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[2013] ZAWCHC 107
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MFC (a division of Nedbank Ltd) v Botha (6981/13) [2013] ZAWCHC 107 (15 August 2013)
Republic of South
Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPEHIGH COURT, CAPE TOWN)
Case No:
6981/13
Before: The Hon. Mr Justice Binns-Ward
In the matter between:
MFC (A Division of NEDBANK LTD)
..................................................................................
Applicant
and
JAJ BOTHA
................................................................................................................
Respondent
JUDGMENT: DELIVERED: 15 AUGUST 2013
BINNS-WARD J:
The
applicant, which is a registered bank, seeks orders,in terms of
paragraphs 1 and 2 of its notice of motion, authorising it
to sell a
certain motor vehicle and to deal with the proceeds of the sale in
accordance with s 127 of the National Credit
Act 34 of 2005
(‘the NCA’) and the equivalent terms of an instalment
sale agreement concluded in respect of the vehicle
between itself
and the respondent on 24 July 2012. In terms of paragraph 3 of
the notice of motion, it also seeks an order
confirming that the
agreement ‘is cancelled’.
The
applicant had purchased the vehicle in question from a car
dealership at the instance of the respondent for the purpose of
being able to sell it on to the respondent in terms of the
instalment sale agreement. The instalment sale agreement is a credit
agreement within the meaning of the NCA. The applicant’s real
role in the sale of the vehicle was thus one of credit provider,
and
not one of supplier of the goods in question. It is therefore
unsurprising that the agreement between the applicant and the
respondent expressly excluded any warranty by the applicant as to
the condition of the vehicle selected by the respondent.The
respondent had nevertheless returned the vehicle to the applicant on
or about 30 August 2012 because he had become dissatisfied
with
it on account of its allegedly defective condition.
The
applicant wishes to deal with the returned vehicle in terms of s 127
of the NCA, and the application has been brought
on the premise that
it is entitled to do so. The effect of the court acceding to this
would be that the vehicle would be sold
and the proceeds credited in
reduction of the amount owed by the respondent to the applicant in
terms of the aforementioned instalment
sale agreement. The
respondent on the other hand appears to consider that consenting to
such a course, and not opposing the current
application, would
compromise what he considers to be his rights in terms of Part H of
chap. 2 of the Consumer Protection
Act 68 of 2008 (‘the
CPA’). He maintains that he returned the vehicle to the
applicant in the exercise of his rights
in terms of s 56(2) of
the CPA, which resorts within the aforementioned Part H. It is
evident that the respondent contests
the application of s 127
of the NCA on the facts.
Section
127 of the NCA provides:
Surrender of goods
(1) A consumer under an instalment agreement, secured
loan or lease-
(a) may give written notice to the credit provider to
terminate the agreement; and
(b) if-
(i) the goods are in the credit provider's possession,
require the credit provider to sell the goods; or
(ii) otherwise, return the goods that are the subject of
that agreement to the credit provider's place of business during
ordinary
business hours within five business days after the date of
the notice or within such other period or at such other time or place
as may be agreed with the credit provider.
(2) Within 10 business days after the later of-
(a) receiving a notice in terms of subsection (1)(b)(i);
or
(b) receiving goods tendered in terms of subsection
(1)(b)(ii),
a credit provider must give the consumer written notice
setting out the estimated value of the goods and any other prescribed
information.
(3) Within 10 business days after receiving a notice
under subsection (2), the consumer may unconditionally withdraw the
notice
to terminate the agreement in terms of subsection (1)(a), and
resume possession of any goods that are in the credit provider's
possession, unless the consumer is in default under the credit
agreement.
(4) If the consumer-
(a) responds to a notice as contemplated in subsection
(3), the credit provider must return the goods to the consumer unless
the
consumer is in default under the credit agreement; or
(b) does not respond to a notice as contemplated in
subsection (3), the credit provider must sell the goods as soon as
practicable
for the best price reasonably obtainable.
(5) After selling any goods in terms of this section, a
credit provider must-
(a) credit or debit the consumer with a payment or
charge equivalent to the proceeds of the sale less any expenses
reasonably incurred
by the credit provider in connection with the
sale of the goods; and
(b) give the consumer a written notice stating the
following:
(i) The settlement value of the agreement immediately
before the sale;
(ii) the gross amount realised on the sale;
(iii) the net proceeds of the sale after deducting the
credit provider's permitted default charges, if applicable, and
reasonable
costs allowed under paragraph (a); and
(iv) the amount credited or debited to the consumer's
account.
(6) If an amount is credited to the consumer's account
and it exceeds the settlement value immediately before the sale, and-
(a) another credit provider has a registered credit
agreement with the same consumer in respect of the same goods, the
credit provider
must remit that amount to the Tribunal, which may
make an order for the distribution of the amount in a manner that is
just and
reasonable; or
(b) no other credit provider has a registered credit
agreement with the same consumer in respect of the same goods, the
credit provider
must remit that amount to the consumer with the
notice required by subsection (5)(b), and the agreement is terminated
upon remittance
of that amount.
(7) If an amount is credited to the consumer's account
and it is less than the settlement value immediately before the sale,
or
an amount is debited to the consumer's account, the credit
provider may demand payment from the consumer of the remaining
settlement
value, when issuing the notice required by subsection
(5)(b).
(8) If a consumer-
(a) fails to pay an amount demanded in terms of
subsection (7) within 10 business days after receiving a demand
notice, the credit
provider may commence proceedings in terms of the
Magistrates' Courts Act for judgment enforcing the credit agreement;
or
(b) pays the amount demanded after receiving a demand
notice at any time before judgment is obtained under paragraph (a),
the agreement
is terminated upon remittance of that amount.
(9) In either event contemplated in subsection (8),
interest is payable by the consumer at the rate applicable to the
credit agreement
on any outstanding amount demanded by the credit
provider in terms of subsection (7) from the date of the demand until
the date
that the outstanding amount is paid.
(10) A credit provider who acts in a manner contrary to
this section is guilty of an offence.
Section
56(2) of the CPA provides:
Within six months after the delivery of any goods to a
consumer, the consumer may return the goods to the supplier, without
penalty
and at the supplier's risk and expense, if the goods fail to
satisfy the requirements and standards contemplated in section 55,
and the supplier must, at the direction of the consumer, either-
(a) repair or replace the failed, unsafe or defective
goods; or
(b) refund to the consumer the price paid by the
consumer, for the goods.
The
term ‘
supplier
’ is defined in s 1 of the
CPA. It means ‘
a person who markets any goods or services
’.
The word ‘
market
’ is also defined in s 1 of
the CPA. When used as a verb, it means ‘
to promote or
supply any goods or services
’. In the current case it
clear that the applicant did not market the vehicle; it merely
financed it. Keitzman Finance is
the entity identified in the
contract documentation as the ‘
supplier
’ or
‘
dealer
’ in respect of the vehicle and it is
apparent from the ‘Acknowledgement of Delivery’ document
signed by the
respondent that he took delivery of the vehicle from
Keitzman Finance. The word ‘
consumer
’ is also
defined in the CPA. It includes ‘
a person to whom those
particular goods or services are marketed in the ordinary course of
the supplier's business
’. By reason of the defined
meanings of the words ‘
promote
’ and ‘
supply
’,
the applicant and the respondent bothqualify as ‘consumers’
under the CPA in respect of the motor vehicle
concerned.
Section 5(2)(d)
of the CPA provides that the Act does not apply to any transaction
‘
that constitutes a credit agreement under the
National
Credit Act, but
the goods or services that are the subject of the
credit agreement are not excluded from the ambit of this Act
’.
However, the practical import of s 5(2)(d) of the CPA in the
context of a case like the current matter is far from
clear. While
it is plain that the instalment sale agreement between the applicant
and the respondent is excluded from the operation
of the CPA, the
effect of the qualification retaining the subject matter of the
contract (i.e. the vehicle) within the ambit
of the Act is far from
obvious.
The
apparent object of s 5(2)(d) of the CPA is to distinguish the
position of a credit provider from that of a supplier and
to protect
the contractual rights of a credit provider which has financed the
supply of goods by a supplier to a consumer, while
seeking at the
same time to preserve the consumer’s statutory protection
against the supplier. However, I have been unable
to identify (and
nor could counsel) any provision in the Act that facilitates the
achievement of the second of the aforementioned
apparent objectives
in the readily conceivable context of the factsof the current case.
It is
not plainly evident how a consumer in the position of the respondent
would be able to avail of the protection offered to
consumers in
terms of s 56(2) of the CPA. He could not return the vehicle to
the supplier against a refund of the purchase
price because
ownership of the car vested in the credit provider; and it was the
credit provider, and not he, that had paid the
purchase price.
Counsel appeared agreed in the circumstances that the only practical
manner in which effect could be given to
the evident legislative
object would be either for the bank to cede its rights as ‘consumer’
against the supplier
in terms of the CPA to the respondent, thus
permitting the latter to return the vehicle to the dealer against a
refund of the
purchase price, or for the bank, at the instance and
request of the respondent, to exercise its rights as ‘consumer’
directly against the supplier and to give the respondent the benefit
of the refund of the purchase price in satisfaction or reduction
of
the latter’s liability to it under the instalment sale
agreement.
Unfortunately,
and no doubt due to the lack of clarity in the relevant provision
and the absence of any reported judicial interpretation
thereof,
neither of these courses was followed, and the six months’
window of opportunity for appropriate action to be
taken has passed.
Instead, both parties proceeded under a misapprehension as to the
legal effect of the respondent’s surrender
of the vehicle to
the applicant. The applicant treated it as a surrender within the
meaning of s 127 of the NCA,while the
respondent considered
that he had no liability to the applicant because he thought that he
had been relieved of any further obligation
in respect of the
purchase of the vehicle because of the protection he believed he was
afforded in terms of s 56 of the
CPA.
The
applicant was misdirected in characterising the surrender of the
vehicle as having been in terms of s 127 of the NCA.
That
provision applies in a case of the surrender of goods by a consumer
who wishes voluntarilyto terminate a credit agreement
on the basis
of the further provisions of the section, that is that the goods
will be realised by the credit provider and the
proceeds applied in
reduction of the consumer’s outstanding liability under the
contract. The provision is in no way the
equivalent of s 56 of
the CPA. The latter provision contemplates a return of
defective
goods, with a consequent termination of any pertinent contractual
relationship between the supplier and consumer, effectively
on the
basis of a
restitutio in integrum
; whereas the former
provides for a regulated basis for a credit provider to recover
contractual damages upon the statutorily
permitted voluntary
termination of a credit agreement by a consumer. The consumer is
able to effect such a voluntary terminationby
giving notice in terms
of s 127(1)(a) of the NCA.
The
respondent did not give the applicant notice in terms of s 127(1)(a)
of the NCA when he surrendered the vehicle and the
procedures
contemplated by the further subsections in the provision therefore
did not find a basis for application. The endeavour
by the
applicant’s counsel to have the following sentence in an email
sent by the respondent’s legal advisors to
the applicant and
the supplier of the vehicle, amongst others, on 15 November
2012,
‘
Our client has been advised to
cancel all debit order instructions in this regard, and we confirm
that same has been done’
construed
as notice in terms of s 127(1)(a) was misplaced. The email in
question fell to be read in the context of the earlier
correspondence
therein referred to, which includes a letter addressed on behalf of
the respondent to the supplier, dated 30 August
2012, which made
it plain that the respondent’s surrender of the vehicle
purported to have occurred in terms of s 56
of the CPA –
not s 127 of the NCA - and on the basis that the respondent
would have no responsibility in respect
of the non-payment of the
purchase price. The letter of 30 August 2012 had been copied to the
applicant.
The
respondent was equally misdirected in conceiving that he was covered
by s 56 of the CPA because the contract between
himself and the
applicant, being a credit agreement within the meaning of the NCA,
was excluded in terms of s 5(2)(d) of
the CPA from the
application of that Act. Moreover, the applicant was in any event
not the ‘supplier’ of the vehicle
within the definition
of that term in the CPA.
