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[2019] ZASCA 92
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National Credit Regulator v Southern African Fraud Prevention Services NPC (560/2018) [2019] ZASCA 92; [2019] 3 All SA 378 (SCA); 2019 (5) SA 103 (SCA) (3 June 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 560/2018
In
the matter between:
NATIONAL
CREDIT
REGULATOR APPELLANT
and
SOUTHERN
AFRICAN FRAUD PREVENTION
SERVICES
NPC RESPONDENT
Neutral
citation:
National Credit
Regulator v Southern African Fraud Prevention Services NPC
(560/2018)
[2019] ZASCA 92
(03 June 2019)
Coram:
WALLIS, SALDULKER, ZONDI and SCHIPPERS JJA and
EKSTEEN AJA
Heard
:
22 May 2019
Delivered
:
03 June 2019
Summary:
Credit bureau – collection of
information pertaining to fraud – whether consumer credit
information in terms of s 70(1)
of National Credit Act 34 of
2005 (NCA) – whether information constituting an adverse
classification of consumer behaviour
in terms of Regulation 17 of
Regulations under NCA in GN R489 of 31 May 2006 – whether
credit bureau required to expunge
information within one year.
ORDER
On
appeal from:
Gauteng Division of High
Court, Pretoria (Vuma AJ, Baqwa J concurring, sitting as a court of
appeal):
1 The appeal is dismissed
with no order for costs.
2 The orders of the high
court granting costs against the National Credit Regulator in the
appeal and the cross-appeal to that court
are set aside.
JUDGMENT
Wallis
and Schippers JJA (Saldulker and Zondi JJA and Eksteen AJA
concurring)
[1]
On 12 March 2015 the appellant, the
National Credit Regulator (NCR), acting in terms of s 140(1) of the
National Credit Act 34 of
2005 (the NCA), lodged a complaint with the
National Consumer Tribunal (the Tribunal), against the respondent,
Southern African
Fraud Prevention Services NPC (SAFPS). The complaint
charged SAFPS, a registered credit bureau, with various
contraventions of
provisions of the NCA and the regulations made
thereunder. Prior to the hearing before the Tribunal the parties
concluded an agreement
of settlement, which they embodied in a draft
order subsequently endorsed by the Tribunal. The agreement disposed
of all save one
of the alleged contraventions. The Tribunal was left
to determine an alleged contravention of s 70(2)(
f
)
of the NCA, read with regulation 17, and, if there had been a
contravention, whether an administrative fine should be imposed
upon
SAFPS.
[2]
The issue for determination by the Tribunal
was whether SAFPS was retaining information for longer than permitted
by the NCA, read
with certain relevant regulations. The NCR contended
that the information in question was consumer credit information as
defined
in s 70(1) of the NCA and that it could not be retained
for longer than one year. SAFPS said that it was what it described
as
‘fraud information’, which was not regulated and which it
was entitled to keep for the period determined by it,
namely ten
years.
[3]
The Tribunal upheld the contentions of the
NCR that SAFPS had contravened s 70(2)(
f
)
of the NCA, read with regulation 17, and made a declaratory order to
that effect. It declined to impose an administrative fine.
SAFPS
appealed to the Gauteng Division of the High Court, Pretoria and its
appeal succeeded. This further appeal on both the issue
of
contravention and the imposition of an administrative fine is with
the special leave of this court.
The
facts
[4]
SAFPS was incorporated in 2000 as a
non-profit corporation by the four major banks to combat fraud in
commerce. Its members include
most major credit providers in South
Africa, as well as the South African Revenue Service and the
Financial Services Board. It
is funded by the annual membership
contributions of its members. SAFPS initially denied that it was a
credit bureau and obliged
to register in terms of s 43 of the NCA.
The Tribunal upheld its contentions, but Legodi J in the North
Gauteng High Court, Pretoria,
overruled that decision in a judgment
delivered on 26 May 2011. Subsequently SAFPS registered as a credit
bureau and it is accordingly
obliged to comply with the statutory
obligations of a registered credit bureau. The issue is whether it
has done so in regard to
expunging the information it collects on
behalf of its members.
