About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2014
>>
[2014] ZAWCHC 79
|
|
Motor Finance Corporation ( A Division of Nedbank) v Petersen (20905/13) [2014] ZAWCHC 79 (29 May 2014)
THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
No: 20905/13
DATE:
29 MAY 2014
In the matter
between:
MOTOR FINANCE
CORPORATION
(A DIVISION OF
NEDBANK)
...........................................................
PLAINTIFF
And
DEON DANIEL
PETERSEN
.......................................................
DEFENDANT
Coram: ROGERS J
Heard: 21 MAY
2014
Delivered: 29 MAY
2014
JUDGMENT
ROGERS J:
Introduction
[1] The plaintiff
(‘MFC’) seeks summary judgment against the defendant
(‘Petersen’) for confirmation of
the termination of an
instalment sale agreement of a vehicle and for the return of the
vehicle. The National Credit Act 34 of 2005
(‘the Act’)
applies to the agreement. If summary judgment succeeds, any monetary
claim which MFC may have in consequence
of the termination will be
determined later. Mr Louw appeared for MFC and Ms Wade for Petersen.
[2] Since there is a
debt rearrangement order (‘DRO’) in place which includes
a rearrangement of MFC’s claim,
the first question I shall need
to decide is whether, for as long the DRO stands, I can grant
judgment in MFC’s favour at
all. If that question is answered
in favour of MFC, the further questions that arise are [a] whether a
creditor can terminate a
debt review in terms of s 86(10) if the
consumer was not in default at the time the debt review process
started but fell into default
during the course of the debt review
(for reasons which will appear, I shall refer to this as the ‘Collett
point’);
[b] if not, whether Petersen was already in default of
his obligations to MFC when the debt review began; [c] whether MFC
could
only terminate the debt review if it acted in good faith and,
if so, whether MFC indeed terminated the debt review in good faith;
[d] whether I should in my discretion refuse summary judgment, inter
alia because of the prospect of the debt review being revived
in
terms of s 86(11).
The facts
[3] The instalment
sale agreement was concluded during November 2010. Petersen was
required to pay a monthly instalment of R2 745
over a period of 72
months (seven years).
[4] Petersen
faithfully paid the instalments until August 2013. In the intervening
period, however, he incurred further debt to
the point where he
concluded that he should seek debt review, which he did on 1 August
2013.
[5] The instalments
owing to MFC were payable on the first day of each month by way of
debit order. The first instalment in respect
of which Petersen
defaulted was the instalment due 1 August 2013.
[6] During about
August or September 2013 the debt counsellor circulated a debt
rearrangement proposal among creditors. This proposal
provided for
Petersen to pay MFC a monthly amount of R892,95. The period over
which this amount was to be paid was 149 months.
On 6 September 2013
MFC rejected this proposal and counter-offered a monthly instalment
of R1 947,29. A period was not specified
in the counter-proposal but
presumably it was intended to endure until the debt was repaid in
full. This would have taken the instalment
sale agreement way beyond
the original contract period of seven years but far short of the
additional period of 149 months proposed
by the debt counsellor. On 3
October 2013 MFC sent a chaser, asking the debt counsellor whether
the counter-proposal was going
to be accepted. On 10 October 2013 the
counsellor replied that, having regard to fairness to other
creditors, the counter-proposal
could not be accommodated and that an
application to the magistrate’s court for a DRO would follow.
[7] On 24 October
2013 the counsellor caused the notice of motion for a DRO to be
issued out of the Malmesbury Magistrate’s
Court (‘MMC’),
with the scheduled hearing date being 5 December 2013 (‘the DR
application’). Petersen and
his wife were the first and second
respondents. The third to eighteenth respondents were the creditors.
MFC was the ninth respondent.
In terms of the proposal contained in
the application, Petersen was to pay his counsellor R6 763,75 per
month for distribution
among his creditors. Petersen says in his
affidavit opposing summary judgment that he has since October 2013
regularly paid this
amount, and it appears that MFC has since then
received the monthly amount for which the debt rearrangement proposal
makes provision.
[8] About a month
later, on 19 November 2013, MFC addressed a notice in terms of s
86(10) to Petersen, the counsellor and the National
Credit Regulator.
The notice was duly delivered. By way of that notice MFC terminated,
or purport to terminate, the debt review
in relation to Petersen’s
indebtedness to MFC.
