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[2008] ZAWCHC 66
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ABSA Bank Limited v De Villiers and Others (15692/07) [2008] ZAWCHC 66; 2009 (5) SA 40 (C) (25 November 2008)
REPORTABLE
THE
HIGH COURT OF SOUTH AFRICA
[CAPE
OF GOOD HOPE PROVINCIAL DIVISION]
Case
No: 15692/07
In
the matter between:
ABSA
BANK LTD
Plaintiff
and
PIETER
DE VILLIERS
First
Respondent
THE
MAGISTRATE FOR THE
DISTRICT
OF SIMON'S TOWN
Second
Respondent
JUDGMENT
DELIVERED: 25 NOVEMBER 2008 FOURIE, J
[1]
This is a review application which concerns certain aspects of debt
enforcement under the National Credit Act No. 34 of 2005
("the
NCA"). In particular, it involves the interpretation of certain
provisions of the NCA dealing with the repossession
of property that
is the subject of an instalment agreement.
[2]
The NCA came into operation incrementally and has been fully in
operation since 1 June 2007. It has repealed the Credit Agreements
Act No. 75 of 1980 and the Usury Act No. 73 of 1968. In terms of
section 3 the purposes of the NCA 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, inter alia, providing for a consistent and harmonised
system of debt enforcement which places priority on the eventual
satisfaction of all responsible consumer obligations under credit
agreements.
[3]
Academic writers have commented on various aspects of the NCA,
including the provisions dealing with debt enforcement procedures.
Apart from articles in law journals, two works have recently been
published, namely JM Otto, The National Credit Act Explained,
2006
("Otto") and JW Scholtz
et
al
Guide
to the National Credit Act, 2008 ("JW Scholtz
et
a/").
The views expressed in these two publications, and in the articles
published in law journals, have been of great assistance
in the
preparation of this judgment. I am not aware of, nor have we been
referred to, any decisions of our courts dealing with
the aspects of
debt enforcement which are the subject of this judgment.
[4]
The background to this application may be summarised as follows: On
25 August 2006, first respondent concluded an instalment
agreement in
terms of which he purchased a motor vehicle on certain conditions
from Premier Attraction 650CC. The instalment agreement
is a credit
agreement as defined in section 8 of the NCA, and the NCA applies to
the instalment agreement by virtue of the provisions
of section 4 of
the NCA. All the rights arising out of the instalment agreement,
including ownership of the subject motor vehicle,
have been ceded and
transferred to applicant, the latter being a registered credit
provider in terms of section 40 of the NCA.
Subsequent to the
cession, respondent breached the instalment agreement by failing to
make payment of the monthly instalments due
to applicant. Applicant
brought an urgent ex parte application in the Simon's Town
Magistrate's Court, in terms of section 130
(1) of the NCA, for an
order authorising the sheriff to attach the motor vehicle which is
the subject matter of the instalment
agreement, and to hand same over
to applicant for safe-keeping. After hearing argument on behalf of
applicant, second respondent
dismissed the application.
[5]
Applicant now seeks an order reviewing, setting aside and correcting
second respondent's decision to dismiss the application
for the
attachment of the motor vehicle. Service of these proceedings was
effected upon first respondent at his chosen
domicilium
citandi et executandi,
but
he has failed to give notice of his intention to oppose. Second
respondent abides the decision of the court, but has filed written
reasons for his order dismissing the application. At the hearing of
the review application, applicant was represented by Advocate
P
Coetsee SC, to whom we are indebted for his most helpful submissions,
both written and oral.
[6]
At the outset I should emphasise that the application in the court
below, was not for relief
pendente
lite,
but
for a final order authorising the attachment of the subject vehicle.
Applicant did not institute an action for cancellation
of the
instalment agreement, nor was it alleged that applicant intended
instituting such an action. Applicant maintained that,
as a credit
provider, it is entitled to obtain possession of the vehicle sold in
terms of the instalment agreement, by means of
an attachment order,
in circumstances where the consumer (first respondent) is in default
and refuses or neglects to return the
vehicle to applicant. Applicant
contended that it only had to prove compliance with the requirements
set out in section 130 (1)
of the NCA, to be entitled to the order of
attachment.
