”
[1
9] Where
the court is considering credit agreements in the context of Rule
31(5) in the absence of the debtors, it would seem manifestly
incorrect for a court to apply the remedies provided in s 85. In any
event, s 86(2)
21
precludes any referral to a debt counsellor once the credit provider
had instituted steps to enforce the debt as contemplated in
s 129 of
the Act as was done in the present applications. Utilising the
procedures provided for in s 85 is therefore not an option
at this
stage.
[20
]
Since the possibility of debt review and a restructuring of the debts
are not available in the High Court, there is no basis
to assist the
defendants to protect their homes by such a process. This court is
powerless to initiate a process whereby the defendants
can be
afforded the opportunity to restructure their debts and thus prevent
an execution order being issued. There is, however,
a protective
measure which can be initiated by another court to see to the
restructuring of the debts.
[21] Where
the execution orders and other relief sought by the applicants are
refused in this Court, plaintiffs can still recover
the debts and
obtain execution orders, by instituting proceedings in the
Magistrate’s Court of applicable jurisdiction. In
such court
the possibility of paying the outstanding amounts in instalments may
present itself as a feasible solution. As stated
by MokgoroJ in
Japhta,
such relief is expressly provided in s 73
22
of the Magistrates’ Courts Act. Invoking this provision could
very well lead to the stated purpose of the Act to ensure the
“satisfaction by the consumer of all responsible financial
obligations”,
23
provided the defendants participate in such process. Hopefully this
will result in a win/win situation where the plaintiffs will
ultimately receive payment of the outstanding balances and the
defendants will retain their homes. The implication of dismissing
the
applications is that the plaintiffs will have to start again with the
process of complying with the provisions of the Act with
the
intention of enforcing the agreements in the magistrates’
court.
PROCEEDINGS IN
THE HIGH COURT
[
22] It
was held by Bertelsmann J in
Absa
Bank Limited v Myburgh
supra
at
page 345 paragraph [41], that issuing summons in the High Court for a
debt that could be recovered in the magistrates’
court runs
counter to the express purposes of the Act. It was further held that
any consent by the debtor to the jurisdiction of
the High Court in
instances where the amount claimed fell within the jurisdiction of
the magistrates’ court, was illegal
and contrary to the
provisions of s 90(2)(k)(vi) of the Act. This conclusion has, however
been overruled by the full bench in
Nedbank
Ltd v Mateman and Another
supra.
24
In that case it was held that a clause in a bond wherein the
mortgagor consents to the jurisdiction of the High Court, does not
conflict with the provisions of s 90(2)(k)(vi). The court further
held that the jurisdiction of the High Court is not excluded
by the
provisions of the Act. It is therefore not illegal to issue a summons
out of the High Court in cases under the Act. However,
I do not read
this case as holding that a High Court is in all circumstances
obliged to hear a case under the Act, once proceedings
in such court
had been commenced at the election of the credit provider. The
magistrates’ court has concurrent jurisdiction
with the High
Court to hear cases under the Act. Also, the magistrates’
court’s jurisdiction to hear cases under the
Act is unlimited.
25
[23
] In
my view, the High Court’s discretion to decline the hearing of
a case under the Act is still unfettered and not curtailed
by the
decision in
Nedbank
v Mateman
.
The High Court does have a discretion to terminate the proceedings
and refer the matter to the magistrates’ court with
jurisdiction. In certain circumstance it may be very appropriate to
refer a matter to the magistrates’ court. This is particularly
so where the amount claimed is within the jurisdiction of the
magistrates’ court, unless difficult principles of law and/or
fact require decision, in which case a hearing in the High Court will
be more appropriate. It would appear that the Act contemplates
the
debt review process to be controlled and concluded in the
magistrates’ court.
26
It would therefore not be foreign or contrary to the provisions or
purpose of the Act if a High Court terminates the proceedings
and
refer a matter to a magistrates’ court in appropriate cases.
[24] A
referral of the cases before me to the appropriate magistrates’
court, will not secure the participation of the defendants
so that
they may benefit from the protective measures in the Act. It seems to
me that a special order is required to apprise them
of their rights
in this regard. Of course, this court cannot force them to
participate in a process which, ultimately, will redound
to their
benefit. The decision to participate in order to bring relief to the
defendants will remain with them. Some encouragement
for their
participation may be secured by making a special order to serve
copies of this judgment on the defendants as a prerequisite
for the
plaintiffs to recommence proceedings in terms of the Act for the
recovery of the debts due. In terms of Rule 4(10)
27
a court is at liberty to order further steps to be taken in securing
adequate service of process upon defendants. I will, therefore,
include an appropriate order in this regard.