[5]
In terms of the agreement concluded between
SAFPS and its members, each member agrees that all fraud detected by
it during the normal
course of its business will be filed to the
SAFPS Shamwari database within two business days of the fraud being
detected. All members
have access to that database in order to access
information applicable to their business requirements and needs.
Primarily members
will seek information before entering into a
variety of commercial transactions or making employment decisions.
[6]
The SAFPS code of practice identifies 11
different categories of fraudulent conduct. These are:
(a) False identity, which
includes the use of a false name, address or ID number or other false
personal detail in an application
of some type;
(b) Impersonation, where
an applicant impersonates someone else, perhaps by using a false ID
book or number, or the particulars
of a dead person, or in some other
way;
(c) Giving false
employment details including an incorrect employer name, address or
telephone number or providing a forged or incorrect
payslip;
(d) Use of other forged
documents;
(e) A victim of
impersonation, where it is doubtful whether the person is in fact
impersonating someone else or is himself or herself
possibly the
victim of impersonation. In that event the person is shown under both
categories (b) and (e). The latter is said to
require the member ‘to
be extra vigilant when deciding as to the granting of any facility’.
After establishing that
they have been a victim of impersonation, for
example, by someone using their stolen identity card, a person listed
under this
category is able to ask for a protective listing;
(f) Misuse of account
through fraudulent conduct, which is described as ‘deliberately
not paying their mortgage or credit
card account, especially by
guile, trickery or illegitimate presentation of the individual’s
financial position’. It
is said that the category is not to be
used unless there was clearly an intention to commit fraud;
(g) Employee fraud or
fraud in an employment application. This is an extensive category
covering a vast number of possibilities;
(h) Insurance fraud,
which relates to dishonest and inflated insurance claims;
(i) Internet fraud;
(j) Business fraud/person
unknown, which records information related to fraudulent activities
where no person can be identified
as responsible;
(k)
Suspected fraud (declined). This is a cautionary category where fraud
is strongly suspected, primarily in regard to the provision
of false
information or impersonation of someone else. Accordingly it does not
involve a case of proven fraud.
[7]
SAFPS referred compendiously to all the
information in these various categories as ‘fraud information’
and we shall
do likewise. In each case the primary item of
information in its records was a factual statement describing the
particular fraud.
It stressed the fact that fraud is widespread and
perpetrators of fraud are often repeat offenders. In other words,
they may repeat
fraudulent conduct with several victims or, if
unsuccessful in one attempt they may try elsewhere. Perhaps along the
lines that
the leopard does not change its spots, SAFPS maintained
that such information remained relevant for a lengthy period. It
accordingly
only deletes it from the Shamwari data base after ten
years, unless the alleged fraud is clarified and resolved before that
date
and the listing removed at the instance of a member.
The
dispute
[8]
The NCR contended that the information
obtained by SAFPS from its members constituted consumer credit
information as defined in
s 70(1) of the NCA. That is information
concerning:
‘
(
a)
a person’s credit history, including applications for credit,
credit agreements to which the person is or has been a party,
pattern
of payment or default under any such credit agreements, debt
re-arrangement in terms of this Act, incidence of enforcement
actions
with respect to any such credit agreement, the circumstances of
termination of any such credit agreement, and related matters;
(
b
)
a person’s financial history, including the person’s past
and current income, assets and debts, and other matters within
the
scope of that person’s financial means, prospects and
obligations, as defined in section 78(3) and related matters;
(
c
)
a person’s education, employment, career, professional or
business history, including the circumstances of termination of
any
employment, career, professional or business relationship, and
related matters; or
(
d
)
a person’s identity, including the person’s name, date of
birth, identity number, marital status and family relationships,
past
and current addresses and other contact details, and related
matters.’
[9]
The first issue between the parties was
whether the NCR was correct in contending that the fraud information
held by SAFPS was consumer
credit information. If it was not, that
was an end to the matter. If it was, the second issue was whether and
when SAFPS was obliged
to expunge the information from its Shamwari
database. Section 70(2)(
f
)
of the NCA required it to:
‘
promptly
expunge from its records any prescribed consumer credit information
that, in terms of the regulations, is not permitted
to be entered in
its records or is required to be removed from its records’.