[7]
In his reasons for dismissing the application, second respondent
found that applicant had duly complied with the requirements
of
sections
129
and 130 of the
NCA,
for
the commencement of legal proceedings to enforce the instalment
agreement. However, he held that a final order for the attachment
of
the vehicle could not be granted in the absence of an action for
cancellation of the instalment agreement by applicant. Second
respondent was of the view that applicant's interpretation of the
provisions of the
NCA,
would
lead to an unacceptable result, in that it would place applicant in
final and permanent possession of the vehicle while maintaining
the
agreement, thereby absolving applicant from performance in terms of
the agreement but requiring performance from first respondent,
whilst
at the same time depriving first respondent permanently of
possession. In addition, second respondent held that the facts
set
out in the affidavit in support of the application, were insufficient
and fell short of the requirements for the granting of
urgent
applications of this nature.
[8]
Mr. Coetsee submitted that these findings of second respondent
amounted to errors of law, constituting a gross irregularity
in the
proceedings. He accordingly argued that the findings of second
respondent are reviewable by this court in terms of section
24 (c) of
the Supreme Court Act No. 58 of 1958. In this regard Mr. Coetsee
relied on the decisions in
Oosthuizen
v
Landdros
Senekal en Andere
2003
(4)
SA
450
(O) at 455 A - B and
Hira
and Another
v
Booysen
and
Another
1992
(4) SA 69
(A) at 93 A -1.
[9]
In dealing with the relevant provisions of the NCA, it has to be bome
in mind that section 2 (1) of the NCA requires its provisions
to be
interpreted in a manner that gives effect to the purposes set out in
section 3. As explained by JW Scholtz
et
al
at
2-2, the NCA is an improvement on the previous legislation in this
field. There is no doubt that the provisions aimed at the
prevention
of the over-indebtedness and exploitation of consumers, are laudable.
However, as emphasised by the learned authors,
the NCA is
unfortunately not always a model of legal accuracy or elegance. As
will be illustrated hereinlater, the use of confusing
terminology by
the legislature, particularly with regard to debt enforcement
procedures, tends to hamper the process of interpreting
the relevant
provisions of the NCA.
[10]
Before dealing with the debt enforcement provisions of the NCA, I
should refer to section 123, which deals with the termination
of a
credit agreement by the credit provider. Section 123(1) prescribes
that a credit provider may terminate a credit agreement,
before the
time provided in that agreement, only in accordance with section 123.
This section, however, does not detail the steps
to be taken by a
credit provider to terminate a credit agreement before the agreed
termination date thereof. Section 123 (2) gives
some guidance, in
providing that if a consumer is in default under a credit agreement,
"the credit provider may take the steps
set out in Part C of
Chapter 6 of the NCA, to enforce and terminate that agreement".
[11]
As mentioned by CM Van Heerden and JM Otto, TSAR 2007.4, page 655,
the use of the words "enforce" and "terminate"
in
section 123 (2), is rather unfortunate. These words are not defined
in the NCA and their simultaneous use may be confusing.
The ordinary
meaning of "enforce", in legal parlance, particularly in a
contractual setting, would be the enforcement
of an obligation. The
use of the word "terminate", on the other hand, conveys the
legal notion of the extinguishing of
contractual obligations. It is
difficult to understand how, as a matter of law, a credit agreement
can be enforced and terminated
at the same time, as is suggested by
the wording of section 123(2). Be that as it may, it is necessary to
consider the ambit of
the relevant remedies which a credit provider
has in terms of the debt enforcement provisions of the NCA.
[12]
Part C of Chapter 6 of the NCA (sections 129 to 133) deals with "debt
enforcement by repossession or judgment". Section
129(l)(b)
provides that if a consumer is in default under a credit agreement,
the credit provider may not commence any legal proceedings
to enforce
the agreement, before complying with the notice requirement of
section 129(l)(a), as well as the requirements of section
130. If the
word "enforce" in section 129 (1) (b) were to be given the
restricted meaning of the enforcement of a contractual
obligation, it
would mean that where a consumer is in default and the credit
provider wishes to invoke the more serious remedy
of cancellation, it
would not be necessary for the credit provider to comply with the
notice provision and other requirements detailed
in sections 129 (1)
(a) and 130. As stated by Otto 88, this would surely go against the
grain of the NCA, one of the declared purposes
of which is to protect
consumers.
