Damon and Another v Nedcor Bank Limited (3970/04) [2006] ZAWCHC 49 (30 October 2006)

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[2006] ZAWCHC 49
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Damon and Another v Nedcor Bank Limited (3970/04) [2006] ZAWCHC 49 (30 October 2006)

REPORTABLE
IN THE
HIGH COURT OF SOUTH AFRICA
(CAPE OF
GOOD HOPE PROVINCIAL DIVISION)
CASE NO. 3970/04
In the matter between:
THEODORE PETER DAMON
First Applicant
CARLA YOLANDA DAMON
Second Applicant
and
NEDCOR BANK LIMITED
Respondent
JUDGMENT DELIVERED THIS 30TH DAY OF OCTOBER 2006
BINNS-WARD AJ
The applicants, who are husband and wife, have applied for an order
rescinding the judgment granted by default against them by
this
court at the instance of Nedcor Bank Ltd in September 2004. Nedcor
had obtained the judgment in an action for payment of
the amount
outstanding in respect of a loan secured by a mortgage bond
registered against certain immovable property then owned
by the
applicants.
The applicants did not oppose the claim because they had no defence
to it. They had been unable to service the bond repayment
instalments as a consequence of their joint income having diminished
when one of them (it is not altogether clear which) lost their
employment. The subsequent sale of the property enabled the payment
of the judgment debt in full.
The applicants have, however, subsequently discovered that the
judgment has been listed by the credit bureaux and that, as a
consequence,
they are unable to obtain credit. The purpose of
obtaining the rescission of judgment that is now applied for is, as
the second
applicant puts it in the founding affidavit, ‘so that
the credit records could be amended’.
The judgment creditor has consented in writing to the rescission of
the judgment.
When the matter was called I drew counsel’s notice to the fact
that it has been held on a number of occasions that the court
does
not have the power to grant a rescission of judgment in
circumstances like this, and even if such powers did vest in the

court, that it would not be appropriate to grant relief of a nature
that has the effect for practical purposes of falsifying actual
credit records by allowing the impression to be given that a default
judgment had never properly been given against the debtor.
See
Saphula v Nedcor Bank Ltd
1999 (2) SA 76
(W); Lazarus and
Another v Nedcor Bank Ltd; Lazarus and Another v Absa Bank Ltd
1999
(2) SA 782
(W)
and
Venter v Standard Bank of South Africa
[1999] 3 All SA 278
(W)
.
I was aware when I raised the point that a two-Judge Bench of this
court had held in
RFS Catering Supplies v Bernard Bigara
Enterprises CC
2002 (1) SA 896
(C)
that rule 49(5) of the
Magistrates’ Court Rules, which appears to allow for the
rescission of a default judgment where a plaintiff
in whose favour a
default judgment has been granted has agreed thereto in writing, is
not inconsistent with the common law. In
so doing this court
disapproved of the judgment in
Venter v Standard Bank of South
Africa
, but made no reference to the other two judgments that I
have mentioned.
In arriving at its decision, this court took
a different view from that adopted in the judgments in the
Witwatersrand Local Division
on the effect of the Appellate
Division’s judgment in
De Wet and Others v Western Bank Ltd
1979 (2) SA 1031
(A)
. In the latter judgment, Trengove AJA (as
he then was) held at 1042F-H, ‘
Thus, under the common law, the
Courts of Holland were, generally speaking, empowered to rescind
judgments obtained on default of
appearance, on sufficient case
shown. This power was entrusted to the discretion of the Courts.
Although no rigid limits were
set as to the circumstances which
constituted sufficient cause (cf examples quoted by Kersteman (op
cit sv
defaillant
) the Courts nevertheless laid
down certain general principles, for themselves, to guide them in
the exercise of their discretion.
Broadly speaking, the exercise of
the Court's discretionary power appears to have been influenced by
considerations of justice
and fairness, having regard to all the
facts and circumstances of the particular case.