That
takes one to the regulations promulgated under the Act (the
Regulations).
[1]
[10]
Regul
ation 17(1)
contains a table of different categories of consumer credit
information, with a more detailed description and a maximum
period
from the date of the relevant event for which it can be displayed and
used for purposes of credit scoring or credit assessment.
No point
was made of that latter qualification and we assume that SAFPS
accepted that its members use the information in part at
least for
credit assessment. It was common cause between the parties, and
correctly so in our opinion, that the only category of
consumer
credit information that might be relevant to the information held by
SAFPS was category 5 entitled ‘Adverse classifications
of
consumer behaviour’. The appended description is ‘Subjective
classifications of consumer behaviour’ and the
period of
expungement one year. The second issue was whether the fraud
information held by SAFPS fell within this category. If
it did, then
its retention on the database for ten years was a breach of
s 70(2)
(f)
of
the NCA.
Is
the SAFPS fraud information consumer credit information?
[11]
The NCR’s case before the Tribunal
was that a listing relating to fraud or suspected fraud constituted
‘consumer credit
information’ as defined in s 70(1) of
the NCA, because consumer behaviour was not limited to payment under
a credit agreement
but also included the behaviour of a consumer who
intended to defraud a credit provider in a prospective credit
application. All
of this fitted comfortably within the general
categories of a person’s credit history or their financial
history. In a real
sense nothing could be more relevant to a person’s
credit history than that they had previously committed fraud.
[12]
Before us counsel for the NCR advanced
essentially the same argument. The data that the SAFPS kept in its
database was consumer
credit information, because it included
information relating to fraudulent, financial or other transactions
involving consumers
and contained their personal details such as
identity numbers, addresses and places of work. The data was
inextricably linked to
credit applications by consumers to credit
providers and used by members of SAFPS when assessing applications
for credit.
[13]
In
construing the relevant provisions of the NCA and regulation 17, the
starting point is the accepted approach to statutory construction
that when interpreting legislation, what must be considered is the
language used, the context in which the provision appears, the
apparent purpose to which it is directed, and the background to its
production.
[2]
[14]
The definition of ‘consumer credit
information’ in s 70(1) is extremely broad. It includes all
sorts of information
of the type that consumers ordinarily furnish in
credit applications, about their credit, financial and employment
history. In
order for it to be meaningful it reflects personal
information such as their name, address, identification number and
contact details.
The breadth of the definition must however be
understood in the context in which it appears. That context emerges
from other provisions
of the NCA. Thus, in s 3
(f)
,
one of the purposes of the NCA is to improve consumer credit
information and the reporting and regulation of credit bureaux. That
appears to serve two purposes consistent with the balance that the
NCA seeks to maintain between consumers who need credit and
those who
provide it. The first is that the information recorded by bureaux
should be as accurate and meaningful as possible. The
second is that
consumers seeking credit should not be burdened by inaccurate or out
of date information.
[15]
In s 43(1), dealing with the
registration of credit bureaux, one finds that they are bodies that
for payment engage in the
business of receiving reports of, or
investigating, credit applications, credit agreements, payment
histories or patterns or consumer
credit information as defined in
s 70 (1). When furnished with consumer credit information they
are obliged to verify its
accuracy and also to maintain it in their
records. In other words, consumer credit information relates to
information concerning
a person’s ordinary track record as a
consumer. Its apparent purpose is credit assessment, more
specifically whether consumers
would be able to comply with their
obligations under a credit agreement. SAFPS submitted that the
information in the section was
confined to this type of information
and did not include information about criminal convictions or
confirmed incidents of fraud.
[16]
A further factor is that the NCA itself
appears to recognise that a credit bureau may receive and retain
certain information that
does not constitute consumer credit
information. Section 70(3)
(a)
provides that, in addition to the consumer credit information
contemplated in s 70(2), which is the information described
in
s 70(1), a credit bureau ‘may receive, compile and report
only other prescribed information in respect of a consumer’.