[13]
I accordingly share the view of Otto 87/8, that it appears that the
legislature has used the word "enforce" in a
wide sense,
namely the exercising of any of its remedies by a credit provider. In
addition to what has been said above, there are
other
indicia
of
this intention of the legislature, e.g. the use of the words
"enforce" and "terminate" in section 123 (2),
in
describing the steps which a credit provider may take in terms of
Part C of Chapter 6 of the NCA. In addition, section 129 (3),
which
forms part of Part C of Chapter 6, provides that a consumer may at
any time before the credit provider has "cancelled"
the
agreement, rectify his or her breach and resume possession of goods
which have been attached. (See Otto 88 and CM Van Heerden
and JM
Otto, TSAR 2007.4, page 655).
[14]
It follows, in my view, that in the event of a consumer defaulting
under a credit agreement, the credit provider who wishes
to invoke
any remedy at his/her disposal in terms of the relevant credit
agreement, will have to comply with the requirements laid
down in
sections 129 and 130. As I have mentioned previously, second
respondent found that applicant had complied with these requirements.
What has to be decided, is whether applicant was legally entitled to
an order attaching the vehicle, in the absence of the cancellation
of
the instalment agreement.
[15]
First respondent failed to pay the instalments due in terms of the
instalment agreement, thereby committing a breach of contract
in the
form of
mora
debitor!s.
This
entitled applicant, as the innocent contracting party, to exercise
one of the following remedies available in terms of the
instalment
agreement:
To
claim specific performance of his contractual obligations by first
respondent; or
To
cancel the instalment agreement, repossess the vehicle and claim
damages for breach of contract.
[16]
In terms of our common law principles of the law of contract, a claim
for specific performance is only competent if the plaintiff
has
performed, or is ready and willing to perform, any obligations
resting on him or her which are due and reciprocal. (See
Famers'
Co-operative Society v Berry,
1912
AD 343
at 350 and
Ese
Financial Services (Pty) Limited v Cramer
1973
(2) SA 805
(C)
at
808-9). A party claiming specific performance of contractual
obligations must therefore allege, or tender, performance of such
reciprocal contractual obligations.
[17]
The reciprocal obligation of applicant under the instalment
agreement, is to provide first respondent with the vehicle which
is
the subject of the agreement. The principles of our law of contract
accordingly dictate that, if applicant wishes to institute
a claim
for specific performance (ie for payment of the monthly instalments
due in terms of the instalment agreement by first respondent),
the
particulars of claim will have to allege that the vehicle has been
delivered to first respondent or delivery thereof should
be tendered.
It follows that a claim for the repossession of the vehicle is
inconsistent with a claim for specific performance.
I wish to
reiterate that I am not referring to a claim for interim repossession
pending the institution of a claim for cancellation
of the agreement
and damages, but to a claim for a final order authorising the
attachment of the vehicle.
[18]
If, on the other hand, applicant were to institute action for the
cancellation of the instalment agreement, it would, in terms
of
clause 10.3.2 of the agreement, be entitled to repossess the vehicle
and to claim damages suffered as a consequence of first
respondent's
breach of contract. According to our law of contract, restitution
(repossession of the vehicle in the instant case)
is the normal
result following from the cancellation of a contract. By cancelling
the instalment agreement, applicant, as the innocent
party, would
seek to set aside the agreement and return to the
status
quo ante,
by
claiming repossession of the vehicle, and to claim damages for breach
of contract.
[19]
It follows from the aforesaid that, in terms of the general
principles of our law of contract, an order authorising the
attachment
of a vehicle which is the subject of an instalment
agreement, would be granted by the court as a claim ancillary to the
cancellation
of the instalment agreement. As mentioned before, second
respondent held that, absent a claim for the cancellation of the
instalment
agreement, applicant was not legally entitled to a final
order for the attachment of the vehicle. This decision of second
respondent
is in accordance with the principles of our common law.
What has to be decided, is whether the NCA, and, in particular, Part
C
of Chapter 6, has introduced a procedure at variance with our
common law, which entitles applicant to repossess the vehicle in the
absence of the cancellation of the instalment agreement.
[20]
The common law remedies of a credit provider have, as previously
indicated, to a certain extent been curtailed by the procedures
to be
complied with prior to the enforcement of a debt (sections 129 and
130). Applicant, however, contends that Part C of Chapter
6 of the
NCA, also allows for the repossession of the goods that are the
subject of an instalment agreement, as a means of debt
enforcement,
without the prior or contemporaneous cancellation of the agreement.