’ Those
remarks fall to be read with the observation by the learned judge of
appeal at 1041C-D of the judgment that ‘
The Courts of Holland…
appear to have had a relatively wide discretion in regard to the
rescission of default judgments, and a
distinction seems to have
been drawn between the rescission of default judgments, which had
been granted without going into the
merits of the dispute between
the parties, and the rescission of final and definitive judgments,
whether by default or not, after
evidence had been adduced on the
merits of the dispute. (Cf
Athanassiou v Schultz
1956 (4)
SA 357
(W)
at 360G and
Verkouteren v Savage
1918 AD 143
at 144). In the former instance the Court
enjoyed relatively wide powers of rescission, whereas in the latter
event the Court
was, generally speaking, regarded as being
functus
officio
, and judgments could only be set aside on the
limited grounds mentioned in the
Childerley
case.
’
1
The essential basis for the difference between the approach in
RFS
Catering Supplies
and the judgments in the Witwatersrand Local
Division appears to me therefore to be the consideration by the
latter court that
in a case where the merits of the case on which
judgment had been given were not open to being revisited, the court
was
functus
.
Apart from the fact that it was made in terms of magistrates’
court rule 49(5), the rescission of judgment application in issue
in
RFS Catering Supplies
was not dissimilar in material respects
to the one currently under consideration.
There is no equivalent of rule 49(5) in the High Court rules of
procedure, but it seems to me that if I am bound by the judgment
in
RFS Catering Supplies
to accept that there is no inconsonance
between the remedy which was there held to be available in terms of
rule 49(5) and the
common law, I am equally bound to recognise the
existence of an equivalent remedy in this jurisdiction
notwithstanding the absence
of any equivalent rule of court. In
RFS
Catering Supplies
, Josman J (Van Reenen J concurring) expressed
the view, contrary to the opinions expressed by learned judges in
the Witwatersrand
Local Division, that it was preferable for the
common law to develop to cater for the difficulties posed by default
judgments
to applicants for credit than for the problem to be
addressed by legislation.
In
RFS Catering Supplies
it was held that the right to the
remedy under the common law, as adapted to meet the exigencies
created by the modern phenomena
of debt records and credit bureaux,
was founded in ‘fairness and justice’. That of course begs the
question of by what criteria
or considerations the fairness and
justice of a given case fall to be established. The answer must
necessarily depend on the peculiar
circumstances of the case. The
availability of a statutory remedy making it unnecessary to extend
the common law, particularly
when there is disharmony between the
divisions of the High Court on the current state of the common law,
must also be part of the
answer. I have considerable reservation
about accepting that the judgment creditor’s consent should by
itself be determinative
of the question. On the contrary, if the
need for relief is established by the applicants’ need not to
unreasonably be denied
access to credit, it is readily conceivable
that a more compelling case might be made out in fairness and
justice in a matter where
the judgment creditor was unwilling, for
no good reason, to furnish written consent of the sort referred to
in Magistrates’ Court
rule 49(5). It also appears to me that
fairness and justice in this context must entail having regard not
only to the interests
of the applicant for rescission, but also to
the economic and societal functions of accurate debt and credit
records in modern
commercial life. A further consideration must be
whether the particular remedy sought is the appropriate one in the
context of
other potentially available common law remedies,
including remedies against the credit bureaux. The latter
consideration did not
enjoy consideration in
RFS Catering
Supplies
because of the focus of the enquiry in that matter;
viz. whether rule 49(5) was consistent with the common law.
Josman J pointed out in
RFS Catering Supplies
that the
Roman-Dutch common law in South Africa is, and always has been,
amenable to adaptation according to changing conditions
in society.
This is undoubtedly so; and indeed conditions have continued to
change since judgment in that matter was given in
October 2001.