This is something of a double-edged sword. It prohibits credit
bureaux from receiving, compiling and reporting on any information
other than information described in s 70(1), but contemplates
that there may be such additional information and that this
may be
kept, if that is prescribed by regulation. So the NCA itself appears
to contemplate that there may be information that it
is desirable
that credit bureaux should keep, falling outside that described in
s 70(1).
[17]
This rather tangled scheme is given effect
by way of the regulations. Regulation 18(3) defines six categories of
consumer credit
information that may not be kept and must be expunged
from a credit bureau’s records in terms of s 70(2)
(f)
of the NCA. These categories include information about a consumer’s
race, political affiliation, medical status, religion,
sexual
orientation or trade union membership. This is all described as
consumer credit information, albeit that it is unclear how
some of it
at least fits within the definition in s 70(1). The additional
information that a credit bureau may keep in terms
of s 70(3)
(a)
is then described in regulation 18(6).
There are four categories of such information viz:
‘
(a)
status and history of outstanding
obligations and payments in respect of goods, services, or utilities
supplied to consumers;
(b)
information that is relevant for the
purposes of credit fraud detection and prevention;
(c)
payments made by a consumer in respect
of a debt, where the debt has been ceded or sold by the credit
provider to another party;
(d)
information that is not related to and
not intended to for the purpose of providing consumer credit,
provided that the consumer’s
consent has been obtained to use
the information for such purpose and to submit, compile and report
such information’.
[18]
Section 70(3)
(a)
describes this as ‘other
information’ in contradistinction to consumer credit
information. The difficulty lies in distinguishing
the two.
Sub-paragraph
(a)
,
for example, undoubtedly refers to information that constitutes part
of a consumer’s credit history. A consumer’s
payment
history in respect of a debt is a ‘pattern of payment or
default’ under a credit agreement and therefore part
of their
credit history as defined. Some at least of the information held by
SAFPS, such as the identity of consumers and the fact
that they had
applied for credit and been refused, would constitute part of their
credit history and therefore consumer credit
information. On the face
of it therefore there is an overlap between the information
prescribed in regulation 18(6) and consumer
credit information in
terms of s 70(1).
[19]
One way of dealing with this would be, as
contended by SAFPS, to ask first whether the information is
information that is relevant
for the purpose of credit fraud
detection and prevention. If the answer to that question is
affirmative then, because s 70(3)
(a)
treats information of that type as
distinct from consumer credit information as defined, it is
automatically excluded from the latter
category. On that basis all
the information it describes as fraud information would fall outside
the scope of consumer credit information
and also outside the scope
of s 70(2)
(f)
of
the NCA, which only applies to the expungement of consumer credit
information and not information that does not constitute consumer
credit information. The same approach could be taken to the other
information referred to in regulation 18(6).
[20]
This is an apparently simple way of dealing
with the overlap between the fraud information held by SAFPS and
consumer credit information
defined in s 70(1), such as information
relating to personal details, for example, the surname and identity
number of a subject;
employment, professional or business history;
and credit history which includes applications for credit. But it
poses problems.
In the first place s 70(1) is the primary
provision, contained as it is in the NCA itself, while regulation
18(6) is a regulation
made under the NCA that serves a subordinate
purpose. It inverts the enquiry to say that the regulation operates
to limit the scope
of the statutory definition. Secondly, it
means that the regulation serves to define the statutory provision,
but that is
not the purpose of a regulation. In our view therefore
the contention that regulation 18(6)
(b)
serves to exclude from the ambit of consumer credit information any
information that is relevant for fraud detection and prevention
purposes cannot succeed.
[21]
There is an alternative argument that may
have a similar result. It is that the purpose of s 70(2)
(f)
of the NCA is to empower the Minister
to make regulations that remove from the ambit of consumer credit
information certain specified
information that would otherwise fall
within it, given the wide terms of the definition in s 70(1).
Accordingly regulation
18(6) serves to excise from consumer credit
information in terms of s 70(1) the information specified in the
regulation. That
construction would overcome the problem that the
regulation and the section overlap. It was not, however, developed in
argument
before us and, as the appeal can be resolved without
deciding the point, it is best not to make a firm ruling on it. We
turn then
to the second issue, which we will approach on the footing
that at least some of SAFPS’ fraud information is consumer
credit
information.
