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[2014] ZAWCHC 1
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Nkata v Firstrand Bank Limited and Others (14272/2010) [2014] ZAWCHC 1; 2014 (2) SA 412 (WCC) (16 January 2014)
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Certain
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THE
HIGH
COURT
OF
SOUTH
AFRICA
(WESTERN
CAPE HIGH COURT)
Case
No: 14272/2010
In
the matter between:
NOMSA
NKATA
APPLICANT
and
FIRSTRAND
BANK LIMITED
FIRST
RESPONDENT
SHERIFF
IN THE DISTRICT OF
DURBANVILLE
SECOND
RESPONDENT
KRAAIFONTEIN
PROPERTIES /
EIENDOMME
THIRD
RESPONDENT
WESTERN
CAPE DEEDS OFFICE
FOURTH
RESPONDENT
Coram
: ROGERS
J
Heard: 21
October 2013
Delivered: 16
JANUARY 2014
JUDGMENT
ROGERS
J:
Introduction
[1]
This is an application for the
rescission of a default judgment granted against the applicant
(‘Nkata’) by the registrar
of this court on 28 September
2010. Judgment was thereby granted against Nkata in favour of the
respondent in the present proceedings
(‘FRB’) for payment
of R1 472 506,89 together with interest from 1 June 2010 to date of
payment, allegedly owing to
FRB in terms of a mortgage loan agreement
secured by a mortgage bond over Erf […] D[…] situated
at 3[…] V[…]
D[…] Street in D[…] (‘the
property’). An order was also granted declaring the property to
be executable
for the amount of the judgment.
[2]
Nkata seeks not only the rescission of
the default judgment but also the setting aside of the writ of
attachment issued by the registrar
on 28 September 2010 and an order
declaring the sale of the property in execution on 24 April 2013 to
the third respondent (‘Kraaifontein
Properties’) to be
invalid. An interdict to restrain transfer of the property by the
sheriff to Kraaifontein Properties was
resolved by an undertaking
pending judgment.
[3]
The factual background to the matter is
as follows. Nkata purchased the property in March 2005. The property
was at that time undeveloped.
Nkata obtained mortgage finance from
FRB which resulted in the registration of a first bond in June 2005
and a second bond in May
2006. Nkata built a home on the property and
took up occupation there with her two daughters during 2007. In the
first bond Nkata
chose the mortgaged property as her domicilium
citandi et executandi. In the second bond she chose as her domicilium
C[…]
D[…] H[…], Rondebosch. This was the flat at
which she was residing prior to the completion of the house she was
building
at the Durbanville property.
[4]
During 2010 Nkata fell into arrears with
her mortgage bond repayments. There were numerous telephone calls to
her about this from
the bank over the period March to November 2010.
On 1 June 2010 FRB’s attorneys, Cohen Shevel Fourie (‘CSF’),
in the person of Mr TO Price (‘Price’), addressed a
letter to Nkata in terms of s 129(1) of the National Credit Act
34 of
2005 (‘the Act’). This letter was addressed to 2[…]
V[…] D[…] Street (not 3[…] V[…]
D[…]
S[…], the address selected in the first mortgage bond). On 4
June 2010 a further s 129(1) was addressed to Nkata
at ‘c[…]
4 D[…] H[…]’ in Rondebosch (not C[…] D[…]
H[…], the address selected
in the second mortgage bond).
Neither of these letters reached Nkata. The second was retrieved by
CSF on 14 June 2010 as an uncollected
item.
[5]
FRB issued summons on 5 July 2010. The
summons alleged that her chosen domicilium was 3[…] V[…]
D[…] Street
in D[…]. The summons alleged compliance
with s 129(1)(a), annexing in purported proof of that allegation a
copy of the notice
sent to the Rondebosch address. On 9 July 2010 the
sheriff attempted service at ‘4[…] D[…] H[…]’
in Rondebosch. His return indicated that service at that address was
unsuccessful because there was a block of flats there called
Exmoore
Court. FRB’s attorneys were requested to supply the unit
number. On 27 July 2010 the sheriff effected service at
the
Durbanville address by affixing a copy of the summons to the outer or
main door.
[6]
Nkata did not enter appearance to
defend. On 4 August 2010 she approached a debt counsellor, and on 20
August 2010 she made an application
for debt review. FRB alleges that
she probably took these steps because she had received the summons.
Nkata denied having received
the summons.
[7]
As already mentioned, default judgment
was granted by the registrar on 28 September 2010. A writ authorising
the sheriff to attach
and take the property into execution was issued
on the same day. (The judgment of the Constitutional Court in
Gundwana v Steko Development &
Others
2011 (3) SA 608
(CC), in
which it was held that rule 31(5)(b) was invalid to the extent that
it permitted the registrar (rather than a court) to
declare a
person’s home executable, was only delivered on 11 April 2011.)
[8]
According to Nkata, she only learnt of
the judgment when she received a telephone call from an FRB employee
in the first half of
October 2010 informing her that the property was
to be sold in execution. The sale was scheduled for 10 December 2010.
On 13 October
2010 her then attorneys, Ahmen & Hamman Attorneys
(‘AHA’), emailed FRB urgently requesting a copy of the
summons
and judgment. On 19 November 2010 Nkata, through the offices
of AHA, issued a rescission application (‘the first
application’).
FRB delivered a notice of opposition, and
answering and replying affidavits were filed. The matter was to have
served before the
duty judge on 10 December 2010. The application was
postponed because the parties were discussing settlement. On the same
day the
first application was settled in terms contained in a draft
order. The agreement was that the sale in execution of the property
(scheduled for that very day) was cancelled. Nkata undertook to sign
FRB’s standard Quicksell mandate. She agreed that while
the
mandate was in place she would pay monthly instalments of R10 000. If
the property was not successfully sold pursuant to the
Quicksell
mandate, Nkata was to pay the full arrears to FRB within 14 days of
such expiry. If she failed to do so, FRB would be
entitled to proceed
to sell the property in execution forthwith. If she did pay the full
arrears, FRB agreed not to sell the property
but Nkata was obliged to
resume payment of the full monthly instalment. Nkata was to pay the
wasted costs of the cancelled sale
and was also to pay the costs of
the rescission application ‘as taxed or agreed’.