CONCLUSION
[
25] In
conclusion the order which is made in each of the four applications
is as follows:
The
defendant is absolved from the instance and the application is
dismissed.
The
plaintiff is interdicted from instituting action
against the defendant arising out of the mortgage bond for the
recovery of the debt and obtaining an execution order, in the
High
Court.
In
the event of the plaintiff re
commencing
proceedings against the defendant for the recovery of the
outstanding balance,
personal
service of a copy of this judgment upon the defendant is ordered
simultaneously with the issue of a letter of demand contemplated
in
s 129
of the
National Credit Act 34 of 2005
.
N
o
costs are allowed.
THUS DATED AND
SIGNED AT JOHANNESBURG ON THIS ……… DAY OF AUGUST
2009
__________________________
C.J. CLAASSEN
JUDGE OF THE HIGH COURT
Counsel
for the Plaintiffs
:
Counsel
for the Respondents
:
Adv
V. Fine Respondents appeared in person.
Attorneys
for the Plaintiffs
:
In
the
Maleke
matter it is
Lowndes Dlamini
Attorneys
In
the
Motingoe
matter it is
Lowndes Dlamini
Attorneys
In
the
Mofokeng
matter it is
Madhlopa
Incorporated
In
the
Mudlaudzi
matter it is
Lowndes Dlamini
Attorneys
Argument in the
above matters was heard on 26 May 2009
Date of Judgment: 20
August 2009
1
See
Section 2(6) of the
Act which provides: “For all purposes of this Act, a person
is a historically disadvantaged person
if that person –
Is one of a
category of natural persons who, before the Constitution of the
Republic of South Africa, 1993 (Act 200 of 1993),
came into
operation, were disadvantaged by unfair discrimination on the basis
of race; …..”
2
See in particular section 8(4) which states:
“An
agreement, irrespective of its form but not including an agreement
contemplated in sub section (2), constitutes
a credit transaction
if it is –
……
(d) a
mortgage agreement or secured loan; …”
3
This amount is clearly incorrect.
The total
bond amounts to R33 500.00 but the certificate of balance indicates
“arrears/advance” of R113 041.75. The
same certificate
of balance indicates also that the outstanding balance is R76
036.91. Neither of these amounts can be correct
as they are both
beyond the total amount of the bond for no apparent reason.
4
See
Nedbank Ltd v
Mateman and Another
[2007] ZAGPHC 295
;
2008
4 SA 276
TPD;
Absa Bank Limited v Prochaska t/a
Bianca Cara Interiors
2009 2 SA 512
D&CLD;
Standard Bank of South
Africa Ltd v Hales and Another
2009 3
SA 315
D and CLD;
Absa Bank Limited v
Myburgh
2009 3 SA 340
TPD;
BMW
Financial Services (SA) (Pty) v Dr. M.B. Mulaudzi Inc.
2009 3 SA 348
BPD;
Firstrand Bank
Limited v Olivier
2009 3 SA 353
SECLD;
Standard Bank of South Africa Limited
v Panayiotts
2009 3 SA 363
WLD
;
ex Parte Ford and two similar cases
2009 3 SA 376
WCC;
Firstrand Bank
Limited v Carl Beck Estates (Pty) Ltd. and Another
2009 3 SA 384
TPD.
5
“To promote a fair and
non-discriminatory marketplace for access to consumer credit and for
that purpose to provide for
the general regulation of consumer
credit and improved standards of consumer information;…. to
prohibit certain unfair
credit and credit-marketing practices; …to
promote responsible credit granting and use and for that purpose to
prohibit
reckless credit granting; to provide for
debt-reorganisation in cases of over-indebtedness; ……
to provide
for registration of credit bureaux, credit providers
and debt counselling services; to establish national norms and
standards
relating to the consumer credit; to promote a consistent
enforcement framework relating to consumer credit; …….”