Is
SAFPS obliged to expunge its fraud information?
[22]
The obligation to expunge consumer credit
information arises under s 70(2)
(f)
of the NCA. A credit bureau must promptly expunge from its records
any prescribed consumer credit information that in terms of
regulations is required to be removed from its records. The
obligation to expunge information arises in relation to any consumer
credit information that is so prescribed. Any information not so
prescribed is not subject to compulsory expungement. The issue
then
is whether the fraud information is so prescribed. In order to
determine that it is necessary to have regard to regulation
17(1).
[23]
The regulation is headed ‘Retention
periods for credit bureau information’. It provides that the
consumer credit information
as per the table to the regulation ‘must
be displayed and used for purposes of credit scoring or credit
assessment for a
maximum period from the date of the event, as
indicated’. That period is ‘1 year or within the period
prescribed in
section 71A’, in the case of category 5 –
adverse classifications of consumer behaviour. This was the only
provision
in the table on which the NCR relied in contending that
there was an obligation on SAFPS to delete its fraud information.
[24]
The term ‘adverse classifications of
consumer behaviour’ is not defined in the Regulations. It has
however been defined
in s 71A(4)
(a)
of the NCA, in the context of the removal of adverse consumer credit
information, as follows:
‘ “
adverse
classification of consumer behaviour” means classification
relating to consumer behaviour and includes a classification
such as
“delinquent”, “default”, “slow paying”,
“absconded”, or “not contactable”
…’
That
definition was introduced into the NCA with effect from 13 March 2015
in terms of Act 19 of 2014. In view of the fact that
the events
leading to the NCR’s original complaint arose prior to the
effective date of the amendment and the regulations
had also been
amended in that time, the parties were asked whether we were to
approach the issues in accordance with the historical
provisions of
the statute and regulations or on the basis of the amendments. They
confirmed that the case had been argued on the
latter basis and, as
that was the live dispute between them, that the case should be
determined under the current statute and regulations.
[25]
In our view, the meaning that must be given
to the term ‘adverse classification of consumer behaviour’
throughout category
5 of regulation 17(1) is the meaning that it is
given in s 71A(4)
(a)
of
the NCA. Various features support that construction. The first is
that its central feature is the failure by consumers to perform
their
legal and contractual obligations under a credit agreement. It
encompasses subjective classifications of that failure and
says
nothing about fraud. The latter is more usually an objective
assessment of the consumer’s conduct in the light of the
definition of fraud. The expression ‘adverse classification of
consumer behaviour’ appears to be directed at the behaviour
of
the consumer once credit has been advanced rather than behaviour
aimed at defrauding a credit provider in a prospective credit
application.
[26]
Different meanings cannot be assigned to
the expression ‘adverse classification of consumer behaviour’
in category 5
of regulation 17(1), depending on whether one is
concerned with the one year period or the seven day period for
expungement. Both
periods require information of that class to be
expunged. In general it must be expunged after one year. Where the
obligation has
been discharged it is seven days. In relation to the
latter class of cases the statutory meaning of ‘adverse
classification
of consumer behaviour’ in s 71A(4)
(a)
is applicable. Regulation 1 makes it clear that any word or
expression defined in the NCA bears the same meaning in the
Regulations.
There is no basis upon which the expression can be given
a different meaning when dealing with a situation where the
obligation
has not been settled, so that the expungement period is
one year.
[27]
This interpretation is underscored by the
fact that in the amending regulations made under GN R1209 of 30
November 2006 the term
‘adverse classifications of consumer
behaviour’ was included in the definition of ‘adverse
consumer credit information’,
which provided:
‘“
adverse
consumer credit information” includes:
(a)
adverse classifications of consumer
behaviour, which are subjective classifications of consumer behaviour
and include classifications
such as “delinquent”,
“default”, “slow paying”, “absconded”
or “not contactable”
…
(b)
adverse classifications of enforcement
actions, which are classifications related to enforcement action
taken by the credit provider,
including classifications such as
“handed over for collection or recovery”, “legal
action”, or “write
off”.’
These
then formed two of the categories in the table in regulation 17(1).
When s 71A was introduced in 2015, these definitions were
removed
from the regulations and transposed to the statute in s 71A(4),
but the categories specified in regulation 17(1) were
unchanged. That
is a clear indication that the statutory meaning that had always
until then governed these categories would continue
to do so.
[28]
The fraud information held by SAFPS does
not fit comfortably in an ‘adverse classification of consumer
behaviour’ as
defined in the NCA. That behaviour, which
includes ‘delinquent’, ‘default’,
slow-paying’, ‘absconded’
and ‘not
contactable’, is behaviour in relation to the performance of
obligations under a credit agreement, and will
not ordinarily include
fraud. Where fraud is committed, as in many cases it appears to be,
when a consumer is seeking to obtain
credit or a job, it stretches
the language to describe that as consumer behaviour of the type
referred to in the definition.
[29]
The fraud information does not involve a
‘subjective’ classification of consumer behaviour. The
reason for expungement
of subjective classifications of consumer
behaviour in category 5 of regulation 17 is a matter of common sense.
It is precisely
because the classification by the credit provider as
‘delinquent’, ‘default’, ‘non-paying’,
‘absconded’ or ‘not contactable’ is entirely
subjective and based on the classifier’s own observations
or
preferences, that the information may not be retained for more than
one year. Where the reason for the default is that the consumer
has
lost their job as a result of illness, one credit provider may treat
that as a misfortune, while another may categorise them
as in default
or delinquent. Such subjective classifications warrant being retained
for a shorter period.
[30]
By contrast, the types of fraud on the
SAFPS database are generally classified on the basis of facts and
objective criteria. For
example, in the filing category ‘false
identity’, applicants in fact supply false documents about
themselves in order
to deceive, which is entered in the Shamwari
database. Likewise, before a filing is made under the category
‘insurance fraud’,
members of the SAFPS are required to
objectively establish that the claimant has completed a claim form
containing materially false
and misleading information in order to
obtain a benefit which would have resulted in a loss to the member.
Fraud in relation to
credit applications may involve forgery of bank
records or pay slips and similar documents.
[31]
All of this points to the fraud information
held by SAFPS not being subject to the time limit, even if it
constitutes consumer credit
information, because it is not consumer
credit information within any of the prescribed categories in
regulation 17. The Tribunal’s
finding that fraud information
‘is the subset of [consumer] credit information that equally
impacts the credit provider’s
decision whether or not to grant
credit to the affected consumer’, does not properly address the
question whether it falls
within one of the categories in regulation
17(1) and is thus incorrect.
[32]
Additionally, the NCA and the regulations
made under it expressly recognise certain categories of information
that credit bureaux
are allowed to keep under s 70(3)
(a)
that are not included in the various categories in regulation 17(1).
Regulation 18(6) prescribes that ‘other’ information,
ie
the information other than consumer credit information that a credit
bureau may keep on record. It lists various categories
of information
of this kind. The relevant provision is s 18(6)
(b)
.
It provides:
‘
(6)
In addition to the consumer credit information contemplated in
section 70(1) of the Act, a registered credit bureau may receive,
compile and report only the following information in respect of a
consumer:
(a)…
(b)
information that is relevant for the purpose of credit fraud
detection and prevention…’
[33]
Section 70(2)(g) of the NCA provides that a
registered credit bureau must issue a report to any person who
requires it for a prescribed
purpose or a purpose contemplated in the
Act. Regulation 18(4) provides in relevant part:
‘
The
prescribed purposes, other than for purposes contemplated in the Act,
for which a report may be issued in terms of section 70(2)
(g)
are:
(a)
an investigation into fraud, corruption or
theft, provided that the South African police service or any other
statutory enforcement
agency conducts such investigation;
(b)
fraud detection and fraud prevention
services …’
[34]
These provisions thus expressly recognise
that recording and making available fraud information is a proper
function of a credit
bureau. There is nothing in the various
categories in regulation 17(1) to suggest that any of them include
fraud information or
that it is required to be retained only for a
limited period. The endeavour in argument to squeeze fraud
information into category
5 without regard to the definition
applicable to that category supports the interpretation that it is
information of a type that
should not be subject to expungement by
way of regulation.