Subsequent to that date the legislature has responded to the
suggestion made by Cloete J (as he then was) in
Lazarus
,
supra, at 786 E-F, that the predicament of persons such as the
applicants in this case be addressed by the parliamentary lawmakers.
The National Credit Act 34 of 2005 (hereafter referred to either as
‘the NCA’, or ‘the Act’) has been adopted.
The long title of the NCA states (insofar as relevant for current
purposes) that it is an Act
‘to promote a fair and
non-discriminatory market place for access to consumer credit and
for that purpose to provide for the general
regulation of consumer
credit and improve 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 regulate
credit information; to
provide for registration of credit bureaux, creditor providers and
debt counselling services; to establish
national norms and standards
relating to consumer credit; to promote a consistent enforcement
framework relating to consumer credit;
to establish the national
credit regulator and the national consumer tribunal … and to
provide for related incidental matters’
. The objects of the
Act as they might be deduced from the long title are confirmed in
relevant respects by the provisions of s 3
thereof.
The Act establishes the National Credit Regulator, which is a
juristic person, with the responsibility, amongst other things, for
the registration of credit bureaux. Section 43 of the NCA provides
that the business of a credit bureau may only be carried on
by a
person that has obtained registration as a credit bureau in terms of
the Act. The National Credit Regulator is not permitted
to register
a person as a credit bureau unless satisfied as to the appropriate
qualification, competence, knowledge, experience
and capacity of
such person to operate as a credit bureau. One of the requirements
for registration as a credit bureau is the
satisfaction by the
applicant for registration of the National Credit Regulator that the
applicant has adopted procedures to ensure
that questions, concerns
and complaints of consumers or credit providers can be treated
equitably and consistently in a timely,
efficient and courteous
manner (see s 43(3)(c)). In terms of Part B of Chapter 2 of
the Act a National Consumer Tribunal
is established with the power
to adjudicate upon any application that might be made to it in terms
of the Act and any allegations
of prohibited conduct under the Act.
The decisions of the National Consumer Tribunal have the status of
judgments of the High
Court (see s 152 of the Act).
Section 70 of the NCA makes a registered credit bureau
responsible for maintaining accurate information on record and, in
this connection, it is required, amongst its other duties, to accept
without charge the filing of consumer credit information from
the
consumer for the purpose of correcting or challenging information
otherwise held by that credit bureau concerning that consumer.
In
terms of s 70(2)(d) of the Act, a registered credit bureau is
required to retain any consumer credit information reported
to it
for the prescribed period, irrespective of whether that information
reflects positively or negatively on the consumer.
Part D of chapter 4 of the Act provides for a system of assisted
debt management or debt re-arrangement for persons who, like the
applicants in this case did, encounter difficulty in meeting their
obligations in terms of credit agreements. (A mortgage contract
is
expressly included within the meaning of ‘credit agreement’
under the Act.) A person subject to a debt re-arrangement becomes
entitled to the issue of a clearance certificate once he or she has
discharged the outstanding financial obligations which are
subject
to the debt re-arrangement. The issue of such a clearance
certificate entitles the credit receiver to the expungement
of the
affected transactions in respect of which he or she had been in
default of his or her contractual obligations from the credit
records maintained by registered credit bureaux. In the event of a
credit bureau failing or refusing to expunge the record, the
credit
receiver is afforded remedies under the Act to address such failure
or refusal without it being necessary to approach a
court.
A consideration of the provisions of the Act as a whole makes it
clear that the legislature has sought to balance the commercial
need
for reliable debtor and credit information with the social need that
an incidence of bad debt in a person’s life should
not, once
rectified, thereafter unduly prevent such person from again
accessing credit. The provisions of the Act also make it
plain that
the legislature considers it to be a matter of public policy that
encouragement should be given to ensuring that the
extension,
obtaining and management of credit or debt, as the case might be, is
handled responsibly by all concerned, whether they
be lenders,
borrowers or credit information managers. It should therefore no
longer be necessary to seek adaptations to the common
law, arguably
by uncomfortable and artificial contrivance, to address the sort of
unhappy predicament that the applicants in this
case find themselves
in. In future persons who find themselves in this predicament
through failure to make responsible use of
the machinery which the
Act provides should, in my view, have to wait out the five year
period provided under the regulations to
the Act, after which
default judgments fall automatically and compulsorily to be expunged
from the records maintained by credit
bureaux.
