IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU -NATAL DIVISION, PIETERMARITZBURG
REPORTABLE
Case No.: AR188/2023
Court a quo : 30823/2019
In the matter between:
MOMENTUM METROPOLITAN LIFE LIMITED Appellant
and
AROON LAKHOO Respondent
ORDER
On appeal from: the District Magistrates Court , Durban (Mr H M Msweli ) sitting as
court of first instance:
1. The appeal is upheld with costs, such costs to include the costs of the
application for condonation.
2. Paragraph 2 of the Magistrate’s order is substituted with the following :
‘[2] Judgment is granted in favour of the plaintiff:
(2.1) in the amount of R124 914.69;
(2.2) together with interest subject to in duplum and limited to the amount of
R25 714.69 such that the total recoverable shall not exceed R 159 629.38;
(2.3) costs of suit on an attorney -client scale’ .
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JUDGMENT
Harrison AJ and Keshav AJ
[1] This is an appeal against the second paragraph of the order of the magistrate ,
Mr H M Msweli , in respect of his j udgment dated 30 January 2023. The second
paragraph grants absolution from the instance with no order as to costs.1
[2] The appeal in the present matter is hardly surprising given that an order of
absolution has the effect of a final order and no further action can be instituted on a
cause of action , which would now have prescribed. The order of absolution was
granted against, as will become apparent below , against the only real issue, namely
whether the National Credit Act 34 of 2005 ( ‘the NCA ’) is applicable to the
acknowledgement of debt , which formed the basis of the appellant/plaintiff’s cause of
action.
[3] The appellant has also raised the issue as to whether the magistrate could
mero motu raise the issue of non registration of the plaintiff and no assessment of
over indebtedness in terms of the NCA in circumstances where these defences had
not been specifically pleaded, however, if the appeal court agrees with the appellant
on the issue , that the NCA does not apply to the acknowledgement of debt, then this
issue of whether the magistrate raised certain points relating to the NCA the point
mero motu become s moot, and it will then accordingly be unnecessary to decide
these issue s.
[4] Before dealing with the merits of this matter, it was necessary to note that
there were certain defects in th e record which came on appeal. Those defects were
pertinently addressed in a n application for condonation. A substantive application for
condonation was made, and it clearly sets out the nature and manner in which the
1 The first order sought d ismissed certain special pleas. There is no counter appeal in respect of that
order and, hence, it is only the issue of the absolution which is before the appeal court .
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appellant’s attorneys sought to recreate the record in compliance with the rules of
court , and, at the outset of the hearing of this appeal, that condonation was granted
and it is accordingly unnecessary to address the matter any further, save and except
to record in this judgment that such condonation was granted pursuant to a
substantive application which clearly sets out the nature and manner in which the
appellant’s attorneys sought to comply with the rules of court . The attorneys are to
be complimented on the manner in which they approached the condonation and,
from a reading of the supporting affidavit, it is clear that it is not through any fault of
the appellant or the appellant’s attorneys that the record was incomplete.
[5] There was no opposition from the respondent and that condonation having
been granted, it follow s that the costs of the condonation should form part of the
costs of this appeal.
[6] The background to this appeal is that the respondent was a financial advisor
with an entity named Plan Smart Trade (Pty) Ltd trading as Tescon Financial
Advisors ( ‘Tescon ’). Tescon was a financial advisor which sold insurance products
from the Momentum Group Ltd (‘Momentum’) , and the respondent was one of the
financial advisors in the employ of Tescon.
[7] During or about 2012, Tescon stopped selling Momentum insurance products
and became a franchise within Discovery Ltd.
[8] The acknowledgement of debt, which forms the subject matter of this appeal,
was subsequently signed by the respondent (I have dealt with the dispute relating to
the signature and how the document came to be signed, hereunder) , arising out of a
clawback of commission advances , which had been paid to Tescon and the
respondent in respect of Momentum policies which had been sold by him to the
clients of Tescon.
[9] During the course of the trial this was referred to as ‘the clawback of upfront
commissions ’.