[9]
It was envisaged that this settlement
agreement would be made an order of court. Nkata during March 2011
applied through the chamber
book to have the settlement made an order
of court but the duty judge declined to make an order, observing that
the papers were
incomplete and confusing and that there would need to
be notice to FRB. Neither Nkata nor FRB took further steps to have
the settlement
made an order. Be that as it may, the property was not
sold pursuant to the Quicksell mandate. Instead, and during March
2011,
Nkata paid a lump sum of R87 500 which extinguished her
arrears, and she resumed monthly payments. It appears that over the
next
12 months she again fell into arrears but brought the account up
to date in March 2012.
[10]
In April 2012, shortly after
extinguishing the arrears for the second time, Nkata asked FRB to
agree to the rescission of the default
judgment because the judgment
was negatively affecting her credit record. FRB refused to agree. In
May 2012 Nkata told FRB that
she was battling to meet her monthly
instalments. After visiting the Durbanville branch of the bank, she
submitted a distressed
debt application but the bank rejected the
application, stating that the matter was under litigation. (The
bank’s internal
records note, against the date 5 June 2012,
that although 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 distressed debt application
‘with this lack of financial behaviour’.)
[11]
Nkata then approached another debt
counsellor, Johan Wepener. The latter was informed by FRB on 19
October 2012 that the mortgage
loan was excluded from any debt review
because it was ‘under litigation’. On Wepener’s
advice, Nkata in December
2012 submitted a fresh distressed debt
application but this was again rejected by the bank.
[12]
Despite her financial difficulty, Nkata
continue to pay the contractual instalments until February 2013, when
she again fell into
arrears. FRB then caused the property to be sold
in execution, which sale was scheduled for 24 April 2013. According
to the bank,
its staff contacted Nkata on numerous occasions over the
period February to April 2013 in an attempt to arrange for payment by
her of the arrears. The bank alleges that she made promises which she
did not keep.
[13]
The sale in execution took place on 24
April 2013. The property was sold to Kraaifontein Properties for
R1,086 million. According
to the bank’s records, her full debt
as at 5 April 2013 was about R1 392 028, with the arrears being R33
716 (approximately
three months’ instalments). Kraaifontein
Properties purchased the property with a view to renovating and
re-selling it. They
immediately erected a for-sale sign at the
property. On the day following the sale in execution (25 April 2013)
Nkata signed a
monthly lease with Kraaifontein Properties to allow
her to remain in occupation pending the re-sale. According to
Kraaifontein
Properties, Nkata agreed that they could arrange show
houses. They started renovations immediately, which were completed in
May
2013. According to them, Nkata did not say that she intended to
seek rescission. On 2 May 2013 Kraaifontein Properties on-sold the
property but registration has by agreement been suspended pending the
outcome of the present application.
[14]
On 3 May 2013 Nkata paid her first
month’s rent to Kraaifontein Properties. She failed to pay rent
in June and July 2013.
[15]
The present rescission application (the
second such application) was issued on 13 May 2013. FRB and
Kraaifontein Properties oppose
the application. They were both
represented at the hearing by Mr D van Reenen. Ms Dzai appeared for
Nkata.
The
rescission application
The
merits
[16]
In her founding affidavit Nkata alleged
various deficiencies in FRB’s action against her without
indicating whether she brought
the application in terms of rule
31(2)(b), rule 42 or the common law. Her criticisms were in summary
the following:
[a]
The summons was not properly served by the sheriff. He called at the
property during working hours, when she was not there.
He should have
tried several times to gain entrance. (In the first application she
added that because the property is surrounded
by a high wall and the
gate is locked when she is absent from the property, the sheriff
could not have affixed the summons to the
outer or main door.)
[b]
Section 129(1) was not complied with because no notice in terms of
that section was addressed to [....] V[....] D[....] S[....].
[c]
The summons failed to draw her attention to s 26(3) of the
Constitution.
[d]
The summons failed to disclose that the s 129(1) notice sent to the
Rondebosch address had not been collected. Nkata alleged
that an
‘honest and
bona fide
legal representatives’ would
have sent the notice to her primary residence at [....] V[....]
D[....] S[....] and would not
‘have dishonestly hidden the
fact’ that the item sent to the Rondebosch address had not been
collected. The allegation
of compliance with s 129(1) was thus a
‘fraudulent misrepresentation of facts’.
[17]
I reject the first criticism. The
sheriff’s return is
prima facie
evidence of the truth of its contents. The sheriff is not required to
attend at a chosen domicilium on several occasions in order
to effect
personal service; rule 4(1)(a)(iv) authorises the sheriff to ‘leave’
a copy of the process at the chosen
domicilium. The main or outer
door of the property, as mentioned by the sheriff in his return, does
not necessarily connote the
front door of the house; it would include
the main entrance to the property.
[18]
I also reject the third criticism. The
summons was issued in July 2010. At that stage the governing decision
was the judgment of
the Supreme Court of Appeal in
Standard
Bank of South Africa Ltd v Saunderson & Others
2006
(2) SA 264
(SCA). In accordance with that judgment, the summons in
the present case drew the attention of Nkata to s 26(1) of the
Constitution.
In
Nedbank Ltd v Jessa
& Another
2012 (6) SA 166
(WCC)
Blignaut J (in a judgment delivered on 20 December 2011) held that
the
Saunderson
rule
of practice should be amplified to require the summons to contain an
appropriate notification to a defendant that he or she
is entitled to
place information before the court regarding relevant circumstances
within the meaning of s 26(3) of the Constitution
and rule 46(1).