[9] On 2 December
2013 MFC delivered a notice to oppose the DR application. On 5
December 2013, and at MFC’s request, the
DR application was
postponed to 20 February 2014 to afford MFC time to file opposing
papers.
[10] About two weeks
later, on 18 December 2013, MFC issued summons in the present case.
The particulars of claim alleged that Petersen
had applied for debt
review on 1 August 2013 but that MFC had duly terminated the debt
review by way of its letter of 19 November
2013. The summons also
served as MFC’s notice of cancellation of the instalment sale
agreement. The summons was served on
10 January 2014. On 23 January
2014 Petersen gave notice of his intention to defend the action.
[11] A couple of
days earlier, on 20 January 2014, MFC delivered its opposing
affidavit in the MMC proceedings. On 22 January 2014
the counsellor’s
attorneys wrote to MFC’s attorneys. I quote the following
relevant paragraphs from this letter:
‘2. Mr
Petersen was not in default with MFC at the time he applied for debt
review. In fact, he was R100 in credit. According
to the Supreme
Court of Appeal judgment in Collett v Firstrand Bank 2011 (4) SA
[sic], a credit provider may not terminate the
debt review process if
the consumer applies for debt review before he is in default.
3. In the premises,
your notice of termination is illegitimate and your client is
effectively still part of the debt review process.
This naturally
renders the High Court action premature.
4. In the
alternative to the above, should your client have been entitled to
withdraw from the debt review process, the credit provider
is
obliged, in section 86(5) to the NCA, to act in good faith during the
entire debt review process.
5. Initially, MFC
were late to file their notice of opposition of the application for
debt review in the Magistrate’s Court.
On 15 November 2013, MFC
purported to withdraw from the debt review. On 5 December 2013, an
attorney appeared on behalf of MFC
at the Magistrate’s Court,
despite this purported withdrawal. The application was postponed on
MFC’s insistence to
20 February 2014, despite their purported
withdrawal. An opposing affidavit was filed by MFC on 21 January
2014, more than two
months after MFC’s purported withdrawal,
and indeed after summons was issued in this matter in the High Court.
6. In the light of
the above, it would appear that MFC failed in their duty to
participate in the debt review process in good faith,
which would
constitute a reason to place the agreement back under debt review in
terms of section 86(11) of the NCA.’
[12] The
counsellor’s attorneys invited MFC, in the light of the above,
to withdraw the action, failing which a special costs
order would be
sought.
[13] MFC did not
withdraw the action. Instead, and following the entry of appearance
to defend, MFC on 5 February 2014 applied for
summary judgment to be
heard on 10 March 2014.
[14] On 20 February
2014 the magistrate postponed the DR application to 20 March 2014
because the counsellor was ill and unable
to attend.
[15] On 6 March 2014
Petersen delivered his opposing affidavit in the summary judgment
application. I shall return presently to
the grounds of opposition.
[16] On 10 March
2014 the summary judgment application was postponed to 21 May 2014,
with costs to be costs in the cause.
[17] The DR
application served again in the MMC on 20 March 2014. The case was
postponed to 17 April 2014 to allow MFC to file an
application for
condonation in respect of the late filing of its answering papers.
[18] On 17 April
2014 the magistrate dismissed MFC’s application for
condonation. MFC’s attorney then left court. The
candidate
attorney who was appearing for the counsellor made certain
submissions to the magistrate in support of the DRO. In the
summary
judgment proceedings before me, Petersen filed a supplementary
opposing affidavit by the candidate attorney in which the
latter said
the following regarding the MMC proceedings on 17 April 2014:
‘Even though
Applicants/Plaintiff’s affidavit [ie, MFC’s opposing
affidavit on the merits of the debt review]
was not before court, I
revealed to the Honourable Court that Applicant/Plaintiff purported
to terminate in terms of
Section 86(10)
of the
National Credit Act.
In
support of my contention that this “termination” was
not well-founded, I quoted from the Collett judgment. The Honourable
magistrate Pretorius concluded that the Plaintiff/Applicant was not
entitled to terminate the debt review process.’
[19] The magistrate
proceeded to make the DRO. A copy is attached to the candidate
attorney’s affidavit. In terms of the DRO,
the magistrate
declared Petersen and his wife to be over-indebted; ordered them to
make payments to the credit providers, in a
total monthly amount of
R7 385,62, as per an amended debt restructuring proposal attached to
the order; and ordered that the debt
obligations of Petersen and his
wife ‘be restricted as per the attached amended debt
restructuring proposal’. A costs
order was also made. Its
import was not debated before me; it appears to convey that MFC must
pay the costs occasioned by its opposition,
save for which all
parties will bear their own costs.