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[10] In effect, the respondent had received greater commissions than that which
ultimately proved to have been earned and, by virtue of them having been paid
upfront, he was obliged to reimbu rse these amounts to Momentum. These amounts
were calculated and then formed the subject matter of the acknowledgement of debt,
which was signed by the respondent on 18 May 2010.
[11] That acknowledgement of debt provided for periodic payments and when the
respondent ceased making payments in March 2018, the appellant instituted action
in the magistrates court for payment of the sum of R124 914.69.
[12] It is necessary to record that the acknowledgement of debt was for
R75 314.69, and the appellant has correctly acknowledged that interest in duplum
would apply to the matter. This is dealt with hereunder.
[13] The respondent defended the magistrates ’ court action and raised no less
than six special pleas ranging from challenging the authority of the named plaintiff to
institute the action, prescription, locus standi , to non -compliance with section 129 of
the NCA . It is unnecessary to consider these special pleas as they were all dealt with
in the magistrates ’ court , and dismissed.
[14] Additionally, the respondent sought to suggest that he had signed the
acknowledgement of debt under duress and that he did not sign the document in
front of the witnesses in question. The contradictory nature of these defences is self-
evident as the contention of duress defeated any suggestion that he did not sign the
document ; furthermore, the document is not one which requires to be witnessed and
the respondent ’s signature is all that is necessary to have a binding acknowledgment
of debt.
[15] Additionally, the respondent challenged the use of copies of the
acknowledgement of debt.
[16] The magistrate correctly found that the acknowledgement of debt was valid
and binding on the respondent, and that there was no duress in signing the
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document. This only left the issue of the applicability of the NCA and the issue of its
compliance.
[17] All other issues of fact and law were determined in favour of the appellant,
and it was only during the course of judgment that the magistrate raised, mero motu ,
that the acknowledgement of debt was a document which was subject to the NCA ,
and in this regard, the magistrate stated as follows in her judgment —
‘[76] The Plaintiff in this matter pleaded compliance with Section 129 as well as 130 of the
Act without pleading registration as a financial service provider with the Regulator and no
evidence of such registration was ever discovered or placed on file.’
[18] The learned magistrate went on to find as follows —
‘[79] The NCA was promulgated against the background of a history of inequality in
bargaining power which often resulted in large credit providers imposing their will,
unreasonably, upon vulnerable credit consumers. The purpose of the NCA, broadly
speaking, is therefore to promote a fair, transparent, competitive, sustainable, responsible,
efficient, effective and accessi ble credit market and industry. It provides for the protection of
credit consumers against the historical abuses by credit providers in a manner articulated in
ss 3(a)-(i). For pu rposes of the present inquiry three of these protections are of particular
significance. Section 3(d) is directed at promoting equity in the credit market by balancing
the respective rights and responsibilities of credit providers and consumers. Sections 3(g)
and (i) are directed pertinently at the protecti on of over -indebted consumers. Section 3(g)
seeks to protect over -indebted consumers by providing mechanisms for resolving their over -
indebtedness ‘based on the principle of satisfaction by the consumer of all responsible
financial obligations’. In similar vein s 3(i) seeks to protect consumers by ‘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 the
credit agreement’.
[80] The Defendant has complied with such agreement even though [it] fell shot on
compliance with the act as mentioned above it follows that this court cannot enforce the
agreement that is clearly evident that is not fully compliant with the act and the decree of
absolution will be appropriate in the given circumstances. ’ [Sic.] (Footnotes omitted.)
[19] What then followed was the order for absolution from the instance.
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[20] What is not clear from the magistrate’s judgment is whether the order for
absolution followed as a consequence of it being alleged that it was not proved that
Momentum was a registered credit provider, or whether it was because there was no
proper investigation as to whether the respondent was overindebted or not.
[21] These issues were raised mero motu by the magistrate in the judgment alone.