[35]
The
above interpretation is sensible. In
Exxon
Corporation
,
[3]
Oliver LJ said: ‘It is not necessary, in construing a statutory
expression, to take leave of one’s common sense’.
A
statutory provision must be interpreted in a way that leads to
sensible and businesslike results, provided the interpretation
does
not do violence to the clear meaning of the provision or undermines
its apparent purpose.
[4]
[36]
Section 3 of the NCA states that its
purposes are ‘to promote and advance the social and economic
welfare of South Africans,
promote a fair, transparent, competitive,
sustainable, responsible, efficient, effective and accessible credit
market and industry,
and to protect consumers’ in the respects
listed in subsections
(a)
-
(i)
.
None of these subsections suggests that the Act does not purport to
regulate the type of fraud combating activities that SAFPS
undertakes. Nor do any of them support a construction that would
undermine genuine endeavours to combat fraud.
[37]
The Tribunal’s interpretation of the
NCA however was that all information kept by a credit bureau
constituted ‘consumer
credit information’ and is subject
to expungement under regulation 17(1). That was inconsistent with the
fact that when the
regulation was amended in 2015 it removed from the
table the general catch-all category ‘Other’. The
construction leads
to patently insensible and unbusinesslike results
and cuts across the purposes of the NCA – it would undermine
the ability
of the financial industry to protect itself against fraud
and in doing so, protect fraudsters and not the victims of fraud; it
would not promote a responsible credit market and industry; and it
would not protect consumers. It would require credit bureaux
to
expunge highly relevant information about fraud on the part of
consumers after one year, but oblige them to retain information
about
maintenance judgments potentially indefinitely (Category 8).
Information about sequestration orders could be retained for
five
years and, once the consumer had been rehabilitated, that fact could
be retained for another five years (Categories 9 and
10). No reason
was advanced for affording this benevolence to fraud and fraudsters,
but withholding it from maintenance defaulters
and insolvents,
including after their rehabilitation.
[38]
The NCR however contended that the
behaviour of a consumer intending to defraud a credit provider under
a prospective credit application
fell within the definition of
‘adverse classification of consumer behaviour’, as
contemplated in the NCA; that this
was ‘the correct
interpretation’; and that otherwise construed, it ‘would
defeat the purpose of the NCA’.
[39]
The contention is both startling and wrong.
It is directly at odds with s 81 of the NCA which provides in
relevant part:
‘
Prevention
of reckless credit
81(1) When applying for a
credit agreement, and while that application is being considered by
the credit provider, the prospective
consumer must fully and
truthfully answer any requests for information made by the credit
provider as part of the assessment required
by this section.
…
(4)
For all purposes of this Act, it is a complete defence to an
allegation that the credit agreement is reckless if–
(a)
the credit provider establishes that the consumer failed to fully and
truthfully answer any requests for information made by
the credit
provider as part of the assessment required by this section; and
(b)
a court or the Tribunal determines that the consumer’s failure
to do so materially affected the ability of the credit
provider to
make a proper assessment.’
The
NCR’s contention that the NCA must be read to protect
fraudsters is untenable in the light of s 81 and leads to a patently
insensible and unbusinesslike result.
[40]
For those reasons there was no obligation
on SAFPS to expunge the fraud information in its possession and the
decision by the high
court upholding its appeal was correct. The
appeal must therefore be dismissed. That renders the appeal in
respect of the imposition
of an administrative fine academic, as
there was no contravention of the NCA.
Costs
[41]
Counsel for the NCR submitted that it
should not be mulcted in costs because it is no ordinary litigant but
a statutory body. It
did not institute this litigation and opposed
the appeal in the court a quo because it concerned the exercise of
the NCR’s
statutory and regulatory powers.
[42]
The
principle that a statutory body should not be ordered to pay costs in
a case where it has acted impartially and reasonably in
exercising
its statutory duties, even if it has been shown to have acted
incorrectly though bona fide, is well-established.