(Pursuant to the
Gundwana
decision
supra
,
rule 46(1) was relevantly amended with effect from 19 November 2010.)
Blignaut J made clear in para 13 that his decision did not
purport to
have any retrospective effect.
[19]
As to the fourth criticism, the
allegation of fraud should not have been made. At the time summons
was issued in the present case
it was thought sufficient for a credit
provider to establish that the s 129(1) notice had been dispatched by
registered post to
the selected address, not that it had reached the
recipient. This view was endorsed by the Supreme Court of Appeal on
30 September
2010 in
Rossouw &
Another v FirstRand Bank Ltd
2010
(6) SA 439
(SCA). It was only on 7 June 2012 that the Constitutional
Court held, in
Sebola & Another v
Standard Bank of South Africa Ltd & Another
2012
(5) SA 142
(SCA), that the credit provider needed to go further and
establish that the notice had probably come to the attention of the
recipient.
(I do not intend to go into the controversy as to what
exactly
Sebola
decided
in that regard.)
[20]
There is force, however, in the second
criticism. At least for purposes of the first mortgage loan
agreement, which was secured
by the first mortgage bond, Nkata’s
selected address for notice of documents was the mortgaged property,
ie 3[…] V[…]
D[…] Street. The notice mistakenly
addressed to 2[….] V[…] D[…] Street clearly did
not comply with
s 129(1). (The error was apparently caused by a
faulty Windeed report which reflected that the street address
corresponding to
Erf […] Durbanville was situated at 2[…]
V[…] D[…] Street.) It is unnecessary to decide whether
the
notice sent to the Rondebosch address (‘4[…] D[…]
H[…]’) complied with the requirement of the second
mortgage loan agreement as secured by the second mortgage bond (C[…]
D[…] H[…]). Even if it did, it was important
in this
case that there should have been compliance with the requirements of
the first mortgage loan agreement, because by the
time the notice was
given Nkata was residing at the Durbanville address, not the
Rondebosch address. I am satisfied that a registered
item addressed
to the Rondebosch address would not have come to her attention.
[21]
The non-compliance with s 129(1) of the
Act afforded Nkata with a
bona fide
defence to FRB’s action.
Whether in the event that defence would have been merely dilatory
would have depended on Nkata’s
reaction after FRB gave due
notice pursuant to a direction of the court in terms of s 130(4)(b)
of the Act. A
bona fide
defence is an important component of showing good cause for
rescission as contemplated in rule 31(2)(b). The non-compliance with
s 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 s 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[…] D[…]
H[…],
Rondebosch’) did not,
ex
facie
the summons, constitute a
valid notice in respect of the first mortgage loan agreement and bond
on which FRB was suing. (The summons
alleged that Nkata’s
chosen domicilium was 3[…] V[…] D[…] Street, and
this was also the chosen address
appearing in the first mortgage bond
annexed to the summons. The summons contained no allegation that
Nkata had selected the Rondebosch
address for purposes of receiving
all notices under the Act.)
[22]
A further point which Nkata might have
taken in her founding affidavit (she mentioned it in the first
rescission application, which
she annexed to her founding affidavit
in the present application, but did not specifically adopt it, though
it was addressed by
Ms Dzai in argument) was that, as subsequently
determined by the
Gundwana
judgment,
rule 31(5), in terms of which the registrar granted default judgment,
was invalid to the extent that it authorised the
registrar (rather
than the court) to declare immovable property specially executable
where such property is (as was the case here)
the home of a person.
The court declined to make its declaration non-retrospective.
However, Froneman J (who delivered the unanimous
decision of the
court) said that the mere constitutional invalidity of the rule was
not in itself sufficient to ‘undo everything
that followed’.
The debtor would have to apply for the rescission of the order
granted by the registrar and would have to
explain the reason for not
bringing the rescission application earlier. The debtor would also
have to set out a defence to the
claim for judgment against him or
her. ‘It may be that in many cases those aggrieved may find
these requirements difficult
to fulfil’ (para 58).
[23]
I shall deal with the question of delay
below. In regard to a defence, the constitutional invalidity of rule
31(5) would bear only
on the order of executability, not on the order
that Nkata pay FRB the amount owing. It is most unlikely in the
present case that
a court would have withheld an order of special
executability of the mortgaged property had it granted the monetary
judgment. The
home which Nkata erected on the property is described
by FRB as a ‘luxurious’. The principal amounts secured by
the
two mortgage bonds totalled R1,48 million. Although Nkata battled
at times to pay her monthly instalments (which exceeded R11 000),
she
was able to clear her arrears in March 2011 and again in March 2012
and to maintain her payments thereafter until February
2013. She was
a business woman of some means. She is a supplier of hospital
equipment. According to her first rescission application,
she
expected her monthly income as from January 2011 to be between R30
000 and R35 000. Her average monthly income over the preceding
six
months had been just under R20 000, with total living expenses
(excluding the monthly bond payments) of about R5 000. She is
also
the co-owner (with her niece) of a property in St James. It is quite
clear that, if she were required to vacate her home at
3[…]
V[…] D[…] Street, she could afford to buy or rent more
modest accommodation for herself and her two daughters.
The
constitutional right to housing is a right to ‘adequate
housing, not to housing that a mortgagor is unable to afford’
(
Absa Bank Ltd v Petersen
2013
(1) SA 642
(WCC) para 34; see also
Standard
Bank of South Africa Ltd v Hunkydory Investments 188 Pty Ltd &
Others
2010 (1) SA 634
(WCC) para
30).
[24]
In her replying affidavit Nkata alleged
that FRB and its attorneys had failed to comply with s 22 of the
Financial Intelligence
Centre Act 11 of 2008 because they had not
properly verified the street address of the mortgaged property. This
complaint is without
merit and I do not propose to say anything more
about it.