For this contention applicant, in particular,
relies upon the
provisions of section 131, read with section 127, of the NCA.
[21]
Section 131 is headed "Repossession of Goods" and reads as
follows:
"If
a court makes an attachment order with respect to property that is
the subject of a credit agreement, section 127 (2) to
(9) and section
128, read with the changes required by the context, apply with
respect to any goods attached in terms of that order.
"
[22]
Section 127 confers an extraordinary right on the consumer, whereby
he or she can rid himself or herself of an instalment agreement,
by
unilaterally returning the goods which are the subject of the
agreement, to the credit provider. The section then prescribes
the
procedure to be followed for the recovery, by the credit provider, of
the outstanding balance due in terms of the instalment
agreement. The
section reads as follows:
"127
Surrender
of goods.
-(1)
A consumer under an instalment
agreement,
secured loan or lease-
(a)
may give written notice to the credit provider to terminate
the
agreement; and
(b)
if
(i)
the
goods are in the credit provider's possession, require the credit
provider to sell the goods; or
(ii)
otherwise,
return the goods that are the subject of that agreement to the credit
provider's place of business during ordinary business
hours Mnthin
five business days after the date of the notice or within such other
period or at such other time or place as may
be agreed with the
credit provider.
(2)
Within 10 business days after the later of-
(a)
receiving a notice in terms of subsection
(J)
(b) (i); or
(b)
receiving goods tendered in terms of subsection (1) (b) (ii), a
credit provider must give the consumer written notice setting
out the
estimated value of the goods and any other prescribed information.
(3)
Within
10 business days after receiving a notice under subsection
(2),
the consumer may unconditionally withdraw the notice to terminate
the
agreement in terms of subsection (1) (a), and resume possession
of
any goods that are in the credit provider's possession, unless
the
consumer is in default under the credit agreement.
(4)
If
the consumer-
(a) responds to a notice as contemplated in
subsection (3), the
credit
provider must return the goods to the consumer unless the consumer is
in default under the credit agreement; or
(b)
does not respond to a notice as contemplated in subsection (3),
the credit provider must sell the goods as soon as practicable
for
the best price reasonably obtainable.
(5)
After
selling any goods in terms of this section, a credit
provider
must-
(a) credit or debit the consumer with a
payment or charge
equivalent
to the proceeds of the sale less any expenses reasonably incurred by
the credit provider in connection with the sale
of the goods; and
(b)
give the consumer a written notice stating the following:
(i)
The
settlement value of the agreement immediately before the sale;
(ii)
the
gross amount realised on the sale;
(iii)
the net proceeds of the sale after deducting the credit
provider's
permitted default charges, if applicable, and
reasonable
costs allowed under paragraph (a); and
(iv)
the amount credited or debited to the consumer's
account.
(6)
If
an amount is credited to the consumer's account and it exceeds the
settlement value immediately before the sale, and-
(a)
another credit provider has a registered credit agreement
with
the same consumer in respect of the same goods, the credit provider
must remit that amount to the Tribunal, which may make
an order for
the distribution of the amount in a manner that is just and
reasonable; or
(b)no
other credit provider has a registered credit agreement with the same
consumer in respect of the same goods, the credit provider
must remit
that amount to the consumer with the notice required by subsection
(5)(b), and the agreement is terminated upon remittance
of that
amount.
(7)
If
an amount is credited to the consumer's account and it is less than
the settlement value immediately before the sale, or an amount
is
debited to the consumer's account, the credit provider may demand
payment from the consumer of the remaining settlement value,
when
issuing the notice required by subsection (5) (b).
(8)
If a consumer-
(a)
fails to pay an amount demanded in terms of subsection (7) within 10
business days after receiving a demand notice, the credit
provider
may commence proceedings in terms of the Magistrates' Courts Act for
judgment enforcing the credit agreement; or
(b)
pays the amount demanded after receiving a demand notice at any time
before judgment is obtained under paragraph (a), the agreement
is
terminated upon remittance of that amount.
(9)
In either event contemplated in subsection (8), interest is payable
by the consumer at the rate applicable to the credit agreement
on any
outstanding amount demanded by the credit provider in terms of
subsection (7), from the date of the demand until the date
that the
outstanding amount is paid.
(10)
A credit provider who acts in a manner contraiy to this section is
guilty of an offence".
[23]
I should mention that section 128, which is also referred to in
section 131 and deals with the situation where a consumer is
not
satisfied with the sale of the goods, is not applicable in the
instant case.
