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IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
JUDGMENT
Not Reportable
Case No: 19793/2015
In the matter between:
VAUGHAN HENRY ULYATE N.O. First Plaintiff
VERONICA ULYATE N.O. Second Plaintiff
and
MAURENE ANNETTE CLASSENS First Defendant
(PREVIOUSLY DAMPIES)
GRANVILLE NEIL DAMPIES Second Defendant
Coram: RALARALA, J
Heard: 3 December 2024
Delivered: 30 January 2026
Summary: Claim for money judgment and order of special execution against
immovable property to secure a consolidation loan – Judgment creditor not to
register as a credit provider in terms of the National Credit Act – credit agreement
reckless credit section 80(1) (a) (iii)and (b) (ii) – credit agreement set aside
consumers rights and obligations in part-section 83(2)(a).
ORDER
The credit agreement is declared reckless credit and it is set aside in terms of
section 83(2)(a).
The Plaintiffs’ claim is dismissed with costs on scale B.
The Plaintiffs are directed to cancel the continuing covering bond registered against
the first Defendant’s immovable property within 90 days from the date of this order.
JUDGMENT
Ralarala, J
INTRODUCTION
[1] The Plaintiffs instituted action against the Defendants for the payment of
monies lent and advanced amounting to R430 000 in terms of a mortgage bond
together with an order seeking to declare the Defendants’ immovable property
executable pursuant to the bond. In the alternative, and in the event of the court
declaring the bond to be reckless credit an order in terms of secti on 8 3(3) of the
National Credit Act, 34 of 2005 (“the NCA”). Regarding a further alternative claim and
in the event of the court finding that the bond was invalid, an enrichment claim in the
sum of R178 675. The Plaintiffs ’ claims against the Defendants are jointly and
severally. Only the first Defendant is defen ding the action. The first Defendant raised
a defense of reckless credit having been extended by the Plaintiffs and without being
registered as a credit provider as envisaged in section 40 of the NCA.
[2] In the particulars of claim, the Plaintiffs alleged the following:
“In and during May 2012, the Defendants jointly had numerous debt obligations
owing to many creditors. The Defendants were desirous to consolidate their debt and
settle same. The Defendants sought to reduce the high cost of credit that they were
incurring, including fees, charges and interest payable to various creditors.
Considering the large number of their creditors the Defendants approached the Trust
with the view of concluding a consolidation agreement in terms of which the Trust
would pay and settle all the Defendants’ existing debts, then due and payable whose
particulars and details were provided by the Defendants. The sum paid by the trust to
the Defendants’ creditors in settlement on behalf of the Defendants would be secured
by the Defendants’ immo vable property and would be repayable to the trust on
expiration of a period of eight months after the date of registration of a covering bond,
after the said settlement of the Defendant’s existing debts and liabilities.
Wherefore the plaintiffs pray for judgment in the following terms:
A. Payment of the amount of R430 000.
B. Interest thereon at a rate of 17,1% per annum monthly in advance, calculated from 1
October 2015 until cancellation of the Bond;
C. An order declaring executable erf 3[...], Kraaifontein, in the City of Cape Town,
Western Cape Province;
D. Costs of suit, as taxed on Attorney and Client scale;
In the alternative to prayers A to D
E. In the event of the court declaring the bond to be reckless credit in terms of section
80(1)(b) of the NCA, the plaintiffs pray that the Court, in terms of section 83(3):
(i) consider whether the Defendants are over- indebted; and
(ii) if the court concludes that the Defendants are over -indebted, to make an order it
(ii) if the court concludes that the Defendants are over -indebted, to make an order it
deems just and equitable in terms of section 83(3)(b) of the NCA;
In the alternative to prayer A to E
E. Payment in the amount of R178 675.00;
F. Interest in the above amount at the legal rate a tempore morae;
G. Cost of suit.”
[3] The action is defended by the First Defendant only. The First Defendant is
represented throughout the duration of the trial proceedings.
[4] The relevant issues in dispute in respect of the main claim is whether the
Defendants are indebted to the Plainti ffs to the extent of R430 000 and in respect of
the alternative claims are the following:
a) Regarding the first alternative claim, what the appropriate order should be as
contemplated by section 83(3) of the NCA; and
b) In respect of the second alternative cl aim, whether the Defendants were
unjustly enriched at the expense of the Plaintiffs in the sum of R178 675.00.
[5] The First Defendant filed a plea to the Plaintiffs’ amended particulars of claim.
Issues for determination
[6] The trial concerns whether the Plaintiffs are entitled to the payment of the
amount claimed and interest with effect from 1 February 2016. It is common cause
that the Plaintiffs advanced a loan amount of R430 000.00. The issues in dispute
central to the main claim:
a) The validity of the bond, being, the credit agreement relied upon by the
Plaintiffs support of the claim;
b) The terms of the bond;
c) Whether the Plaintiffs were required to be registered as a credit provider in
terms of section 40 of the NCA;
d) Whether the bond was granted recklessly as contemplated by section 80(1) of
the NCA;
e) Plaintiff’s compliance with the terms of the bond;
f) Whether the Defendants breached the terms of the bond;
g) The Plaintiffs’ claim amount;
h) Plaintiffs’ compliance with section 129 of the NCA;
i) The Plaintiffs’ rule 46 A application, which entails the following two issues:
i. Whether the property should be declared executable; and if so
ii. What the appropriate reserve price should be.
[7] The First Defendant’s defense as set out in her plea reads:
‘6.2 In particular, the First Defendant pleads that during the course of 2012 she,
together with her erstwhile husband, the Second Defendant, was in need of financial
assistance (loan) for purposes of paying their creditors and at that time could not
approach established financial institutions to access such financial assistance.
6.3 The First and Second Defendants were then informed by some of their
colleagues that Elefin Debt Solutions could provide them with the required financial
assistance in a form of a loan and that, alternatively, Elefin Debt Solutions could
facilitate a process of obtaining a loan with established financial institutions such as
banks on the First and Second Defendant’s behalf.
6.4 The First and Second Defendants approached Elefin Debt Solutions and were
later introduced to the Vaughan Ulyate Family Trust for purposes which resulted into
the trust and the defendants reaching an agreement with the effect that:
6.4.1 the Trust would make availab le financial assistance to the Defendants to pay
their creditors pending the facilitation in accessing established financial institutions;
6.4.2 the Trust would assist the Defendants to access financial assistance from one
of the established financial institutions;
6.4.3 the Defendants would provide a list of their creditors to the Trust to enable the
latter to settle the Defendants debts; and
6.4.4 the Defendants would provide the Trust with a title deed in respect of the
Defendants immovable property situated at Erf 3[...] Kraaifontein, in the City of Cape
Town, to enable the Trust to register a mortgage bond on the immovable property as
security of accessing a loan with a bank.
6.5 On the basis of the above understanding, during the course of May 2012 the
6.5 On the basis of the above understanding, during the course of May 2012 the
Trust prepared and presented a series of documents to the Defendants purporting to
regulate their relationship and this culminated into the agreement between the
Parties attached hereto “ANNEXURE MAD -01” which formed part of the Plaintiffs’
initial Particulars of Claim.
6.6 However, on a closer scrutiny later it was with shock that the first defendant learnt
that the series of documents that were presented to them were meant to be an
agreement of sale in terms of which the defendants were selling their immov able
property to the Trust.
6.7 The purported agreement of sale (“ANNEXURE MAD -01”) has the following
peculiar features which do not make commercial sense in the deed of sale:
6.7.1 The purchase price was the amount of 430 000.00 (FOUR HUNDRED AND
THIRTY THOUSAND RAND) which was payable to the defendants creditors;
6.7.2 The agreement was subject to the Trust (as the Purchaser) registering a
mortgage bond over the immovable property as security for the purchase price as a
first mortgage bond over the property.
6.7.3 The Defendants (as the Sellers) would pay monthly bond instalments to the
trust in the amount of R6127.00 (SIX THOUSAND, ONE HUNDRED AND TWENTY-
SEVEN RAND);
6.7.4 The Defendants were given period of 8 (eight) months to repay the purchase
price a nd all monies due to the Trust during which period the Trust would do
everything to assist the defendants to secure a loan from a registered financial
institution;
6.7.5 Should the Defendants not pay any monthly instalment on the due date for
payment therefore, the Trust was entitled to immediate transfer of the property; and
6.7.6 In the event that the Trust takes transfer of the property due to the Defendants
breach of contract as aforesaid, the Trust would make every effort to sell the property
at a market related price and in the event of being sold, the trust would pay from the
net proceeds from the sale of the property to the Defendants after deduction all the
holding and other costs incurred by the Trust until the date of transfer of the property
to the purchaser.
6.8 In addition to the agreement of sale, the Defendants signed other documents
including the Power of Attorney to Transfer as well as a Power of Attorney to Pass a
Continuing Covering Bond.
6.9 What is apparent from the aforesaid is that the Trust was never to have any real
intention of acquiring the immovable property other than having same as security to
recover the credit facility advanced and used to pay the Defendants’ creditors.
recover the credit facility advanced and used to pay the Defendants’ creditors.
6.10 The First Defendant further pleads that the Continuing Covering Mortgage Bond
was as a result of a grave misrepresentation by the Plaintiffs of their true intention as
at all relevant times the Defendants, the First Defendant in particular, had signed the
documentation presented to her for the sole pur pose of enabling the trust to facilitate
a loan from a registered financial institution on behalf of the Defendants.
6.11 Given the fact that the Defendants’ financial circumstances were known to the
Trust, it is inconceivable that the Defendants could have been expected to repay the
total sum of R430 000.00 within eight (8) months when the Trust had failed to secure
the relevant finance for the Defendants.
10.8 The convoluted nature of the transaction(s) concluded with the Trust points to
an intention to conceal the true character of the credit agreement and possibly an
intention to circumvent the provisions of the National Credit Act
10.9 Consequently, the purported credit agreement entered into between the Parties
stands to be declared reckless, invalid and set aside.’
SUMMARY OF THE EVIDENCE
Plaintiffs’ Case
Lyle Irwin’s evidence
[8] Lyle Irwin (“Irwin”) worked as an administrator for Elefin Debt Solutions
(“Elefin”) in 2012, a company that specializes in debt consolidation. According to him,
Elefin’s business operations entailed a process of debt consolidation whereby Elefin
together with the client would calculate the client’s total amount of debt and find a
way to extinguish the debt completely. Thereafter, an analysis is done as to what the
client can afford to pay in respect of a loan. In the event that there exists enough
value in the immovable property , Elefin will procure a loan to the client in order to
settle all the client’s outstanding debt. The loan is secured by a bond to be registered
on the client’s immovable property. The funds received from the loan will be
channeled to Elefin’s attorneys trust accou nt to settle and pay all outstanding debts.
Upon settlement of debts , Elefin and its attorneys will take the necessary steps to
rescind all judgments and clear the client’s credit profile.
[9] Irwin’s task was, according to him, to clear the credit recor d of the client and
ensure that all debt has been settled and thereafter facilitate the loan application
process to the mainstream banks. This process , and the initial process of securing
funding and lending assistance to the client in the bond registration process and
settlement of the debt , was at a fee of R40 000. Irwin said that Elefin’s success rate
in debt consolidation was 96%, at the time. Furthermore, the client was informed that
in debt consolidation was 96%, at the time. Furthermore, the client was informed that
during the eight -month period, the client was not to apply for credit as that would
affect the client’s credit score and in turn the affordability as the banks would
perceive that as a failed consolidation attempt.
[10] Irwin testified about the assessment process . According to him the client
assessment would entail the provision of bank statements, pay slips, credit checks
on the client and the completion of application forms. In the event that the client
qualifies for consolidation, a mandate would be completed along with the power of
attorney which will authorize Elefin to communicate with creditors and conduct credit
checks. This was followed by the validation of the client information and affordability
which is a fun ction that was performed by Mr Graham Clive Clover Sinclair
(“Sinclair”). This process involved consideration of client’s bank statements, ID, proof
of address and all other relevant personal information.
[11] After the validation process , the property wo uld be valuated . The valuation is
followed by the affordability assessment, taking into account the income, the deed
search and the value of the property and the amount they would be able to afford for
repayment. The client will also be requested to provid e the latest statements in
respect of all their debt. Sinclair would calculate the consolidation costs and present
same to the credit committee which is comprised of the investor.
[12] The next step would be to obtain final settlement amounts from the cr editors
and the presentation of the insurance contract which is a life cover on the property
and that of the client. Irwin confirmed that the creditors included the existing
bondholder, and the bond was paid or settled and thereafter cancelled. The next step
would be the registration of a bond in the deeds office in favour of the investor and a
power of attorney or offer to purchase would be signed prior to that. This would serve
as a security measure in the event the client defaults on their payments , the property
can then be sold to recover the investor’s money or act upon the offer to purchase
and take transfer of the immovable property. In the present case the investor was the
and take transfer of the immovable property. In the present case the investor was the
Vaughan Ulyate Family Trust (“the Trust”) . Upon registration of the bond , Elefin
would facilitate the payment of the creditors by the investor. The client s, in this case
the Defendants , would provide the investor with the title deed in respect of their
immovable property situated at erf 3[...], Kraaifontein, City of Cape Town, to register
a bond as security for the investor in order to settle the debt.
[13] An amount of R6127.00 was payable monthly as an instalment towards the
bond. In the event of failure to pay the said instalment, Vaughn Ulyate Family Trust
may act upon the o ffer to purchase and take transfer of the property. This is what he
referred to as power of attorney in respect of the sale and this was part of the
structure of the transactions utilized by Elefin. Irwin pointed out that in 40
transactions of this nature that he dealt with , that step had never been taken by an
investor. According to him , the most important security that the lender had in his
transaction was the bond against the property.
[14] He further testified that the collection of monthly occupational rent means that
clients pay monthly occupational rent into the attorney’s trust account. According to
Irwin, t he deed of sale was the offer to purchase. A final quot ation would then be
prepared, reflecting all of the client’s outstanding debts, fees and the cancellation of
the existing bond. Elefin would pay the funds into the attorneys’ trust account, and
upon bond registration , the attorneys would make payments to the creditors on
behalf of the client. He explained that the bond origination process would begin only
after the client ’s debts had been settled, and that it involves a bond application to
commercial banks on behalf of the client. This would be followed by the registration
of the bank’s bond. Irwin explained that the concept of occupational rent also refers
to an instalment amount paid to the lender , and in this case that the amount of
R6 127.00 referenced in the offer to purchase was the monthly instalment.
[15] Regarding the Defendants, Irwin confirmed that they also approached Elefin
for financial assistance , were introduced to the Trust, and ultimately entered into an
agreement for financial assistance . This agreeme nt entailed the Trust providing
funds to assist the Defendants in settling their debts, pending the facilitation of a loan
funds to assist the Defendants in settling their debts, pending the facilitation of a loan
with the financial institutions. Both Defendants’ monthly financial obligations
exceeded their combined income, which was R21 421. Thirty percent thereof was
used to calculate the maximum amount the client could afford towards the bond. At
the time, the outstanding bond in the Defendants’ immovable property was R96 000.
After performing calculations in terms of Elefin’s Home Equity Plan, Elefin
determined that the equity available in the immovable property was R324 000. This
led Elefin to conclude that it was possible to proceed with the transaction.
[16] Irwin testified that Elefin conducted an assessment of the Defendants’ income
and expenses. This process required the Defendants to provide details of their
income, expenses, and bank account statements. The Defendants’ bank statements
could not be presented as evidence in co urt because they were no longer in their
possession, as printed records of their company had been discarded after five years.
Regarding their electronically stored files, Irwin testified that what the court
understood to be relevant records had been lost due to a virus that infected the
Google Drive associated with their computers.
[17] On 31 May 2012, a meeting was convened at the attorneys’ offices which was
attended by the Defendants, Mr Sinclair, Irwin and the attorney Vaughan Ulyate
(“Ulyate”) who is also a trustee of the Trust . At this meeting , all the documents and
the process that was to follow were explained to the Defendants. An agreement was
thereafter reached between the Defendants and the attorneys that credit inquiries in
respect of the Defendants would be conducted , and the Defendants undertook to
maintain a clean credit record from the date of signature . They further undertook not
to enter into any new credit agreements or incur additional liabilities, as this would
nullify the resolutive condition. Subsequent to the registration of the covering
mortgage bond over the Defendants’ property in favour of the Trust, the y would
assist the Defendants in obtaining a loan from commercial banks in order to repay
the Trust.
[18] Upon repayment of the purchase price and all monies advanced to them , the
agreement would operate as a resolutive condition, and the sale of the property
would become null and void. In the event of a f ailure to obtain a new bond and to
repay the loan amount advanced by the Trust to settle the creditors and consolida te
the Defendants’ debts, the Trust would be entitled to act upon the offer to purchase.
the Defendants’ debts, the Trust would be entitled to act upon the offer to purchase.
The Defendants then agreed to the payment structure and signed the document ,
which was commissioned by Ulyate.
[19] The total bond amount was calculated at R430 000 after taking into account
the amounts paid to creditors and the bond cancellation fees. The amount of
R6 127.00 was also determined to be the monthly instalment on the loan. Irwin
testified that, prior to the conclusion of the process , an affordability assessment had
been conducted in respect of both Defendants ; however, due to the loss of
documents, Elefin no longer ha d the assessment in its possession. The Defendants’
debt repayment history was similarly considered. It was further his evidence that ,
during the meeting on 31 May 2012 , the contents of the documentation w ere
discussed with the Defendants , and it was his impression that they understood the
nature of the transaction and the related documentation and signed same. He held
this view in light of the fact that , at the meeting, Sinclair and Ulyate took liberty to
explain the contents of the documents to the Defendants . According to Irwin , it was
also explained to the Defendants that , eight months after the date of registration ,
Elefin w ould commence with mortgage bond applications in order to settle the
R430 000 debt. At no stage did the Defendants indicate that they did not understand
the nature of the transaction or that they did not wish to proceed with it.
[20] Irwin confirmed that he p repared payment requests, which he addressed and
conveyed to Vaughn Ulyate and Associates. The total sum of the debt owing to, and
paid to , the Defendants’ creditors was R233 245.33. An additional amount of
R95 554.96 was paid for the cancellation of the A BSA bond o ver the Defendants’
immovable property. Pursuant to the payments made from the R430 000, the final
balance was R18 822.84.
[21] The second Defendant applied for motor vehicle finance from a bank prior to
the commencement of the bond application process, and the bond application was
subsequently withdrawn. The Defendants obtained loans in July 2012 and again in
March 2013, in violation of the agreement. A further attempt to secure a bond from a
bank was unsuccessful due to arrears that had accumulated on the municipal rates
account of the Defendants’ immovable property. Further delays in the bond
account of the Defendants’ immovable property. Further delays in the bond
application were occasioned due to the Defendants’ divorce proce edings, between
the end of 2012 and 29 August 2013. In a subsequent bond application the loan
amount was increased to R600 000 at first Defendant’s instance to cover the
Defendants debt incurred after 31 May 2012. The applications submitted to three
different banks in 2014 w ere declined based on affordability constraints and low
credit scores.
[22] Irwin also intimated that at no stage did the Defendants indicate that the
transaction was in violation of the provisions of the NCA. This only came to his
attention subsequent to SA Home Loans de clining the first Defendant’s bond
application in September 2014.
[23] Under cross-examination, Irwin reiterated that the amount that was repayable
was R430 000, and that on 31 May 2012 , the content of all documents pertaining to
the transaction was explained to the Defendants in his presence.
Graham Clive Clover Sinclair’s evidence
[24] Sinclair was a director at Elefin. He explained that the company conducted a
debt consolidation business whereby they assisted individuals in settling all of their
debts in order to qualify for a home loan , through which the amount advanced to the
client would ultimately be repaid . Sinclair confirmed that he met with the Defendants
and explained to them the advantages and disadvantages of the transaction , the
procedure to be followed, as well as the time frames involved. According to him, they
conducted an affordability assessment in respect of the Defendants. The Defendants
completed an assessment form, which was considered with the ir salary slips and
bank statements. Elefin also took into account the Defendants’ additional rental
income derived from their immovable property situated in Kraaifontein , as well as the
municipal rates and ta xes account from the City of Cape Town. The assessment
process further involved a consideration of the Defendants’ expenses.
[25] Pursuant to the assessment process , it was determined that the Defendants
qualified for the assistance they required from El efin, as they were in a position to
afford the proposed monthly instalments of R6 127. According to Sinclair , he
explained to the Defendants when the funds would be made available and indicated
that he intended to finalise the process within eight months. He stated that he clearly
that he intended to finalise the process within eight months. He stated that he clearly
explained that the Defendants’ accounts with their creditors would be settled within
two months, and that the remaining six months would be the period needed before
banks c ould consider whether they were eligible for a home loan. Sinclair further
stated the Defendants were informed that in that eight-month period, no debt should
be incurred by the Defendants.
[26] Sinclair confirmed that , using a guideline employed by bond originators to
calculate the affordability of the maximum bond amount, he determined that 30% of
the Defendants’ combined income of R24 421 was R7 326,30 , which represents
approximately a third of their total income and is permissible for the payment of a
covering mortgage bond. However, the monthly instalment was reduced to
R6 127.00, leaving the Defendants with R18 000 for their living expenses. Sinclair
held the view that the Defendants would be able to live comfortably on that amount.
He further stated that, according to his calculations and the Defendants’ earnings at
that stage, they were eligible to qualify for a home loan of R732 000.
[27] Ultimately, according to their calculation on the home equity plan, the equity
on the property value of the Defendants would be an amount of R324 000, which,
according to Sinclair , was a positive indication that there is an amount available to
assist in the settlement of the debt.
[28] The witness attended the meeting of 31 May 2012 and state d that all the
relevant documents pertaining to the transaction with the Defendants were
considered. The process for payment of the Defendants’ creditors by the Trust , and
the process that Elefin would follow to assist the Defendants in applying for a new
mortgage bond, was explained . Although the Defendants appeared to be in doubt,
they did not indicate to any of the parties at the meeting that they did not understand
the nature of the transaction or that they did not want to proceed with it. The
Defendants did not raise any concerns regarding the affordability of the monthly
payment of R6 127.00; on the contrary, they appeared content with that amount.
payment of R6 127.00; on the contrary, they appeared content with that amount.
[29] Sinclair stated that , at the meeting , they discussed the bond documents and
the legal requirements with Ulyate. The list of creditors’ documents was compiled by
Sinclair, and at the meeting , it was signed by the Defendants in his presence.
Thereafter, Irwin proceeded with the final payment settlements.
[30] Under cross-examination, Sinclair confirmed that the eight -month period was
to be calculated from the time the covering bond was regist ered to the time the new
mortgage bond was registered, provided no defaults or new debt were incurred.
Sinclair dispelled the notion that not all the debts were consolidated. Augmenting on
this, he stated that there w ere one or two small debts that were le ss than R3000.00
that the Defendants undertook to settle, which they did. He reiterated that all debts of
the Defendants provided to them were settled.
Vaughan Ulyate’s evidence (“Ulyate”)
[31] Ulyate is an attorney and a trustee of the first Plaintiff, the Trust. Ulyate stated
that the Trust invests in property. He agreed to act as an investor in respect of the
credit agreement in question upon being approached by Sinclair. This was the first
time he engaged with Elefin as an investor. He further explained that, as an attorney,
he primarily focused on litigation work and some conveyancing.
[32] Ulyate stated that he knew very little about the NCA, as he had never dealt
with it as an attorney. If matters dealing with the NCA arose in his firm o f attorneys,
he would refer them to professional assistants. He stated that he at least knew that
creditors were required to conduct credit assessments before advancing credit to
consumers. Ulyate further stated that in 2012 the Trust was not registered as a credit
provider, and this remained the case at the time of his testimony. At the time of the
transaction with the Defendants , the Trust did not enter into any credit agreements.
The transaction with the Defendants was below R500 000, as was the total
outstanding book of credit , and no other similar transactions existed at the time;
therefore, the Trust did not require registration as a credit provider.
therefore, the Trust did not require registration as a credit provider.
[33] Ulyate explained that Sinclair was referred to him as a litigation expert. He
became aware of the business model of Elefin and that they needed investors and
he offered to act as an investor. He stated that Sinclair explained that the investor
would furnish the funds for consolidation of the debt of Elefin’s client s who were over
indebted. The investor would lend money to Elefin’s client s to settle all their debts ,
including bond cancellation and bond registration fees. He understood that for a
period of eight months from the registration of the mortgage bond , the clients would
have to remain debt -free, during which time applications would be made to bank s to
obtain a mortgage bond which would then be used to settle the debt of the investor.
[34] Ulyate confirmed that , at the meeting of 31 May 2012 , the Defendants
understood the nature of the transaction and were ask ed several times if they
understood, to which they responded in the affirmative. He stated that the amount
paid by the Defendants to the Trust was R251 325, with the last payment received
on 1 February 2016. Ulyate further stated that , according to the certificate of balance
dated 9 February 2016 , the Defendants were indebted to the Trust in the amount of
R430 000, with further interest at 17.1% per annum , calculated monthly in advance
from 1 February 2016 and not from 1 October 2015 , as prayed in the parti culars of
claim.
[35] Under cross -examination, Ulyate confirmed that , subsequent to Sinclair’s
explanation of the transaction, the Defendants were comfortable with the transaction.
He further stated that the offer to purchase was signed as secondary security for the
Plaintiffs in respect of the loan and was subject to the registration of a first mortgage
bond over the property. He explained that the registered mortgage bond sets out the
terms of the loan agreement. He also stated that the ag reement comprises of a
number of documents and that the Defendants could settle the loan amount at any
time prior to the end of the eight-month period.
FIRST DEFENDANT’S CASE
Maurine Annette Classens (“Classens”)
FIRST DEFENDANT’S CASE
Maurine Annette Classens (“Classens”)
[36] Classens testified that , while employed by the South African Police Service
(“SAPS”), she approached Elefin for their debt consolidation services. She and the
Second Defendant attended Elefin ’s offices for a meeting with Irwin. According to
Classens, Irwin explained that Elefin c onsolidated the debts of clients with existing
mortgage bonds on their immovable property. Elefin would calculate all the debts ,
lend the required amount to the client, and register a bond for the amount so that the
client can be able to repay the amount at the end of the eight-month period.
[37] A follow-up meeting was set up and the Defendants were required to provide
certain documentation namely, salary slips and three months’ bank statements. At
the second meeting , Irwin and Sinclair were present , although Sinclair was not in
close proximity. On that day, the Defendants signed the power of attorney , as far as
her recollection served her. Pursuant to this meeting , they were required to furnish
Irwin with a list of th eir income and expenditure. Irwin informed the m that,
subsequent to the credit checks , they qualified for an amount of R430 000, with a
bond instalment of approximately R6000.00. Their monthly obligations exceeded
their joint income by over R10 000.
[38] Prior to the meeting of 31 May 2012, Irwin informed the Defendants , in the
presence of Sinclair, that they were about to meet the attorney who had drafted the
documents. Based on their prior discussions and the signed power of attorney, the
Defendants would merely sign the documents. The Defendants were introduced to
the attorney who became known as Ulyate. The documents were presented to the
Defendants, and they were required to sign and initial same without provision of any
explanation, as everything had been previously discussed.
[39] Classens explained that the discussion s prior to the signing of the documents
pertained to the R430 000 loan and the eight-month period during which they were to
work together and ensure that no new debt was incurred. The Defendants were to
inform Elefin if they were struggling financially during the eight-month period.
[40] Claasens understood that Elefin would facilitate the loan amount of R430 000
[40] Claasens understood that Elefin would facilitate the loan amount of R430 000
and pay the settlement figures in respect of the debts owed by the Defenda nts to
their creditors. She further understood that a cover ing mortgage bond would be
registered on their immovable property in favour of the Plaintiffs , and upon the
Defendants being successful with their application for a mortgage bond in any of the
financial institutions, they would repay the Plaintiffs the loan amount of R430 000.
[41] Classens stated that the document listing their creditors was signed by the
Defendants without completing the details of their creditors. She was not certain
when she received the document confirming which creditors ha d been settled,
estimating it could have been between August and October 2012. She indicated that
not all the creditors had been paid by the Plaintiffs and she found it difficult to reach
Irwin for clarification in this regard. Classens would confirm with their creditors
whether the debts were settled, some of whom indicated that they had not been paid
or settled by Irwin. After numerous failed attempts to reach Irwin , she ultimat ely
brought the matter to his and Leonore Kotze ’s attention (Ulyate’s secretary ). The
creditors that were not settled were MFC, ABSA MLN, ABSA cheque account, ABSA
overdraft facility, Telkom cellphone account and debts that she owed to private
individuals. She continued to make monthly payments to the respective creditors.
Those payments that were debited from her bank account were reflected in her bank
statements that she provided to Irwin monthly.
[42] Classens relocated to Pretoria in subsequent to the conclusion of the credit
agreement in 2012 for better employment , incurring additional costs for school
aftercare in respect of her two children and R4000,00 per month for rent , while the
Second Defendant remained in Cape Town before 2013. According to Cla ssens,
their divorce proceedings, which were instituted after the eight -month period, did not
cause any delays in the mortgage bond application. She further stated that, contrary
to Irwin’s assertions, overcharging of municipal rates and taxes had been resolved in
2012 and thus was not the cause of any delay , and neither was the issue of the
additional or fictitious erf.
additional or fictitious erf.
LEGAL PRINCIPLES AND DISCUSSION
[43] It is the duty of the court to evaluate the evidence with due regard to the
probabilities. The evaluation of the competing contentions of the parties involves the
process of weighing up the evidence adduced by the Plaintiffs against the evidence
adduced by the Defendant. The court has to look at the evidence holistically a nd
weigh it based on an analysis of the probabilities.
[44] In Stellenbosch Farmer’s Winery Group Ltd and Another v Martell & Cie SA
and Others 2003 (1) SA 11(SCA) para 5:
“On the central issue, as to what the parties actually decided, there are two
irreconcilable versions. So too on a number of peripheral areas of dispute which may
have a bearing on the probabilities. The technique generally employed by courts in
resolving factual disputes of this nature may conveniently be summarised as follows.
To come to a conclusion on the disputed issues a court must make findings on (a) the
credibility of the various factual witnesses; (b) their reliability; and (c) the probabilities.
As to (a), the court’s finding on the credibility of a particular witness will depend on its
impression about the veracity of the witness. That in turn will depend on a variety of
subsidiary factors, not necessarily in order of importance, such as (i) the w itness’s
candour and demeanour in the witness -box, (ii) his bias, latent and blatant, (iii)
internal contradictions in his evidence, (iv) external contradictions with what was
pleaded or put on his behalf, or with established fact or with his own extracuri al
statements or actions, (v) the probability or improbability of particular aspects of his
version, (vi) the calibre and cogency of his performance compared to that of other
witnesses testifying about the same incident or events. As to (b), a witness’s
reliability will depend, apart from the factors mentioned under (a)(ii), (iv) and (v)
above, on (i) the opportunities he had to experience or observe the event in question
and (ii) the quality, integrity and independence of his recall thereof. As to (c), thi s
necessitates an analysis and evaluation of the probability or improbability of each
party’s version on each of the disputed issues. In the light of its assessment of (a),
party’s version on each of the disputed issues. In the light of its assessment of (a),
(b) and (c) the court will then, as a final step, determine whether the party burde ned
with the onus of proof has succeeded in discharging it. The hard case, which will
doubtless be the rare one, occurs when a court’s credibility findings compel it in one
direction and its evaluation of the general probabilities in another. The more
convincing the former, the less convincing will be the latter. But when all factors are
equipoised probabilities prevail.”
[45] The Plaintiffs’ counsel argued that the Defendant is required to admit or deny
all material facts alleged in the combined summons a nd to state all material facts on
which she/he relies. It is so that evidence not covered by the pleadings will usually
be inadmissible and may only be relied upon where it is not prejudicial to the other
litigant.
[46] During her testimony, t he First Defendant disputed various aspects of the
Plaintiffs’ witnesses’ evidence, which her counsel had not put to those witnesses
during cross -examination. Plaintiffs’ counsel submitted that a reasonable inference
could be drawn that the first Defendant tai lored her version of events as the trial
progressed. This inference, c ounsel further argued , is consistent with the first
Defendant raising issues that were never addressed in the pleadings.
[47] For instance , during her testimony , the First Defendant introduced a new
version claiming that the Defendants were only obligated to pay the monthly
instalments for a period of eight months and speculated as to when this eight -month
period commenced. Furthermore, it was never pleaded that Elefin’s failure to comply
with the obligations forced the Defendants to incur further debts, resulting in the
refusal of the bond. In addition, the First Defendant, for the first time, claimed that on
31 May 2012 , when concluding the bond with the Plaintiffs , the Defendants signed
blank documents.
[48] Counsel for the Plaintiffs highlighted internal contradictions in the first
Defendant’s e vidence. For instance, she testified that she relocated to Pretoria in
2012 but later during cross -examination claimed that the mortgaged property
remained her primary residence. She also initially testified that the documents that
the Defendants signed at the 31 May 2012 meeting were not explained to them prior
to signing; this version was later altered to suggest that some of the documents were
in fact explained . During cross -examination, she ultimately reverted to her initial
version.
[49] Her initial evidence was that the structure of debt document which recorded
her debts and creditors was signed while it was blank, she stated that it only
her debts and creditors was signed while it was blank, she stated that it only
contained a lot of lines, this version was also momentary as she, thereafter, claimed
that the document was partially completed when the Defendants signed it.
[50] Plaintiffs’ counsel further argued that there were external contradictions in the
first Defendant’s testimony, when compared to what was pleaded and put to the
witnesses on her behalf, he poin ted out that the first Defendant’s plea in paragraph
6.4.1 specifically pleaded that the Plaintiffs would lend the money to them. During
her evidence in chief the first Defendant contradicted this assertion by stating that
Elefin would be the entity lendin g the money to them. The first Defendant clearly in
her pleadings directed the Plaintiffs to particular issues only to have her alter same
and canvass others at trial, which is impermissible. See Kali v Incorporated General
Insurance Ltd 1976 (2) SA 179 (D ) at 182A.Ultimately, this is contrary to the whole
purpose of pleadings which ought to bring clearly to the other party including the
court the issues upon which reliance is to be placed. In essence the parties in their
pleadings have to state the issues with precision. See Imprefed (Pty) Ltd v National
Transport Commission [1993] 2 ALL SA 179 (A) 188 -189; 1993 (3) SA 94 (A) at 107
C-H; In NDPP v Phillips 2002 (4) SA 60 (W) the court stated as follows:
‘Pleadings must be lucid, logical and intelligible. A litigant must plead his cause of
action or defence with at least such clarity and precision as is reasonably necessary
to alert his opponent to the case he heads to meet . A litigant who fails to do so may
not thereafter advance a contention of law or fact if it’s determination may depend on
evidence which his opponent has failed to place before the court because he was not
sufficiently to its relevance.’
[51] Importantly, this is clearly a case where the first Defendant ’s viva voce
evidence contradicts what was initially pleaded, juxtaposed to the case where the
parties have widened the issues by agreement whether expressly or impliedly and
adduced evidence on those issues fully canvassed by all parties and the court wou ld
adduced evidence on those issues fully canvassed by all parties and the court wou ld
then pronounce on those specific issues. As this is purely a case of self-contradictory
evidence on the part of the first Defendant rather than that of widening of issues at
trial, the parties will be kept strictly to their pleadings in avoidance of pre judice and in
the promotion of the parties’ rights to a fair hearing as guaranteed by section 34 of
the Constitution of the Republic of South Africa, 1996 (“the Constitution”). See South
African Service v Solidarity obo Barnard 2014 (10) BCLR 1195 (CC), [2014] 11 BLLR
1025 (CC), 2014 (6) SA 123 (CC) para 202. In my view the acceptance of the above
belated versions which materially depart from the pleadings would be to the
detriment of the Plaintiffs as they deal with the real issues between the parties. In the
premises the first Defendant’s evidence in this regard would not be accepted by this
court.
Registration as credit provider
[52] It is common cause between the parties that the NCA is applicable in this
matter. It is prudent at this stage as a point of departure to determine whether the
Trust was obliged to register as a credit provider prior to extending the loan as
contended by the First Defendant. The Plaintiffs do not share this view. Section 40 of
the NCA regulates registration of credit providers. The relevant portion of the section
which was applicable prior to its amendment in 2014 read:
‘(1) A person must apply as a credit provider if-
(a) that person, alone or in conjunction with any associated person, is the credit
provider of at least 100 credit agreements, other than incidental credit
agreements;
(b) the total principal debt owed to that credit provider under all the outstanding
agreements, other than incidental credit agreements, exceeds the threshold
prescribed in the terms of section 42(1).
(2) In determining whether a person is required to register as a credit provider-
. . .
(3) A person who is required in terms of subsection (1) to be registered as a credit
provider, but who is not so registered, must not offer, make available or extend
credit, enter into a credit agreement or agree to do any of those things.
(4) A credit agreement entered into by a credit provider who is required to be
registered in terms of subsection (1) but who is not so registered is an unlawful
agreement and void to the extent provided for in section 89.’
[53] In its amended state section 40(1) of Act 19 of 2014 provides:
‘A person m ust apply to be registered as a credit provider if the total principal debt
‘A person m ust apply to be registered as a credit provider if the total principal debt
owed to that credit provider under all outstanding credit agreements, other than
incidental credit agreements, exceeds the threshold prescribed in terms of section
42(1).
42 (1) On the effective date, and at intervals of not more than five years, the Minister,
by notice in the Gazette, must determine a threshold of not less than R500 000 for
the purpose of determining whether a credit provider is required to be registered in
terms of section 40(1). ’
In this regard, Ulyate testified that the Trust’s total outstanding credit was below
R500 000 as the loan amount under the bond was R430 000. Clearly, the threshold
that would be determined by the Minister in terms of section 42(1) would be more
than the loan amount extended by the Trust to the Defendants in the current matter.
The Plaintiffs had at the time a total outstanding book credit of less than R500 000
and the Trust was a credit provider of one credit agreement which is below the 100
credit agreements requir ed for registration as credit provider . This means that the
threshold set out in section 40(1) has not been triggered therefore no obligation was
placed on the Trust to register as a credit provider under such circumstances.
Was there reckless credit?
[54] Another question raised by the first Defendant of whether the credit was
granted to the Defendants in a reckless man ner as pleaded by the first Defendant.
The First Defendant relies on both grounds as contemplated on section 80(1)(a) and
(b) of the NCA. The onus is on the first Defendant to prove that at the time the credit
agreement was entered into no credit assessment was conducted by the Plaintiffs as
she contended. Reckless credit is regulated by section 80 and 81 of the NCA. The
prevention of reckless credit is provi ded for in section 80(1). In terms of section 80
(1)(a) in the event that the credit provider fails to conduct an assessment in terms of
section 80(2) irrespective of what the outcome would have been; or as envisaged in
section 80(1)(b) in the event the c redit provider conducted an assessment and the
section 80(1)(b) in the event the c redit provider conducted an assessment and the
preponderance of information available to the credit provider shows that the
consumer did not generally understand or appreciate the consumer’s risks, costs or
obligations under the proposed agreement as conte mplated in section 80(1)(b)(i); or
as contemplated in section 80(1)(b) (ii) entering into a credit agreement would make
the consumer over- indebted.
[55] Another argument raised by the first Defendant’s counsel was that the series
of documents that constituted the credit agreement resembled the Brusson scam
where over indebted persons were deceived into signing away their homes through
offers to purchase pr esented as loans. In Leta v Bennet and Others (23639/2015)
ZAGPPHC 329 (30 July2019) the court referred to the dictum in Maize Board v
Jackson 2005 (6) SA 592 (SCA) at 596 in determining the test applicable in the
determination of the essence of a contract held:
‘The true enquiry in a matter such as this is to establish whether the real nature and
the implementation of these particular contracts is (sic) consistent with their
ostensible form. In pursuit of that enquiry one must strive to ascertain, from all the
relevant circumstances, the actual meaning of the contracting parties. It therefore
becomes necessary to examine in greater detail the agreements in question and the
manner in which they were implemented.’
[56] In the Brusson scam, the investor and the vict im signed a sale agreement in
which the victim sells their immovable property to the investor. Immediately the
investor resold the immovable property to the victim in terms of a deed of sale
wherein the victim undertakes to repay the loan amount in instalments. Money raised
by way of a mortgage bond was split between Brusson and the investor and a
portion was given to the victim to appease her/him. Brusson received monthly
payments from the victim in repayment of the loan, and it guaranteed the obligations
of the investor towards the financial institution that provided the loan. The property of
the victim is sold for a lesser amount than its market value. The investor pays
nothing and stands to lose nothing if anything goes wrong.
[57] This is not the case in casu, in that the investor has provided the Defendants
with the consolidation loan amount and settled the Defendant’s debts. The property
with the consolidation loan amount and settled the Defendant’s debts. The property
is not sold by the Defendants to the Plaintiffs and resold to the Defendants like in the
Brusson scam cases. The Supreme Court of Appeal, in ABSA Bank Ltd v Moore and
another 2016 (3) SA 97 (SCA), held that the Brusson transactions were not
simulated in the normal sense of the word. The victims of the scam were
hoodwinked into believing that the true nature of the tra nsaction was such that they
would not lose ownership of their properties, nor did they intend to transfer
ownership. The Constitutional Court in determining a further appeal in ABSA Bank
Ltd v Moore and another [2016] ZACC 34, confirmed that the agreements were
invalid not for simulation but for fraud, further that the property owners, when
concluding the agreements had no intention to transfer ownership of the property.
[58] In the present matter the first Defendant pleaded at para 6.9 that the Trust
was never to have any real intention of acquiring the immovable property other than
having same as security to recover the loan amount advanced . This was also the
evidence of the Plaintiffs that the Plaintiffs did not have the intention to acquire the
property per se, but the offer to purchase was used as a secondary security of the
loan amount . Thus, the Brusson scam is in that regard distinguishable from the
current matter.
[59] The requirement for credit assessment is embodied in the provisions of
section 81(2) of the NCA which requires the credit provider to take reasonable steps
to assess the consumer’s understanding and appreciation of the risks and costs of
such proposed cred it; debt repayment history; the existing financial means,
prospects and obligations. Not only that, the credit provider is expected to ascertain
whether a reasonable basis exists for the conclusion that any commercial purpose
may be successful upon the consumer applying for such credit agreement. On behalf
of the Plaintiffs, it was submitted that prior to 13 September 2015 there was no
prescribed form of assessment or statutory requirements for the credit provider to
meet with regards to credit assessments. Meaning that, the credit provider would
improvise and devise its own reasonable assessment mechanisms and models to
comply with the requirements of section 81. See Horwood v Firstrand Bank Ltd
(2010/36853) [2011] ZAGPJHC 121 (21 September 2011) para 5.
(2010/36853) [2011] ZAGPJHC 121 (21 September 2011) para 5.
[60] With the advent of Regulation 23A [Government Notice R202 in Government
Gazette 38557, dated 13 March 2015] which got under way on 13 September 2015
the position has since changed as the specific criteria and formula to be used in such
assessments is s et out therein. Notably, the latter position did not apply to the
Plaintiffs at the time of the conclusion of the credit agreement on 31 May 2012, the
Plaintiffs were to devise their own assessment mechanisms. The evidence presented
by the Plaintiffs’ witn esses is that a credit assessment was conducted by Elefin on
the affordability of the Defendants. The model used included an assessment sheet
considered with their salary slips, first Defendant’s appointment letter, other sources
of income (rental income), bank statements and the Defendants’ expenses inclusive
of the Defendants’ debt repayment history and assets.
[61] Evidently the Defendants upon approaching Elefin were over indebted and
were unable to meet their monthly financial obligations with the in come that they
were earning. This is borne by Irwin’s and Sinclair ’s evidence that both Defendant’s
monthly financial obligations exceeded their combined income which was
R24 421.00. Section 79 of the NCA regulates over- indebtedness and provides:
‘(1) A consumer is over-indebted if the preponderance of available information at the
time a determination is made indicates that the particular consumer is or will be
unable to satisfy in a timely manner all the obligations under all the credit agreements
to which the consumer is a party, having regard to that consumer’s –
(a) financial means, prospects and obligations ;
(b) probable propensity to satisfy in a timely manner all the obligations und er all the
credit agreements to which the consumer is a party, as indicated by the
consumer’s history of debt repayment.
(2) When a determination is to be made whether a consumer is over -indebted or
not, the person making that determination must apply the cri teria set out in
subsection (1) as they exist at the time the determination is being made.’
[62] The process of ensuring affordability requires assessing income, expenses
and existing debt obligations to determine if the consumer can reasonably afford new
debt, in the context of the present case, the consolidation loan. Evidence shows that
the affordab ility to repay the consolidation loan was based on the ability to incur
the affordab ility to repay the consolidation loan was based on the ability to incur
further debts/securing a further loan in future in order to settle the consolidated loan
instead of using the Defendants’ current income to assess the affordability at the
time of the credit assessment. When the client reveals household income during an
affordability assessment, the loan provider must use this income into its evaluative
calculations. Capitec Bank Limited v Mahlangu (A16/2020)[2021] ZAMPMHC 28(25
October 2021). This case elucidates the extent of credit providers ’ assessment
responsibilities under section 81 and illustrates that a proper assessment is
contingent upon the specific facts and must address the information supplied by the
consumer. Evidently th e Defendants at the time had no financial means to satisfy
their existing debts. In my view the Defendants were over -indebted even prior to the
affordability assessment being conducted. Hence , they approached Elefin. In the
circumstances it cannot be succe ssfully argued that the Plaintiffs ensured that the
Defendants could afford the new debt of R430 000 as required by NCA.
[63] The Plaintiffs took a risk because the assessment process was based on a
risky potential of future funding as opposed to the certainty of the Defendants income
and assets. Put differently, Plaintiffs had no guarantee that at the time of conducting
the credit assessment that the Defendants would certainly without doubt afford to
repay the consolidation loan. It is borne by the Plaintiffs’ evidence that the
Defendants had an adverse credit profile. The Defendants’ total debt considered by
the Plaintiffs during the credit assessment was R326 742.00, R103 258.00 less than
the consolidation loan.
[64] I say this because even after the consolidation loan was advanced to the
Defendants, they still remained over indebted because with their own income they
were not able to repay the consolidation loan within the eight months period without
obtaining a further loan. I am alive to the fact that when determining whether the
consumer is over indebted in terms of section 79 regard must be had to her or his
financial means and prospects which include assets and liabilities and prospects
meaning liquidating assets and improving the consumer’s financial position. See
Standard Bank of South Africa v Panayiotts 2009(3) SA 363 (W) para 9. However, in
this instance even the equity in the immovable property which was R324 000 at the
time of the assessment and tied in the mortgage bond was less than the loan
time of the assessment and tied in the mortgage bond was less than the loan
amount and would not have been able to d efray the consolidation loan without
obtaining another loan which would amount to perpetual over indebtedness. Section
80(1)(b)(ii) of the NCA . The assessment must be done reasonably not irrationally to
promote the responsible credit granting and use and for that purpose to prohibit
reckless credit granting. ABSA Bank Ltd v De Beers and Other s 2016 (3) SA 432
(GP) para 60. Thus, basing affordability on the said equity would also be
problematic.
[65] At the time of the assessment, with the existing financial means, prospects
and obligations of the Defendants, there was no reasonable basis to conclude that
any commercial purpose may prove to be successful, as contemplated in section
80(1)(a) read with 8 1 (2) (a) (iii) and 81(2) (b). In my view, even after the conclusion
of the credit agreement the Defendants remained over indebted to an even greater
extent than they were before the conclusion of the credit agreement. The
mechanisms and procedure employed by Elefin did not result in a fair and objective
assessment as envisaged in section 82(1) of the NCA. Notwithstanding that the
character of the transaction in this matter, is distinguishable from the ‘Brusson scam’
it still fall foul of the NCA. Accordingly, the credit agreement is declared to be
reckless. Consequently, the Defendant’s interests and obligations under the bond are
set aside.
[66] The Plaintiffs in the alternative submitted that in the event the court conclud es
that the Defendants are over -indebted make an order that is just and equitable in
terms of section 83(3)(b) and the amount payable would be R178,675.00 based on
enrichment. The first Defendant’s counsel submitted that the Defendant’s interest
and obligation under the bond be set aside in its entirety as contemplated in section
83(1) (2)(a) and (3).
[67] Section 83(2)(a) of the NCA specifically states that when a court deems a
credit agreement imprudent, it may issue an order nullifying all or part of the
consumer’s rights and obligations under that agreement, as the court finds just and
reasonable under t he circumstances. The statutory language is explicit and
unequivocal. Courts have the freedom to propose remedies that correspond with the
specifics of each case, including the authority to partially annul obligations instead of
entirely. This discretionary authority embodies a sophisticated strategy for consumer
protection that reconciles the conflicting aims of curbing irresponsible lending and
protection that reconciles the conflicting aims of curbing irresponsible lending and
safeguarding the property rights of credit providers against unjustified infringement.
The Constitutional Court’ s ruling in National Credit Regulator v Opperman 2013 (2)
SA 1CC determined that the contractual security rights of credit providers qualify as
a property under section 25 (1) of the Constitution. At para 63;
“In the circumstances of this case, the recogn ition of the right to restitution of money
paid, based on unjustified enrichment, as property under section 25(1) is logical and
realistic.”
[68] Any remedy under section 83(2), whether partial or total, entails a deprivation
of property that must be just ified as non -arbitrary. The practical ramifications of
partial versus complete annulment are substantial, especially when performance has
already transpired under the agreement. In instances of the restructuring or partial
annulment, the consumer shall retain possession while the outstanding debt is
settled if this restructured payment plan is fu lfilled. This method preserves continuity
and circumvents the intricate restitutionary dilemmas that emerge when agreements
are wholly annulled following significant performance. In situations when the v alue
has already been exchanged the loan provider hav ing dispersed funds and the
consumer having made payments a partial remedy may more precisely and
adequately represent the equitable balance between safeguarding consumers and
averting unjust enrichment.
[69] In National Credit Regulator v K201421715 (South Africa) Ltd t/a Quick Bucks
Cash Loans [2025] ZANCT 26, in March 2025, the Tribunal deemed the credit
agreements reckless, nullified the consumer’s rights and obligations under this
agreements, and mandated refunds agreements that had been fully repaid . This
case illustrates that both the courts and the National consumer Tribunal utilise the
complete spectrum of remedies permitted under section 83(2), incorporating
restitution consideration when applicable. Case law research and academic
commentary have delineated the considerations that should inform courts in deciding
whether to give partial complete relief. The degree of callousness is a significant
factor. The degree of bad faith or turpitude exhibited by the credit provider should be
a significant contributing element. In instances where a credit provider has engaged
a significant contributing element. In instances where a credit provider has engaged
in intentional predatory lending practices or exhibited total neglect of its statutory
responsibilities, more extensive redress may be justified. In contrast recklessness
stems from inco mpetence or systemic failings rather than deliberate exploitation
partial remedies may be more suitable.
[70] The extent of the performance already executed under the agreement
represents another critical consideration. Courts must evaluate whether parties have
fulfilled their duties, either partiality or completely, and must design remedies to
prevent unjust enric hment for either party . The consumers individual circumstances
are also significant in the selection of remedies . The just and reasonable approach
articulated in section 83 (2)(a) , incorporates all these factors into the court’s
adjudicative procedure. The remedy must be equitable and appropriate in light of the
factors. In the circumstances of this case an order in terms of section 83(2) (a) which
nullifies the remainder of the first Defendant’s responsibilities under the loan
agreement is justified , and the covering bond security, liberating the property from
encumbrance and absolving the first Defendant of any further payment obligations.
In conclusion, the first Defendants ’ rights and obligations under the agreement are
set aside in part. The Plaintiffs extended the loan to the Defendants while fully aware
that the Defendants were over -indebted which was irresponsible. Ostensibly the first
Defendant was still over -indebted during the trial proceedings, it surfaced during the
trial that the first Defendant is now divorced meaning that there is now one stream of
income in her household . An order for payment of the difference of R178, 675 .00
from the loan would further perpetuate the first Defendant’s over-indebtedness that
still persists , after being disregarded by the Plaintiffs when conducting the
affordability assessment of the Defendants. The first Defendant is absolved of
payments of the remaining payment responsibilities under the loan agreement.
[71] If credit providers could easily reclaim advanced payments via enrichment
claims after section 83 nullified contractual obligations, the rehabilitative intent of the
reckless credit rules would be considerably compromised the penalties levied
reckless credit rules would be considerably compromised the penalties levied
against credit providers for risky lending would be rendered ineffective if they could
evade statutory consumer protections via legal avenues. This is not disregarding the
first Defendant’s responsibilities and Plaintiffs’ right, but serves as a limitation of the
Plaintiffs’ right to restitution of the money still owing in view of p romoting the
objective of justice. The loan extension amounts to irresponsible lending. The public
intent of the reckless credit remedies is evident , the NCA explicitly aims to deter
irresponsible lending and foster prudent credit issuance, goals that hold considerable
socio-economic significance due to the harm that unaffordable loans can inflict on
consumers, their families, and the society at large. Notwithstanding, it is my view that
it would be just and reasonable for the Plaintiffs to retain the sum o f R251 325.00
already paid by the first Defendant towards the loan extended by the Plaintiffs. In
conclusion, the first Defendants’ rights and obligations under the agreement are set
aside in part.
[72] A court decision in terms of section 83 of the NCA unravels a continuing
covering bond on the property. For it has significant and complex legal implications,
impacting both personal duties under the credit agreement and the real security
rights associated under section 83 of the Act which authorises courts to rec tify
instances of recklessly granted credit resulting in remedial orders that dismantle the
security framework supporting the credit agreement. The continuing covering bond is
a mortgage bond that persists as ongoing security for the principal sum, interest, and
the supplementary sums despite any interim settlement . Thomani v Seboka N.O
2017(1) SA 51(GP). When the requirements of the credit agreement are nullified, the
bond forfeits its subject matter.
ORDER
[73] In the result, I make the following order:
[73.1] The credit agreement is declared reckless credit and it is set aside in
terms of section 83(2)(a);
[73.2] The Plaintiffs’ claim is dismissed with costs on scale B;
[73.3] The Plaintiffs are directed to cancel the continuing covering bond
registered against the first Defendant’s immovable property within 90
days from the date of this order.
________________________
N.E. Ralarala
Judge of the High Court
APPEARANCES
For the Plaintiffs:
JW Jonker instructed by Vaughan Ulyate & Associates
For the First Defendant:
P Mathibela instructed by Sambo-Mlahleki Attorneys