[25]
In conclusion on the merits, the only
bona fide
defence which Nkata would have had was that, because no s 129(1)
notice was addressed to her at 3[…] V[…] D[…]
Street, there had not been compliance with that section, compliance
being a prerequisite for the issuing of summons.
Delay
and related considerations
[26]
The fact that Nkata had a
bona
fide
defence to the action and that
the judgment was erroneously sought and granted does not without more
entitle her to rescission.
In terms of rule 31(2)(b) a rescission
application must be brought within 20 days of the defendant’s
acquiring knowledge
of the default judgment. Even the first
rescission application was slightly out of time. The current
application was launched nearly
two and a half years after Nkata
learnt of the default judgment (which, on her version, was in the
first half of October 2010).
Although Ms Dzai sought to argue that
the current application was merely a continuation of the previous
one, that submission is
untenable. The first rescission application
was settled on the terms I have described. The fact that the
settlement was not made
an order of court is neither here nor there.
There was an agreement, and the parties evidently acted on it. The
current application
was brought under a fresh case number. On her own
version, Nkata has been aware of the default judgements since the
first half
of October 2010.
[27]
Although rule 42(1) does not specify a
time-limit, it is a discretionary remedy. Like all discretionary
remedies, rescission under
rule 42(1) must be sought within a
reasonable period of time (see
First
National Bank of Southern Africa Ltd v Van Rensburg NO: In re First
National Bank of southern Africa Ltd v Jurgens
1994
(1) SA 677
(T) at 681B-G). The same applies to rescission at common
law (see
Roopnarain v Kamalapathy &
Another
1971 (3) SA 387
(D) at
391B-D). What is reasonable will depend on the circumstances of the
case (
Promedia Drukkers &
Uitgewers (Edms) Bpk v Kaimowitz & Others
1996
(4) SA 411
(C) at 421F-H), but the 20-day period laid down in rule
31(2)(b) provides some guidance as a starting point. The reason for a
time-limit
is that there must be finality in litigation and that
prejudice can be caused if rescission is not promptly sought. There
is no
reason in principle why a litigant should have more time when
seeking rescission under rule 42(1) than under rule 31(2)(b). (In
Smit v Olivier
[2011]
ZAWCHC 414
Assheton-Smith AJ appears to have considered that a
defendant is entitled as of right to rescission once he shows that
the judgment
was erroneously sought and granted, regardless of delay
– see para 20. I am satisfied that that view of the legal
position
is wrong.)
[28]
Nkata has not in the present case
satisfactorily explained the lengthy delay in seeking rescission. The
absence of a satisfactory
explanation appears sufficiently, I think,
from my summary of the facts. Even when she learnt in March 2013 of
the sale in execution
scheduled for 24 April 2013, she took until 13
May 2013 to launch the present application. By then the property had
been sold in
execution to Kraaifontein Properties and the latter had
on-sold the property to a third party. Clearly there will be
prejudice
to third parties if the default judgment were to be
rescinded.
[29]
I thus consider that Nkata’s
prayer for condonation of her non-compliance with the 20-day limit in
rule 31(2)(b) should be
refused and that in the exercise of the
court’s discretion I should decline to entertain the
application in terms of rule
42(1) or under the common law.
Peremption
[30]
Quite apart from these considerations,
FRB and Kraaifontein Properties contend that Nkata lost the right to
seek rescission when
she settled the first rescission application. I
think that contention is correct. Although Mr van Reenen argued this
aspect with
reference to principles of compromise and estoppel, I
think the relevant legal principles are those relating to peremption.
The
principles of peremption apply not only to appeals but also to
the remedy of rescission (see
Sparks
v David Polliack
1963 (2) SA 491
(T)
at 496D-F). The general principle is that ‘no person can be
allowed to take up two positions inconsistent with one another,
or as
is commonly expressed to blow hot and cold, to approbate and
reprobate’. In order to show that a person has acquiesced
in a
judgment, the court must be satisfied upon the evidence ‘that
he has done an act which is necessarily inconsistent with
his
continued intention to have the case reopened or to appeal’
(
Hlatshwayo v Mare and Deas
1912
AD 242
at 259).
[31]
Here Nkata initially decided to
challenge the default judgment. One of the points she raised in the
first application was the alleged
non-compliance with s 129(1). Her
conduct in settling that case on the terms I have described is
entirely inconsistent with a continued
intention on her part to have
the case reopened by way of rescission.
Section
129(3) of the Act
[32]
Although, for the reasons stated above,
the application for rescission must fail, I raised with counsel
during the course of argument
the possible applicability of s 129(3)
of the Act. I gave directions for the delivery of further affidavits
on this question and
also for the filing of supplementary
submissions.
[33]
Sections 129(3) and (4) provide as
follows:
‘
(3)
Subject to subsection (4), a consumer may –
(a)
at any time before the credit provider has cancelled the agreement
re-in?-state 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 para (a), may resume possession of any property
that has been repossessed by the credit provider
pursuant to an
attachment order.
(4)
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 determination thereof in accordance with section 123.’
[34]
I raised the possible application of s
129(3) because it appeared from the papers that in March 2011 and
again in March 2012 Nkata
made payments to FRB which wiped out her
arrears. Depending on the proper interpretation of ss 129(3) and (4),
these events may
have caused the mortgage loan agreements to be
reinstated. If the mortgage loan agreements were reinstated, it might
follow, as
a necessary implication of the statutory scheme, that
execution could no longer be levied against the property despite the
existence
of the default judgment. If (as happened) Nkata again fell
into arrears in respect of the reinstated mortgage loan agreements,
FRB would arguably need to obtain a fresh judgment and authority to
execute after complying again with the provisions of s 129(1).