[24]
Mr. Coetsee submitted that by incorporating the provisions of section
127 (2) to (9) in section 131, the legislature intended
to create a
procedure for the attachment of goods where a consumer is in breach
of his contractual obligations in terms of an instalment
agreement,
while the agreement remains extant. In fact, he argued that the
credit provider is precluded from cancelling the instalment
agreement, as the legislature intended to keep the agreement alive,
to enable the parties to deal with the repossessed goods in
accordance with the provisions of section 127 (2) to (9). Mr. Coetsee
accordingly submitted that the NCA has introduced a procedure
at
variance with the common law concept of the cancellation of an
instalment agreement, upon breach thereof by the consumer. He
contended that it is evident from section 127, that the relevant
instalment agreement is only terminated in accordance with the
provisions of section 127 (6) (b) or section 127 (8) (b). Therefore,
Mr. Coetsee submitted, the repossession of goods which are
the
subject of an instalment agreement, is no longer dependent on a
cancellation of the instalment agreement.
[25]
In sum, it is applicant's case that in the event of the consumer
defaulting, section 131 of the NCA provides for the granting
of a
final order attaching the goods which are the subject of an
instalment agreement, whereupon the credit provider has to realise
same in accordance with the provisions of section 127 (2) to (9).
Applicant contends that, in such event, the credit provider only
has
to prove compliance with the requirements set out in section 130 (1)
of the NCA. There is, according to applicant, no need
for the issuing
of a summons claiming cancellation of the relevant credit agreement,
either prior to, or simultaneously with, the
application for an
attachment order in terms of section 131 of the NCA. Such
application, applicant submits, may be brought ex
parte by the credit
provider in terms of
section 30
of the
Magistrates' Courts Act No. 32
of 1944
.
[26]
Mr. Coetsee pointed to the following provisions of
section 127
, to
substantiate his submission that the legislature has introduced this
procedure whereby the credit provider is entitled to the
return of
the goods, without cancelling the relevant instalment agreement.
Firstly, sub
section 127
(3), which allows the consumer a window
period of 10 business days after receiving a written notice from the
credit provider regarding
the value of the repossessed goods, within
which he or she can resume possession of the goods by purging his or
her default. Mr.
Coetsee submitted that, had there been a prior
cancellation of the instalment agreement, there would be no basis for
the consumer
to resume possession of the goods. Secondly, subsections
127 (6) and (8), which provide for the "termination" of the
instalment agreement pursuant to the sale of the goods. These
subsections state that upon the remittance of any excess by the
credit
provider to the consumer, or the remittance of any shortfall
by the consumer to the credit provider, the instalment agreement
terminates.
Mr. Coetsee submitted that the termination of an
instalment agreement in terms of these subsections, is irreconcilable
with the
concept of the prior cancellation of the instalment
agreement by the credit provider, as such cancellation would have
resulted
in the prior termination of the instalment agreement. He
contended that the "termination" of the instalment
agreement
in terms of sub-sections 127 (6) (b) and 8 (b), would then
not make any legal sense, as the instalment agreement had already
been
cancelled prior to the repossession of the goods.
[27]
In interpreting the relevant provisions of the NCA, one should remind
yourself that a purposive construction is called for.
As emphasised
in Department of Land Affairs and Others v Goedgelegen Tropical
Fruits (Pty) Ltd,
[2007] ZACC 12
;
2007 (6) SA 199
(CC) at paragraph 52-3, it is
necessary that the provisions of the NCA should be read in the light
of the subject matter with which
they are concerned, to enable the
court to arrive at the true intention of the legislature. In view of
the submission of applicant,
that the NCA has done away with the
right of a credit provider to cancel an instalment agreement, the
presumption of our common
law, that the legislature does not intend
to alter the common law unless it is clear from the language of the
statute that the
very object is to alter or modify it, should also be
borne in mind. (See
Stadsraad
van Pretoria v Van Wyk
1973
(2) SA 779
(A) at 784). However, as pointed out by J R de Ville,
Constitutional
and Statutory Interpretation,
page
172, the common law also needs to be critically re-evaluated in the
light of the values of the Bill of Rights, before it is
allowed to
influence the interpretation of legislation. As stated in
Du
Plessis and Others v De Klerk and Another
[1996] ZACC 10
;
1996
(3) SA 850
(CC) at paragraph 86, the common law "needs to be
revisited and revitalized with the spirit of the constitutional
values defined
in Chapter 3 of the Constitution and with full regard
to the purport and object of that Chapter".
[28]
In my view, applicant's interpretation of the relevant sections of
the NCA, and, in particular sections 131 and 127 (2) to
(9), does not
take proper account of the purpose for which the provisions of
section 127 (2) to (9) were incorporated in section
131. I hold the
view that, upon a proper construction of this legislation, all that
the legislature intended was to prescribe,
with reference to section
127 (2) to (9), the execution and realisation process of goods
attached by the credit provider in terms
of a court order. The
relevant court order would be obtained upon cancellation of the
agreement by the credit provider, pursuant
to the breach thereof by
the consumer, which cancellation terminates the respective
obligations of the parties. Thereafter the
execution and realisation
procedure prescribed by section 127 (2) to (9), is to be followed. I
do not agree with the submission
on behalf of applicant, that the
legislature intended, by incorporating section 127 (2) to (9) in
section 131, to change the common
law by doing away with the
requirement of the cancellation of an instalment agreement prior to
the repossession of the goods. If
this is what the legislature
intended, I would have expected it to have been conveyed in clear and
uncertain terms and not by means
of a process of inferential
reasoning, as contended for by applicant.
[29]
I am of the view that applicant's interpretation fails to pay
sufficient regard to the restriction imposed by section 131,
ie that
section 127 (2) to (9) should be "read with the changes required
by the context". If this is borne in mind, it
appears to me that
the legislature intended to provide the following with regard to the
execution and realisation of goods attached
by virtue of a court
order in terms of section 131 of the NCA:
(a) Within
10 business days after receiving the goods that are the subject of
the instalment agreement, the credit provider must
give the consumer
written notice setting out the estimated value of the goods and other
prescribed information. (Section 127 (2)
(b)).
(b) Section
127 (3), which deals with the right of the consumer, who is not in
default, to unconditionally withdraw his or her notice
to voluntary
terminate the agreement, obviously does not find application, as the
goods have not been voluntarily surrendered,
but attached in terms of
section 131. For the same reason section 127 (4) (a), which allows
for the return of the goods to the
consumer, will not apply.
(c) If
the consumer fails to respond to the notice in terms of section 127
(2) (b), advising him or her of the estimated value of
the goods, the
credit provider must sell the goods as soon as practicable for the
best price reasonably obtainable. (Section 127
(4) (b)).
After
selling the goods, the credit provider must credit or debit the
consumer with a payment or charge equivalent to the proceeds
of the
sale, less any expenses reasonably incurred by the credit provider
in connection with the sale of the goods and give the
consumer a
written notice stating the following:
(i)
The
settlement value of the agreement immediately before the sale:
(ii)
The
gross amount realised on the sale;
(iii)
The
net proceeds of the sale after deducting the credit provider's
permitted default charges, if applicable, and reasonable costs;
and
(iv)
The
amount credited or debited to the consumer's account.
(Section
127 (5) (a) and (b)).
(e)
If an amount is credited to the consumer's account and it exceeds the
settlement value immediately before the sale, and another
credit
provider has a registered credit agreement with the same consumer in
respect of the same goods, the credit provider must
remit that amount
to the National Consumer Tribunal established by section 26 of the
NCA, which may make an order for the distribution
of the amount in a
manner that is just and reasonable. However, if no other credit
provider has a registered credit agreement with
the same consumer in
respect of the same goods, the credit provider must remit that amount
to the consumer with the notice required
by subsection (5) (b).
(Section 127 (6) (a) and (b)).
(f) If
an amount is credited to the consumer's account and it is less than
the settlement value immediately before the sale, or
an amount is
debited to the consumer's account, the credit provider may demand
payment from the consumer of the remaining settlement
value, when
issuing the notice required by subsection (5) (b). (Section 127 (7)).
(g) If
a consumer fails to pay an amount demanded in terms of section 127
(7), within 10 business days after receiving the required
demand
notice, the credit provider may apply for judgment in terms of the
Magistrates' Courts Act for
the recovery of the remaining settlement
value. If, however, the consumer pays the amount demanded after
receiving the demand notice,
judgment against him or her will be
prevented.
(Section 127
(8) (a) and (b)).
