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[2016] ZACC 12
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Nkata v Firstrand Bank Limited and Others (CCT73/15) [2016] ZACC 12; 2016 (6) BCLR 794 (CC); 2016 (4) SA 257 (CC) (21 April 2016)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT 73/15
In the matter
between:
NOMSA
NKATA
Applicant
and
FIRSTRAND BANK
LIMITED
First Respondent
SHERIFF FOR THE DISTRICT
OF DURBANVILLE,
WESTERN
CAPE
Second Respondent
KRAAIFONTEIN
EIENDOMME /
PROPERTIES
Third Respondent
REGISTRAR OF DEEDS, WESTERN
CAPE
Fourth Respondent
and
SOCIO-ECONOMIC RIGHTS INSTITUTE
OF SOUTH
AFRICA
Amicus Curiae
Neutral
citation:
Nkata
v FirstRand Bank Limited and Others
[2016]
ZACC 12
Coram:
Moseneke DCJ, Cameron J, Jafta J, Khampepe J,
Madlanga J, Nkabinde J, Nugent AJ, Van der Westhuizen J and Zondo J
Judgments:
Cameron J with Nugent AJ concurring (main
judgment): [1] to [74]
Moseneke DCJ with Jafta J, Khampepe J, Madlanga J,
Nkabinde J, Van der Westhuizen J
and
Zondo J concurring (majority judgment): [75] to [139]
Nugent AJ with Cameron J concurring (separate concurrence to main
judgment): [140] to [162]
Jafta J (separate concurrence to majority
judgment): [163] to [189]
Heard
on:
19 November 2015
Decided
on:
21 April 2016
Summary:
National Credit Act 34 of 2005
—
section 129(3)
— requirements for reinstatement of credit
agreement — payment of credit provider’s reasonable costs
of enforcement
— credit provider unilaterally capitalised the
costs in consumer’s bond account without demand of payment and
taxation
or agreement on reasonableness — costs not due and
payable — reinstatement not precluded
ORDER
On appeal from the Supreme
Court of Appeal (hearing an appeal from the High Court of South
Africa, Western Cape Division, Cape Town):
(a)
Leave to appeal is granted.
(b)
The appeal succeeds.
(c)
The order of the Supreme Court of Appeal is set aside.
(d)
It is declared that—
(i)
the credit agreement between FirstRand Bank Limited and Ms Nkata
was lawfully
reinstated;
(ii)
from 8 March 2011, the default judgment entered against Ms Nkata
and the subsequent
warrant of execution against her home had no legal
force;
(iii)
the public auction of Ms Nkata’s home on 24 April 2013 to the
third respondent is set aside;
and
(iv)
the property may not be transferred to or registered in the name of
the third respondent.
(e)
The Bank must pay Ms Nkata’s costs in the High Court, the
Supreme Court of Appeal
and in this Court, including where
applicable the costs of two counsel.
JUDGMENT
CAMERON J
(Nugent AJ concurring):
Introduction
[1]
The National Credit Act
[1]
(NCA) permits consumers who have fallen into arrears, and face
impending debt enforcement procedures, to remedy their default or,
as
the NCA terms it, “reinstate” the credit agreement by
paying the full arrear amounts, along with the credit provider’s
permitted default charges and reasonable costs of enforcing the
agreement.
[2]
The principal question is whether reinstatement of a credit agreement
took place in this case.
[2]
The applicant, Ms Nomsa Nkata (Ms
Nkata), says Yes. So does the amicus curiae, the
Socio economic Rights Institute
of South Africa (SERI).
The first respondent, FirstRand Bank Limited (Bank), says No.
[3]
The courts below came to differing conclusions. Now this Court
must, by interpreting the provisions of the NCA, provide
an answer.
Background
[3]
Ms Nkata is a businesswoman and
single mother of two. She sells hospital equipment. In
March 2005, she bought a property
at 35 Vin Doux Crescent, Durmonte,
Durbanville, Western Cape (property). That year, and in
2006, she registered two
mortgage bonds with the Bank to finance the
property’s acquisition. The property became her primary
residence in 2007.
The first mortgage bond was for R850 000
and the second for R630 000. For the first bond, Ms Nkata
selected the
address of the property as the
domicilium
address for the service of all notices. For the second, she
selected C/04 Devonshire Hill, Rondebosch, Cape Town, 7700
(Rondebosch
apartment). This was the address she temporarily
lived in while her house was being built on the property. The
loan
or mortgage agreement, that both mortgage bonds secure, is a
credit agreement to which the NCA applies, even though it was
concluded
before the NCA came into effect.
[4]
[4]
Ms Nkata was unable to meet her
obligations under the credit agreement and repeatedly fell into
arrears. This triggered many
telephone calls and letters from
the Bank, including two notices in terms of section 129(1) of the
NCA.
[5]
On 1 June 2010, the Bank addressed the first section 129(1)
notice to Ms Nkata, but it was delivered to 27 (instead
of 35) Vin
Doux Crescent, Durmonte, Durbanville. So Ms Nkata
never received it. The Bank said the wrong address
was due to
an error in the deeds office records. At that stage Ms Nkata’s
arrears were R30 186.19.
[5]
Three days later, on 4 June 2010,
the Bank addressed a second section 129(1) notice to Ms Nkata.
This time it was sent
to the Rondebosch apartment. But the Bank
misstated the address, sending to “c/o 4 Devonshire Hill”
rather
than C/04 Devonshire Hill. At this stage, Ms
Nkata’s arrears were R42 257.01. She denied
receiving
either notice.
[6]
On 5 July 2010, the Bank issued
summons. It alleged section 129(1)(a) compliance. The
address debacle continued.
The second respondent (Sheriff)
tried, without success, to serve the summons at the Rondebosch
apartment. The Sheriff later
served at the correct address –
35 Vin Doux Crescent – by affixing a copy of the summons
to the outer door.
Ms Nkata did not enter an appearance to
defend. She maintained that the summons was never served on
her.
[7]
On 28 September 2010, the Registrar
of the Western Cape Division of the High Court, Cape Town
(Registrar) granted default judgment
against Ms Nkata for the total
outstanding amount owed to the Bank. This totalled
R1 472 506.89, together with
interest from 1 June 2010
to the date of payment. The Registrar issued a writ authorising
the Sheriff to attach and
take the property into execution.
[6]
Ms Nkata claims that she became aware of the judgment only when a
representative from the Bank telephoned her to inform her
that the
property was to be sold in execution by public auction on 10 December
2010.
[8]
On 19 November 2010, Ms Nkata
applied urgently to the High Court to rescind the default judgment.
On 10 December 2010, before
her application was heard, she and the
Bank entered into a settlement agreement.
[7]
The Bank cancelled the sale in execution. Ms Nkata agreed to
pay monthly instalments of R10 000. If she
failed to do
so, the Bank would be entitled to “proceed to sell the property
in execution forthwith”.
[8]
Ms Nkata also agreed to pay the costs of the cancelled sale as well
as the costs of the rescission application “as
taxed or
agreed”.
[9]
The agreement was never made an order of court.
[10]
[9]
Ms Nkata contends that after the
settlement agreement, when she paid her arrears
of
over R87 000,
[11]
her credit agreement with the Bank was
reinstated. She resumed monthly repayments in March 2011
when she caught up with
her arrears. The Bank contends that the
fact that default judgment had been granted, with the notice of
execution dated 28
September 2010, made reinstatement impossible
under the statute.
[10]
In February 2011, the Bank debited
Ms Nkata’s mortgage bond account with amounts titled
“
Legal
Fees” on the account statement. The amounts were R6 498
and R8 000. The Bank describes these as
being for the
attorney’s fees and counsel’s day fee in Ms Nkata’s
unsuccessful rescission application, which
costs were covered by the
parties’ settlement agreement. This was in addition to a
globular amount of R9 050,
debited to the mortgage bond account
in October 2010, for fees that the Bank had incurred in pursuing
the cancelled execution
and sale.
[12]
Ms Nkata says these costs were not presented to her and the Bank did
not invite her to pay them.
[11]
After paying the full arrears on her
account in March 2011, Ms Nkata again fell behind in her payments.
She brought her account
up to date in March 2012, and, again, in
May 2012.
[12]
In the meantime, Ms Nkata tried to
have the default judgment rescinded. First, in March 2011,
shortly after settling her arrears,
she sought to make the settlement
agreement an order of court. The chamber judge queried the
application because the Bank
had not been notified of it. It
never proceeded. In April 2012, Ms Nkata asked the Bank to
agree to have the default
judgment rescinded as it affected her
credit record. The Bank refused.
[13]
Ms Nkata also tried making a
distressed debt application,
[13]
which the Bank rejected since the matter was “under
litigation”.
[14]
She unsuccessfully asked that the Bank allow her to pay reduced
instalments for five years. The Bank proposed she sell
the
property if she could not afford the instalments. By the end of
2012, Ms Nkata was in arrears of R22 058.09.
[14]
In February 2013, with Ms Nkata
now in arrears of R24 424.80, the Bank sent a notice of sale in
execution to her by registered
mail. This, she failed to
collect. In March 2013, she was informed of the date of the
sale in execution – 24
April 2013. Ms Nkata continued to
make promises to pay. The property was sold to the third
respondent by public auction.
By this time,
the
Bank’s records reflected a total debt of R1 392 028,
with arrears of R33 716 (approximately three months’
instalments).
[15]
On 1 March
2013,
the Bank debited R4 000 to Ms Nkata’s mortgage bond
account for fees, advertising, sheriff’s charges and
VAT in
respect of the scheduled sale in execution.
[16]
At the end of April 2013, Ms Nkata
and the purchaser of the property, the third respondent, entered into
a lease agreement.
This allowed her to remain on the property
pending its renovation and on-sale.
High Court
[17]
In May 2013, Ms Nkata launched this
litigation. It was her second High Court application. She
once more sought rescission
of the default judgment. Transfer
and registration of the property to the new owner was suspended
pending the outcome.
The High Court (per Rogers J) heard the
matter in October 2013.
[18]
The High Court refused to rescind
the default judgment, even though it found that Ms Nkata had a bona
fide defence to the claim
on which default judgment was granted.
This was because the Bank failed to give her proper notice under the
NCA. The
Court refused rescission because Ms Nkata had no
satisfactory explanation for why she delayed for nearly two and a
half years after
learning of the default judgment.
[19]
Another reason why Ms Nkata was not
entitled to rescission, the High Court found, was that she settled
her dispute with the Bank
when she entered into the agreement on 10
December 2010. She thereby perempted her right to set aside the
judgment.
[20]
So the default judgment stood.
But, having rejected Ms Nkata’s claim on the grounds she
brought it, the High Court,
of its own accord, raised a different
question – reinstatement under section 129(3) of the NCA.
Subject to section
129(4), which stipulates circumstances in which a
consumer may not reinstate a credit agreement,
[15]
section 129(3) provides that—
“
a
consumer may—
(a)
at any time before the credit provider has cancelled the agreement
re instate
a credit agreement that is in default by paying to
the credit provider all amounts that are overdue, together with the
credit provider’s
permitted default charges and reasonable
costs of enforcing the agreement up to the time of re-instatement;
and
(b)
after complying with paragraph (a), may resume possession of any
property that had
been repossessed by the credit provider pursuant to
an attachment order.”
[21]
Had Ms Nkata reinstated the credit
agreement? The High Court found she had. Her March 2011
payment wiped out her arrears
and reinstated her credit agreement
with the Bank. The Court’s reasoning had four main
elements.
[22]
First, it found that reinstatement
after falling in arrears does not require payment of the full
accelerated debt.
[16]
Here, the mortgage bonds contained acceleration clauses that
allowed the Bank to claim the full debt when Ms Nkata fell into
arrears. However, the High Court found that only payment of
arrears is required for reinstatement. In this case, despite
periodically falling behind in her payments, Ms Nkata paid all
her arrears. First
in March 2011 and
again, in March 2012.
[23]
Second, it was common
cause
that the Bank had not cancelled Ms Nkata’s agreement, so it was
eligible for reinstatement.
[24]
Third, section
129(3)(a)
requires the debtor to pay arrears including the “
credit
provider’s permitted default charges and reasonable costs of
enforcing the agreement up to the time of re-instatement”.
Here, the Bank had debited Ms Nkata’s bond
account with various charges relating to their own costs.
[17]
The High Court held that the Bank could not unilaterally impose these
costs without their being “taxed or agreed”.
[18]
[25]
What was more, the High Court held,
by debiting these costs to Ms Nkata’s account, rather than
demanding separate payment,
the Bank indicated to her as a consumer
that it was “content to lend the corresponding amount to the
consumer and to receive
repayment thereof in instalments as if the
debited costs were part of the capital”.
[19]
Therefore, although Ms Nkata had not paid those costs, the High
Court was satisfied that her payment of arrears sufficed
to meet the
requirements of section 129(3)(a).
[26]
Fourth, it found that Ms Nkata did
not have to intend to reinstate her credit agreement. Still
less did she have to signal
to the Bank any intention to do so. This
was because reinstatement occurs “by operation of law if the
consumer as a
fact makes the payments contemplated by section 129(3),
unless reinstatement is precluded by virtue of section 129(4)”.
[20]
[27]
The upshot was that, although the
default judgment stood, it could no longer be enforced against Ms
Nkata because before the judgment
was executed her credit agreement
with the Bank had been reinstated. The sale of the property was
thus set aside.
[21]
Supreme Court of Appeal
[28]
The Supreme Court of Appeal reversed
the High Court order.
[22]
It found for the Bank. But it did so on a basis that everyone
now accepts was wrong. It found that the Bank had
already
executed the default judgment in terms of section 129(4) by the
time Ms Nkata paid her arrears. This occurred,
the Court held,
when the property was sold at the sale in execution. The
difficulty is that the sale in execution took place
on 24 April
2013, whereas Ms Nkata paid her arrears in March 2011 –
25 months earlier. Execution, if it was
to thwart
reinstatement, would have to have been before 7 or 8 March
2011.
[23]
[29]
The Supreme Court of Appeal in
addition found that reinstatement of a credit agreement implies
an amendment to it. Since
the NCA requires that changes or
amendments to credit agreements be recorded in writing and signed,
reinstatement demands
a formality.
[24]
Since this was not followed, reinstatement was not competent.