[35]
The interpretation of ss 129(3) and (4)
is not without its difficulties. Many of these are discussed in Brits
Purging Mortgage Default: Comments on
the Right to Reinstate Credit Agreements in terms of the
National
Credit Act
(2013
) 24
Stell
LR
165. I shall only need to
consider certain of the contentious issues.
[36]
The first question which arises is what
sum is contemplated by the phrase ‘all amounts that are
overdue’ in
s 129(3)(a).
In the present case the mortgage bonds
contained acceleration clauses. When Nkata fell into arrears during
2010, FRB invoked its
right of acceleration. Thereupon the full
amount of the mortgage debt fell due and payable, and it was on that
basis that FRB was
able to obtain judgment for the full amount and
not only for the arrear instalments.
[37]
In my opinion, the fact that a
contractual acceleration clause has become operative does not, for
purposes of
s 129(3)(a)
, obliterate the distinction between the
arrear instalments and the full debt. The lawmaker must be taken to
have been aware that
most credit transactions concluded by banks and
other financial institutions contain acceleration clauses as a
standard provision.
The right of reinstatement conferred by
s
129(3)(a)
would be rendered nugatory if the ‘overdue’
amount contemplated by
s 129(3)(a)
were the full accelerated debt
rather than the arrear instalments. In most credit transactions there
would be nothing to reinstate
if the consumer could only ‘reinstate’
the agreement by paying the full debt. The very notion of
reinstatement, in
the context of
s 129(3)
, is that the consumer may
put the agreement back into the position it was prior to his or her
falling into default. This accords
with certain of the stated
purposes of the Act, namely of promoting responsibility in the credit
market by encouraging ‘the
avoidance of over-indebtedness and
fulfilment of financial obligations by consumers’ (s 3(c)(i)),
providing mechanisms ‘for
resolving over-indebtedness based on
the principle of satisfaction by the consumer of all responsible
financial obligations’
(s 3(g)), and providing 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’ (s
3(i)).
[38]
It follows that, in order to effect
reinstatement in terms of s 129(3)(a), Nkata did not need to pay the
full accelerated debt but
only the arrear instalments. It is common
cause that she did so in March 2011 and again in March 2012. (The
conclusion I have reached
on this aspect accords with the
obiter
views expressed by Peter AJ in
Nedbank Ltd v Fraser & Another
and Four Others Cases
2011 (4) SA
363
(SGJ) para 41. See also Brits
op
cit
at 179 and 181-182.)
[39]
A credit agreement can only be
reinstated if it has not already been cancelled by the credit
provider. Mr van Reenen conceded that
there had been no cancellation
here. That concession was correctly made. What FRB did was to seek
specific performance of the mortgage
loan agreements by relying on
the acceleration clause. In the case of the loan of money, there may
not be a material difference
between the monetary amount claimable by
the lender upon cancellation on the one hand and by way of specific
performance of the
accelerated debt on the other but conceptually
there is a distinction between the two cases. Where an agreement is
terminated by
the credit provider because of the consumer’s
breach, the contract is terminated by the act of the credit provider
(provided
he has complied with the procedures laid down in the Act).
The remedies then available to the credit provider are those provided
by law where a contract has been terminated because of breach. Where
the credit provider invokes an acceleration clause, the contract
remains in force and the consumer is obliged to make specific
performance of the accelerated indebtedness. If the consumer pays
the
accelerated indebtedness, the contract will be terminated not by the
act of the credit provider but through performance by
the consumer.
(I therefore disagree with the view expressed by Hartle J in
Dwenga
v FirstRand Bank Ltd & Others
[2011]
ZAECELLC 13 para 21 to the effect that ‘cancellation or
termination is … necessarily implied’ by the invocation
of an acceleration clause. Once it is appreciated that the
enforcement of an acceleration clause does not in law constitute a
cancellation of the agreement, the difficulties mentioned by the
learned judge in her
obiter
observations in footnote 36 of the
judgment – to the effect that the enforcement of acceleration
clauses is inimical to the
purpose of the Act in promoting
responsible consumer behaviour, a purpose served
inter
alia
by holding out the possibility
of reinstatement as a beacon of hope – fall away.)
[40]
In any event, in terms of s 123 of the
Act FRB could not lawfully have terminated the mortgage loan
agreements without first complying
with the requirements
inter
alia
of s 130 read with s 129. I
have already explained that there was not compliance in this case
with s 129 of the Act.
[41]
In order to effect reinstatement the
consumer must not only pay all amounts that are overdue but also the
credit provider’s
‘permitted default charges and
reasonable costs of enforcing the agreement up to the time of
re-instatement’. In FRB’s
supplementary affidavit
concerning s 129(3) it was stated that on 25 October 2010 FRB debited
to Nkata’s bond account an
amount of R9 050 as a globular
charge for the summons, default judgment, writ, attachment and the
first sale in execution, inclusive
of VAT and the sheriff’s
fees. On 21 February 2011 FRB debited a further amount of R14 498 to
Nkata’s bond account
in respect of the first rescission
application. According to the supplementary affidavit these were the
fees of the attorney (presumably
for drafting opposing papers) and
counsel’s day fee (presumably for 10 December 2010). On 1 March
2013 a sum of R4 000 was
debited to the bond account in respect of
the sale in execution which was scheduled to take place on 24 April
2013. FRB contended
that these costs would have had to be paid in
order for the mortgage loan agreements to be reinstated, and that
they were not paid.