(h)
In
either event contemplated in terms of
section 127
(8), interest is
payable by the consumer at the rate applicable to the instalment
agreement on any outstanding amount demanded
by the credit provider
in terms of subsection 7, from the date of the demand until the date
that the outstanding amount is paid
(Section 127
(9)).
[30]
I should add, that when the provisions of
section 127
(6) (b) and
127
(8) (b) are read with the changes required by the context, it is, in
my opinion, clear that the references to the "termination"
of the instalment agreement are to apply only in the case where the
goods have been voluntarily surrendered. These references do
obviously not find application where the goods have been attached in
terms of
section 131
, pursuant to the cancellation of an instalment
agreement by the credit provider. The "termination" of the
instalment
agreement would then have been brought about by the
exercising of its right of cancellation by the credit provider.
[31]
Mr. Coetsee argued that by incorporating the provisions of
section
127
(2) to (9) in
section 131
, the legislature intended to keep the
instalment agreement alive to ensure compliance with the provisions
of
section 127
(2) to (9). I am of the opinion that, upon a proper
construction of the relevant provisions of the NCA, there is no basis
for this
conclusion of applicant. As I have already indicated, when
section 127
(2) to (9) is read with the changes required by the
context, it regulates the execution and realisation procedures to be
followed
by the credit provider after cancellation of the instalment
agreement. The consumer is protected from disadvantageous practices
during the realisation process, by the measures introduced by
section
127
(2) to (9), which provide for the orderly sale of the goods which
are the subject of the instalment agreement. Put differently,
there
is no need to keep the instalment agreement "alive", to
ensure that the protection of
section 127
(2) to (9) is afforded to
the consumer.
[32]
In my view, the construction contended for by applicant, would impact
negatively on the rights of the consumer. The credit
provider would
not be required to prove that the consumer has committed a breach of
contract, justifying the cancellation of the
instalment agreement and
resultant repossession of the goods. Any breach, whether material or
not, would, on applicant's interpretation
of the relevant provisions
of the NCA, entitle the consumer to approach the court on an ex parte
basis to obtain a final order
of repossession. I do not believe that,
having regard to the objects of the NCA, the legislature intended to
allow a credit provider
to repossess the goods without showing that
it is entitled to the cancellation of the instalment agreement, by
virtue of a material
breach, or at least a breach which the parties
have considered to be material in terms of a
lex
commissoria
incorporated
in the instalment agreement.
[33]
I also share the concern of second respondent, that applicant's
interpretation will lead to an unfair result. On this interpretation
the consumer is finally and permanently dispossessed of the goods,
thereby absolving applicant from performance in terms of the
agreement. However, in view of the extant agreement, the consumer,
while having been deprived of the goods, remains liable to pay
the
instalments due in terms of the agreement. It should be borne in
mind, that in terms of
section 127
(5) (b) (i) of the NCA, the
settlement value of the agreement for purposes of the realisation
process, is determined immediately
before the date of the sale of the
goods by the credit provider. Although
section 127
(4) (b) provides
that the goods are to be sold as soon as practicable, such a sale
may, especially in difficult financial times,
take some time to
eventuate. This would mean that the consumer, although having being
dispossessed of the goods, will remain liable
for payment of the
instalments which have fallen due since the date of the repossession
of the goods. Once again, it seems to me
that the legislature, who,
by means of this legislation, intended to promote and advance the
social and economic welfare of South
Africans, would not have
intended the consumer to be prejudiced in this manner.
[34]
In the course of his argument, Mr. Coetsee was constrained to submit
that it is only in the case of instalment agreements that
the
legislature introduced this procedure, which entitles a credit
provider to repossess the goods in the absence of the cancellation
of
the instalment agreement. As I understand his submission, the
legislature did not intend to tamper with the common law remedy
of
cancellation with regard to other credit transactions, as defined in
the NCA. I would have thought that, had it been the intention
of the
legislature to single out instalment agreements for this drastic
departure from the normal principles of our law of contract,
it would
have been done in clear and unambiguous language. However, one
searches the NCA in vain for a clear indication of such
an intention.
[35]
In view of the aforegoing, I conclude that applicant's reliance on
the provisions of
section 131
, read with
section 127
(2) to (9), as
substantiation for the submission that the legislature has introduced
a procedure whereby the credit provider is
entitled to the return of
the goods, without cancelling the relevant instalment agreement, is
without merit.