The DRO of 17
April 2014
[20] In order to
understand the DRO made by the magistrate, it is necessary to explain
the Collett point. In Collett v Firstrand
Bank Ltd
2011 (4) SA 508
(SCA) the Supreme Court of Appeal held that a credit provider was
entitled to terminate a debt review in terms of
s 86(10)
even though
an application was pending in the magistrate’s court for a DRO.
(This position will change when the
National Credit Act Amendment
Act
19 of 2014 is brought into force but that is not relevant here.)
[21] In the course
of delivering the court’s judgment, Malan JA said that a
consumer who was overindebted or in strained circumstances
could
apply for debt review in terms of s 86(1) whether or not he was in
arrears under any particular credit agreement. The learned
judge of
appeal proceeded:
‘[9] …
Where the consumer is not in default of any of his obligations, the
credit provider is unable to terminate the
process, because s 86(10)
gives the right to terminate the debt review only where the consumer
is in default. In such a case the
creditor must await the hearing in
terms of s 87. Nor can the credit provider proceed to enforce the
credit agreement, because
the consumer is not in default. Where the
consumer, however, is in default the credit provider is entitled to
enforce that credit
agreement, provided the consumer has not made
application for debt review pursuant to s 86(1) and the credit
provider has complied
with the requirements of ss 129 and 130. In
terms of s 86(2), an application for debt review concerning a
particular credit agreement
may not be made if the credit provider
has “proceeded to take the steps contemplated in section 129 to
enforce that agreement”.’
[22] Malan JA
continued by observing that the purpose of debt review was not to
relieve the consumer of his obligations but to achieve
either a
voluntary debt rearrangement or a debt rearrangement by the
magistrates’ court (para 10). Under ss 86 and 87 there
was
‘only one unified process, the purpose of which is the
restructuring of the consumer’s debts by amending the terms
of
the credit transaction between the parties’.
[23] He then dealt
with the decision of this court in Wesbank, A Division of FirstRand
Ltd v Papier
2011 (2) SA 395
(WCC), which held that a credit
provider’s right to terminate the debt review was forfeited
once the counsellor delivered
an application to the magistrates’
court for a DRO. In Papier the court concluded that the lawmaker had
selected a 60-day
period in s 86(10) to allow the debt counsellor 30
days, and thereafter the consumer 20 days, to approach the
magistrates’
court for a DRO. Only if this was not done could
the credit provider (effectively after a further 10 days – 60
days in all)
terminate the process. Malan JA rejected this
interpretation of the section (the underlining is mine):
‘[12] …
I do not think that s 86 requires the consumer or his debt counsellor
to “approach the court” within
the period of 60 days.
Indeed no time period is specified within which the debt counsellor
must make application to the magistrates’
court. Nor does the
NCA require the process of debt-restructuring to be complete within
the period of 60 days after the application
was made. To do so would
obviously be unrealistic… A sounder approach is to recognise
the express words of s 86(10), which
gives the credit provider a
right to terminate the debt review in respect of the particular
credit transaction under which the
consumer is in default, and only
when he is in default, at least 60 business days after the
application for debt review was made.
It must be emphasised that it
is only when the consumer is in default that the credit provider has
this right. If he is not, the
debt review continues without the
credit provider being entitled to terminate it. It is not that the
credit provider is “derailing”
the process when he
terminates the debt review: it is the consumer that is in breach of
the contract, not the credit provider.
If the consumer applies for
debt review before he is in default the credit provider may not
terminate the process. But if the consumer
is in default the consumer
is entitled to a 60 business days’ moratorium, during which
time the parties may attempt to resolve
their dispute.’
[24] The argument
before me in relation to the Collett point was that the words I have
underlined mean that, if the consumer was
not in default when he
applied to a debt counsellor to be placed under debt review, a credit
provider cannot thereafter terminate
the debt review in terms of s
86(10), even though the consumer subsequently falls into default. On
the premise that this argument
is correct, Ms Wade for the defendant
contended that the defendant had not been in default of his agreement
with MFC at the time
he applied for debt review, because he made such
application on 1 August 2012 but had until midnight on that day to
pay his instalment.