[42]
I am prepared to assume for present
purposes that FRB’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 s 129(3). The difficulty I have is that the
costs which FRB debited to Nkata’s
bond account were not taxed
nor quantified by agreement between the parties. Unless costs have
been quantified by agreement, the
official with the authority to
determine the reasonableness and thus the recoverability of costs in
high court litigation is the
taxing master, acting in accordance with
the rules of court (
Composting
Engineering Pty Ltd v The Taxing Master
1985
(3) SA 249
(C) at 250I-J). While taxation or agreement may not be a
prerequisite for liability (this is established by the court order),
execution
in respect of costs cannot be levied until the costs have
been taxed or the litigant has agreed to the quantification in
writing
(rule 45(2); see
Phillips &
Others v Van den Heever NO & Another
2007(4)
SA 511 (W) paras 65-73). Even as between an attorney and his own
client, the latter is entitled to insist on taxation if
the attorney
sues for payment of his fees and disbursements (
Benson
& Another v Walters & Others
1984
(1) SA 73
(A) at 84B). In the case of the first rescission
application, the terms of the settlement specifically provided that
Nkata would
pay FRB’s costs ‘as taxed or agreed’.
FRB does not allege that any of the legal costs debited to Nkata’s
bond account were taxed, and Mr van Reenen’s supplementary
submissions proceed on the basis that those costs were not taxed.
There is also no evidence that Nkata agreed or was invited to agree
to the quantification of the costs or that payment of the costs
was
even demanded from her. FRB simply debited the amounts to her
account. I do not know whether Nkata examined her bond statements
or
understood what the debits related to (the narration was simply
‘legal fee’). At no stage after October 2010 did
FRB call
for separate payment of the debited legal costs nor regard those
debits as causing Nkata to be in arrears. FRB regarded
her account as
being ‘up to date’ following the payment in March 2011
and again following the payment in March 2012.
[43]
It might be said that, although FRB’s
legal costs were not yet due and payable, Nkata could not reinstate
the agreement until
those costs (whatever they might turn out to be)
were paid. This would mean that a consumer could not reinstate an
agreement without
proactively taking steps to find out what those
costs were and either reach agreement with the credit provider on the
quantification
thereof or initiate a taxation. I do not believe that
such an approach would be consistent with the purposes of the Act. If
the
credit provider wants to recover the costs of enforcing the
agreement from the consumer, the credit provider must take the
appropriate
steps. If the credit provider does not do so, and if in
the meanwhile the consumer pays the full amount of the overdue
instalments
and any other amounts already due and payable, the
agreement would be reinstated in terms of s 129(3).
[44]
In any event, FRB in the present case
did not present the costs to Nkata and invite her to pay them. FRB
simply debited the amounts
to the bond account. If the amounts in
question were owing by Nkata, it is clear from FRB’s conduct
that the bank was content
to settle the costs by lending her the
money through a debit to her bond account. I am aware that in the
context of the common
law
in duplum
rule it has been held that interest
debited to a loan account does not lose its character as interest
(see
Standard Bank of South Africa
Ltd v Oneanate Investments (Pty) Ltd (In Liquidation)
[1997] ZASCA 94
;
1998
(1) SA 811
(SCA) at 828C-829H). However, that finding was made
primarily on the basis that the commercial practice of capitalising
unpaid
interest could not have the effect of overriding a rule of
positive law designed to protect borrowers from exploitation By
contrast,
in the context of rule 129(3)(a) it strikes me as untenable
to say that where the credit provider is content to debit the costs
of enforcing the agreement to the bond account and thus to
‘capitalise’ the legal costs, the consumer must
nevertheless
pay the full amount of the legal costs in order to
obtain reinstatement of the credit agreement. By debiting the legal
costs to
the account rather than demanding separate payment thereof,
the credit provider indicates to the consumer that the credit
provider
is 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. For purposes of s 129(3)(a) the
costs, if properly debited, lose their separate character as costs of
enforcing the agreement. Put differently, the enforcement costs which
the consumer must pay as contemplated in s 129(3)(a) in order
to
obtain reinstatement are those costs of which the credit provider is
at that time requiring payment. (Again, this interpretation,
rather
than the one advanced for FRB, appears to me to give better effect to
the purposes of the Act as set out in s 3.)
[45]
The question then arises whether Nkata
was precluded from reinstating the credit agreement by virtue of the
provisions of s 129(4).
I should interpose here to say that in my
view it is not necessary, in order for there to be reinstatement in
terms of s 129(3),
that the consumer should have been aware of the
statutory right of reinstatement and have made payment with the
intention of reinstating
the agreement. The agreement is reinstated
by operation of law if the consumer as a fact makes the payments
contemplated by s 129(3),
unless reinstatement is precluded by virtue
of s 129(4). I agree with the views expressed by Eksteen J in that
regard in
Nedbank Ltd v Barnard
[2009] ZAECPEHC 45 at paras 14-15.
See also Brits
op cit
at 170.)
[46]
In terms of s 129(4)(a)(i) the consumer
may not reinstate a credit agreement after there has been a sale of
any property pursuant
to ‘an attachment order’. Section
129(4)(b) proceeds to state that reinstatement is not permitted after
‘the
execution of any other court order enforcing that
agreement’. These two paragraphs thus contrast ‘an
attachment order’
on the one hand and ‘any other court
order’ on the other.
[47]
If the property in the present case was
sold in execution pursuant to an ‘attachment order’ as
contemplated in s 129(3)(a)
it would follow that there was no
impediment to the reinstatement of the mortgage loan agreements in
March 2011 or in March 2012,
because the sale in execution only took
place in April 2013. If the property was not sold pursuant to an
‘attachment order’,
one would need to determine the
meaning of the word ‘execution’ in s 129(4)(b); in
particular, and where a credit provider
who has a monetary judgment
levies execution by causing property to be attached and sold in
execution, does ‘execution’
merely require some step in
the process to have been taken (such as the obtaining of a writ or
the attachment of property pursuant
to a writ) or does it require
money actually to have been levied by way of the sale in execution?
[48]
There
is no definition in the Act of the expression ‘attachment
order’. That expression is used in ss 129(3)(b), 129(4)(a)(i)
and 130(2)(a)(i). The word ‘attachment’ is used in s
132(1) in a context which envisages an order for attachment. It
appears to me, from the way in which the terms ‘attachment
order’ and ‘attachment’ are used in ss 129(3)(b),
130(2)(a)(i) and 132(1), that what is envisaged is an order entitling
a credit provider to take repossession of movable goods which
are the
subject of an instalment agreement, secured loan or lease as defined
in the Act. In relation to such agreements, the credit
provider would
need to obtain an order from the court if the consumer was not
prepared voluntarily to surrender possession in terms
of s 127. (This
was the view expressed by Peter AJ in
Fraser
supra
in
an
obiter
observation
in para 39.
Absa
Bank Ltd v De Villiers
2009
(5) SA 40
(WCC) contains a discussion regarding the prerequisites for
obtaining an attachment order in this setting.
[1]
)
[49]
Where a credit provider obtains a
monetary judgment against the consumer for the outstanding amount of
the loan, the court order
will not include an order for the
attachment of any property. In such cases, the rules of court entitle
the judgment creditor to
obtain a writ of execution. The writ is
addressed by the registrar to the sheriff. A writ of execution is not
itself an ‘order’.
It is a process which may be issued
where an order for the payment of money has been made. Even where the
loan agreement is secured
by a mortgage bond and the court declares
the bonded property to be specially executable, the court’s
order does not include
an order for the attachment of the property.
The order of executability merely entitles the creditor to levy
execution on the immovable
property in terms of rule 46 without first
attempting execution against movables in terms of rule 45. The court
does not order
the immovable property to be attached; it is for the
judgment creditor to determine how it will go about execution.
[50]
Accordingly, I do not think that in the
present case the default judgment granted by the registrar on 28
September 2010 constituted
an order for the attachment of property
nor did the default judgment acquire that character when FRB elected
to obtain a writ of
execution against the mortgaged property. It
follows that s 129(4)(i) is not applicable.
[51]
The question then is whether, by the
time Nkata cleared the arrears in March 2011 and again in March 2012,
there had been ‘execution’
of the default judgment (which
was an order ‘enforcing’ the mortgage loan agreements).
Mr van Reenen submitted that
the obtaining of the writ of attachment
on 28 September 2010 and the organising of the first sale in
execution constituted ‘execution’
for purposes of s
129(4)(b) and that because these steps had already been taken by the
time the arrears were cleared reinstatement
was barred.
[52]
Mr van Reenen referred me to the
commentary on the word ‘execution’ in Claasen
Dictionary
of Legal Words and Phrases.
The
learned author refers to
Reid &
Another v Godart & Another
1938
AD 514
where De Villiers JA held that the word ‘execution’
meant ‘carrying out’ or ‘giving effect’
to
the judgment and that it was thus not confined to a ‘levy under
a writ’ but included other ways in which a judgment
could be
given effect to, for example ‘by specific performance, by
sequestration, by the passing of transfer, by the issue
of letters of
administration or by ejectment from premises’ (at 514). The
learned judge of appeal was not concerned with
the point now in issue
and was considering the word ‘execution’ in a rule of
court. I nevertheless observe that the
examples of execution given by
him focus on the final event giving effect to the judgment, and not
on prior procedural steps. For
example, a levy is made under a writ
when the sheriff actually raises money by selling attached property.
In eviction proceedings,
execution would be constituted by actual
ejectment, not by the obtaining of a writ of ejectment.
[53]
Although s 129(4)(a) is not applicable
in the present case, it forms part of the context in which s
129(4)(b) must be interpreted.
Where movable property is the subject
of an instalment agreement, secured loan or lease, the movable
property constitutes in effect
the credit provider’s security
for the provision of credit, either through retained ownership or by
way of a pledge. Reinstatement
in such cases is not precluded merely
because the credit provider has obtained repossession of the movable
property through an
attachment order or through the voluntary
surrender of the property by the consumer; reinstatement is barred
only if the credit
provider has sold the movable property. If that is
so in respect of the very property which is the subject of the credit
agreement,
I cannot conceive of a rational basis for the lawmaker to
have made reinstatement more difficult for the consumer where the
credit
provider seeks to obtain satisfaction of a monetary judgment
through execution. If ‘execution’ in s 129(4)(b) included
the mere obtaining of a writ of attachment of movables or immovables
or the attachment of goods by the sheriff, there would usually
be
very little time between the granting of the enforcement order and
its ‘execution’ and thus very little scope for
the
consumer to purge his default. The common law principle is that a
judgment debtor can purge his default at any time prior to
the sale
of attached property (see the authorities cited by Peter AJ in
Fraser
para 40, though at common law the
full accelerated debt would have to be paid in order to avoid the
sale in execution). In themselves,
the steps of obtaining a writ and
causing property to be attached are merely steps towards execution
and can be undone at common
law if the judgment debtor pays the full
judgment debt. The judgment is only actually ‘executed’
when money is raised
pursuant to a sale of attached property and paid
to the judgment creditor. (Again, this view accords with the
obiter
remarks of Peter AJ in the
Fraser
case in paras 40-41. It also appears
to be the view of Brits
op cit
at
177-178.)
[54]
In the present case there was no
execution against movable property. In regard to the immovable
property, a writ of attachment was
issued but no sale in execution
had been held by the time Nkata cleared the arrears. In my view,
therefore, ‘execution’
of the default judgment had not
occurred by the time Nkata brought the account up to date.
[55]
My conclusion is thus that the mortgage
loan agreements were reinstated by not later than 8 March 2011 when
the arrears were cleared
for the first time. As foreshadowed earlier,
I consider it to be necessarily implicit in s 129(3) read with s
129(4) that if a
credit agreement is reinstated before the execution
of a monetary judgment enforcing that agreement, the judgment can no
longer
be enforced. If the consumer again falls into arrears, the
credit provider can only approach the court for an order enforcing
the
reinstated agreement after compliance with s 130. The earlier
judgment cannot on this ground be rescinded but by operation of law
it ceases to have any further effect.
[56]
The remaining question is whether Nkata
should be granted any relief, given that she did not specifically
apply for relief based
on s 129(3). In my opinion justice requires
that she should be granted relief pursuant to the standard prayer for
‘further
and/or alternative relief’. FRB did not, in its
supplementary affidavit, claim that it would be prejudiced
(procedurally)
if the s 129(3) point were adjudicated. The affidavits
in the rescission application covered the history of the matter,
including
Nkata’s allegations that she had cleared the arrears
in March 2011 and again in March 2012. She communicated with the bank
during 2012 with a view to obtaining an agreed rescission of the
default judgment or distressed debt relief. The bank refused to
accede to these requests because it believed, erroneously as it turns
out, that the default judgment was still enforceable. Nkata’s
purpose in bringing the present proceedings was to be relieved of the
burden imposed on her by the default judgment and to obtain
consequential relief in respect of the sale of her home. She
misconceived her remedy but justice requires that the appropriate
remedy now be granted, given that the issue has been fairly
ventilated.
Conclusion
[57]
I thus propose to grant an order
declaring that the mortgage loan agreements were reinstated by not
later than 8 March 2011 and
that the default judgment of 28 September
2010 thereupon became of no force and effect, and to grant
consequential relief as sought
in prayers 4 and 5 of the notice of
motion (declaring the sale of the property on 24 April 2013 to have
been invalid and restraining
transfer of the property to Kraaifontein
Properties).
[58]
Despite
the fact that Nkata will now be obtaining relief which she may regard
as comparable to the relief of rescission which she
initially sought,
that is as a result of a matter raised by the court, not by her. I do
not think that she is entitled to her costs.
On the contrary, I think
she should be ordered to pay the costs of FRB and Kraaifontein
Properties in respect of her failed rescission
application, in regard
to which those respondents have been successful. Not only did she
fail in her bid for rescission but she
made unwarranted allegations
of fraud against FRB’s attorney, allegations for which Nkata
has tendered no apology.
[2]
The
costs in favour of FRB and Kraaifontein Properties will cover the
costs up to and including the hearing on 21 October 2013.
Those costs
should include the costs reserved when the matter was postponed on 6
June 2013. The matter was again postponed on 12
August 2013. That
order is not in the file and I do not know whether any costs were
reserved on that date. It appears that the
postponement was necessary
because both parties were guilty of delay in filing affidavits. To
the extent that the costs of that
postponement were reserved, the
parties should bear their own costs. In respect of the supplementary
affidavits and written submissions
dealing with the s 129(3) point, I
think the parties should bear their own costs.
[59]
I make the following order:
[a]
It is declared that on 8 March 2011 the mortgage loan agreements
which the first respondent sought to enforce in case
14272/10 were
reinstated in terms of
s 129(3)
of the
National Credit Act 34 of
2005
.
[b]
It is declared further that pursuant to such reinstatement the
default judgment granted by the registrar of this court
on 28
September 2010, and the writ of attachment issued by the registrar on
that date directing the sheriff to attach the mortgaged
property, Erf
[.....] D [….] (‘the property’), ceased by
operation of law to have any force or effect as from
8 March 2011.
[c]
It is declared, further, that, by virtue of the declarations in [a]
and [b] above, the sale of the property by public
auction on 24 April
2013 to the third respondent was invalid, and the said sale is set
aside.
[d]
The first, second and fourth respondents are restrained from causing
transfer of the property to be registered in the
name of the third
respondent.
[e]
The applicant shall pay the costs of the first and third respondents
in opposing the rescission application, such costs
to include all
those incurred in the application up to and including the hearing on
21 October 2013. These costs shall include
those reserved by the
postponement of 6 June 2013 but not any costs which may have been
reserved by the postponement of 12 August
2013 (in regard to the
latter costs, the parties shall bear their own costs).
[f]
No order is made in regard to the costs incurred by the parties in
the filing of supplementary affidavits and written
submissions after
21 October 2013 in relation to the applicability of
s 129(3)
of the
National Credit Act.
ROGERS
J
APPEARANCES
For
Applicant: Ms
L Dzai
Instructed
by: NB
Nyati Attorneys
For
First Respondent: Mr
D
van Reenen
Instructed
by: Cohen
Shevel and Fourie
40
McIntyre Street
Parow
For
Third Respondent: Mr
D van Reenen
Instructed
by: FPS
Attorneys
8
Gert Kotze Street
Brackenfell
[1]
It
was held in
Absa
v De Villiers supra
that
the Act has not altered the common law principle that goods supplied
under an instalment sale agreement can only be recovered
by the
seller if the contract is cancelled. Since s 129(3)(a)
precludes reinstatement where the credit agreement has been
cancelled, the lawmaker's apparent assumption that there could be an
attachment order prior to the cancellation of the credit
agreement
presents one of the conundrums in the interpretation of the relevant
provisions. See the discussion in Brits
op
cit
at
172-173 and footnote 38 and the academic writings there cited.
[2]
The allegations of fraud were not limited to those summarised in
para 16[d] above. In her replying affidavit Nkata alleged that
FRB’s
attorneys had, by a 'cut and paste method', fraudulently altered the
addresses on the envelopes of the registered
items allegedly sent to
her on 22 October 2010 and 26 February 2013 and that those envelopes
did not relate to correspondence
addressed to her at all. She based
this allegation on the fact that according to the track-and-trace
reports the items in question
had supposedly been collected by a
another recipient, a Mr Sauls. As explained by Price in a
supplementary answering affidavit,
Sauls was his firm’s
messenger who had retrieved the items from the post office after
Nkata failed to collect them. Nkata
or her attorney completely
misunderstood the standard track-and-trace reports issued by the
post office in that regard.