[22] In Ratlou v Man Financial Services (Pt) Ltd ,2 the Supreme Court of Appeal
found that even if a settlement agreement met with the definition of a credit
transaction, on a purposive interpretation, the NCA was not to apply to settlement
agreements where the underlying agreements fell outside the ambit of the NCA . The
NCA is concerned with the advancing of money on the granting of credit.
[23] In Grainco (Pty) Ltd v Broodryk NO en andere ,3 it was held that an
acknowledgement of debt arising out of damages and not a money lending
transaction, did not fall within the ambit of the NCA .
[24] In Ribeiro and another v Slip Knot Investments 777 (Pty) Ltd ,4 the court
concluded that the NCA was not designed t o regulate settlement agreements where
the underlying agreement or cause was not one which fell within the NCA .
[25] In the present case, the acknowledgement of debt is for the claw back of
commissions earned by the respondent. That commission agreement was not a n
agreement in terms of the NCA , and the underlying causa for the acknowledgement
of debt , being such commissions, does not attract the application of the NCA . The
commissions were not advances or credit . It was payments for work done. These
policies were canc elled and gave rise to the claw back on the commissions already
paid.
2 Ratlou v Man Financial Services (Pty) Ltd [2019] ZASCA 49 ; 2019 (5) SA 117 (SCA) paras 21, 22,
and 26 .
3 Grainco (Pty) Ltd v Broodryk No en andere 2012 (4) SA 517 (FB) .
4 Ribeiro and another v Slip Knot 777 Investments (Pty) Ltd [2010] ZASCA 174 ; 2011 (1) SA 575
(SCA).
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[26] As has been correctly argued by Ms Scallan , for the appellant, before us, the
NCA does not apply to the acknowledgement of debt and the magistrate’s finding
that it did apply , and, hence , there should be absolution, is misdirected. The
misdirection also applies to the requirements raised by the magistrate. On the issue
of non -registration, the defendant had been selling the plaintiff’s products and
accordingly had to have known of its registration lest he be acting unlawfully. On the
issue of an assessment, the payments prior to the institution of action prove that the
defendant could a nd did pay the amounts. In light of the facts of the case the
defendant could not and did not plead the issues raised by the Magistrate. They
were non -issues.
[27] In light of the clear authorities referred to above, it is clear that the
acknowledgement of debt was not an agreement, which was subject to the NCA , but
was a repayment due in terms of advances on commissions , which fell outside the
NCA .
[28] In such circumstances, the only basis upon which the magistrate found that
there should be absolution from the instance is flawed.
[29] Accordingly, the magistrate , having found in favour of the appellant on all
other aspects, should have granted judgment.
[30] In light of the aforegoing findings, it is unnecessary to go into whether the
magistrate was entitled to mero motu raise the issue of the NCA in his judgment.
This is not something which this appeal has to concern itself as by virtue of the
finding that the Magistrate misdirected on the issue of the absolution, the appeal can
be decided on that point alone.
[31] As the appeal is successful, it also follows that the costs of the application for
condonation should form costs of the appeal and, hence, the following order is
granted.
1. The appeal is upheld with costs, such costs to include the costs of the
application for condonation.
2. Paragraph 2 of the Magistrate’s order is substituted with the following :
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‘[2] Judgment is granted in favour of the plaintiff :
(2.1) in the amount of R124 914.69 ;
(2.1) together with interest subject to in duplum and limited to the amount of
R25 714.69 such that the total recoverable shall not exceed R 59 629.38 ;
(2.2) costs of suit on an attorney -client scale’ .
________________
G M HARRISON AJ
I agree.
________________
KESHAV AJ
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Appearances
For the Appellant : Adv J Scallan
Instructed by: GERINGS ATTORNEYS
Address: 79 HAMLIN STREET
HIGHLANDS NORTH EXTENTION
JOHANNESBURG
Ref: M ZIETSMAN/MO1252
Tel: 011 440 1282
Email: madeleine@gerings.co.za
For the Respondent: Mr A Lakhoo (In person: No appearance)
Address: 37 DUIKER ROAD
ISIPINGO BEACH
Email: lakhooa@gmail.com
Date reserved:
Date of delivery: