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[2018] ZACC 47
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Amardien and Others v Registrar of Deeds and Others (CCT212/17) [2018] ZACC 47; 2019 (2) BCLR 193 (CC); 2019 (3) SA 341 (CC) (28 November 2018)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT
212/17
In the matter
between:
RIAAN MOGAMAT
AMARDIEN
First Applicant
TASSANDRA ANNE
APRIL
Second Applicant
ASHEEQAH
DAMON
Third Applicant
ROEWAYDA
JOCHEMS
Fourth Applicant
LOUISE
PRIMOE
Fifth Applicant
MARGARETH
ROMAN
Sixth Applicant
CASSIEM SAPAT
N.O.
Seventh Applicant
CYNTHIA
ARENDSE
Eighth Applicant
CRAIG
CLOETE
Ninth Applicant
FAIZA
GASANT
Tenth Applicant
WARREN
KOEN
Eleventh Applicant
KASFICAH
SMITH
Twelfth Applicant
and
REGISTRAR OF
DEEDS
First Respondent
SHAUN WINGERIN
N.O.
Second Respondent
GRAEME MICHAEL
SHKOLNE
N.O.
Third Respondent
NICOLA MARTINE
COHEN
N.O.
Fourth Respondent
CAPE TOWN
COMMUNITY
HOUSING COMPANY
(PTY)
LIMITED
Fifth Respondent
and
WOMEN’S
LEGAL CENTRE
TRUST
Amicus Curiae
Neutral citation:
Amardien and Others v Registrar of Deeds and Others
[2018]
ZACC 47
Coram:
Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ,
Khampepe J, Mhlantla J, Petse AJ and Theron J
Judgment:
Mhlantla J (unanimous)
Heard on:
7
August 2018
Decided on:
28 November 2018
Summary:
Alienation of Land Act 68 of 1981
—
sections 19
,
20
and
26
— purchaser not obliged to make payment until recordal complete
by seller
National Credit Act
34 of 2005
—
section 129
— notice of default — draw
default to the attention of the consumer— specify amount of
arrears
ORDER
The following order
is made:
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the High Court of South Africa, Western Cape
Division, Cape Town is set aside and replaced with:
“(a)
The application is upheld with costs.
(b)
The cancellation of the instalment sale agreements by the Cape Town
Community Housing Company (Pty) Limited is
unlawful and is
set aside.
(c)
The cancellation of the recordal of the instalment sale agreements by
the Registrar of Deeds is set aside.”
4. The application of the Cape Town Community Housing Company (Pty)
Limited to adduce new evidence is dismissed with costs.
5. The Cape Town Community Housing Company (Pty) Limited is ordered
to pay costs.
JUDGMENT
MHLANTLA J
(Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J,
Goliath AJ, Khampepe J, Petse AJ and Theron
J concurring):
Introduction
[1]
In
Kubyana
, this Court held:
“One of the main aims of the [National Credit Act] 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.”
[1]
[2]
This judgment deals with two key issues that impact upon the
lawfulness of the termination of instalment sale agreements for
subsidised
housing. The first question is: what is the legal
effect of a late recordal of an instalment sale agreement upon a
seller
and purchaser in terms of sections 20 and 26 of the Alienation
of Land Act
[2]
(ALA)? The second is: must a notice in terms of section 129(1)
of the National Credit Act
[3]
(NCA) indicate the amount that a creditor alleges is owed by a
debtor? These questions were considered by Binns Ward
J in
the High Court of South Africa, Western Cape Division, Cape Town
(High Court) in an application launched by the
twelve
applicants.
[4]
The application was dismissed. The applicants now apply
to this Court for leave to appeal against that judgment.
Parties
[3]
The twelve applicants are all beneficiaries and purchasers of
homes bought between 2000 and 2003 under a state-subsidised housing
programme administered by the fifth respondent, the Cape Town
Community Housing Company (Pty) Limited, through instalment sale
agreements with the fifth respondent as the seller.
[4]
The first respondent is the Registrar of Deeds, Cape Town who
is cited in his official capacity as the person responsible for the
registration and cancellation of deeds in terms of section 3 of the
Deeds Registries Act,
[5]
and in particular to this application, in terms of section 20 of the
ALA.
[5]
The second to fourth respondents are the trustees for the time
being of the S & N Trust (Trust). The Trust
is cited as the purchaser of the applicants’ homes from the
fifth respondent. The trustees elected to abide the decision
of
the High Court and did not participate in proceedings in this Court.
[6]
The fifth respondent is the Cape Town Community Housing
Company (Pty) Limited, a company which is wholly owned by the
National
Housing Finance Corporation (NHFC). It was set up
through a joint venture agreement between the City of Cape Town
(City)
and the NHFC with the explicit mandate to provide affordable
housing to deserving beneficiaries.
[7]
The Women’s Legal Centre Trust (WLC) has been admitted
as amicus curiae. The role of the WLC is to advance and
protect the rights of women and girls in South Africa,
particularly women who suffer from disadvantage. One of its
programmatic
focus areas is women’s rights to land, housing and
property.
[8]
The Department of Human Settlements had also been admitted as
amicus curiae but withdrew its application, without providing
an
explanation and without tendering wasted costs.
Background facts
[9]
In 1998, the City established a housing initiative to deliver
government subsidised housing to poor members of the Cape Town
community.
The fifth respondent was the driving force
for the delivery of the subsidised housing. It receives housing
subsidies
on behalf of beneficiaries and applies those subsidies
towards the construction of new houses. The subsidies are used
to
reduce the purchase prices of the houses. The applicants
were all beneficiaries of government subsidised housing and concluded
instalment sale agreements with the fifth respondent as the
seller between December 2000 and February 2001.
[6]
The relevant terms of these agreements are set out in clauses 4, 8
and 17 of the instalment sale agreements.
The
applicants were, in terms of clause 4, required to make payment in
instalments on the last day of each month for a period of
four
years. Clause 17 sets out the steps to be followed by the
seller in the event that the purchaser breached the terms
of the
agreement or failed to comply with the seller’s notice to
remedy the breach.
[10]
In terms of clause 8, the fifth respondent was obliged to
record these agreements with the Registrar of Deeds in accordance
with
the ALA. This obligation arises from section 20 of
the ALA, which is headed “Recording of contract”, read
with section 26 which places restrictions on the receipt of
consideration by virtue of certain deeds of alienation.
These
sections provide:
“20(1)(a) A seller, whether he is the owner of the land
concerned or not, shall cause the contract to be recorded by the
registrar concerned in the prescribed manner provided a prior
contract in force in respect of the land has not been recorded or
is
not required to be recorded in terms of this section.
. . .
26(1) No person shall by virtue of a deed of alienation relating to
an erf or a unit receive any consideration until—
(a) such erf or unit is registrable; and
(b) in case the deed of alienation is a contract required to be
recorded in terms of section 20, such recording has been effected.”
[11]
The applicants moved into their respective homes at various
times between 2000 and 2003, only to discover that the buildings were
of an inferior quality. According to the applicants, they spent
substantial amounts of money to repair these homes, with
little
assistance from the fifth respondent. As a result, the
applicants paid their instalments with varying levels of regularity.
In addition, the applicants advanced the following reasons for this:
the instalments due were higher than what the applicants expected,
the building standards were of inferior quality; the fifth respondent
had failed on numerous occasions to respond to the applicants’
complaints, and the fifth respondent had extremely poor accounting
and record keeping practices making it onerous for the
applicants to calculate the outstanding amounts.
[12]
The fifth respondent contends that a programme was undertaken
to remedy any defects in the homes for its account. In 2004,
the fifth respondent suggested and encouraged the applicants to
conclude an affordability scheme in an attempt to resolve the
problems regarding irregular payments. Those applicants who
elected to do so, concluded addenda to their instalment sale
agreements in terms of which the monthly payments were reduced and
repaid over a longer period.
[13]
The fifth respondent failed in its contractual and statutory
duty to record the instalment sale agreements. Despite the
ALA’s
statutory bar, the fifth respondent continued to
receive payments from those applicants who continued paying. It
eventually
recorded each of the instalment sale agreements with the
Registrar of Deeds on 1 April 2014 – more
than
ten years after these agreements were originally concluded.
[14]
On 25 April 2014, the fifth respondent sent notices in terms
of section 129(1)
[7]
of the NCA (section 129 NCA notices) to the applicants, informing
them (amongst other things) that firstly, they were in arrears
in
terms of their respective instalment sale agreements and provided
them with various options to bring the payments up to date.
Secondly, the applicants were threatened with the cancellation of the
instalment sale agreements in the event they failed to respond
to the
notice within ten days of receipt, and failed to remedy the default
of their payment obligations in terms of the instalment
sale
agreements within 20 days. Lastly, the applicants were informed
that their instalment sale agreements had been recorded
in terms of
section 20 of the ALA.
[8]
The applicants did not take any steps in response to the section 129
NCA notices.
[15]
On 23 June 2014, the fifth respondent sold the
applicants’ homes to the Trust. At that stage, the fifth
respondent
had not cancelled the instalment sale agreements, nor had
it submitted an application to the Registrar of Deeds for
cancellation
of the recording of the instalment sale agreements.
[16]
The fifth respondent only submitted an application for the
cancellation of the instalment sale agreements in April 2015.
The
Registrar of Deeds cancelled the recording of these agreements on
4 May 2015. On 5 May 2015, the properties were
transferred to the Trust.
[17]
Following this, the Trust instituted eviction proceedings
against the second to sixth applicants in the Mitchells
Plain
Magistrates’ Court, Cape Town and expressed an
intention to evict the seventh to twelfth applicants. The
eviction
applications have been postponed pending the outcome of this
application.
Litigation
history
In the High Court
[18]
In 2016, the applicants launched an application in the High
Court against the respondents. They sought a declarator that
the
actions of the fifth respondent in cancelling the instalment
sale agreements had been unlawful. They also sought the
review
and setting aside of the cancellation of these agreements by the
Registrar of Deeds; and a declarator that the subsequent
sale of the
properties by the fifth respondent to the Trust was unlawful and
hence void.
[19]
The High Court considered three issues: (a) whether the
applicants had been in breach of their payment obligations under
their
respective instalment sale agreements; (b) whether the
applicants had been given notice in terms of section 129(1) of the
NCA; and (c) assuming notice had been given, whether the extent
of arrears had been indicated.
[20]
On the first question, the High Court held that although the
instalments had not been due and payable until the instalment sale
agreements were recorded, that did not prevent them from becoming
due. The Court held that the effect of section 26 of the
ALA
was only to prevent the creditor from receiving consideration until
it had attended to promptly recording the instalment sale
agreements. It did not affect the terms of the agreements and
accordingly did not prevent the amounts from becoming due under
the
instalment sale agreements. The High Court held that at the
moment of recordal, all the outstanding amounts became immediately
payable and since the applicants were in arrears under the instalment
sale agreements and accordingly in default thereof, these
agreements
were amenable to cancellation by the fifth respondent.
[21]
Regarding the alleged conflict between the NCA and the ALA,
the High Court held that section 129(1) of the NCA substantively
overrides section 19 of the ALA. It noted that while section 19
of the ALA is plainly equivalent to section 129 read with
section 130
of the NCA, they inconsistently provided for notice to be given as
the sections required different numbers of days’
notice before
cancellation for breach of agreement can be effected. The Court
thus held that section 172(1) of the NCA read
with Schedule 1
provides that where there is a conflict, the NCA prevails over those
of Chapter II of the ALA. In the result,
the High Court held
that the fifth respondent was permitted to cancel the agreement
subject to compliance with only section 129(1)
of the NCA and not
section 19 of the ALA.
[22]
In respect of the delivery of the section 129 NCA notices to
the applicants, the High Court relied on
Sebola
[9]
and
Kubyana
[10]
and held that the evidence provided by the fifth respondent was
sufficient to place the burden on the applicants to adduce evidence
to show that delivery of the notice was not effective. The High
Court further held that the applicants failed to adduce this
evidence.
[23]
On the question of whether the extent of the arrears had been
indicated, the High Court held that it was not essential for the
section
129 NCA notices to set out the amounts in which the
applicants were in arrears. The High Court held that the
applicants’
counsel did not refer to any authority in support
of the argument that particulars of the arrears were an essential
ingredient
of a section 129 NCA notice, nor were there any
provisions in the NCA or the regulations thereto that required this.
The Court further held that the legislative purposes set out in
section 3 of the NCA would not be frustrated if the particulars
of the arrears were not included.
[24]
The High Court relied on
Phone-A-Copy
[11]
and held that “the applicants were, notionally at least, in as
good a position to determine for themselves how much they
owed under
the agreements”. Furthermore, if the applicants were
uncertain about the amounts, the notice afforded them
the opportunity
(directly or through an intermediary) to make the necessary enquiries
or engage with the substantive issue.
If the amount was lacking
information that the applicants required, the fifth respondent would
have been bound to provide it upon
request.
[25]
The High Court thus dismissed the application with costs.
An application for leave to appeal was also subsequently dismissed.
In the Supreme Court of Appeal
[26]
Aggrieved by the decision of the High Court, the applicants
petitioned the Supreme Court of Appeal for leave to appeal. On
28 July 2017, that application was dismissed. The applicants
now seek the leave of this Court to appeal the decision of the
High
Court.
In this Court
[27]
This Court has to consider the following issues:
(a) Should leave to appeal be granted?
(b) What is the effect on the purchaser’s obligations of the
seller’s failure to record an instalment sale agreement
as
required by section 20 of the ALA?
(c) Does section 129(1) of the NCA require a credit provider to state
the amount alleged to be owing in the notice it sends to
the
consumer?
(d) Should the new evidence that the fifth respondent seeks to have
admitted in this Court be admitted?
(e) What is the appropriate remedy in this case?
Leave to appeal
[28]
We are called upon to interpret section 129(1) of the NCA and
sections 19, 20 and 26 of the ALA. This Court’s
jurisdiction
is engaged because the statutory interpretation of these
provisions raises a constitutional issue directly pertaining to
section
26 of the Bill of Rights and has a significant effect on the
applicants’ right of access to housing.
[12]
This Court has also previously held that the interpretation of
section 129(1) of the NCA raises a constitutional issue.
[13]
Furthermore, the matter raises an arguable point of law of general
public importance which ought to be considered by this
Court.
There are also reasonable prospects of success. It is thus in
the interests of justice that leave to appeal
should be granted.
Merits of appeal
What is the effect of the late recordal?
[29]
In order to determine the effect on the purchaser’s
obligations, the following legal questions must be answered: firstly,
at what point are the purchaser’s obligations, in relation to
late recordal of agreements in terms of section 20 of the ALA,
activated? This has implications for the cancellation of the
instalment sale agreements by the fifth respondent. Secondly,
can notice of recordal and cancellation of agreement be provided at
the same instance? Thirdly, which provisions of the NCA
and ALA
govern cancellation as a remedy?
Submissions by the parties
[30]
The applicants submit that they could not have been in arrears
or in default when they were informed that the instalment sale
agreements
had been recorded because the fifth respondent was only
entitled to receive consideration after the recordal of these
agreements.
The fifth respondent failed to inform them of the
exact date of the recordal until service of the section 129 NCA
notices, and
the applicants were thus unable to ascertain when the
debt became due and payable, and therefore unable to make payments as
required.
[31]
The fifth respondent submits that the effect of the late
recordal of an instalment sale agreement is that it constitutes the
fulfilment
of a suspensive condition. Further, that when the
condition is fulfilled, the payment of the instalments become
unconditional.
The fifth respondent contends that fulfilment of
this condition does not create a new obligation but causes
contractual obligations
created under the instalment sale agreement
to become due retroactively. Thus, when the condition is
fulfilled, a notice
of recordal need not be given.
[32]
The WLC submitted that the late recordal and subsequent
cancellation diminishes women’s access to security of tenure
and infringes
their right of access to adequate housing.
Furthermore, it impacts on the ability of women to access alternative
subsidies
under the government’s housing scheme.
When is the purchaser’s debt obligation activated?
[33]
The issue of when a debt is due has been considered by this
Court most recently in
Makate
, where this Court held that
“debts become due when they are immediately claimable or
recoverable”.
[14]
[34]
In
Mdeyide
, this Court held:
“A
debt is due
when it is ‘immediately claimable
or recoverable’. In practice this will often coincide
with the date upon which
the debt arose, although this is not
necessarily always so. In terms of section 12(3) of the
[Prescription Act 68 of 1969],
a debt is deemed to be due when a
creditor has knowledge of the identity of the debtor and of the facts
from which the debt arises.
A creditor is deemed to have the
required knowledge if she or he could have acquired it by exercising
reasonable care.
Furthermore, section 13 provides for
circumstances in which the completion of prescription is delayed, for
example, when the
creditor is a minor, insane, or outside the
Republic, or in certain other circumstances.”
[15]
(Footnotes omitted.)
[35]
It is only after the debt becomes due that the debtor has an
obligation to make payment or perform, and the creditor acquires the
right to demand performance or payment at any time. In
Trinity
Asset Management
, this Court held:
“The necessity of a demand to place a debtor in mora in
relation to an obligation where no time for performance has been
stipulated, does not detract from the conclusion that specific
performance of the obligation is available at any time at the option
of the creditor. The exigibility of the primary performance
obligation in terms of the agreement stands apart from the creation
of a secondary obligation flowing from a breach of contract . . . .
Where does this leave [the time clause] of the loan agreement?
The clause is not a ‘condition precedent’ or suspensive
condition. It did not suspend the operation of the contract
itself, because the loans were advanced. And it did not suspend
the exigibility of repayment, because the lender could at
any time
make demand for repayment on 30 days’ notice. Nor is it a
time clause ‘by virtue of which the creditor
grants to the
debtor a period within which the latter may discharge his obligation
. . . or by which the operation of the contract
is restricted to a
certain time’. To repeat: the lender could at any time
demand repayment. Even if the 30-day
demand clause was not a
part of the loan agreement, the lender would still have had to place
the borrower in mora. A mora
demand for repayment must be
reasonable, but parties may determine the reasonableness of the
period by agreement. That is
what happened here . . . .
Specific performance for repayment of the loan could have been
claimed by [the applicant] immediately
upon conclusion of the loan
agreement. That is when it became due. There is no
underlying injustice in the sense that
it was prevented by the clause
from enforcing repayment of the loan at any time it wished to do
so.”
[16]
[36]
It follows that where there is no additional statutory
protection offered – like the requirement for an agreement to
be recorded
before payment of any instalment – the debt
becomes due and payable automatically upon the conclusion of the
agreement.
It is only subject to terms of the agreement or
being placed in mora for the purposes of the cancellation of the
agreement.
Is notice of the recordal necessary before a section 129 NCA
notice?
[37]
The answer to this question depends on what the seller relies
on as the default. If it is non-payment in order to claim
proper
payment as specific performance, then in accordance with
Trinity Asset Management
, the instalments are immediately due
and payable and the notice in respect of that default will not be
premature. However
if the purpose of the section 129 NCA
notice is not to claim payment but cancellation, it is premature.
[38]
Where there is a statutory requirement that an agreement must
be recorded, the correct position is that the payments become due and
payable only upon recordal of that agreement. In terms of the
ALA, section 26 provides a clear textual statutory bar to the
seller
receiving payments (“consideration”) in the event of
non-recordal of the agreement, in the form of criminal
liability.
It reads:
“(1) No person shall by virtue of a deed of alienation relating
to an erf or a unit receive any consideration until—
(a)
such erf or unit is registrable; and
(b)
in case the deed of alienation is a contract required to be recorded
in terms of section 20, such recording has been effected.
(2) Any person who contravenes the provisions of subsection (1) shall
be guilty of an offence and liable on conviction to a fine
not
exceeding R1 000 or to imprisonment for a period not exceeding one
year or to both such fine and such imprisonment.”
[39]
The purchaser is under a natural obligation to make
payment,
[17]
but that obligation cannot be enforced until the recordal takes
place. Considering that the responsibility to record primarily
rests with the seller, in most cases the information relating to the
date of registration of the instalment sale agreement would
be known
by the seller. Therefore, it would be incumbent upon the seller
to notify the purchaser when the agreement has been
recorded so that
the purchaser can make the necessary payments. The seller when
making demand for payment must also afford
the purchaser an
opportunity to pay what is due within a reasonable time.
[40]
It is only in the event that the purchaser fails to make
payment after the debt becomes due and payable, that the seller will
additionally
be entitled to claim cancellation of the agreement.
How do the provisions of the NCA and ALA govern claims for
cancellation?
[41]
In
Wary Holdings
, this Court held that statutes must be
interpreted with due regard to their purpose and within their
context.
[18]
The purpose of the ALA is to regulate the alienation of land in
certain circumstances, and also to fulfil the need for protection
of
vulnerable purchasers and imbuing good faith and fairness into
contractual relationships relating to land. The ALA sets
out
requirements for, amongst others, the cancellation of credit
agreements for the sale of land through instalment sale agreements.
Section 19 limits the seller’s right to take immediate and
unilateral action by providing for certain steps to be taken before
it can cancel an agreement concluded with a purchaser. This
section provides:
“(1) No seller is, by reason of any breach of contract on the
part of the purchaser, entitled—
(a)
to enforce any provision of the contract for the acceleration of the
payment of any instalment of the purchase price or any
other penalty
stipulation in the contract;
(b)
to terminate the contract; or
(c)
to institute an action for damages, unless he has by letter notified
the purchaser of the breach of contract concerned and made
demand to
the purchaser to rectify the breach of contract in question, and the
purchaser has failed to comply with such demand.
(2) A notice referred to in subsection (1) shall be handed to the
purchaser or shall be sent to him by registered post to his address
referred to in section 23 and shall contain—
(a)
a description of the purchaser's alleged breach of contract;
(b)
a demand that the purchaser rectify the alleged breach within a
stated period, which, subject to the provisions of subsection
(3),
shall not be less than 30 days calculated from the date on which the
notice was handed to the purchaser or sent to him by
registered post,
as the case may be; and
(c)
an indication of the steps the seller intends to take if the alleged
breach of contract is not rectified.
(3) If the seller in the same calendar year has so handed or sent to
the purchaser two such notices at intervals of more than 30
days, he
may in any subsequent notice so handed or sent to the purchaser in
such calendar year, make demand to the purchaser to
carry out his
obligation within a period of not less than seven days calculated
from the date on which the notice was so handed
or sent to the
purchaser, as the case may be.
(4) Subsection (1) shall not be construed in such a manner as to
prevent the seller from taking steps to protect the land and
improvements thereon or, without or after notice as required by the
said subsection, from claiming specific performance.”
[42]
The NCA, on the other hand, is a legislative effort to
regulate and improve relations between consumers and providers of
credit.
[19]
It was enacted to ensure that credit is available to vulnerable
sections of society who would not otherwise be able to afford
it.
In line with its purpose of providing consumers with adequate
knowledge of debt management, the NCA affords debtors further
protection before cancellation or other legal remedies can be
enforced in the courts by creditors. This is evident from the
text of section 129(1) of the NCA. It 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.”
[43]
Section 19 of the ALA limits the right of the seller to take
legal action and outlines those limitations. On the other hand,
section 129(1) of the NCA specifies certain obligations the creditor
must fulfil before it can proceed to the stage of legal enforcement
or unilateral cancellation. The purchaser has to be afforded an
opportunity to consider certain steps. Therefore, the
requirements of the ALA and the NCA do not conflict, and there is no
need to have recourse to Schedule 1 of the NCA. In fact,
in
instances where they both apply, they can and should be read
together: a seller must comply with the NCA in informing the
purchaser of the default, and they must inform a purchaser in terms
of section 19 if they are going to rely on the remedies in
terms
thereof if entitled to do so. The two pieces of legislation,
specifically sections 19 of the ALA and section 129 of
the NCA, serve
different purposes.
Application of these principles
[44]
In this case, the fifth respondent claims cancellation of the
instalment sale agreement in the
same letter
as the notice of
default to the purchasers of their arrears. This is problematic
because it bypasses compliance with section
19 of the ALA and does
not afford the purchasers a reasonable time to manage their debts.
[45]
The fifth respondent was obliged to record the instalment sale
agreements with the Registrar of Deeds within 90 days of concluding
the agreements with the applicants, but failed to do so timeously.
The fifth respondent eventually recorded them more than
ten years
after the conclusion of these agreements and the occupation of the
houses by the applicants during that time. It
is common cause
that the instalment sale agreements were recorded on 1 April
2014. The section 129 NCA notices were
issued on 25 April
2014. These notices contained the following information: that
the applicants were in default and
were advised of their options
under the NCA. The fifth respondent also threatened
cancellation. At the end of
that notice, it was merely stated
that these agreements had been recorded. This was the very
first communication to the applicants
of the recording of the
instalment sale agreements by the fifth respondent.
[46]
As the fifth respondent was statutorily barred from accepting
payment, the applicants could not have been in breach of the
agreements
at the time of receipt of the section 129 NCA notice, as
they had not been aware of the recordal of the instalment sale
agreements
before that date. The fifth respondent should have
alerted the purchasers to this fact before issuing the section 129
NCA
notices and claiming cancellation of the agreements. In the
proper course of action, the fifth respondent should have advised
the
applicants of the recordal, therefore signalling that the debt would
then be due and payable, and given them a reasonable opportunity
to
pay, before moving to enforce the agreement and subsequently cancel
the agreement.
[47]
Even if the section 129 NCA notice can additionally serve the
purposes of section 19 of the ALA it does not, on the facts here,
suffice. The actual notice falls short of the requirements set
out in section 19 of the ALA as discussed. Having regard
to
both the plain meaning of section 20 read with section 26 of the ALA
and the case law referred to, the effect of the late recordal
is
clear. The payments under the instalment sale agreements were
not due and payable and therefore the applicants were not
in arrears
as contended by the fifth respondent
.
For the period
that the agreements remained unrecorded, no fault can be imputed to
the purchasers for not paying the instalments.
It follows that
the recordal is not a contractual suspensive condition as contended
by the fifth respondent and obligations do
not become due
retroactively. The interpretation of these sections, in my
view, will not have unfair consequences on the
seller. It is
consistent with the text and fairly balances the rights and
responsibilities of the seller and purchaser.
[48]
It follows that the section 129 NCA notices were premature and
invalid insofar as it was relied upon as a basis for the cancellation
of the instalment sale agreements. The effect of this is that
the subsequent cancellation of the instalment sale agreements
and the
cancellation of the recording of these agreements are invalid.
[49]
This conclusion will affect the subsequent sale of the
properties to the Trust. However, this issue was not ventilated
in
the High Court. I will refrain from making a finding on the
validity of the sale of the properties to the Trust, as it is
an
affected party and has to be given the opportunity to make
representations on this.
[50]
My conclusion on the effect of the late recordal of the
instalment sale agreements renders it unnecessary to consider the
issue
relating to the ingredients of the section 129 NCA notice.
However, I am constrained to deal with this issue in the light
of the
conclusion of the High Court that a section 129 NCA notice need not
include the amount of arrears owed by the debtor.
The finding
of the High Court has far reaching implications not only for
this case but also for other credit providers and
consumers. It
is thus imperative that clarity be provided on the interpretation of
the meaning of the phrase “bring
the default
to the
attention of the consumer”. I proceed to deal with that
question.
Does section
129(1) require a credit provider to state the amount that is owed?
[51]
Simply put, what are the ingredients of a section
129(1) notice? Is it mandatory to include the amount of
arrears in
the notice?
Submissions by the parties
[52]
The applicants submit section 129(1) of the NCA must be
interpreted harmoniously with section 19 of the ALA. They
contend
that the text of section 129(1) mentions “the
default” which refers to a specific debt that the consumer owes
to the creditor, and it is the notice of this default that must be
brought to the consumer’s attention. They assert
that
this is not an onerous obligation upon the creditor. Given the
long history of this matter and the uncertainty regarding
the effect
of non-recordal, it is difficult for the debtors to determine how
much they owe in order to fully exercise their rights.
The
applicants contend that this is consistent with the interpretation
adopted by this Court in
Nkata.
[20]
[53]
The fifth respondent submits that it must be accepted that the
section 129 NCA notices contained the arrear amounts.
It further contends that the notices would in any event not be
invalid if they did not contain the arrear amounts and accordingly,
it is not a legal requirement that notices issued in terms of section
129(1) of the NCA must indicate the amount of alleged indebtedness.
The fifth respondent contends that it is only required that the
default must be “sufficiently” drawn to the consumer’s
attention; that it is only logical that all a debtor needs to do is
to contact the creditor to establish the amount outstanding,
bearing
in mind that the NCA does not purport to come to the aid of reckless
or irresponsible consumers.
[21]
Alternatively, the fifth respondent submits that this matter should
be remitted to the High Court for further evidence in
order to prove
that the notices did in fact contain the amounts owed by the
debtors. In this regard, it has made an application
to admit
new evidence. The fate of that application will become apparent
in due course.
[54]
The WLC submits that the purpose of a section 129(1) notice is
to explore alternative mechanisms for the payment of a debt.
An
overly technical approach to interpretation works to the detriment of
the rights of vulnerable women. The WLC submits
that the
intention of social housing schemes such as those implemented by the
fifth respondent cannot be to leave the beneficiaries
in a worse off
situation.
Assessment
[55]
It must be borne in mind that a purposive interpretation, as
laid out in section 2(1) of the NCA must be adopted. The
relevant purposes of the NCA 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—
. . .
(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—
.
. .
(iii)
providing consumers with protection from … unfair or
fraudulent conduct by credit providers …;
. . .
(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.”
[22]
[56]
The purposes of section 129 of the NCA are as follows:
(a) It brings to the attention of the consumer the default status of
her credit agreement.
(b) It provides the consumer with an opportunity to rectify the
default status of the credit agreement in order to avoid legal
action
being instituted on the credit agreement or to regain possession of
the asset subject to the credit agreement.
(c) It is the only gateway for a credit provider to be able to
institute legal action against a consumer who is in default under
a
credit agreement.
[57]
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.
It prescribes that the notice given to the consumer must be in
writing
and specifies 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 the consumer has the option to refer the credit
agreement
to a debt counsellor, dispute resolution agent, consumer
court or ombudsman. The purpose of the referral must also be
stated
in the notice.
[23]
[58]
There are two statutory conditions which must be met before
the credit provider may institute litigation under section 129.
In peremptory terms, the section declares that legal proceedings to
enforce the agreement may not commence before (a) providing
notice to the consumer; and (b) meeting further requirements set
out in section 130.
[59]
The reference to section 130 reveals a strong link between the
two provisions hence they are required to be read together.
When a credit provider seeks to enforce the agreement by means of
litigation, it must first show compliance with section 130, which,
by
extension, refers back to section 129.
[24]
The application of these sections is triggered by the consumer’s
failure to repay the loan. These sections suspend
the credit
provider’s rights under the credit agreement until certain
steps have been taken. The credit provider is
not entitled to
exercise its rights immediately under the agreement. It is
first required to notify the consumer of the specific
default and
demand that the arrears be paid. If the consumer pays up the
arrears, then the dispute is settled.
[25]
[60]
Section 129(1) of the NCA refers to a situation where the
consumer is “in default”. Section 129(1)(a)
and
(b) explain the obligations that the creditors must fulfil before
moving to enforce their debt. The text explicitly refers
to
“the default” that must be drawn to the notice of the
consumer by the creditor – and not just the fact
that the
consumer is “in default”. Read in conjunction with
section 130(4) which provides an opportunity
to the debtor to
remedy the default, section 129(1) should be interpreted to
include the amount so that the debtor knows how
much to pay to avoid
cancellation. The same applies to the notice under section 19
of the ALA.
[26]
In addition, in order to “provid[e] consumers with
adequate disclosure of standardised information in order to make
informed choices”
[27]
they must be informed of the extent of their arrears in the section
129 NCA notice so as to decide how to move forward regarding
the
management of their debt.
[61]
It is thus a necessary requirement to specify the amount and
nature of the default in the section 129 NCA notice. As section
129(1) specifically requires the credit provider to “draw the
default to the attention of the consumer” it is clear
that this
will only be met if the amount of arrears is specified in the notice,
since the consumer’s attention will not have
been drawn to the
amount of the default otherwise. If the basis of the default is
that the debtor has fallen into arrears,
it must follow axiomatically
that “drawing the default to the attention of the consumer”
entails that the consumer
should be advised of the amount in
arrears. It is only when this has been done that it can be said
that notice of the “default”
has been drawn to the
attention of the consumer.
[62]
If the consumer is not advised of the arrear amount she will
be left none the wiser. The referral by the consumer of the
credit
agreement to a debt counsellor, alternative dispute resolution
agent, consumer court or ombud with jurisdiction presupposes that
the
consumer has been apprised of the facts to enable her to, amongst
others, develop and agree on a plan to bring the payments
under the
agreement up to date. One may rhetorically ask: how is the
consumer to agree on a plan to bring payments under
the agreement up
to date if she is not notified of the amount in arrears?
[63]
This Court in
Nkata
held that the onus is on the credit
provider to take appropriate steps if it wants to recover the cost
for enforcing an agreement
with the consumer.
[28]
The creditor is in a better position to determine the amount of the
debt and must be required to stipulate the amount owed
by the
debtor. The burden of determining the amount is an onerous one
to place upon the consumer, as the consumer may not
be aware of
complex calculations that are to be taken into account while
calculating interest. On the other hand, it will
be
significantly easier for the creditor to state the amount concerned.
After all, it is the credit provider itself that
claims that the
consumer is in arrears with her payments.
[64]
In the result, a section 129 NCA notice must specify the
default – that is, the actual amount of the arrears. The
High
Court thus erred in its conclusion that it was not essential
that the section 129 NCA notices set out the amounts in which the
applicants were in arrears.
[65]
Since the cancellation of the instalment sale agreements and
the cancellation of the recordals are invalid, it follows that the
instalment sale agreements are extant and the applicants have payment
obligations pursuant thereto, arising from the date of recordal.
The fifth respondent will have to calculate the amounts and inform
the applicants accordingly.
Should the new
evidence be admitted?
[66]
On 16 March 2018, the fifth respondent filed an application to
introduce new evidence. This is an affidavit by the Chief
Operations
Officer of the fifth respondent explaining how the
applicants’ attorneys did in fact receive copies of the
section 129 NCA
notices in which the arrear amounts were
included by the fifth respondent, but had been deleted.
[67]
I have already concluded that the applicants were not obliged
to make payment until the instalment sale agreements were recorded.
On recordal, the fifth respondent was obliged to provide the
applicants with an opportunity to make payment before issuing
the
section 129 NCA notice in which it simultaneously claimed payment and
cancellation of the agreement. It is therefore
not necessary to
consider the application for admission of new evidence, and that
application falls to be dismissed.
Outstanding
issues
[68]
There are two outstanding issues that must be dealt with
before considering the appropriate remedy in this case. The
first
relates to the withdrawal of the Department of Human
Settlements and the second to the sale of the properties to the
Trust.
Withdrawal of first amicus curiae
[69]
The Department of Human Settlements was initially admitted as
first amicus curiae. However, six days before the hearing
and after the parties had already responded to the Department’s
written submissions, a notice of withdrawal was filed without
any
explanation and without a tender for costs.
[70]
The role of an amicus curiae was described by this Court in
Treatment Action Campaign
:
“The role of an amicus is to draw the attention of the Court to
relevant matters of law and fact to which attention would
not
otherwise be drawn. In return for the privilege of
participating in the proceedings without having to qualify as a
party,
an amicus has a special duty to the Court. That duty is
to provide cogent and helpful submissions that assist the Court.”
[29]
[71]
The Department is responsible for ensuring that the government
housing subsidy is accessible to low to middle income groups in
furtherance
of their right of access to adequate housing in terms of
section 26 of the Constitution. It is the only entity that can
assist
the Court regarding the impact of the fifth respondent’s
cancellation of the instalment sale agreements upon the subsidy
amount granted to the fifth respondent to implement the housing
scheme. The Court thus takes a serious view of the withdrawal
by the Department without reasons, as the Department is the only
entity that can provide information to the Court on the conditions
of
the financial arrangements regarding the institutional subsidy and
the constitutional implications of the fifth respondent’s
management of that subsidy. Regard must also be had to
section 165(4) of the Constitution, which specifically states
that “[o]rgans of state, through legislative and other
measures, must assist and protect the courts to ensure the
independence,
impartiality, dignity, accessibility and effectiveness
of the courts”. The withdrawal of the Department amounts
to
an abrogation of its duty to assist the Court in this matter.
Validity of the sale of the properties to the Trust
[72]
The trustees elected to abide the High Court’s decision
and did not participate in the proceedings in this Court. They
took the same stance in the High Court. The Trust is an
affected party in respect of the validity of the sale of the
impugned
properties. However, this issue has not been ventilated in the
High Court. This Court thus cannot pronounce
on this issue
without
all
the affected parties in this instance making
representations. Accordingly, no order in that regard will be
made.
Remedy
[73]
It follows that the cancellation of the instalment sale
agreements was premature. The effect of this is that the
subsequent
cancellation of the instalment sale agreements and the
cancellation of the recording of these agreements are also invalid.
The appeal must thus succeed and the order of the High Court be set
aside.
[74]
In the result the following order is made:
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the High Court of South Africa, Western Cape
Division, Cape Town is set aside and replaced with:
“(a)
The application is upheld with costs.
(b)
The cancellation of the instalment sale agreements by the Cape Town
Community Housing Company (Pty) Limited is
unlawful and is
set aside.
(c)
The cancellation of the recordal of the instalment sale agreements by
the Registrar of Deeds is set aside.”
4. The application of the Cape Town Community Housing Company (Pty)
Limited to adduce new evidence is dismissed with costs.
5. The Cape Town Community Housing Company (Pty) Limited is ordered
to pay costs.
For the Applicants:
M Bishop and R Matsala instructed by the Legal Resources Centre.
For the Fifth
Respondent: D C Joubert SC and R M G Fitzgerald instructed by A
Parker & Associates.
For the Amicus
Curiae: S Samaai instructed by the Women’s Legal Centre Trust.
[1]
Kubyana v Standard Bank of South Africa Ltd
[2014] ZACC 1
;
2014 (3) SA 56
(CC);
2014 (4) BCLR 400
(CC) at para 38.
[2]
68 of 1981.
[3]
34 of 2005.
[4]
Amardien v Registrar of Deeds
(2017)
2 All SA 431 (WCC).
[5]
47 of 1947.
[6]
It is common cause that the terms of the instalment sale agreements
signed by all of the applicants were identical.
[7]
Section 129(1) of the NCA provides as follows:
“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.”
[8]
The letter inter alia stated:
“
In terms of section 129(1)(a) of the
National Credit Act, No 34 of 2005, (hereinafter referred to as “the
Act”) your
attention is hereby drawn to the fact that you are
in default under the Agreement.
It is proposed that you refer the agreement to debt counselor,
alternative dispute resolution agent, Consumer Court or Ombud
with
jurisdiction within 10 (TEN) business days from receipt hereof with
the intent to resolve any dispute under the Agreement
and / or to
develop a plan, to be agreed upon by our client, to bring the
payments under the agreement up to date.
Should you fail to respond to this notice within 10 (TEN) business
days from receipt hereof by either rejecting our client’s
proposal or by failing to respond at all and should you remain in
default with your obligations in terms of the Agreement for
a period
of 20 (TWENTY) business days from the date of default, and further
in terms of the agreement, should you not remedy
your default within
20 (TWENTY) business days of receipt of this letter, our client
will—
1.
retain
all penalty amount that you have paid to it in terms of the
Agreement and furthermore our client will institute action
against
you for the recovery of the amount outstanding under the credit
agreement, together with the permissible interest thereon
calculated
from the due date to the date of final payment, legal and other
charges under the
National Credit Act that
are due and owing to our
client, and
2.
proceed
to cancel the installment purchase agreement if necessary, institute
legal action for your ejectment and repossession
of the repossession
of the property together with legal costs thereof.
. . .
Kindly be advised that the Instalment Purchase Agreement has been
recorded as required in terms of
section 20
of the
Alienation of
Land Act 68 of 1981
.”
[9]
Sebola v Standard Bank of South Africa Ltd
[2012] ZACC 11;
2012 (5) SA 142 (CC); 2012 (8) BCLR 785 (CC).
[10]
Kubyana
above n 1.
[11]
Phone-A-Copy Worldwide (Pty) Ltd v Orkin
1986 (1) SA 729
(A);
[1986] 2 All SA 12
(A) (
Phone-A-Copy
). In this case, the
seller had sent a letter of demand which did not specify the
amount. The Appellate Division held that
the absence of the
specific amount was not fatal to the notice and the seller merely
had to inform the purchaser of the failure
to pay the balance of the
purchase price and interest. The balance was readily capable
of ascertainment by both the purchaser
and the seller.
[12]
Section 167(3)(b)(i) of the Constitution. See also
Mankayi
v AngloGold Ashanti Ltd
[2011] ZACC 3
;
2011 (3) SA 237
(CC);
2011 (5) BCLR 453
(CC) at paras 13-9; and
Alexkor Ltd v
Richtersveld Community
[2003] ZACC 18
;
2004 (5) SA 460
(CC);
2003 (12) BCLR 1301
(CC) at paras 27-8.
[13]
Kubyana
above n 1 at para 17. This ratio was followed
in
Nkata v FirstRand Bank of South Africa Limited
[2016] ZACC
12
;
2016 (4) SA 257
(CC);
2016 (6) BCLR 794
(CC) at para 33.
[14]
Makate v Vodacom Ltd
[2016] ZACC 13
;
2016 (4) SA 121
(CC);
2016 (6) BCLR 709
(CC) at para 188.
[15]
Road Accident Fund v Mdeyide
[2010] ZACC 18
;
2011 (2) SA 26
(CC);
2011 (1) BCLR 1
(CC) (
Mdeyide
) at para 13.
[16]
Trinity Asset Management (Pty) Limited v Grindstone Investments
132 (Pty) Limited
(
Trinity Asset Management
)
[2017] ZACC
32
;
2018 (1) SA 94
(CC);
2017 (12) BCLR 1562
(CC) at paras 160-3.
[17]
Allison v Massel and Massel
1954 (4) SA 569
(TPD) at 576C-D.
[18]
Wary Holdings (Pty) Ltd v Stalwo (Pty) Ltd
[2008] ZACC 12
;
2009 (1) SA 337
(CC);
2008 (11) BCLR 1123
(CC) at para 61. See
also
African Christian Democratic Party v Electoral Commission
[2006] ZACC 1
;
2006 (3) SA 305
(CC);
2006 (5) BCLR 579
(CC) at paras
21-8; and
Bato Star Fishing (Pty) Ltd v Minister of Environmental
Affairs and Tourism
[2004] ZACC 15
;
2004 (4) SA 490
(CC);
2004
(7) BCLR 687
(CC) at para 91.
[19]
Sebola
above n 9 at paras 39-41.
[20]
Nkata
above n 13
at paras 62-6.
[21]
Id at paras 6-13.
[22]
Section 3 of the NCA.
[23]
Kubyana
above n 1 at paras 20-1.
[24]
Id at para 73.
[25]
Id at para 68-70.
[26]
See [43] and [47].
[27]
Section 3(e)(ii) of the NCA.
[28]
Nkata
above n 13 at para 122.
[29]
In re: Certain Amicus Curiae Applications: Minister of Health v
Treatment Action Campaign
[2002] ZACC 13
;
2002 (5) SA 713
(CC);
2002 (10) BCLR 1023
(CC) (
Treatment Action Campaign
) at para
5.