[25]
In this Court
[30]
So the principal question
before us is whether the High Court was correct to
hold that Ms Nkata had reinstated the credit agreement, thereby
purging her default
and disentitling the Bank from proceeding to sell
the property. If the High Court was wrong and she did not
reinstate her
agreement, then no further questions arise. The
order the Supreme Court of Appeal granted should be sustained, though
not
for the reasons that Court gave, and her application must fail.
But if she fulfilled the requirements of section 129(3), then
the
question would arise whether section 129(4) bars her from
reinstatement.
[31]
Ms Nkata supported the High Court
judgment. In addition, she sought to attack the validity of the
sale by relying on the fact
that the Bank failed to provide her with
notice under section 129(1) of the NCA.
[32]
The Bank contends
that,
though she had paid her instalment arrears in March 2011, and
again in March 2012, she failed to pay its “
permitted
default charges and reasonable costs of enforcing the agreement up to
the time of re-instatement
”
, as
section 129(3) requires. In addition, it contends that a
consumer must notify the credit provider when she intends
to
reinstate a credit agreement. Ms Nkata did not do this.
In any event, the Bank urges this Court to find that reinstatement
was precluded because attachment and publication of a notice of sale
in terms of rule 46 of the Uniform Rules of Court constitute
the
execution of an order as contemplated by section 129(4)(b).
Leave to appeal and
condonation
[33]
The interpretation
of
the NCA raises constitutional issues.
[26]
Ms Nkata’s case on reinstatement is arguable and has some
prospects of succeeding. It is in the interests
of justice that
leave to appeal be granted to her. She filed the record and her
submissions late. The knock-on was
that the Bank filed its
submissions late. Acceptable explanations were tendered and
condonation should be granted.
Assessment
The
section 129(1) notices
[34]
We must dispose
at
the outset with Ms Nkata’s invocation of the badly addressed
notices, which she alleges never reached her. That is
a dead
issue. She cannot resurrect it now. The High Court
dismissed her application to rescind the default judgment.
It
upheld her resistance to the Bank’s claim on a completely
different ground. Ms Nkata never obtained leave to appeal
against its determination on that issue. And in this Court she
did not seek leave to appeal the refusal of rescission.
[35]
The result is that
the
default judgment stands. With it, the High Court’s
refusal of all remedies to Ms Nkata in respect of it is
res
judicata
. The only way the bad
notices can revive before us is if absence of notice under the NCA
is, in the way she attempted to
invoke it as a defence weapon, either
an irreparable constitutional violation or a continuing wrong that
vitiates everything that
follows. But that contention is wrong,
and she later abandoned it. The failure to obtain leave to
appeal against the
judgment refusing condonation and rescission means
that her complaint about notice is not available in determining the
rights or
wrongs of the sale of the property.
Did Ms Nkata reinstate
under section 129(3)(a)?
[36]
So we must return
to
the question: did Ms Nkata reinstate her credit agreement with the
Bank? Section 129(3)(a) requires as a precondition to
reinstatement that the consumer must pay three separate items.
These are: (a) overdue amounts; (b) the credit provider’s
permitted default charges; and (c) the credit provider’s
reasonable costs of enforcing the agreement. What is at issue
here is only (c).
[37]
The first question
is
whether, on the evidence before us, Ms Nkata paid the Bank’s
“reasonable costs” of enforcing the agreement
against
her. The unchallenged evidence shows that she did not.
And it was on the basis of this evidence – that
those were not
paid – that the High Court decided the case.
[38]
Indeed, the litigation
has
been conducted all along on the basis that what Ms Nkata paid on
7 or 8 March 2011 were her arrear instalments under her
mortgage
bond, but not anything else. Her founding affidavit in the High
Court, in which she sought rescission, claims only
that she has paid
her “arrears . . . in terms of the settlement agreement”.
[39]
The settlement agreement of 10
December 2010 distinguishes between three amounts Ms Nkata owes the
Bank. These are: (i) arrears
due in terms of the mortgage bond
(clauses 3, 4, 5 and 6); (ii) the wasted costs occasioned by the
cancellation of the sale in
execution scheduled for that same day
(clause 7); and (iii) the costs of the rescission application as
taxed or agreed (clause
8). It was not disputed before us that
the costs covered by clause 8 constituted “
costs
of enforcing the agreement”
envisaged
in section 129(3).
[40]
In its answering affidavit, the Bank
accepted that Ms Nkata had paid her arrears in terms of the
settlement agreement. After the High Court
raised the question of reinstatement, the parties lodged
supplementary affidavits.
The Bank lodged an affidavit
asserting that Ms Nkata had paid only her arrears, but not the legal
costs arising from the default
judgment, the rescission application
and the sale in execution.
[41]
To its supplementary
affidavit the Bank attached a schedule setting out
the bond arrears and payments made, including the payment of R87 500
on
7 or 8 March 2011. In the supplementary
affidavit filed on behalf of Ms Nkata, her attorney asserted that
“in
accordance with the intention of the legislature and the prescripts
of section 129 [Ms Nkata] paid all reasonable default
charges and
costs under the credit agreement on or about 7 March 2011 and 4 June
2012”.
[42]
But Ms Nkata
did
not deal with or contest the Bank’s exposition and calculations
in the schedule to its affidavit. In these circumstances,
the
High Court treated it as common cause that she had paid her bond
account arrears (item (a) in section 129(3)(a)), but not any
legal
costs owing to the Bank (item (c)). It was on this
basis that it adjudicated the application.
[27]
And it is on this basis that I now do.
[28]
[43]
In argument before
us,
Ms Nkata sought to contend that the account statements the Bank
attached to its affidavits showed that she had, in fact, paid
all
items section 129(3) required her to pay to the Bank, including
legal costs. Counsel’s submission is wrong.
Indeed,
counsel made no reference to the Bank’s account schedule in
advancing this claim, and when challenged from the Bench
on this, he
appeared to have no answer.
[44]
In addition, the
Bank,
the respondent in the rescission proceedings, denied that she had
paid item (c). The attorney’s vague claim to
the contrary
in the supplementary affidavit is not sufficient to constitute an
effective challenge to the Bank’s denial.
On the accepted
rules of motion court proceedings, the Bank’s version must
therefore stand.
Meaning of “payment”
[45]
We are now in
a
position to consider what section 129(3) means when it says a
creditor may reinstate a credit agreement that is in default “by
paying”
the credit provider’s
reasonable costs of enforcing the agreement
.
The High Court held that, when the Bank debited its legal fees to Ms
Nkata’s account, it was “content to settle”
those
costs “by lending her the money through a debit to her bond
account”. By debiting these costs to the account,
rather
than demanding separate payment of them, the Bank indicated to her
that it was “content to lend the corresponding
amount to [her]”
and to receive repayment in instalments as if the debited costs were
part of the capital loan.
[29]
[46]
The High Court’s
approach means that, in effect, the enforcement
costs the consumer must pay to achieve reinstatement are, in its
words, only “those
costs of which the credit provider is at
that time requiring payment”.
[30]
[47]
This approach was not correct.
It fails to give force to the clear wording of section 129(3).
The High Court rightly
concluded that the Bank’s debit to
Ms Nkata’s bond account showed that it was happy to add
those costs to the
capital debt for her settlement. That does
not mean that it accepted that she had paid those costs, or that she
in fact did.
By adding those costs to the capital debt, the
Bank lent her money, thereby prescribing the manner in which it
expected to receive
payment. But the Bank’s action in
postponing its claim to payment did not mean that she had paid those
costs.
And the High Court was incorrect to conclude that it
did.
[48]
Differently put, the question is
whether adding a debit to a debtor’s total outstanding debt
constitutes payment for purposes
of section 129(3). The High
Court held Yes. This was wrong. “Payment” has
always been understood
in our law to mean “the delivery of what
is owed by a person competent to deliver to a person competent to
receive”.
This is the definition of payment according to
our common law authorities which Innes CJ adopted in
Harrismith
Board of Executors v Odendaal
.
[31]
[49]
Payment means “the
satisfaction or performance” of an
obligation.
[32]
It does not mean a promise to pay later. Nor does postponing
payment by adding it to an already outstanding debt constitute
payment. By debiting the costs to her bond account, the Bank
agreed to allow Ms Nkata to pay those costs later. It
did not
agree that she need not pay them, or that she had already paid them.
[50]
During argument, Ms Nkata contended
that reinstatement could occur once the parties, by “quasi-mutual
assent”, as counsel
put it, agreed that payment would be
effected as part of the total capital payment, followed by monthly
instalments. The
contention was that once the first instalment
was paid – contributing in some measure, however small, to
repayment of the
items debited – reinstatement could occur.
This approach seems to entail that the unpaid items can gradually be
repaid
as a function of monthly instalments against the capital
amount. Hence, on this argument, no separate payment is
required
to effect reinstatement under section 129(3). The
contention is tenuous. It would require us to conclude that, in
debiting
Ms Nkata’s bond account, the Bank made a tacit
representation that it waived its right to receive full payment.
[51]
The argument cannot be sustained.
Had the legislation meant that the consumer can make payment by
agreeing to postpone payment,
it would have said so. The
provision doesn’t say that. It says instead that
reinstatement can be effected by
“paying” the costs in
issue. This requires advance, not postponed, and complete, not
partial, payment.
On this basis it cannot be said that Ms Nkata
successfully reinstated the credit agreement since she failed to pay
all the amounts
section 129(3)(a) requires. This conclusion
follows from the words of the statute, coupled with a consideration
of its context
and purposes. Narrowness doesn’t come into
it.
[52]
SERI contended that the NCA does not
prescribe how payment must be made. It contended that the
parties could therefore agree
on any manner of payment. This is
true. But it does not assist Ms Nkata. There was never
agreement between her
and the Bank on payment of the costs section
129(3) requires. And no agreement can be inferred from the
debit entries the
Bank made.
Interpreting the
NCA
–
balancing consumer and creditor
rights
[53]
I have had the benefit
of
reading the judgment of my colleague, Moseneke DCJ. We
agree on this fundamental premise: in interpreting section 129(3),
we must bear in mind the NCA’s aims. The statute tells us
what they are, and how they are to be achieved.
[33]
It aims to protect consumers by “promoting
equity in the credit market by balancing the respective rights and
responsibilities
of credit providers and consumers”.
[34]
We also agree that the statute’s express objectives mean that
the
correct interpretation of section 129 is one that strikes an
appropriate balance between the competing interests of parties
to a
credit agreement
. That is what
this Court has previously held.
[35]
But we differ fundamentally on where that takes us. More
particularly, as my colleague, Nugent AJ, in whose judgment
I concur,
points out, we differ on whether the Bank’s legal costs were
required to be paid.
[36]
[54]
Moseneke DCJ finds that
the
Bank failed to give Ms Nkata notice of the legal costs
[37]
and that, since the costs had not been taxed or agreed, they could
not have been considered reasonable; hence they were not due
and
payable.
[38]
He finds in those circumstances that the consumer is required to do
no more than pay the outstanding arrears to reinstate
the credit
agreement.
[39]
He reasons that since it is the Bank that wants to recover the costs
of enforcing the credit agreement from the consumer,
the Bank
must be the one to take proactive steps. These include
initiating taxation or agreeing with the consumer on the
quantification of the costs.
[40]
In addition, my colleague finds, the Bank must draw the costs to the
consumer’s attention, by way of separate demand,
rather than as
itemised charges appearing on a bank statement.
[41]
[55]
There’s a glaring problem
with this. The Bank didn’t “want
to recover the costs of enforcing the agreement from the consumer”
at all.
[42]
It was quite content to capitalise those costs for its, and
Ms Nkata’s, convenience.
[43]
Whyever should it have been obliged to initiate the process of
quantifying the unpaid additional costs, when Ms Nkata was
the one
seeking to rely on reinstatement?
[56]
And, glaringly, the statute
says the consumer, not the credit provider, must
pay the outstanding sums. The statute imposes no obligation on
the credit
provider to take steps to recover the costs of enforcing
the credit agreement.
The credit
provider does not have to do anything. It is the consumer who
wants reinstatement – and the statute requires
her to pay the
sums if she seeks to attain it.
[57]
The same applies to whether
the costs the Bank added to Ms Nkata’s
statement were “reasonable”. No doubt she could
have objected that
the sums added weren’t reasonable. She
never did so. She simply claimed that she was entitled to
reinstate her
credit agreement. But the statute doesn’t
say the Bank must establish that the costs are reasonable in order to
ward
off reinstatement. The statute says the consumer can
attain reinstatement “by paying” the costs. It was
for her to try to determine what was reasonable in order to achieve
reinstatement. If the Bank insisted on her paying an
unreasonable charge, no doubt the statute would have helped her.
But it never did. It was never given the chance.
[58]
Ms Nkata seeks to escape
the
duty the statute imposes on her of “paying” the charges
in issue by saying that those charges weren’t taxed
or
established as reasonable. To uphold this contention seems to
me to forfeit the balance that our precedents on the NCA
require us
to maintain.
[59]
Historically, creditors to whom
properties were mortgaged were entitled contractually to refuse late
payment of home loan instalments.
Only payment of the full
outstanding accelerated amounts (not just the arrears) would save a
mortgagor’s property.
Section 129(3) has
drastically changed this. Justly so.
It offers a consumer in dire circumstances
a
lifeline. It spares consumers the harshness of that era of
debtor-unfriendly laws. It protects consumers who face
the sale
in execution of their properties by allowing them to reverse the
credit provider’s election to foreclose.
But it does so
on conditions. The consumer must fulfil the requirements for
reinstatement. Simply bringing arrear bond
instalments up to
date is not enough.
[60]
The provision is specifically
designed to counter the harsh effects of an acceleration clause.
It makes good sense –
and just sense – for the consumer
to bear the responsibility of initiating the process and taking the
necessary steps, including
those required to pay the enforcement
costs. There is no suggestion that the Bank was obstructive or
tried deliberately to
frustrate reinstatement. There is no good
reason to exonerate Ms Nkata from the responsibility the statute
places on
her and instead impose it on the Bank.
[61]
This approach does not render the
statute’s protection of consumers nugatory – it simply
sustains the balance the statute
itself imposes. So whilst I
agree with Moseneke DCJ, that the statute must be interpreted
purposively and contextually,
[44]
a degree of caution must be exercised in doing so. That much we
decided in
Kubyana
:
“
[L]egislation
must be understood holistically and, it goes without saying,
interpreted within the relevant framework of constitutional
rights
and norms. However, that does not mean that ordinary meaning
and clear language may be discarded, for interpretation
is not
divination and courts must respect the separation of powers when
construing Acts of Parliament.”
[45]
(Footnotes omitted.)
[62]
The purposes of the NCA are
manifold. While it aims to correct imbalances by providing
additional rights and protections to
the consumer, it also aims to
ensure that South Africa’s credit market becomes and remains
“competitive, sustainable,
responsible [and] efficient”.
[46]
Sections 3(c) and (g) outline the importance of “responsible
borrowing”, the “fulfilment of financial obligations
by
consumers”, and “discouraging . . . contractual default
by consumers”. These provisions signal that
the
legislation must be interpreted without disregarding or minimising
the interests of credit providers.
[47]
[63]
To borrow the words of Mhlantla AJ
in
Kubyana
:
“
It deserves re-emphasis that the purpose of
the [NCA] is not only to protect consumers, but also to create a
‘harmonised system
of debt restructuring, enforcement and
judgment,
which places priority on the
eventual satisfaction of all responsible consumer obligations under
credit agreements
’.”
[48]
(Emphasis in original and footnote omitted.)
[64]
In addition—
“
[o]ne
of the main aims of the [NCA] is to enable previously marginalised
people to enter the credit market and access much needed
credit.
Credit is an invaluable tool in our economy. It must,
however, be used wisely, ethically and responsibly. Just
as these
obligations of ethical and responsible behaviour apply to providers
of credit, so too to consumers. . . . The notion
of a
‘reasonable consumer’ implies obligations for both credit
providers and consumers.”
[49]
[65]
So Ms Nkata’s circumstances,
in the form of her account history, should be balanced against the
increased risk and costs to
credit providers and, ultimately, the
increased cost to those seeking to enter the credit market.
Many less affluent than
she, who could not contemplate acquiring a
second property as she did, might not be able to afford to acquire
property at all if
the cost of bond credit rose unduly.
Affording her reinstatement on these facts will surely increase that
cost.
[66]
The view that paying her arrear
settlements, but none of the other charges section 129(3) mentions,
was sufficient for reinstatement
may seem enticing. But I find
it unwarrantably tenuous. Not only is it at odds with the
provision’s words, it
skews the statutory balance excessively
toward the consumer.
[67]
The requirement that
a
consumer may reinstate a credit agreement only “by paying”
specified items undoubtedly seeks to protect a credit provider
who
has taken steps after a consumer has defaulted under a credit
agreement. This means that the Bank had a right to receive
the
payments specified in section 129(3) before Ms Nkata could
reinstate her credit agreement.
[50]
[68]
It is true that the Bank did
not present the legal costs to Ms Nkata for
separate payment. It simply debited them to her account under
the entry “Legal
Fees”. But the statute does not
require the Bank to demand payment of the costs section 129(3)
lists. It requires
the consumer to pay them in order to
reinstate the credit agreement. This means that Ms Nkata had to
pay those costs, or,
at least, to tender payment of them.
Reasonable costs of
enforcement up to reinstatement
[69]
Section 129(3) provides
that
the costs the consumer must pay must be
“reasonable”. That accords with the parties’
settlement agreement.
This required Ms Nkata to pay the
costs of the rescission application as “taxed or agreed”.
Had she tendered
payment of the Bank’s costs, the fact that
they had not been agreed or taxed, as the settlement agreement
required, or that
there was no process through which it was
established that they were “reasonable”, as the statute
requires, may have
been in issue. Because she made no tender,
the question does not arise. It is not the Bank that wanted
reinstatement.
It wanted to sell. It was Ms Nkata who
sought to invoke reinstatement. That required her either to pay
or to tender
a reasonable amount to cover the Bank’s costs.
[70]
Differently put, the fact that the
costs had not been taxed or agreed did not absolve her from the
obligation to pay them, or at
least to tender payment of them, in
order to reinstate the credit agreement. The Bank in argument
readily conceded that it
could not obstruct a consumer from
reinstating a credit agreement that is in default by refusing to
agree what is reasonable. This
is obvious. But the
consumer must, at least, tender payment of what she considers to be
reasonable.
Conclusion
[71]
From this I conclude that Ms Nkata
did not reinstate the credit agreement on 7 or 8 March 2011
or at any time
before the Bank sold the property in execution on
24 April 2013. This means it is not necessary to
consider the
Bank’s argument that the point of no return in the
process of execution occurred before the alleged reinstatement of the
credit agreement. Nor is it necessary to consider the meaning
of the terms “attachment order”, “court order”,
“sale” or “execution” in section 129(4).
[72]
The conclusion
also
means we do not need to consider whether section 129(3) requires the
consumer to communicate her intention to reinstate to
the Bank, as
the Bank contended.
[51]
[73]
Ms Nkata owns two other properties.
She is currently leasing the contested property from the purchaser.
She does not
face eviction in these proceedings. So the
question before us is confined to the statutory interpretive issues
under the
NCA.
[74]
I would, therefore, have granted
leave to appeal and condonation for the late filing of the written
submissions and record, but
dismissed the appeal and ordered Ms Nkata
to pay the Bank’s costs, including the costs of two counsel.
MOSENEKE DCJ (Jafta
J, Khampepe J, Madlanga J, Nkabinde J, Van der Westhuizen J
and Zondo J concurring):
Introduction
[75]
I have read the meticulously
prepared judgment of my colleague, Cameron J (main judgment).
Like him, I would grant leave
to appeal and condonation for the
late filing of the written submissions and of the record. I am
grateful for his useful
and accurate recital of the background
facts. Cameron J concludes that the appeal against the decision
of the Supreme Court
of Appeal must fail with costs. I regret
that I am unable to support that outcome. I have also had the
benefit of reading
the judgment of Nugent AJ, with which, as will
appear later, I disagree. I am also grateful for the concurring
judgment of
Jafta J and have noted the additional reasons he relies
upon.
[76]
On the view I take, the appeal
should be upheld with costs. Like Rogers J in the Western Cape
Division of the High Court (High
Court), I find that the credit
agreement was reinstated; that from 8 March 2011 the default judgment
entered against Ms Nkata and
the subsequent warrant of execution
against her home had no legal force; that the public auction of Ms
Nkata’s home on 24
April 2013 to the third respondent is set
aside; and that the property may not be transferred to or registered
in the name of the
third respondent.
[77]
Our difference stems from the proper
interpretation of section 129(3) of the National Credit Act
[52]
(Act) and its implication for the present facts. The statutory
provision permits a consumer at any time before the credit
provider
has cancelled the agreement to reinstate a credit agreement that is
in default by paying to the credit provider all amounts
that are
overdue. The provision adds that the consumer must also pay
“the credit provider’s permitted default
charges and
reasonable costs of enforcing the agreement up to the time of
reinstatement”.
[53]
[78]
Cameron J takes the stance that the
credit agreement between Ms Nkata, the applicant, and FirstRand Bank
Limited (the Bank), was
not reinstated in terms of section 129(3).
He reasons that whilst it is so that she paid all amounts that were
overdue,
she did not also pay the reasonable costs of enforcing the
agreement.
[79]
I see matters differently. The
credit agreement was indeed reinstated on 8 March 2011 when Ms
Nkata settled in full her
bond arrears of R87 500. Then,
the Bank’s legal costs were not due and payable. This
is because the Bank
had not given her notice of the legal costs.
It had not demanded its payment properly or at all. Also, the
nature and
extent of the legal costs had not been agreed to by Ms
Nkata and had not been assessed for reasonableness by taxation or
other
acceptable means. Instead, the Bank chose to be the sole
arbiter of the extent of the legal costs and one sidedly debited
the costs against the bond account of Ms Nkata.
[80]
Properly construed, section 129(3)
does not preclude the reinstatement of a credit agreement where the
consumer has paid all the
amounts that are overdue, but has not been
given due notice of reasonable legal costs – whether agreed or
taxed – of
recovering the bond arrears. This must be so
because the legal costs would become due and payable only when they
are reasonable,
agreed or taxed and on due notice to the consumer.
[81]
In order to reach the interpretive
difference with the main judgment, I have to restate only those facts
that may have a bearing
on my approach to the applicable law.
Thereafter, I will embark on the interpretive task followed by a
concluding assessment.
Background facts
[82]
In March 2005, Ms Nkata purchased
undeveloped property, Erf 8832, Durbanville (the property). She
obtained mortgage finance
from the Bank against registration of a
first bond in June 2005 and a second bond in May 2006. She
built a home on the property
and took up occupation with her two
children in 2007.
[83]
From 2010, she fell into the woes of
an average credit consumer – arrears with her mortgage bond
repayments. The Bank
sent her a letter in terms of section
129(1) twice.
[54]
All accept now that the notice never reached her. The Bank
issued summons, which after several service attempts was
affixed to a
door of her chosen address of service. On 28 September 2010,
the Bank obtained a default judgment against her
for the accelerated
bond debt of R1 472 506.89 together with interest and a writ of
execution against the property. Her home
was scheduled to be
sold in execution at a public auction on 10 December 2010.
[84]
Ms Nkata approached the High Court
and sought an order staying the impending public auction and setting
aside the default judgment.
The Bank resisted the application.
It did not proceed because the parties settled the dispute. The
settlement required
that Ms Nkata sign a standard FirstRand Bank
Quicksell agreement.
[55]
She was required to pay the Bank monthly instalments of R10 000.
The agreement provided that if she paid the full arrears
within 14
days, the Bank would not sell the property. Her attorney
applied to have the settlement agreement made an order
of court and
sought rescission of the default judgment. The settlement
agreement was never made an order of court and the
rescission
application was not determined. This meant that the judgment
debt was never discharged and the attachment of her
home remained
effective.
[85]
Something crucial for the fate of
the appeal happened on 8 March 2011. Ms Nkata paid to
the Bank R87 500 representing
all amounts that were then overdue.
The Bank does not contest that the payment discharged all arrears on
her bond account.
As we will observe in a moment, its gripe was
that she did not also pay the legal costs it incurred when enforcing
the agreement.
And for that reason in the main, the Bank says,
the credit agreement was not reinstated and it was justified, in
time, to auction
her home to the public in order to discharge her
accelerated and full indebtedness to the Bank.
[86]
Given the core legal issue that
arises, ordinarily this narrative would have ended here. It did
not. The events that
followed led to the sale of her home by
public auction on 24 April 2013. The property was acquired by
the third respondent,
Kraaifontein Eiendomme / Properties, for R1 086
000.
[87]
Here are the events that proved
disastrous to Ms Nkata’s quest to hold onto her home.
After paying her bond arrears
in full on 8 March 2011, Ms Nkata
resumed her monthly repayments. She fell into arrears again on
30 April 2011. However,
she brought the account up to date in
March 2012. In the period between April and December 2012,
Ms Nkata made several
efforts to weather her financial distress.
She made attempts to rescind the default judgment by consent.
The Bank resisted.
She also made an application for distressed
debt relief with the Bank. The Bank opposed the debt relief
arguing that it already
had a judgment against Ms Nkata and a valid
attachment of her home. The Bank preferred foreclosure.
On 5 April 2013,
her account’s accelerated debt stood at R1 392
028 with arrears being R33 716. She came to know, on 16 March
2013,
that the property was going to be sold at a public auction.
The sale took place on 24 April 2013.
[88]
Ms Nkata approached the High Court
to rescind the default judgment of 28 September 2010. The
matter was heard by Rogers
J in October 2013. The Court held in
favour of Ms Nkata that when the default judgment was entered she had
a bona fide
defence. The Bank had not given her notice in
terms of section 129(1) of the Act before issuing summons to recover
the debt.
However, the Court refused to set aside the default
judgment because her delay in seeking a rescission was unduly long
and without
a satisfactory explanation. In addition, her
entitlement to rescission had become perempted. Her continued
intention
to have her case reopened by means of rescission was
inconsistent with her conduct in agreeing to the settlement.
The default
judgment stood.
[89]
The Court, rightly in my view,
invited the parties to file further affidavits and submissions on the
possible application of reinstatement
of the credit agreement under
section 129(3) of the Act. In an appropriate case, it is open
to a court to invite parties
to file further affidavits and make
submissions on a matter that the court draws their attention to,
provided that the matter is
essential to the proper determination of
the dispute, none of the parties is materially prejudiced; and it is
in the interests
of justice to reach the matter.
[90]
The Court concluded that
reinstatement in terms of section 129(3) occurs by operation of law
and there is no need for the consumer
to be aware of the right to
reinstatement or to have the intention of reinstating the agreement.
On this approach, the agreement
would be reinstated in terms of
section 129(3) unless it was precluded by section 129(4) of the Act.
The Court held that
for purposes of section 129(3)(a), the costs that
were debited to Ms Nkata’s account lost their separate
character as costs
for enforcing the agreement. This
interpretation, the Court found, gives better effect to the purposes
of the Act which are
set out in section 3.
[56]
[91]
The Bank was unhappy with this
outcome. It appealed to the Supreme Court of Appeal. The
Court upheld the appeal.
Before us, both parties agreed that
the Court interpreted the incorrect provision of the Act –
section 129(4)(b) on execution
– instead of section 129(3),
which addresses reinstatement. About this, Cameron J rightly
observes that the Supreme
Court of Appeal decided the appeal—
“
on
a basis that everyone now accepts was wrong. It found that the
Bank had already executed the default judgment in terms
of section
129(4) by the time Ms Nkata paid her arrears. This occurred,
the Court held, when the property was sold at the
sale in execution.
The difficulty is that the sale in execution took place on 24 April
2013, whereas Ms Nkata paid her arrears
in March 2011 – 25
months earlier. Execution, if it was to thwart reinstatement,
would have to have been before 7 or
8 March 2011.”
[57]
Reinstatement of a
credit agreement under section 129(3)
[92]
It is now expedient to undertake the
interpretive task. As I do, I acknowledge that my approach has
drawn generously from
the cogently reasoned judgment of the High
Court. But first, I remind myself of the overarching objects of
the Act and the
narrower purpose of section 129(3) and what it lays
down.
[93]
Section 2 of the Act, somewhat
redundantly, enjoins us to interpret the provisions of the Act in a
way that gives effect to its
purposes. The purposes are
described in section 3.
[58]
They are optimistic but sometimes in tension. They are about
credit markets made up of credit providers and consumers
of credit.
Section 3 makes the point that the legislation is meant to advance
both “social and economic welfare”.
It hopes to
find a balance between the rigour of an “efficient, effective
and accessible credit market and industry”,
often driven by
profit, and measures “to protect consumers” propelled by
social good. It places a premium on
“sustainable market
conditions”, but also helps access to credit. For now, I
single out two poignant purposes—
“
(d)
promoting equity in the credit market by balancing the respective
rights and responsibilities
of credit providers and consumers;
(e)
addressing and correcting imbalances in negotiating power between
consumers and credit
providers.”
[59]
[94]
The Act seeks to infuse values of
fairness, good faith, reasonableness and equality in the manner
actors in the credit market relate.
Unlike in the past, the
sheer raw financial power difference between the credit giver and its
much needed but weaker counterpart,
the credit consumer, will not
always rule the roost. Courts are urged to strike a balance
between their respective rights
and responsibilities. Yes,
debtors must diligently and honestly meet their undertakings towards
their creditors. If
they do not, the credit market will not be
sustainable. But the human condition suggests that it is not
always possible –
particularly in credit arrangements that run
over many years or decades, as mortgage bonds over homes do.
Credit givers serve
a beneficial and indispensable role in advancing
the economy and sometimes social good. They too have not only
rights but
also responsibilities. They must act within the
constraints of the statutory arrangements. That is particularly
so
when a credit consumer honestly runs into financial distress that
precipitates repayment defaults. The resolution of the
resultant dispute must bear the hallmarks of equity, good faith,
reasonableness and equality. No doubt, credit givers ought
to
be astute to recognise the imbalance in negotiating power between
themselves and consumers. They ought to realise that
at play in
the dispute is not only the profit motive, but also the civilised
values of our Constitution.
[95]
On what I have just expressed, I am
in good company. This Court has before expressed itself on the
purposes of the Act.
In
Sebola
,
[60]
in the context of section 129(1)(a) of the Act, Cameron J
observed that at the core of the Act is the objective to protect
consumers.
[61]
This protection, however, must be balanced against the interests of
credit providers and should not stifle a “competitive,
sustainable, responsible, efficient [and] effective . . . credit
market and industry”.
[62]
The Act, the Court noted, replaces the apartheid era legislation that
regulated the credit market,
[63]
and infuses constitutional considerations into the culture of
borrowing and lending between consumers and credit providers.
[96]
The purposes of the Act are directly
attributable to the constitutional values of fairness and
equality.
[64]
Sebola
recognised that the Act is at pains to create a credit marketplace
that agrees with our constitutional democracy both through its
purpose – to promote “a fair . . . marketplace for access
to consumer credit”
[65]
– as well as through the means that ought to be adopted to
achieve these goals. The tools for achieving the Act’s
purposes include the promotion of “equity in the credit market
by balancing the respective rights and responsibilities of
credit
providers and consumers”,
[66]
and the development of “a consistent and accessible system of
consensual resolution of disputes arising from credit
agreements”.
[67]
In sum, the Act is “a clean break from the past”
[68]
and encourages dialogue between consumers and credit providers.
[97]
Kubyana
[69]
sought to clarify the interpretation of section
129(1) that was adopted in
Sebola
and had been understood and applied in conflicting ways in other
courts.
[70]
It relied on
Sebola
to make the point that the provision aspires “to facilitate the
consensual resolution of credit agreement disputes”.
[71]
[98]
In
Ferris
,
[72]
the issue was whether a credit provider could enforce, without
further notice, a credit agreement once the consumer breached a
debt restructuring order in terms of section 86(7)(c)(ii) of the
Act.
[73]
The Court recognised that
Sebola
stressed the means to be employed in order to achieve the purposes of
the Act.
[74]
It held that the good faith negotiations required by section 86(5) in
an application for debt review were aimed at the parties
reaching an
agreement
before
the need for a debt restructuring order. Once the order
had been granted, then the requirement for negotiations set
by
section 86(5) became superfluous.
[99]
With these objectives in mind, I
look closer at sections 129(3) and (4). These provisions bear
repetition:
“
(3)
Subject to subsection (4), a consumer may—
(a)
at any time before the credit provider has cancelled the agreement
reinstate a credit
agreement that is in default by paying to the
credit provider all amounts that are overdue, together with the
credit provider’s
permitted default charges and reasonable
costs of enforcing the agreement up to the time of reinstatement; and
(b)
after complying with paragraph (a), may resume possession of any
property that had
been repossessed by the credit provider pursuant to
an attachment order.
(4)
A consumer may not reinstate a credit agreement after—
(a)
the sale of any property pursuant to—
(i)
an attachment order; or
(ii)
surrender of property in terms of section 127;
(b)
the execution of any other court order enforcing that agreement; or
(c)
the termination thereof in accordance with section 123.”
[100]
Sections 129(3) and (4) have
introduced a novel relief of reinstatement, which parts ways with the
debt collection measures of old.
The relief is available when a
credit agreement is in default but has not been cancelled by the
credit provider. Once the
consumer makes specified overdue
payments, the agreement is reinstated. What is more, she may
resume possession of the property
that has been repossessed by the
credit provider under an attachment order. The evident purpose
of section 129(3) is
to urge on consumers to pay their overdue
amounts, default charges and legal costs to their lenders and, in
turn, consumers in
good standing are rewarded with reinstatement of
the credit accord and the return of their attached property.
Is the agreement
reinstated by the conduct of the consumer only?
[101]
The first interpretive contest
between the parties was whether an agreement is reinstated by the
conduct of the consumer only or
in cooperation with the credit
provider or simply by operation of law.
[102]
Before us, the Bank contended that
section 129(3) requires a consultative process for a credit agreement
to be reinstated and that
a consumer cannot, without more, reinstate
the agreement merely by making payment of a sufficient amount of
money to cover all
the charges referred to in section 129(3).
It stressed that payment of arrear instalments does not always mean
the consumer
wishes to reinstate the credit agreement and resume
possession of the property repossessed. It argued that the
consumer may
not be able to afford the upkeep and costs associated
with possession or ownership of the property, but simply wishes to
comply
with her obligations under the credit agreement until the
property may be sold. The Bank submits that the section
provides
that a consumer “
may
. . . reinstate a credit agreement . . . by paying to the credit
provider all amounts that are overdue”.
[75]
This envisages a positive act by the consumer in order to achieve a
desired result.
[103]
The amicus curiae, SERI, submitted
that once Ms Nkata paid her arrears in terms of the settlement
agreement, she reinstated her
credit agreement by operation of law in
terms of section 129(3) of the Act. SERI says it does not
matter whether the
consumer’s intention to reinstate the
agreement is communicated to the credit provider.
Section 129(3) merely
requires the consumer to perform a certain
action – not communication. Requiring the consumer to
give notice of her
intention to reinstate the credit agreement would
be at odds with the plain text of section 129(3). SERI argues
that a court
should be slow to read requirements into
consumer-friendly provisions like section 129(3). This would
have the effect of
“narrowing the circumstances under which a
consumer would be able to claim relief”.
[104]
At the outset, I observe that
sections 129(3) and (4) start with what a consumer may and may not
do. It is the consumer who
may reinstate a credit agreement.
This she may do “any time before the credit provider [cancels]
the agreement”.
[76]
So, as long as the agreement is current, she may elect to reinstate
it. The clear import is that for purposes of reinstatement
the
consumer is the protagonist. She may disclose her design to the
credit provider but she is not compelled to give notice
to or seek
the consent or cooperation of the credit giver.
[105]
The reinstatement occurs by
operation of law. This is so because the wording of the
provision is clear that the consumer’s
payment in the
prescribed manner is sufficient to trigger reinstatement. She
may reinstate by paying to the credit provider
all arrears that are
due, permissible default charges and legal costs. Reading in a
requirement of prior notice to the credit
provider as well as a
reinstatement that does not occur automatically against due payment,
would unduly limit the value to the
consumer of the remedy of
reinstatement. It would unduly diminish the usefulness of the
relief of reinstatement if the consumer
were saddled with procedural
requirements most consumers are likely to falter on.
[106]
Reinstatement has the beneficial
outcome that she may reclaim her attached property. For most
consumers that would be the
pressing purpose of bringing her arrears
up to date. She is not compelled to have the property
restored. If, for any
of the reasons the Bank has advanced, she
shuns restoration, she may not demand it.
What are “all
amounts that are overdue”?
[107]
Section 129(3)(a) requires the
consumer to pay “all amounts that are overdue” before the
credit agreement is reinstated.
On the facts here, the mortgage
bonds contained acceleration clauses that the Bank invoked,
particularly in 2010, as soon as Ms
Nkata fell into arrears.
Once the acceleration clauses were invoked, the full extent of the
mortgage debt was made due and
payable and not just the arrear
instalments.
[108]
This prompts the question whether
the right of reinstatement in terms of section 129(3)(a)
requires the debtor to pay back
the full accelerated debt or only the
arrear instalments. I readily embrace the conclusion of the
High Court that only the
arrear instalments, and not the full
accelerated debt, needed to be paid in order to effect
reinstatement. This flows without
more from the wording and
purpose of the provision. Reinstatement is predicated on “a
credit agreement that is in default”.
It is a rescue
mechanism that is available to the consumer precisely when she has
fallen into arrears and may be liable to pay
the full accelerated
outstanding debt.
[109]
The entitlement to reinstatement
would be made useless if the amount due in terms of section 129(3)(a)
were interpreted to mean
the full accelerated debt as most consumers
would be unable to reinstate the agreement by paying the full debt.
That construction
would also fall short of the purpose of the Act to
encourage consumers to fulfil their financial obligations and resolve
over-indebtedness.
I did not understand the Bank to contest
this construction.
“
Before the
credit provider has cancelled the agreement”?
[110]
Reinstatement may occur only before
the credit provider has cancelled the agreement. The question
arises whether, when the
Bank invokes the acceleration clauses, it
has, for that reason only, cancelled the agreement. This is a
mixed question of
fact and law. If the acceleration clause is
resorted to while the contract subsists and the Bank demands full
payment it
is not the same thing as cancellation of the agreement for
breach. This is so if we keep in mind that section 129(3)(a)
applies
to agreements in default. Here, the Bank could only
have lawfully terminated the credit agreements in terms of section
130
read with section 129. At a factual level, the Bank did not
comply with section 129. This meant that the credit agreements
were not cancelled.
“
Reasonable
costs of enforcing the agreement up to the time of reinstatement”?
[111]
A consumer must pay reasonable costs
of enforcing the agreement up to the time of reinstatement. The
costs relate to legal
fees and related disbursements. The Bank
contended Ms Nkata had to pay these costs to satisfy the requirements
for reinstatement.
She did not pay the legal costs when she
discharged all other overdue amounts and thus reinstatement did not
occur. The main
judgment upholds the Bank’s submission.
[112]
A brief look at the facts is
necessary. On 25 October 2010, the Bank debited legal fees
amounting to R9 050 to Ms Nkata’s
mortgage bond account.
The amounts were for summons, judgment, writ, attachment and first
sale in execution including VAT,
disbursements and sheriff’s
fees. The amounts became part of the overdue balance in Ms
Nkata’s bond account with
the Bank. In February 2011,
again the Bank debited Ms Nkata’s mortgage bond account with
amounts titled “Legal
Fees” on the account statement.
The amounts were R6 498 and R8 000. The Bank describes these as
being for the
attorneys’ fees and counsel’s day fee in Ms
Nkata’s unsuccessful rescission application. This was in
addition
to a globular amount of R9 050, debited to the mortgage bond
account in October 2010, for fees that the Bank had incurred in
pursuing
the cancelled execution and sale.
[113]
Ms Nkata claims that these costs
were not presented to her, but were debited directly to her bond
account and she was not invited
by the Bank to pay them. The
Bank never contested in the High Court or in this Court that it had
debited Ms Nkata’s
bond account with legal costs, nor did
it aver that it had given her a separate notice of the legal costs or
demanded their payment.
[114]
The self-evident question is whether
the costs that the Bank had debited to Ms Nkata’s bond
account for legal costs form
part of “permitted default charges
and reasonable costs of enforcing the agreement up to the time of
reinstatement”.
[115]
The High Court found on the facts
that these costs were neither taxed nor quantified by agreement
between the parties. The
Bank did not call for a separate
payment of these costs, nor did it regard Ms Nkata as being in
arrears because of these costs.
After she had paid the arrears
in March 2011 and again in March 2012, the Bank regarded her as being
“up to date” with
her payments. The Court found
that the Bank was satisfied with settling the costs by lending Ms
Nkata the money for legal
costs as they simply debited her bond
account with the money and did not bring it to her attention or
invite her to pay it.
[77]
Before us these factual findings were never impugned. If
anything, they are consistent with the pleadings.
[116]
The High Court noted that the
consumer could not be expected to take proactive steps to find out
what the costs would be for reinstatement
to be effected.
Neither could a consumer be expected to start taxation or agree with
the credit provider on the quantification
of these costs. The
credit provider is required to take the appropriate steps if it wants
to recover the costs for enforcing
an agreement with the consumer.
[117]
The High Court observed that the
Bank debited Ms Nkata’s account instead of demanding separate
payment of the legal costs.
That indicated that the Bank was
satisfied with lending the money to Ms Nkata and receiving repayment
for those costs in instalments.
The Bank happily “
capitalised
”
the legal costs. It held that for purposes of section 129(3)(a)
the costs that were debited to Ms Nkata’s account
lost their
separate character as costs for enforcing the agreement. This
interpretation, the High Court found, gives better
effect to the
purposes of the Act that are set out in section 3.
[118]
The Bank’s submissions before
this Court are less than clear. They appear to amount to this.
The costs were not
paid to it but were capitalised in the debt owing
by Ms Nkata. It submits that the High Court’s finding
that the capitalisation
of legal fees in the bond account was payment
of those amounts by Ms Nkata was incorrect. The Bank
contends that the
addition of those amounts to the loan account
constituted a unilateral increase in the amount of the loan to Ms
Nkata. And
that there was no indication in any event that all
costs required in terms of section 129(3) had been charged or added
to the loan
account, or that any increased instalments had been paid
or were payable. As a result, the Bank concludes that the
requirements
for reinstatement in terms of section 129(3) were not
met.
[119]
Before us, Ms Nkata made a number of
submissions. I find it necessary to restate only one. She
pressed on us that should
the credit provider want to recover the
costs of enforcing the agreement from the consumer, the credit
provider must be the one
to take the appropriate steps. She
submitted that only the costs that the Bank represented to her in the
Bank’s statements
and no other costs were due and payable.
Ms Nkata also submitted that once payment had been made then the
credit agreement
was reinstated automatically. SERI supported
this stance by submitting that the Bank had the obligation to invite
Ms Nkata
to agree to its bill of costs and, if she failed to do so,
to tax it and demand payment only thereafter.
[120]
There is indeed much to be said for
the reasoning of the High Court that by debiting Ms Nkata’s
account instead of demanding
separate payment of the legal costs, the
Bank was satisfied with lending the money to Ms Nkata and receiving
repayment of those
costs in instalments. And that, for purposes
of section 129(3)(a), the costs that were debited to Ms Nkata’s
account
lost their separate character as costs for enforcing the
agreement. However, I do not think it is necessary to reach as
firm
a conclusion on this point as the High Court did. In doing
so, I avoid the dilatory controversy mooted by the main judgment
that
the Bank has not been shown to have waived its right to receive
payment of legal costs under section 129(3). Even more
importantly, the dispute may be resolved on another and perhaps
clearer basis.
[121]
On these facts, I find that the
credit agreement was indeed reinstated on 8 March 2011 when Ms
Nkata settled in full her bond
arrears of R87 500. At that
point, the Bank’s legal costs were not due and payable.
It is undisputed that the
Bank had not given Ms Nkata notice of the
nature and extent of the legal costs. It had not demanded their
payment properly
or at all. Also, the legal costs were not
shown to be reasonable. Their nature and extent had not been
agreed to by
Ms Nkata and had not been assessed for reasonableness by
taxation or other acceptable means. Instead, the Bank chose to
be
the sole arbiter of the extent of the legal costs and one-sidedly
debited the costs against the bond account of Ms Nkata.
[122]
In this regard, I agree with the
High Court that the consumer could not be expected to take proactive
steps to find out what the
costs would be for reinstatement to be
effected. Neither could a consumer be expected to start
taxation or agree with the
credit provider on the quantification of
these costs. The credit provider is required to take the
appropriate steps if it
wants to recover the costs for enforcing an
agreement with the consumer. The Bank knows well that it is
entitled to reasonable
costs only. It must take steps to place
its legal costs within this statutory pigeon hole.
[123]
Properly understood, section 129(3)
does not preclude the reinstatement of a credit agreement where the
consumer has paid all the
amounts that were overdue but has not been
given due notice of the reasonable legal costs, whether agreed or
taxed, of enforcing
the credit agreement. The legal costs would
become due and payable only when they are reasonable, agreed or
taxed, and on
due notice to the consumer.
[124]
This is clear from a simple reading
of section 129(3), which provides that the agreement is reinstated by
the consumer by paying
to the credit provider “all amounts that
are overdue
together with
the credit provider’s permitted default charges
and
reasonable costs of enforcing the agreement up to the time of
reinstatement”.
[78]
The words “together” and “and” make it clear
that three distinct requirements are imposed on a consumer
before a
credit agreement is reinstated. By requiring a credit provider
to demand separately payment of the reasonable costs
of enforcing the
agreement, the Act imposes a more transparent practice of billing –
one which is in line with the purposes
of the Act. The Bank
should have demanded payment of the reasonable costs of enforcing the
agreement separately from Ms Nkata’s
arrears, and brought it to
her attention.
[125]
This understanding of section 129(3)
is of considerable importance. It gives better effect to the
clear text and purpose of
the provision and the Act. If a
credit provider is not obliged properly to quantify and give due
notice of the legal costs
to the consumer, the relief section 129(3)
affords to a consumer will be frustrated and become illusory.
It will always be
open to the credit provider to thwart a
reinstatement by simply asserting, as happened in this case, that the
legal costs unilaterally
debited to the bond account had not been
paid. Here Ms Nkata paid R87 500 because she wanted to
discharge her full arrears
and save her home, which was under
attachment, only to be told by the Bank that she still owed
relatively small amounts labelled
legal costs, which were never
assessed and disclosed to her properly.
[126]
All of these considerations lead to
the one conclusion that the credit agreement was properly reinstated
within the meaning of section
129(3).
Execution –
section 129(4)
[127]
I have held that Ms Nkata was
entitled to have her credit agreement reinstated under section
129(3). The Bank contended before
us that even so her right to
reinstate has been limited by the provisions of section 129(4)(a) of
the Act. Is the Bank correct?
[128]
The section precludes a consumer
from reviving a credit agreement after the sale of the property
following on an attachment order.
Section 129(4)(b) goes
further to lay down that a consumer may not reinstate the agreement
after the execution of any other court
order enforcing that
agreement.
[129]
In giving meaning to section
129(4)(b), the High Court held that the bar to a reinstatement occurs
only when the proceeds from a
sale in execution have been realised.
On the facts here, the High Court found that the default
judgment of 28 September
2010 did not constitute an attachment
order against the property nor did the default judgment acquire that
character when the Bank
obtained a writ of execution against Ms
Nkata’s mortgaged property.
[130]
The Bank challenged this reasoning
on a number of grounds. It contended that execution does not
only refer to the completed
act of execution, but also to the process
of execution. It argued that in order to arrange a sale in
execution, it had to
attach the property and cause notices of sale in
execution to be published and served in terms of rule 46.
[79]
It insisted that the High Court should have interpreted the word
“execution” in section 129(4) as including those
steps
that were taken to attach the property.
[131]
There is no compelling reason why
the meaning of “execution” in section 129(4)(b)
should be given the extended
meaning preferred by the Bank. The
extended construction would render the section unuseful. The
High Court was correct
that the barrier to a revival of the credit
agreement applies only when proceeds from a sale in execution have
been realised.
Only then would the revival be of no use to
either party. I have already observed that section 129(3) had
created a novel
remedy to foster payment of overdue debts and to
rescue attached property, provided the consumer had lawfully revived
the credit
agreement. The provision amounts to a statutory
remedy for rendering a default judgment and attachment order
ineffectual.
That explains why once the credit agreement has
been reinstated by paying all overdue amounts and allied
administrative and legal
costs, the consumer “may resume
possession of any property that had been repossessed by the credit
provider”.
This plainly means that the default judgment
and subsequent attachment would be rendered without force or effect.
[132]
On another tack, the Bank contended
that when a judgment creditor attaches goods, the creditor obtains a
real right in respect of
those goods because the attachment of
property in execution creates a judicial mortgage. The argument
is at odds with the
ordinary, contextual and purposive meaning of
sections 129(3)(a) and (b). The common law judicial
mortgage the Bank
has in mind, in this context, has been superseded
by the design of section 129(3).
[133]
The Bank accepted that, in its
words, “[i]n the event that the arrears are now paid, the Bank
cancels the sale in execution,
the agreement continues and the
defendants retain their immovable property”. However, the
Bank steadfastly maintained
that “[i]f the defendants again
[fell] into arrears, the Bank, as it is entitled to, [may instruct]
its attorneys to reschedule
a sale in execution”. The
Bank fell back on the facts here to buttress its stance. The
argument ran thus: here
reinstatement would still be precluded as the
settlement agreement reached between the parties on 10 December 2010
– long
before the payment of any arrears in 2011 and 2012 –
reserved the Bank’s right to sell the property.
[134]
This argument too must falter.
Clause 5 of the settlement agreement states that “[s]hould [Ms
Nkata] pay the full arrears
. . . the [Bank] shall not sell the
property in execution but [Ms Nkata] shall pay the full monthly
instalments to the [Bank]”.
Not even the terms of the
settlement agreement entitled the Bank to seek to sell the property
without more.
[135]
There is another decisive reason why
the High Court was right. Had the property been sold in
execution following an attachment
order, the execution would not have
stopped the reinstatement because the sale in execution took place in
April 2013 –
just over two years after Ms Nkata had
cleared her arrears for the first time in 2011.
[136]
Although there had been an
attachment of the bonded property, no sale in execution of the
property occurred and no proceeds of the
sale were realised at any
time before Ms Nkata had cleared her arrears in March 2011. She
was well within her entitlement
to revive the credit agreement that
the credit provider had not cancelled. That she did by purging
her default in full. She
paid the credit provider all amounts
that were then overdue together with default charges. For these
reasons, the High Court
correctly ordered that the default
judgment and the writ of execution ceased by operation of law to have
any force or effect as
from 8 March 2011.
[137]
It follows without more that the
appeal must succeed. Ms Nkata is entitled to an order declaring
that: the credit agreement
was lawfully reinstated; from
8 March 2011, the default judgment entered against Ms Nkata
and the subsequent warrant
of execution against her home had no legal
force; the public auction of
Ms Nkata’s
home on 24 April 2013 to the third respondent is set aside and the
property may not be transferred to or registered
in the name of the
third respondent.
Costs
[138]
There is no reason why costs should
not follow the event. The Bank should pay Ms Nkata’s
costs in the High Court, Supreme
Court of Appeal and in this Court.
Order
[139]
The following order is made:
(a)
Leave to appeal is granted.
(b)
The appeal succeeds.
(c)
The order of the Supreme Court of Appeal is
set aside.
(d)
It is declared that—
(i)
the credit agreement between FirstRand Bank Limited and Ms Nkata
was lawfully
reinstated;
(ii)
from 8 March 2011, the default judgment entered against Ms Nkata
and the subsequent
warrant of execution against her home had no legal
force;
(iii)
the public auction of Ms Nkata’s home on 24 April 2013 to the
third respondent is set aside;
and
(iv)
the property may not be transferred to or registered in the name of
the third respondent.
(e)
The Bank must pay Ms Nkata’s costs in
the High Court, the Supreme Court of Appeal and in this Court,
including where applicable
the costs of two counsel.
NUGENT AJ
[140]
I have read with considerable
interest the conflicting judgments of my colleagues Moseneke DCJ
(majority judgment) and Cameron J
(main judgment). I regret I
cannot agree with Moseneke DCJ. I agree with Cameron J that the
appeal must fail, and the
order of the Supreme Court of Appeal left
undisturbed, for the reasons he gives, to which I add brief reasons
of my own.
[141]
When home loans are made against the
security of a mortgage bond, the agreement generally requires the
borrower to repay the loan,
with compounded interest, in monthly
instalments. If the borrower fails to pay an instalment the
full amount then outstanding
becomes repayable to the bank. Unless
new arrangements are made with the bank it can be expected that the
borrower will not
be able to repay the debt and the process for
recovery will be set in motion. Demand will be made, summons
will be issued,
judgment will be taken, a writ of execution will be
issued, the property will be attached, and ultimately it will be
sold.
At each point in that process the bank will incur costs
of various kinds. That was the form of the agreement in this
case
and those were the consequences that followed upon default.
[142]
For good reasons eloquently
expounded by my colleagues, section 129(3) of the Act makes inroads
upon the ordinary right of the bank
to recover the loan upon
default. The borrower may at any time – from the time the
default occurs right until the eve
of the sale – interrupt the
process and restore the earlier position. To do so he or she
must fulfil three conditions:
(i) all amounts overdue (the
instalments required to have been paid by that time) must be paid;
(ii) the bank’s permitted
default charges (if any) must be
paid; and (iii) the reasonable costs incurred by the bank until then
in enforcing the agreement
(if any) must be paid.
[143]
I agree with my colleagues that
fulfilment of the conditions need not be communicated to the bank.
All that is required is
that they must be fulfilled, whereupon the
agreement is automatically reinstated by operation of law, by which
is meant the position
before default is restored.
[144]
The section affords powerful
protection to borrowers who fall into temporary distress (or
carelessness) at any time until the loan
is repaid. But it
requires the borrower to comply with its conditions if he or she is
to have that protection. The
language in which the conditions
have been expressed is straightforward, and I see nothing, in the
context or its purpose, not
to construe it for what it says.
[145]
In this case it is not controversial
that the overdue amounts were paid. It is also not
controversial that the Bank incurred
costs in enforcing the
agreement. It is also not controversial that the costs were not
paid. The difference, as I see
it, between my colleagues is
that the majority judgment contends the costs were not required to be
paid because they were not due.
[146]
The majority judgment construes the
section as requiring payment by the borrower only if the bank has
itself met certain conditions
at the time the borrower seeks to
invoke the section. It finds the borrower is required to pay
the costs only if by then
they have been taxed and demanded by the
bank. Absent that, the borrower may reinstate the agreement by
paying only the overdue
amounts.
[80]
[147]
The language of the section is
against that construction. In its terms it requires the
borrower to pay. Nothing in the
language of section 129(3) of
the Act suggests that sometimes the borrower need not pay. The
majority judgment does not suggest
that demand by the bank is a
pre-condition for payment of the overdue amounts. I fail then
to see how it becomes a pre-condition
for payment of the costs when
the same language is used for both.
[148]
I also do not find it supported by
the context within which the section appears. Perhaps greater
transparency in bank billing is
desirable, though the Bank’s
account in this case seems clear enough to me, but that is then a
matter for the Legislature
to correct. My colleague points to
nothing in the Act indicating the Legislature has chosen to achieve
billing transparency
through enacting section 129(3). Had that
been its object, I have no doubt credit providers would have been
directed expressly
on what is required, as they are directed in other
parts of the Act.
[149]
Nor do I find support for that
construction in the purpose of the section. Its purpose is to
throw a lifeline to a borrower
who has defaulted. It was not
enacted to provide a remedy for banks to recover their costs.
No doubt the Bank in this
case would have been perfectly content to
recover its costs in the ordinary way. To construe it as
attaching conditions if
banks want to recover their costs does not
give effect to its purpose but inverts it instead.
[150]
Since we agree that the borrower is
not required to notify the bank that he or she intends invoking the
section, the bank is not
to know whether a borrower will invoke the
section, and if it is invoked, when that will occur.
[151]
I observed earlier that costs are
incurred by a bank at various stages of the process of enforcement.
They are incurred when
a letter of demand is issued, and again when a
summons is issued, and again when judgment is taken, and again at
various stages
of the process of execution. On the construction
proposed by my colleague, Moseneke DCJ, the bank would need
immediately to
tax and then demand its costs each time they are
incurred, just in case the borrower were at some time to invoke the
section, if
it is to preserve its right to have them paid when
reinstatement occurs. To expect a bank to tax and demand costs each
time they
are incurred seems to me to be unrealistic, and I cannot
accept it is what the provision means.
[152]
The majority judgment reaches this
conclusion on the basis that the costs incurred by the bank are not
reasonable until agreed with
the borrower or assessed for
reasonableness by taxation or other acceptable means, and then are
not payable until they have been
demanded.
[153]
Costs are either reasonable or they
are not reasonable as a fact. It is true that what is reasonable is
not exact and falls within
a band. But they either fall within
that band or they do not. Costs that are not reasonable do not
become reasonable
by agreement between the parties. They merely
become agreed. They are also not converted from one to the other by
taxation.
On taxation a taxing official merely certifies that
in his or her opinion the costs are reasonable. If they are
reasonable
in fact, and are then certified as such by a taxing
official, they were reasonable from the start. And if they were
unreasonable
at the start, and were then reduced by the taxing
official to what is reasonable, the reduced amount becomes reasonable
because
the amount was reduced, not because it was the opinion of the
taxing official that the reduced amount was reasonable. If an
approved tariff allows a charge of R100 it can hardly be said a
charge of R50 is not reasonable only because a taxing official
has
not expressed an opinion to that effect. I am not sure what
other acceptable processes of assessment the majority judgment
has in
mind but whatever they are the position remains the same. Whether
costs are reasonable as a fact is not dependent
upon the opinion of a
costs assessor.
[154]
That does not leave the bank at
large to determine the extent of the costs, as contended for by my
colleague. The section
requires the borrower to pay only
reasonable costs, and it is only reasonable costs the borrower must
pay. If the borrower
wants the opinion of a taxing official on
whether they are reasonable the borrower may ask for them to be
taxed, and it would be
a naive bank that sought to require payment of
more than the amount considered by the taxing official to be
reasonable. Even
then the borrower is not required to pay the
amount in which the costs have been taxed. The section does not
require a borrower
to pay what a taxing officer believes to be
reasonable. The borrower is required to pay what is reasonable
as a fact.
Ultimately it will be for a court to determine
whether the costs are reasonable should it be disputed in legal
proceedings like
the present.
[155]
Demand might or might not be a
prerequisite for a debt to become payable depending upon the
particular facts. In this case,
Ms Nkata was obliged by
clause 11.1.3 of the agreement to “pay all costs including
attorney and client costs and collection
commission incurred by the
Bank . . . in demanding or obtaining payment of all or any sums due
by the [borrower] . . . to the Bank
and in suing for the recovery
thereof” without any precondition of demand.
[156]
But I do not reach my conclusion on
the basis of the agreement. Section 129(3) does not require
payment of costs only if they
have become payable at the time the
section is invoked. The section itself makes them payable as a
condition for reinstatement
if they have been incurred. To
construe “incurred” as meaning “then payable”
does violence to the
language of the section. There is no
dispute that the costs now in issue had indeed been incurred by the
Bank, provided they
were reasonable, and there has been no suggestion
that they were not. But if Ms Nkata had wanted them taxed, then
it was
for her to ask for it, and pay them once they were taxed.
They could not simply be ignored.
[157]
The majority judgment expresses the
view that the borrower cannot be expected to take proactive steps to
find out what the costs
would be for reinstatement to be effected.
I do not see why that should be so. That judgment accepts the
borrower must
pay what is overdue, and I can imagine few borrowers
having records that are so meticulous, and whose calculations of
compound
interest are so exact, as to be capable of knowing what is
overdue without asking the bank. It is not unduly oppressive to
expect a borrower to ask at the same time what costs have been
incurred. It is the bank, instead, that cannot be expected
to
know whether, and if so when, the borrower will invoke the provision,
and so be obliged to tax and demand its costs in case
that should
occur.
[158]
I have also read the judgment of my
colleague Jafta J, which takes us down untrodden paths. He
finds the High Court judgment
taken by default was null and void.
From there he goes on to find, first, that the costs incurred in
enforcing the agreement
were not recoverable, and second, that the
sale in execution was invalid. He finds also that the parties’
settlement
agreement in itself reinstated the agreement. And he finds
the portion of the costs Ms Nkata undertook to pay were required to
be agreed upon or taxed, in the absence of which she was not required
to pay them as a condition for reinstatement.
[159]
The last finding echoes that of the
majority judgment, which I dealt with earlier. Section 129(3)
does not require the costs
to have become payable in the ordinary
course when the section is invoked. If they have been incurred
the section makes them
payable as a condition for reinstatement.
No doubt, Ms Nkata was entitled to have the costs she undertook to
pay taxed but,
having been incurred, she was required to pay them for
reinstatement to occur. Again they could not simply be ignored.
[160]
As for the remaining findings –
save for saying I see strong arguments against each of them – I
am not willing to decide
them, in either direction, without the Bank
first having been heard. It is a salutary practice before any
decision is made
that a person affected by the decision should have
the opportunity to be heard before the decision is made, and I think
it can
be taken as well established that that applies especially when
rights are decided by courts. It is not uncommon for points
that at first seem attractive to vaporise when subjected to critical
examination and debate. There is powerful authority
for the
proposition that new points will not be considered on appeal unless
they have been exhaustively covered by the pleadings
and the
evidence, and it is not unfair to the parties to require this.
[81]
That is certainly not the case where an affected
party has not had the opportunity to deal with them in any court at
all –
not in the High Court, not in the Supreme Court of
Appeal, nor even in this Court. That is the present case.
[161]
But on one thing I do not think it
would be improper to express myself. What was said by Ponnan JA
in
Motala
[82]
is not authority for the findings made by my
colleague Jafta J. In that case the learned judge found, on
good authority, no
more than that a person is not compelled to obey
an order made by a court that had no jurisdiction to make it, and for
that reason
he or she is not in contempt for failing to do so.
[83]
It is not authority for the proposition that if
the order has indeed been given effect, the consequences are to be
treated as if
they had not occurred. Nor is it authority for
the proposition that the order may be ignored if a court has
authoritatively
ordered it should stand, which are the facts in the
present case. Perhaps my colleague is right, and perhaps my
colleague
is wrong, but should he be right that would not be on the
authority of
Motala
.
[162]
In conclusion I agree with Cameron J
that the payment that was made by Ms Nkata did not bring her
within the protection of
section 129(3) and thus that the order of
the Supreme Court of Appeal was correct.
JAFTA J
[163]
I have had the benefit of reading
judgments prepared by Moseneke DCJ, Cameron J and Nugent AJ.
Unlike Cameron J and Nugent
AJ, I would not dismiss the appeal.
Like Moseneke DCJ, I would uphold the appeal and set aside the order
of the Supreme Court
of Appeal for mainly the reasons advanced by him
in his judgment and to which I add mine. In the additional
reasons I also
hold that legal costs claimed by the Bank were not due
but for reasons that differ from his. In my view the litigation
instituted
by the Bank was irregular as it was commenced in
circumstances where there was no compliance with section 129(1) of
the Act.
[164]
Payment of legal costs sits at the
heart of the divergent views expressed by my colleagues Cameron J and
Nugent AJ, on the one hand,
and Moseneke DCJ, on the other. The
disagreement lies in the question whether, on the proper
interpretation of section 129(3),
when Ms Nkata paid the full
amount of the arrears on 8 March 2011, by that alone she reinstated
the credit agreement as envisaged
in that section. All
judgments accept that section 129(3) means that the credit agreement
is reinstated by operation of law,
once the consumer pays “all
amounts that are overdue, together with the credit provider’s
permitted default charges
and reasonable costs of enforcing the
agreement up to the time of reinstatement”.
[165]
The disagreement is somewhat
narrower and it revolves around the question whether Ms Nkata had
paid reasonable legal costs.
It is common cause that the Bank
debited legal fees in the sum of R9 050 to Ms Nkata’s mortgage
bond account. This
amount was for issuing summons, obtaining a
default judgment, issuing a writ, attaching Ms Nkata’s
home, advertising
the first sale in execution, including the
sheriff’s fees. Later amounts of R6 498 and R8 000
were also added
to her bond. These sums were described as the
attorney’s and counsel’s day fees charged in connection
with the
unsuccessful rescission application.
[166]
Both Cameron J and Nugent AJ hold
that Ms Nkata failed to pay reasonable costs of enforcing the credit
agreement. While I
agree that those costs existed in fact, I do
not agree that they constituted reasonable costs of enforcing the
credit agreement.
In my view, as a matter of law, no legal fees
were due because the institution of the legal action without
compliance with section
129(1) was irregular and the default judgment
was a nullity because the registrar had no power to grant it.
[84]
For one to conclude that section 129(3) was not met for purposes of
reinstating the agreement, one must be satisfied that
costs which Ms
Nkata failed to pay were those envisaged in the section. This
is so because the action does not require payment
of costs incurred
in irregular proceedings or as a result of invalid judgments.
On the authority of
Motala
and
Changing Tides
,
the default judgment granted by the registrar was a nullity.
[167]
Here the Bank commenced the legal
action at a time when it was not permitted to do so. Section
130(1)
[85]
prohibits the commencement of legal proceedings before the expiry of
10 business days from the date of delivery of notice in terms
of
section 129(1). The High Court held that the Bank failed
to deliver the requisite notice and the correctness of this
finding
was not challenged in this Court.
[168]
It is compulsory for any credit
provider to comply with section 129(1) before instituting legal
proceedings. In
Sebola
,
Cameron J said:
“
Section
129(1)(a) requires a credit provider, before commencing any legal
proceedings to enforce a credit agreement, to draw the
default to the
notice of the consumer in writing. It has been described as a
‘gateway’ provision, or a ‘new
pre- litigation
layer to the enforcement process’. Although section
129(1)(a) says the credit provider ‘may’
draw the
consumer’s default to his or her notice,
section 129(1)(b)(i)
precludes the commencement of legal proceedings unless notice is
first given
. So, in effect, the
notice is compulsory.”
[86]
(Footnotes omitted and emphasis added.)
[169]
Parliament has considered compliance
with section 129(1) to be so important that it deemed it necessary to
preclude a court from
adjudicating the dispute until the court itself
is satisfied that there was compliance.
[87]
Notably, it is the court that must be satisfied and nobody else.
This signifies that legal proceedings to which the
Act applies must
be determined by the court only.
[170]
Furthermore, section 130(3)
precludes a court from deciding the case unless it is satisfied that
the notice requirements in section
129 have been complied with.
Section 130(3) provides:
“
Despite
any provision of law or contract to the contrary, in any proceedings
commenced in a court in respect of a credit agreement
to which this
Act applies, the
court may determine the
matter only if the court is satisfied
that—
(a)
in the case of proceedings to which
sections 127, 129 or 131 apply, the procedures required by those
sections have been complied
with.” (Emphasis added.)
[171]
If it appears to the court that the
credit provider has not complied with section 130(3)(a) or that
it is not positively satisfied
that there was compliance, the court
must—
(a)
adjourn the matter before it; and
(b)
make an appropriate order setting out steps
the credit provider must complete before the matter may be
resumed.
[88]
[172]
Later in
Kubyana
,
we reaffirmed the principle that the Court is precluded from deciding
a matter unless it is satisfied that the procedures stipulated
in
sections 129 and 130 are met. We said:
“
The
text of this section reveals that in the event of the consumer being
in default of her repayments of the loan, the credit provider
is
obliged to draw the default to the attention of the consumer.
The section prescribes that the notice given to the consumer
must be
in writing. It further stipulates what the notice must
contain. The notice must propose the options available
to the
consumer who is in financial distress and unable to purge the
default. It must point out that, at the election of
the
consumer, the credit agreement may be referred to a debt counsellor,
dispute resolution agent, consumer court or ombud.
The purpose
of the referral must also be stated in the notice.
The
purpose of the referral is to resolve whatever disputes may have
arisen from the credit agreement and also to agree on a plan
to cure
the default and bring the payments up to date. Furthermore, the
section makes reference to section 130 which
governs the
institution of litigation for enforcing credit agreements.
Section 129(1) lays down two conditions which
must be met before
the credit provider may institute litigation. In peremptory
terms, the section declares that legal proceedings
to enforce the
agreement may not commence before—
(a)
first providing notice to the consumer; and
(b)
meeting further requirements set out in
section 130.”
[89]
[173]
Here the legal fees claimed by the
Bank arose in circumstances where the Bank had acted in breach of the
Act in a number of respects.
First, it failed to give notice as
required by section 129(1) read with section 130(1). Second, it
sought and obtained a
default judgment from the registrar of the High
Court, something that is incompatible with section 130(3) which
requires such matters
to be determined by the court. Third, the
Bank sought and obtained the default judgment without satisfying the
Court on compliance
with section 129. Fourth, the Bank caused a
writ to be issued, an attachment to be effected and Ms Nkata’s
home to
be advertised for sale in execution on account of an invalid
judgment. Fifth, the Bank opposed Ms Nkata’s application for
the rescission of that judgment.
[174]
The High Court declared:
“
The
non-compliance with section 129(1) also leads to the conclusion, in
my opinion, that default judgment was ‘erroneously’
sought and granted within the meaning of rule 42(1)(a) (see
Buys
v Changing Tides 17 Pty Ltd NO & Others
[2013] ZAWCHC 150).
Compliance
with section 129(1) is a substantive legal prerequisite for the valid
institution of legal proceedings on a credit transaction
to which the
Act applies
. The notice annexed
to the summons (the notice addressed to ‘c/o 4 Devonshire Hill,
Rondebosch’) did not
ex facie
the summons, constitute a valid notice in respect of the first
mortgage loan agreement and bond on which [the Bank] was suing.
(The summons alleged that [Ms] Nkata’s chosen domicilium was 35
Vin Doux Street, and this was also the chosen address appearing
in
the first mortgage bond annexed to the summons. The summons
contained no allegation that [Ms] Nkata had selected the Rondebosch
address for purposes of receiving all notices under the Act.)”
[90]
(Emphasis added.)
[175]
Thus the High Court notably points
out that on the face of it, the notice in terms of section 129(1) was
served at the wrong address.
It is apparent from the
High Court’s statement that had the request for the
default judgment been placed before a court,
that court could not
have been satisfied that there was compliance with section 129(1)
read with section 130(1). In that
event, the Court could not
have granted the default judgment because it would not have been
competent for it to do so, in light
of the peremptory language of
section 130(3). That section proclaims that a court may
determine a matter to which the Act
applies
only
if the court is satisfied that there was compliance
with section 129. Thus the exercise of the court’s
competence or jurisdiction is deferred until compliance is achieved.
[176]
This is the backdrop against which
the reasonableness of the legal fees claimed by the Bank must be
assessed. In my view,
it cannot be said that costs incurred
when the Bank acted in breach of the Act were reasonable costs
contemplated in section 129(3).
This section envisions
costs incurred in legitimate proceedings. If the High Court
had set aside the default judgment
during the first application for
rescission, the legal fees in question would have fallen away.
This application was made
in November 2010 but was settled by the
parties on 10 December 2010.
[177]
In terms of the settlement
agreement, Ms Nkata was to pay the costs of the rescission
application as taxed or agreed. Notably,
the agreement on
payment of costs was limited to the rescission application only.
[91]
The other costs would have been payable in terms of section 129(3),
if they were reasonable. In view of the fact that
the Bank was
not entitled to issue the summons, those costs were not reasonable.
This is because the entire process, from
the stage the summons was
issued up to the attachment and advertising the sale, was tainted by
non-compliance with various provisions
of the Act.
[178]
But this does not include the costs
that Ms Nkata agreed to pay in terms of the settlement agreement.
However, in terms of
that agreement payment of those costs depended
on being taxed or agreed. The question that arises is whether
where, as here,
the parties agree on conditions for payment of costs,
the activation of reinstatement of the credit agreement is delayed
until
those costs are paid. I think not.
[179]
It will be recalled that were it not
for the parties’ settlement agreement, those costs would be
tainted too. Payment
of those costs was regulated by the
agreement and not section 129(3). In any event, in the
settlement agreement the parties
agreed to reinstate the credit
agreement. If the settlement agreement was enforceable against
Ms Nkata in respect of the
payment of costs, it must equally have
been binding on the Bank with regard to the reinstatement of the
credit agreement.
[180]
Therefore, whether one approaches
the matter on the footing of the settlement agreement, or section
129(3), it appears that the
credit agreement was reinstated. It
makes no difference whether reinstatement occurred in December 2010
or in March 2012
when the arrears were cleared.
[181]
Ms Nkata’s home was sold to a
third party in April 2013 on the strength of a default judgment that
amounted to a nullity.
The effect of dismissing the appeal is
to endorse that absurd outcome. Since the default judgment was
a nullity, it did not
have the legal consequence of authorising the
sale in execution. As Ponnan JA observed in
Motala
:
“
It
is after all a fundamental principle of our law that a thing done
contrary to a direct prohibition of the law is void and of
no force
and effect. . . . Being a nullity a pronouncement to that
effect was unnecessary. Nor did it first have to
be set aside
by a court of equal standing.”
[92]
[182]
Nugent AJ holds that he would not
determine whether the default judgment was invalid and that the costs
incurred in the legal proceedings
enforcing the agreement were not
recoverable without hearing the Bank. He finds that the Bank as
the affected party has not
had the opportunity to deal with the
argument relating to the regularity of the legal proceedings
instituted by it. This
is not correct.
[183]
In her written argument Ms Nkata,
having cited
Sebola
and
Kubyana
,
submitted that the bank was precluded from instituting the legal
proceedings without first complying with section 129(1).
With
reference to section 130(3) Ms Nkata proceeded to submit that in
terms of that section “the court may determine the
matter
only
if the court is satisfied that the procedures required . . . by
section 129 have been complied with”. She concluded
by
contending that section 130(4) obliges the court to adjourn the
matter where there is non-compliance and direct that specified
steps
be completed before the matter may be resumed.
[184]
The Bank countered Ms Nkata’s
argument by contending that the High Court was correct in
withholding rescission, owing
to Ms Nkata’s delay and the fact
that she settled the rescission application. The Bank argued
that by settling the
rescission application Ms Nkata had accepted
that the default judgment was correctly granted and that the sale in
execution was
validly concluded. The Bank submitted that to set
aside the default judgment after all this would be grossly unfair to
it.
Therefore, the Bank was heard. What remains for
consideration is whether its argument should be upheld. I think
it
should not.
[185]
In my view, none of the submissions
advanced by the Bank to counter invalidity of the legal proceedings
has merit. On the
authority of this Court in
Sebola
and
Kubyana
,
the Bank was prohibited from instituting the legal proceedings.
Not only were the proceedings prohibited, but section 130(3)
made the
Court’s competence to adjudicate the matter dependent on the
Court being first satisfied that there was compliance
with section
129(1). On the papers non-compliance was apparent. The
notice in terms of the section was served at an
address different
from the one appearing on the summons and the mortgage bond.
[186]
What is more is that the default
judgment was granted in violation of the peremptory terms of section
130(3) by someone other than
the Court and who had no power at all to
decide a matter to which the Act applies. The result was that
what was done by the
registrar contrary to a direct prohibition of
section 130(3) was a nullity and had no force in law. The fact
that Ms Nkata
believed otherwise did not change the legal position
simply because she had no authority to overrule the Act. A
common but
mistaken application of the law by the parties does not
bind the court. If that were to be true, decisions based on
incorrect
application of the law would be made. And in the
present context a nullity would be given legal force contrary to the
principle
of legality.
[93]
[187]
Unlike my colleague I do not read
Motala
as
laying down the limited principle that a person is not compelled to
obey an order made by a court that had no jurisdiction to
make it.
With reference to
Schierhout
,
the Supreme Court of Appeal expressed a general principle that what
is done contrary to a direct prohibition amounts to a nullity.
[94]
The Court went further to say that as a nullity, it is not even
necessary for it to be declared invalid. Clearly this
has
nothing to do with being compelled to obey an order. Nowhere in
paragraph 14, does the Supreme Court of Appeal refer
to compulsion to
obey an order. The entire paragraph is devoted to showing that
the High Court there usurped for itself
the power expressly left
to the Master by the relevant Act. Here too the registrar
usurped for himself a power expressly
left to a court by section
130(3) of the Act.
[188]
It will be recalled that the appeal
to this Court lay against the order of the Supreme Court of Appeal
and not the order of the
High Court. The High Court
granted an order in favour of Ms Nkata. It declared that the
credit agreement
had been reinstated and that the default judgment
ceased by operation of law to have force and effect from the moment
of reinstatement.
The sale in execution was also declared
invalid and set aside.
[95]
Therefore, here there is no suggestion that the Court has
authoritatively ordered the default judgment and what was done
purportedly on its authority to stand.
[189]
All judgments here having accepted
that the Supreme Court of Appeal was wrong, reach the High Court
order not on the basis
that there was an appeal against it to this
Court. But they do so in the process of determining whether the
Supreme Court
of Appeal granted the correct order, albeit for wrong
reasons. That enquiry involves the question whether the High
Court
came to the correct conclusion. If it had, then the
Supreme Court of Appeal should have dismissed the appeal. In
other
words, this enquiry enabled this Court to determine what order
the Supreme Court of Appeal ought to have granted in this case.
For the
Applicant:
M Donen SC and L Dzai
Instructed by Nolundi Nyati Attorneys
For the First
Respondent:
M A Chohan SC, D Van Reenen and N Van
Zyl
Instructed by Cohen Shevel & Fourie Attorneys
For the Amicus
Curiae:
S Wilson, I De Vos and K Thobakgale
Instructed by Socio-economic Rights Institute Law Clinic
[1]
34 of 2005. This litigation preceded the
amendments to the
National Credit Act 34 of 2005
by the
National Credit Amendment Act 19 of 2014 (Amendment Act),
which came into operation on 13 March 2015.
[2]
See section 129(3) of the NCA, the statutory
provision at issue, which is set out in [20] below.
[3]
No relief is sought against the second to fourth
respondents, who are cited merely because of their potential
interest in these
proceedings.
[4]
For convenience and since Ms Nkata made her bond
repayments in consolidated fashion under the same home loan
facility, I refer
to the mortgage bonds as the “credit
agreement”.
[5]
Section 129(1) of the NCA provides:
“
If
the consumer is in default under a credit agreement, the credit
provider—
(a)
may draw the default to the notice of the consumer in writing and
propose that the consumer refer the credit agreement to a debt
counsellor, alternative dispute resolution agent, consumer court
or
ombud with jurisdiction, with the intent that the parties resolve
any dispute under the agreement or develop and agree on
a plan to
bring the payments under the agreement up to date; and
(b)
subject to section 130(2), may not commence any legal proceedings
to
enforce the agreement before—
(i)
first providing notice to the consumer, as contemplated in
paragraph (a), or in section 86(10), as the case may be;
and
(ii)
meeting any further requirements set out in section 130.”
[6]
See
Nkata v
FirstRand Bank Ltd and Others
[2014]
ZAWCHC 1
;
2014 (2) SA 412
(WCC) (High Court judgment) at para 7.
This occurred before this Court had delivered its judgment in
Gundwana v Steko Development CC
[2011] ZACC 14
;
2011 (3) SA 608
(CC);
2011 (8) BCLR 792
(CC)
(
Gundwana
),
disallowing all registrar-issued default judgments and execution
writs involving debtors’ homes, and requiring that the
facts
in each case be judicially supervised. See
Gundwana
at para 53 where this Court held that “in allowing execution
against immovable property, due regard should be taken of
the impact
that this may have on judgment debtors who are poor and at risk of
losing their homes”.
Gundwana
further declared rule 31(5) of the Uniform Rules of Court
invalid to the extent that it authorised the Registrar (rather
than
the court) to declare immovable property specially executable,
without judicial supervision, where it is the debtor’s
home –
but the Court declined to make the declaration of invalidity
retrospective. The judgment requires debtors
against whom
default judgments have been granted before 11 April 2011 to
apply for rescission and to explain the reason
for lateness.
[7]
The settlement agreement provides, among other things:
“
1.
The sale in execution in respect of Erf 8832 Durbanville, also known
as 35 Vin Doux Street, Durmonte, Durbanville (the property) which
was scheduled to take place on 10 December 2010 is cancelled.
2.
[Ms Nkata] shall sign a standard FNB Quicksell Mandate
(Quicksell
agreement) within seven days of the granting of this [court order].
3.
While the Quicksell agreement is in place [Ms Nkata]
shall make
payment to the [Bank] of R10 000 per month in respect of the
instalments due to the [Bank].
4.
Should the property not be sold in terms of the Quicksell
agreement
prior to its expiry/termination [Ms Nkata] shall pay the full
arrears to the [Bank] within 14 days of such expiry/termination
or
on such terms as may be agreed between the parties.
5.
Should [Ms Nkata] pay the full arrears to the [Bank]
in terms of
clause 4 above the [Bank] shall not sell the property in execution
but [Ms Nkata] shall pay the full monthly instalments
to the [Bank].
6.
Should the property not be sold in terms of the Quicksell
agreement
and should [Ms Nkata] fail to pay the arrear amount owing to
the [Bank], the [Bank] shall be entitled to proceed
to sell the
property in execution forthwith.
7.
[Ms Nkata] shall pay the wasted costs occasioned by the
cancellation
of the sale in execution referred to in paragraph 1 above.
8.
[Ms Nkata] shall pay the costs of this application as
taxed or
agreed.”
[8]
Id at clause 6.
[9]
Id at clause 8.
[10]
This occurred even though it was envisaged that
the settlement agreement would be made an order of court and it was
drawn up in
the form of a draft order.
[11]
These arrears led to the September 2010 default
judgment proceedings.
[12]
More particularly the fees were for the summons,
judgment, writ, attachment and cancelled sale in execution,
including VAT and
disbursements for sheriff’s fees.
[13]
In terms of section 87(1) read with sections
79(1)(a), 86(7)(c)(ii)(aa) and (bb), and 86(8)(b) of the NCA.
[14]
High Court judgment above n 6 at para 10.
The Bank’s records noted that although Ms Nkata’s
account was up to
date, this was “after years in arrears”;
that the Bank had a judgment; and that there was no justification
for acceding
to the debt application “with this lack of
financial behaviour”.
[15]
Before its amendment by the Amendment Act (see n
1 above), section 129(4) read:
“
A
consumer may not re-instate a credit agreement after—
(a)
the sale of any property pursuant to—
(i)
an attachment order; or
(ii)
surrender of property in terms of section 127;
(b)
the execution of any other court order enforcing that agreement;
or
(c)
the termination thereof in accordance with section 123.”
[16]
High Court judgment above n 6 at paras 38-9.
[17]
See [10].
[18]
High Court judgment above n 6 at para 42.
[19]
Id at para 44.
[20]
Id at para 45.
[21]
Id at paras 57-9.
[22]
In a judgment by Willis JA (Maya, Cachalia,
Majiedt, and Saldulker JJA concurring), reported as
FirstRand
Bank Ltd v Nkata
[2015] ZASCA 44
;
2015
(4) SA 417
(SCA) (Supreme Court of Appeal judgment).
[23]
I say before “7 or 8 March 2011”
because the exact date is unclear. The parties agreed that the
R87 500
lump sum that cleared Ms Nkata’s arrears was paid
on 8 March 2011. However, at several instances in her papers
before
the High Court Ms Nkata alleges that this occurred on
7 March 2011. The Bank, in its supplementary affidavit,
alleged that she paid the lump sum on 8 March 2011. See
further, [41] below. The High Court ultimately found
that she
paid this lump sum by “not later than 8 March 2011”.
See the High Court judgment above n 6 at para
55.
[24]
Section 116 of the NCA provides:
“
Any
change to a document recording a credit agreement or an amended
credit agreement, after it is signed by the consumer, if applicable,
or delivered to the consumer, is void unless—
(a)
the change reduces the consumer’s liabilities under the
agreement;
(b)
after the change is made, unless the change is effected in terms
of
section 119(1)(c), the consumer signs or initials in the margin
opposite the change;
(c)
the change is recorded in writing and signed by the parties; or
(d)
any oral change is recorded electromagnetically and subsequently
reduced to writing.”
[25]
Supreme Court of Appeal judgment above n 22 at
para 36.
[26]
Sebola and Another v Standard Bank of South
Africa Ltd and Another
[2012] ZACC 11
;
2012 (5) SA 142
(CC);
2012 (8) BCLR 785
(CC) (
Sebola
)
at para 36 and
Kubyana v Standard Bank
of South Africa Ltd
[2014] ZACC 1
;
2014 (3) SA 56
(CC);
2014 (4) BCLR 400
(CC) (
Kubyana
)
at para 17.
[27]
See the High Court judgment above n 6 at para 42
where Rogers J states:
“
I
am prepared to assume for present purposes that [the Bank’s]
costs of opposing the rescission application, like the costs
of
obtaining default judgment, form part of the reasonable costs of
enforcing the credit agreement and that they would thus have
to be
paid before the credit agreement was reinstated in terms of section
129(3).”
[28]
In any event, as shown in [10], [39] and [40]
above, default charges are not at issue simply because those were
never itemised
by the Bank, in the settlement agreement or in the
mortgage bond account, as costs that Ms Nkata needed to pay.
[29]
High Court judgment above n 6 at para 44.
[30]
Id.
[31]
Harrismith Board of Executors v Odendaal
1923 AD 530
at 539.
[32]
Woudstra v Jekison
1968
(1) SA 453
(T) at 457H.
[33]
The NCA’s purposes as set out in section 3
are—
“
(a)
promoting the development of a credit market that is accessible to
all South
Africans, and in particular to those who have historically
been unable to access credit under sustainable market conditions;
(b)
ensuring consistent treatment of different credit products and
different credit providers;
(c)
promoting responsibility in the credit market by—
(i)
encouraging responsible borrowing, avoidance of over-indebtedness
and fulfilment of financial obligations by consumers; and
(ii)
discouraging reckless credit granting by credit providers and
contractual default by consumers;
(d)
promoting equity in the credit market by balancing the respective
rights and responsibilities of credit providers and consumers;
(e)
addressing and correcting imbalances in negotiating power between
consumers and credit providers by—
(i)
providing consumers with education about credit and consumer
rights;
(ii)
providing consumers with adequate disclosure of standardised
information in order to make informed choices; and
(iii)
providing consumers with protection from deception, and from unfair
or fraudulent conduct by credit providers and credit bureaux;
(f)
improving consumer credit information and reporting and regulation
of credit bureaux;
(g)
addressing and preventing over-indebtedness of consumers, and
providing mechanisms for resolving over-indebtedness based on the
principle of satisfaction by the consumer of all responsible
financial obligations;
(h)
providing for a consistent and accessible system of consensual
resolution of disputes arising from credit agreements; and
(i)
providing for a consistent and harmonised system of debt
restructuring, enforcement and judgment, which places priority on
the eventual satisfaction of all responsible consumer obligations
under credit agreements.”
[34]
Section 3(d) of the NCA. See Moseneke DCJ’s
judgment at [93] to [96].
[35]
Kubyana
at para
21, citing
Sebola
at para 40 (both above n 26). The latter case is cited in
Moseneke DCJ’s judgment at [94].
[36]
See Nugent AJ’s judgment at [145].
[37]
Moseneke DCJ’s judgment at [79] and [121].
[38]
Id at [123]. At [146] to [149] of his
concurrence, my colleague, Nugent AJ, sets out the nub of why this
construction is
at odds with a plain reading and interpretation of
the NCA.
[39]
Moseneke DCJ’s judgment at [80].
[40]
Id at [122] where it is held that—
“
a
consumer [cannot] be expected to start taxation or agree with the
credit provider on the quantification of these costs.
The
credit provider is required to take the appropriate steps if it
wants to recover the costs for enforcing an agreement with
the
consumer. The Bank knows well that it is entitled to
reasonable costs only. It must take steps to place its legal
costs within this statutory pigeon hole.”
[41]
Id at [79], [120] and [122].
[42]
Id at [119], where implicit endorsement is given
to Ms Nkata’s submission, supported by SERI, that “should
the
credit provider want to recover the costs of enforcing the
agreement from the consumer, the credit provider must be the one to
take the appropriate steps”.
[43]
As I mention at [25] and [47] above.
[44]
This is required by section 2(1) of the NCA which
states that “the [NCA] must be interpreted in a manner that
gives effect
to the purposes set out in section 3”.
Section 3 is set out in full in n 33 above.
[45]
Kubyana
above n
26 at para 18 citing Kentridge AJ, at paras 17-8 of
S
v Zuma and Others
[1995] ZACC 1
;
1995
(2) SA 642
(CC);
1995 (4) BCLR 401
(CC). There he stated:
“
We
must heed Lord Wilberforce’s reminder that even a constitution
is a legal instrument, the language of which must be respected.
If the language used by the lawgiver is ignored in favour of a
general resort to ‘values’ the result is not
interpretation
but divination.”
Mhlantla
AJ stated, in
Kubyana
at para 18 fn 23, that even though the
above remarks referred to constitutional interpretation, “they
apply even more forcefully
in relation to statutory interpretation
generally”.
[46]
Section 3 of the NCA.
[47]
Sebola
above n
26 at para 40.
[48]
Kubyana
above n
26 at para 35.
[49]
Id at para 38.
[50]
Ms Nkata rightly did not seek to contend that the
Bank waived its right to receive payment of the items section 129(3)
specifies.
Waiver is a unilateral act consisting of a
renunciation of a right or legal advantage (
Mutual
Life Insurance Co of New York v Ingle
1910 TPD 540
at 550, per Innes CJ), and the onus is “strictly”
on the party asserting waiver to prove it (
Laws
v Rutherford
1924 AD 261
at 263, per
Innes CJ). There can be no suggestion here that the Bank
either expressly or by conduct incompatible with the
intention to
enforce its section 129(3) rights, abandoned its entitlement to
payment. Debiting Ms Nkata’s account
did not constitute
a waiver of the Bank’s right to receive payment.
[51]
If it is necessary to express a view,
communication by the consumer does not seem to be a requirement.
Reinstatement is
not one of the rights section 129(1) requires the
credit provider to draw the consumer’s attention to in the
notice it
requires the credit provider to send. Since the Bank
is not obliged to let the consumer know of this right, it wouldn’t
make sense to burden the consumer with the obligation to let the
Bank know she intends to exercise it. In addition, it
is not
open to the Bank to accept or reject reinstatement. Instead,
as the High Court found, reinstatement occurs automatically,
by
operation of law, upon the fulfilment of the requirements section
129(3)(a) posits. Requiring notification before reinstatement
would, as SERI contended, render section 129(3) largely inoperative.
[52]
34 of 2005.
[53]
See section 129(3) at [20].
[54]
Section 129 of the Act reads:
“
(1)
If the consumer is in default under a credit agreement, the credit
provider—
(a) may
draw the default to the notice of the consumer in writing
and
propose that the consumer refer the credit agreement to a debt
counsellor, alternative dispute resolution agent, consumer
court or
ombud with jurisdiction, with the intent that the parties resolve
any dispute under the agreement or develop and agree
on a plan to
bring the payments under the agreement up to date; and
(b)
subject to section 130(2), may not commence any legal proceedings
to
enforce the agreement before—
(i)
first providing notice to the consumer, as contemplated
in
paragraph (a), or in section 86(10), as the case may be; and
(ii)
meeting any further requirements set out in section 130.”
[55]
For an explanation of the Quicksell agreement,
see the main judgment at n 7.
[56]
See section 3 below n 58.
[57]
See [28].
[58]
Section 3 reads in relevant part:
“
The
purposes of this Act are to promote and advance the social and
economic welfare of South Africans, promote a fair,
transparent, competitive, sustainable, responsible, efficient,
effective and accessible credit market and industry, and to protect
consumers by—
(a)
promoting the development of a credit market that is accessible
to
all South Africans, and in particular to those who have
historically been unable to access credit under sustainable market
conditions;
. . .
(d)
promoting equity in the credit market by balancing the respective
rights and responsibilities of credit providers and consumers;
(e)
addressing and correcting imbalances in negotiating power between
consumers and credit providers by—
(i)
providing consumers with education about credit and consumer
rights;
(ii)
providing consumers with adequate disclosure of standardised
information in order to make informed choices; and
(iii)
providing consumers with protection from deception, and from unfair
or fraudulent conduct by credit providers and credit bureaux;
. . .
(h)
providing for a consistent and accessible system of consensual
resolution of disputes arising from credit agreements; and
(i)
providing for a consistent and harmonised system of debt
restructuring, enforcement and judgment, which places priority on
the eventual satisfaction of all responsible consumer obligations
under credit agreements.”
[59]
Sections 3(d) and (e) of the Act.
[60]
Sebola
above n
26.
[61]
Id at para 40.
[62]
Section 3 of the Act.
[63]
The preamble notes that the Act repeals the Usury
Act, 1968 and the Credit Agreements Act, 1980 – the two pieces
of legislation
that by and large regulated the relationship between
consumers and credit providers. See also
Sebola
above n 26 at para 38 where the majority of the Court highlights
that the pre apartheid design of the credit industry was
“ill-suited to South Africa’s post-apartheid economy and
society”.
[64]
See fn 22 of
Sebola
above n 26, which through sections 1 and 9 of the Constitution,
echoes the equality ethos of the Act.
[65]
Sebola
id at
para 36. See also the aims listed in the preamble of the Act.
[66]
Sebola
id.
See also section 3(d) of the Act.
[67]
Section 3(h) of the Act. See also
Sebola
id at para 46.
[68]
Sebola
id at
para 39.
[69]
Kubyana
above n
26.
[70]
Id at para 17.
[71]
Id at para 22 and fn 34. See also
Sebola
above n 26 at para 46.
[72]
Ferris and Another v Firstrand Bank Ltd
[2013] ZACC 46
;
2014 (3) SA 39
(CC);
2014 (3) BCLR 321
(CC)
(
Ferris
).
[73]
Id at paras 17-8.
[74]
Id at para 7.
[75]
Section 129(3)(a) (emphasis added).
[76]
Section 129(3)(a) of the Act.
[77]
The High Court took note of the decision in
Standard Bank of South Africa Ltd v
Oneanate Investments (Pty) Ltd (In Liquidation)
[1997] ZASCA 94
;
1998 (1) SA 811
(SCA) that interest debited to a
loan account does not lose its character as interest. However,
it found that it would
be untenable to expect the consumer to pay
the full amount of the legal costs to effect reinstatement as a
result of a rule established
on the commercial practice of
capitalising unpaid interest. In contrast, the Act was
designed to protect consumers from
exploitation.
[78]
Emphasis added.
[79]
Uniform Rules of Court.
[80]
It is not clear to me what the position is to be concerning the
permitted default costs but that is not important for present
purposes.
[81]
See for example
Cole v Government of the Union of South Africa
1910 AD 263
at 272;
LF Boshoff Investments (Pty) Ltd v Cape
Town Municipality (1)
1971 (4) SA 522
(C) at 529B-D; and
Bank
of Lisbon and South Africa Ltd v The Master and Others
1987 (1)
SA 276
(A) at 288J, 289A-B and 290D-I.
[82]
Master of the High Court Northern Gauteng High
Court, Pretoria v
Motala
NO
and
Others
[2011] ZASCA 238
;
2012 (3) SA
325
(SCA) (
Motala
).
[83]
Id at para 12.
[84]
City of Johannesburg v Changing Tides
74 (Pty) Ltd and Others
[2012] ZASCA 116
;
2012 (6) SA 294
(SCA) (
Changing
Tides
) and
Motala
above n 82.
[85]
Section 130(1) as read at the relevant time
provided:
“
Subject
to subsection (2), a credit provider may approach the court for an
order to enforce a credit agreement only if, at that
time, the
consumer is in default and has been in default under that credit
agreement for at least 20 business days and—
(a)
at least 10 business days have elapsed since the credit provider
delivered a notice to the consumer as contemplated in section 86(9),
or section 129(1), as the case may be;
(b)
in the case of a notice contemplated in section 129(1), the consumer
has—
(i)
not responded to that notice; or
(ii)
responded to the notice by rejecting the credit provider’s
proposals; and
(c)
in the case of an instalment agreement, secured loan, or lease,
the
consumer has not surrendered the relevant property to the credit
provider as contemplated in section 127.”
[86]
Sebola
above n
26 at para 45.
[87]
Id at para 163.
[88]
Section 130(4) provides:
“
In
any proceedings contemplated in this section, if the court
determines that—
(a)
the credit agreement was reckless as described in section 80, the
court must make an order contemplated in section 83;
(b)
the credit provider has not complied with the relevant provisions
of
this Act, as contemplated in subsection (3)(a), or has approached
the court in circumstances contemplated in subsection (3)(c)
the
court must—
(i)
adjourn the matter before it; and
(ii)
make an appropriate order setting out the steps the credit provider
must complete before the matter may be resumed.”
[89]
Kubyana
above n
26 at paras 67-8.
[90]
High Court judgment above n 6 at para 21.
[91]
The settlement agreement provides, among other things:
“
1.
The sale in execution in respect of Erf 8832 Durbanville, also known
as 35 Vin Doux Street, Durmonte, Durbanville (“the property”)
which was scheduled to take place on 10 December
2010 is
cancelled.
2.
[Ms Nkata] shall sign a standard FNB Quicksale Mandate
(“Quicksell
agreement”) within seven days of the granting of this [court
order].
3.
While the Quicksell agreement is in place [Ms Nkata]
shall make
payment to the [Bank] of R10 000 per month in respect of the
instalment due to the [Bank].
4.
Should the property not be sold in terms of the Quicksell
agreement
prior to its expiry/termination [Ms Nkata] shall pay the full
arrears to the [Bank] within 14 days of such expiry/termination
or
on such terms as may be agreed between the parties.
5.
Should [Ms Nkata] pay the full arrears to the [Bank]
in terms of
clause 4 above the [Bank] shall not sell the property in execution
but [Ms Nkata] shall pay the full monthly instalments
to [the Bank].
6.
Should the property not be sold in terms of the Quicksell
agreement
and should [Ms Nkata] fail to pay the arrear amount owing to
the [Bank] the [Bank] shall be entitled to proceed
to sell the
property in execution forthwith.
7.
[Ms Nkata] shall pay the wasted costs occasioned by the
cancellation
of the sale in execution referred to in paragraph 1 above.
8.
[Ms Nkata] shall pay the costs of this application as
taxed or
agreed.”
[92]
Motala
above n
82 at para 14.
[93]
CUSA
v
Tao Ying Metal Industries and Others
[2008]
ZACC 15
;
2009 (2) SA 204
(CC);
2009 (1) BCLR 1
(CC) at para 68.
[94]
Schierhout v Minister of Justice
1926 AD 99
at 109.
[95]
High Court judgment above n 6 at para 59.