6
“3. The purposes of this Act are to
promote and advance the social and economic welfare of South
Africans, promote
a fair, transparent, competitive, sustainable,
responsible, efficient, effective and accessible credit market and
industry, and
to protect consumers , by –
promoting the development of a credit market
that is accessible to all South Africans, and
in
particular to those who have historically been unable to access
credit under sustainable market conditions;
…………
(c
) Promoting
responsibility in the credit market by –
(i) encouraging responsible borrowing, avoidance of
over-indebtedness and fulfilment of financial obligations by
consumers;
and
(ii) discouraging reckless credit granting by credit providers
and contractual default by consumers;
(d)
promoting equity
in the credit market by balancing the respective rights and
responsibilities of credit providers and consumers;
(e) addressing and correcting imbalances in negotiating power
between consumers and credit providers by -
(i) providing consumers with education about credit and consumer
rights;
(ii) providing consumers with adequate disclosure of standardised
information in order to make informed choices; and
(iii) providing consumers with
protection
from deception, and
from unfair
or fraudulent
conduct by credit
providers
and credit bureaux;
………
(g) addressing and preventing over-indebtedness
of consumers, and providing mechanisms for resolving
over-indebtedness based on
the
principle
of satisfaction by the consumer of all responsible financial
obligations;
(h) providing for a consistent and accessible system of consensual
resolution of disputes arising from credit agreements; and
(i) providing for a consistent and harmonised
system of debt restructuring, enforcement and judgment, which places
priority on the eventual satisfaction
of all responsible consumer obligations
under credit agreements.” (Emphasis added)
____________________________
7
See s 3(a) of the Act
supra
as well as s 13(a) of the
Act which provides: “The National Credit Regulator is
responsible to – (a) promote and support
the development,
where the need exits, of a fair, transparent, competitive,
sustainable, responsible, efficient, effective and
accessible
credit
market and industry
to serve the needs of – (i)
historically disadvantaged persons
; (ii)
low income
persons and communities
; and (iii) remote, isolated or low
density populations and communities, ...” (Emphasis added)
8
See
Absa Bank Ltd v
Myburgh
supra
at paragraph [41].
9
See
Absa bank Ltd v
Myburgh supra
paragraphs
[28]
to [39]
10
Rule 31(5)(b)(vi) states: The Registrar may -
(vi) require that the matter be set down for hearing in open court.”
11
See s 3(e)(iii) of the Act, supra.
12
See section 86(2) of the Act which provides as
follows:
“(2) An
application in terms of this section 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.”
13
See
Absa Bank
Limited v Myburgh
supra
at page 345 F paragraph [43].
14
This sub-rule provides: “Save where the
defendant or respondent is awarded costs, the tariff of maximum fees
for advocates
between party and party referred to in Part IV of
Table A of Annexure 2 to the Rules for the Magistrates’ Court
(hereunder
referred to as ‘the tariff’) shall apply
where the amount or value of the claim falls within the jurisdiction
of
the magistrates’ court, unless the court, on request made
before or immediately after the giving of judgment, otherwise
directs”.
15
This established practice may have been
influenced by the prescriptions in this regard imposed upon the
Registrar in terms of
Rule 31(5)(e) when granting default judgment
in cases where the claimed amount is within the Magistrates’
Court jurisdiction.
16
See s 3(a) of the Act, supra.
17
In the Maleke and Motingoe matters the property
sizes are a mere 389 square metres each; in the Mudlaudzi matter the
property
is a mere 170 square metres in size; and in the Mofokeng
matter the property size is 242 square metres.
18
See
Japhta
supra at page 158 B.
19
See
Hales
’s
case
supra
at 317 E.
20
Section 85 states as follows:
“Despite any provision of law or agreement to the contrary, in
any court proceedings in which a credit agreement is being
considered, if it is alleged that the consumer under a credit
agreement is over-indebted, the court may –
Refer the matter
directly to a debt counselor with a request that the debt
counsellor evaluate the consumer’s circumstances
and make a
recommendation to the court in terms of s 86(7);….. “
21
Section 86(2) provides: “An application in
terms of this section 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
the agreement.”
22
Section 73(1) provides: “The court may,
upon application of any judgment debtor or under section
65E(1)(a)(ii) or 65E(1)(c)
and
if it
appears to the court that the judgment debtor is unable to satisfy
the judgment debt in full at once, but is able to pay
reasonable
periodical instalments towards the satisfaction thereof
or if the judgment debtor consents to an emolument attachment order
or a garnishee order being made against him, suspend execut5ion
against the debtor either wholly or in part on such conditions as to
security or otherwise as the court may determine.”
(Emphasis
added)
23
See s 3 (g) and (i), supra.
24
See also Roestoff and Coetzee, “Consent to Jurisdiction”
2008 (71)THRHR p 678.
25
See s 29(1)(e) of the Magistrates’ Court
Act 32 of 1944; CM van Heerden, “Perspectives on Jurisdiction
in Terms of
the
National Credit Act 34 of 2005
” TSAR 2008. 4
p840.
26
See
s 86(7)(c)
, (8)(b), (9) and (11).
27
">
27
Rule 4(10)
provides: “Whenever the court
is not satisfied as to the effectiveness of the service, it may
order such further steps
to be taken as to it seems meet.”