[5]
More than a century ago in
Coetzeestroom
,
[6]
affirmed by the Constitutional Court in
Pioneer
Hi-Bred
,
[7]
Innes CJ said that it was inequitable to mulct an official (the
Registrar of Deeds in that case) with costs where his actions,
though
mistaken, were bona fide, as that was detrimental to the vigilance
required of that office in the public interest.
[43]
In
Pioneer
Hi-bred
,
[8]
Skweyiya ADCJ stated the principle thus:
‘
The
principle that should inform the CAC’s exercise of discretion
is that, when the Commission is litigating in the course
of
fulfilling its statutory duties, it is undesirable for it to be
inhibited in the
bona fide
fulfilment of its mandate by the threat of an adverse costs award.
This flows from the need to encourage organs of state to make
and to
stand by honest and reasonable decisions, made in the public
interest, without the threat of undue financial prejudice if
the
decision is challenged successfully.’
[44]
There
is no suggestion that the NCR’s decision to refer the matter to
the Tribunal in terms of s 140 of the NCA on the basis
that SAFPS had
allegedly contravened s 70(2)
(f)
read with regulation 17, was neither honest nor reasonable. That
decision was taken in the exercise of its statutory and regulatory
duties. The Tribunal ruled in favour of the NCR. Its opposition to
SAFPS’s appeal against that decision in the court a quo
was
likewise bona fide and reasonable: the proper interpretation of
provisions of the NCA which the NCR was statutorily obliged
to
enforce, and which directly impacted upon its powers and functions,
were at issue. Fairness, in the light of the particular
circumstances
of this case and the NCR’s statutory duties in regulating the
consumer credit industry and enforcing the NCA,
[9]
dictated that the costs orders issued by the high court against it
were not justified, despite its finding that the NCR’s
actions
were mistaken.
[10]
[45]
Similarly, the NCR’s decision to
lodge an appeal in this court was bona fide, reasonable and taken in
the course of fulfilling
its statutory duties. It is a public
functionary and required clarity and certainty in relation to the
interpretation of the relevant
provisions of the NCA. In our opinion,
an adverse costs order against the NCR is not justified in the
circumstances.
[46]
The following order is made:
1. The appeal is
dismissed with no order for costs.
2. The orders of the high
court granting costs against the National Credit Regulator in the
appeal and the cross-appeal to that
court are set aside.
_______________________
MJD
WALLIS
JUDGE
OF APPEAL
_______________________
A
SCHIPPERS
JUDGE
OF APPEAL
Appearances
For
appellant: T V Norman SC (with her R J Mbuli)
Instructed
by: Mothle Jooma Sabdie Attorneys, Pretoria
Matsepe
Inc, Bloemfontein
For
respondent: W Trengove SC (with him C Steinberg)
Instructed
by: Bieldermans Inc, Pretoria
Honey
Attorneys, Bloemfontein.
[1]
The
Regulations were originally published in
GN
R489 of 31 May 2006 and amended by
GN
R1209 of 30 November 2006 and further amended by GN R202 of 13 March
2015.
[2]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18; affirmed in
Airports
Company South Africa Big Five Duty Free (Pty) Limited
&
others
[2018] ZACC 33
;
[2019] 2 BCLR 165
(CC) para 29;
[3]
Exxon
Corporation v Exxon Insurance Consultants International Ltd
[1982] Ch 119
at 144.
[4]
Endumeni
fn 2, para 18.
[5]
See LAWSA, 2 ed, Vol 3 Part 2 p 257 para 367 and the authorities
there collected.
[6]
Coetzeestroom
Estate and GM Co v Registrar of Deeds
1902 TS 216
at 223-224.
[7]
Competition
Commission of South Africa v Pioneer Hi-bred International Inc and
Others
[2013] ZACC 50
;
2014 (2) SA 480
(CC) para 24.
[8]
Ibid, footnotes omitted.
[9]
Sections 14 and 15 of the NCA.
[10]
Pioneer
Hi-Bred
fn 27 para 27.