[36]
Mr. Coetsee further relied on
section 123
of the NCA, as placing a
limitation on a credit provider's right to cancel an instalment
agreement. I do not agree.
Section 123
(2) expressly provides that
where a consumer is in default under a credit agreement, the credit
provider may take the steps set
out in Part C of Chapter 6, to
"enforce and terminate" the agreement. As mentioned
previously, the use of the word "terminate",
conveys the
legal notion of the extinguishing of contractual obligations, which
would normally include the cancellation of an agreement.
[37]
I also understood Mr. Coetsee to rely on
section 129
(4) (a) (i) of
the NCA, as support for the submission that the NCA has introduced a
procedure at variance with the common law concept
of the cancellation
of an instalment agreement upon breach thereof.
Section 129
(3) and
(4) makes provision for the reinstatement of a credit agreement as
part of the procedure available before debt enforcement.
Section 129
(3) provides that, subject to
section 129
(4), a consumer may at any
time before the credit provider has cancelled the agreement,
re-instate same by paying to the credit
provider all amounts that are
overdue.
Section 129
(4), however, precludes the re-instatement of a
credit agreement after:
(a)
the
sale of any property pursuant to-
(i)
an
attachment order; or
(ii)
the
surrender of property in terms of
section 127
;
the
execution of any other court order enforcing that agreement; or
(c) the
termination thereof in accordance with
section 123.
[38]
I do not agree that
section 129
(3) and/or (4), provides support for
the argument of applicant.
Section 129
(3) only deals with
re-instatement prior to the cancellation of the relevant credit
agreement, while, as pointed out by J W Scholtz
et
al
at
12-37, the relevant instances referred to in
section 129
(4), imply
that the credit agreement has been cancelled (or terminated) and that
such cancellation (or termination) constitutes
a bar to
re-instatement. The said sub-sections do not, in my view, serve as
indications of an intention on the part of the legislature
to
introduce a procedure at variance with the concept of the
cancellation of an instalment agreement upon breach thereof.
[39]
I accordingly conclude that upon a proper interpretation of the
relevant provisions of the NCA, the legislature has not done
away
with the requirement of a claim for the cancellation of an instalment
agreement, prior to the granting of an attachment order
in terms of
section 131
of the NCA. This conclusion appears to be in accordance
with the views expressed by Otto and J W Scholtz
et
al,
as
well as the authors of articles in law journals dealing with the NCA.
[40]
I am of the view that, within the context of the issues in this
matter, the legislature only intended encroaching upon a credit
provider's common law rights in two respects. Firstly, by prescribing
procedures to be complied with prior to the enforcement of
the debt
(sections 129
and
130
), and, secondly, by means of the prescribed
execution and realisation process to be followed after cancellation
of the instalment
agreement by the credit provider
(section 131
read
with
section 127
(2) to (9)).
[41]
I am satisfied that the conclusion which I have reached, regarding
the interpretation of the relevant provisions of the NCA,
is in
harmony with the declared purposes of the NCA. In my view the
construction contended for by applicant, is not only foreign
to the
principles of our common law, but is, for the reasons furnished
hereinbefore, inconsistent with the declared aim of the
legislature
to provide for a consistent and harmonised system of debt
enforcement, in which the consumer's rights are protected.
[42]
In my opinion the common law principle (as embodied in the instant
instalment agreement), requiring the cancellation of the
instalment
agreement prior to the attachment and repossession of first
respondent's vehicle, is a necessary requirement for a consistent
and
harmonised system of debt enforcement and for the protection of the
consumer's rights. A critical re-evaluation of this common
law
principle, does not, in my view, show that the retention thereof will
impact negatively on the values enshrined in our Bill
of Rights. On
the contrary, I reiterate that I am of the opinion that the retention
of this principle of our law of contract, is
necessary for the
protection of the rights of consumers.
[43]
I accordingly agree with the finding of second respondent that,
absent a claim for the cancellation of the instalment agreement,
applicant was not entitled to a final order for the attachment of the
vehicle in terms of
section 131
of the NCA. It accordingly follows
that the application for review cannot succeed. In view of my
conclusion, it is not necessary
to deal with second respondent's
finding that the allegations in applicant's founding affidavit fell
short of what is required
for the granting of applications of this
nature.
[44]
In the result, the application for review is dismissed.
P
B FOURIE, J
I
agree
V
Saldanha, J
I
agre
T
S Madima, A J