When
confronted during argument with the applicant’s difficulties
in purporting to rely on s 127, the applicant’s
counsel
argued in the alternative that on any approach the respondent had
repudiated the agreement and that the applicant by
accepting the
repudiation had terminated the contract and should thus be entitled
to sell the vehicle. He submitted that the
claim against the
respondent for payment of any shortfall that might thereafter exist
should not be a matter to concern the court
at this stage. Apart
from the consideration that the argument ran counter to the relief
sought in terms of paragraph 2 of the
applicant’s notice of
motion, it also overlooked the statutory formalities applicable in
terms of the debt enforcement
provisions of the NCA.
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.
Proceedings
to confirm the cancellation of a credit agreement, or to claim relief
consequent upon such a cancellation have been
characterised as
enforcement proceedings within the meaning of s 129(1) of the
NCA; see the judgment of the full court in
Absa Bank Ltd v De
Villiers and Another
2009 (5) SA 40
(C) and compare the
observations made
en passant
thereanent in
Naidoo v Absa
Bank Ltd
2010 (4) SA 597
(SCA), at para 8. (The
characterisation is paradoxical having regard to the common law
principle that holds contractual enforcement
to be the very
antithesis of cancellation, but it seems to be supported by the
peculiar language of the relevant provisions of
the statute read
contextually; cf.
Standard Bank of South Africa Ltd v Newman
[2011] ZAWCHC 91
(15 April 2011) at para 7.)
The
applicant has not complied with the provisions of s 129(1) of
the NCA.
In
the result, and inasmuch as the relief sought in terms of paragraphs
1 and 2 of the notice of motion was predicated on the
supposed
application of s 127 of the NCA, the applicant has failed to
make out a case. It is also not entitled at this stage
to an order
in terms of paragraph 3 in terms of the alternative argument
advanced on its behalf because it has not complied with
s 129(1)
of the Act. In that regard the proceedings are thus of the character
contemplated by s 130(3)(a) of the NCA.
1
The applicant’s counsel requested that should I arrive at such
a conclusion the proceedings should be adjourned in terms
of
s 130(4)(b) of the Act
2
with directions to be given on the appropriate steps to be taken
before their resumption.I shall accede to that request.
There
remains the issue of the costs occasioned in connection with the
hearing before me at this stage. The applicant’s
counsel
submitted that costs should stand over to be decided by the court
which might deal with the matter further after the
applicant has
complied with the terms of the adjournment order. There is no good
reason to accede to that request. The adjournment
has been
necessitated by the applicant’s misconception of the case as
being one arising from the provisions of s 127
of the Act, and
its consequent failure to comply with s 129(1). The respondent
was fully justified in coming to court to
oppose the relief sought
against it on the basis of s 127 of the NCA and the provisions
of clause 15 of the credit agreement
that mirrored that section. It
is only right that the applicant should bear the costs associated
with this stage of the proceedings.
The
following order is made:
The
application for relief in terms of paragraphs 1 and 2 of the notice
of motion is refused.
Save
as provided in paragraph 3 hereof, the hearing of the application
for relief in terms of paragraphs 3, 4 and 5 of the notice
of motion
is adjourned
sine die
and it is directed that the proceedings
may be resumed on notice to the respondent only after the applicant
has complied with
the provisions of
s 129(1)
of the
National
Credit Act 34 of 2005
and the period of at least ten business days
provided in terms of s 130(1)(a) of the Act hasthereafter
elapsed.
The
applicant shall pay the respondent’s costs of suit incurred in
respect of the hearing on 14 August 2013 and the
noting of this
judgment on 15 August 2013.
A.G. BINNS-WARD
Judge of the High Court
1
Section
130(3)(a) of the NCA 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-
in the case of proceedings to which sections 127,
129 or 131 apply, the procedures required by those sections have
been complied
with;
2
Section
130(4)(b) of the NCA provides:
In any proceedings contemplated in this section, if
the court determines that-
(a)…
(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
.