Mr
Abrahams
, who appeared for the applicants pointed out that
in terms of item 6 of the table in s 17(1) of the regulations
published
under the Act
2
consumer credit information related to civil court judgments,
including default judgments, may be displayed and used for purposes
of credit scoring or credit assessment for a maximum period of five
years, or ‘
until the judgment is rescinded by a court or
abandoned by the credit provider in terms of section 86 of the
Magistrates’ Court
Act
’. I understood him to suggest that
this reference to the rescission of judgments in the regulations
afforded legislative recognition
that applications such as this
should be positively entertained. I do not agree.
It is an established principle that the legislature is taken to be
aware of the existing state of the relevant law, including the
reported judgments of the superior courts, when it enacts
legislation in respect of any particular matter. Cf. e.g.
Attorney-General, Eastern Cape v Blom and Others
1988 (4) SA 645
(A)
at 649G:
Harpur NO v Govindamall and Another
[1993] ZASCA 110
;
1993 (4) SA
751
(A)
at 770E-F. In the context of a series of judgments
emanating from what is undoubtedly the busiest seat of the High
Court dealing
with commercial matters, in which that court has
refused to recognise the existence in common law of a remedy of
rescission of
judgment in cases like the present, I consider it to
be significant that there is no provision in the Act providing a
statutory
basis for rescission of judgments in such cases.
Considering the extra-curial remedies (outlined in general terms
above) that
are provided in the Act, which effectively address the
issues identified in the WLD judgments, I do not find it surprising
that
the legislature did not consider it necessary to provide an
additional statutory basis for the rescission of judgments over and
above the limited common law grounds recognised in the Witwatersrand
Local Division in the context of that court’s reading of
the
exposition of the common law in
De Wet and Others v Western Bank
Ltd
, supra, and
Chetty v Law Society, Transvaal
1985 (2) SA
756
(A)
at 764I - 765D. Once the Act becomes fully
operational,
3
relief by way of rescission of judgments in the context acknowledged
in this division of the High Court in the
RFS Catering Supplies
case should be unnecessary.
The NCA does not, however, contain any transitional provisions that
would enable persons such as the applicants whose adverse credit
history reaches back to a time before the commencement of the Act to
obtain expungement of their default judgments from the records
of
the credit bureaux. Such persons will, if they are not to obtain
relief on the basis permitted in terms of the judgment in
RFS
Catering Supplies
, have to wait out the period of five years
prescribed in the regulations.
It is clear on the facts that the applicants could in the context of
the Act’s debt re-arrangement provisions, had they been
available
at the time, probably have obtained appropriate relief that would
have permitted them upon the subsequent liquidation
of the debt to
obtain the immediate expungement of any reference to the default
judgment from the records of registered credit
bureaux. In the
circumstances I have been persuaded that the applicants are entitled
in the peculiar circumstances of this case
to the advantage of the
law as stated in the
RFS Catering Supplies
case, vestigial as
the authority of that judgment appears to have become.
Accordingly an order is made rescinding the default judgment granted
against the applicants in favour of Nedcor Bank Limited in
case
no.3970/04.
A.G. BINNS-WARD
ACTING JUDGE OF THE HIGH COURT
1
Childerley Estate Stores v Standard Bank of SA Ltd
1924 OPD 163.
2
Published under GN R489 in GG 28864 of 31 May
2006.
3
The commencement of the operation of the
provisions of the Act has been staggered, with many of the
provisions relevant to the discussion
in this judgment due to come
into effect only on 1 June 2007.