[25] Reverting now
to the DR application which served before the magistrate on 17 April
2014, one knows (at least on the facts alleged
in the affidavit
opposing summary judgment) that the magistrate rejected MFC’s
application for condonation and thus presumably
did not take into
account the facts alleged in the opposing papers which MFC had filed.
What those facts were I do not know because
the papers in the DR
application (which Ms Wade told me exceeded 100 pages) are not before
me. What one does know is that the magistrate,
after hearing inter
alia the submission on behalf of Petersen which I have previously
quoted, made the DRO attached to Petersen’s
affidavit opposing
summary judgment. While the submission made to the magistrate is
recorded in the supplementary opposing affidavit
in very brief terms,
it is reasonable to infer that it was exactly the same point as the
one subsequently advanced to me in opposition
to summary judgment,
namely that Petersen had not been in default when he sought debt
review; and that for this reason, and by
virtue of the words I have
emphasised in the Collett judgment, the s 86(10) notice had been
invalid.
[26] It might
notionally have been possible for Petersen to contend that the s
86(10) was invalid for a different reason, namely
that MFC did not
act in good faith when giving the notice. In Mercedes Benz Financial
Services South Africa (Pty) Ltd v Dunga
2011 (1) SA 374
(WCC)
Blignault J held that it was necessary to imply a proviso in s 86(10)
to the effect that a credit provider may only terminate
a debt review
if in so doing he is acting in good faith (para 52). He found it
unnecessary to define the precise ambit of the good
faith criterion
beyond observing that, in the absence of special circumstances, he
would not regard the termination of a debt review
as being in good
faith if the consumer was prosecuting it in good faith and in a
reasonable manner (para 51).
[27] However, if
this was the point which Petersen’s attorney had wished to make
to the magistrate, the attorney would presumably
have relied on
Dunga. Although Collett refers to a duty of good faith on the part of
creditors and the consumer, Malan JA did not
in terms hold that a s
86(10) notice would be invalid if given in bad faith. What he
indicated in para 15 of his judgment was that
the failure by a credit
provider to participate in the debt review process might be a factor
in favour of ordering a resumption
of the debt review in terms of s
86(11), with a concomitant stay of summary judgment proceedings. I
thus do not think that a legal
representative, relying on absence of
good faith as a ground for invalidating a s 86(10) notice, would have
based the argument
on Collett. That is not to say that Dunga cannot
be reconciled with Collett, only that Collett is not specifically
authority for
the point made by Blignault J in para 52 of Dunga.
[28] To this I would
add that, even in the present proceedings, Petersen does not in terms
allege that MFC did not act in good faith
in giving the s 86(10)
notice. MFC is criticised because its counter-proposal was much
higher than the proposals made in respect
of other creditors and was
one which he would never have been able to accept. However, this does
not without more mean that MFC
was acting in bad faith. A consumer’s
financial position may be such that he is simply not in a position to
make a reasonable
rearrangement proposal in respect of a particular
creditor. A credit provider does not act in bad faith by rejecting an
unreasonable
proposal and counter-proposing an amount which the
consumer is unable to afford.
[29] Be that as it
may, it is clear to me that the magistrate must have found, for one
reason or another, that MFC’s s 86(10)
notice was invalid, and
as I have said this was probably on the basis of the Collett point.
The reason why the magistrate must
have made a finding of invalidity
is that, without such a finding, he could not have made the DRO. If a
creditor gives a valid
s 86(10) notice, the notice removes, from the
debt review process, the debt which is the subject of the notice. If
the magistrate
had thought that MFC’s notice was valid, he
could not have made a DRO which included the debt owed by Petersen to
MFC.
[30] Mr Louw
submitted that there was no necessary implication of such a finding
by the magistrate. However, and despite the strength
with which he
pressed this submission, I fear that I was unable to grasp its basis.
[31] He said that
MFC was not necessarily ‘unhappy with’ the DRO made by
the magistrate and that the DRO could stand
together with an order
from the high court cancelling the instalment sale agreement and
requiring Petersen to return the vehicle
to MFC. I do not understand
how it can be said that MFC finds the DRO acceptable. After all, one
knows that MFC opposed its grant
in the magistrate’s court and
that its attorney only left after the magistrate refused to condone
the late filing of MFC’s
papers.
[32] To the extent
that Mr Louw was suggesting that the DRO could stand as an order
requiring Petersen to pay off, by way of the
stipulated instalments,
whatever monetary amount might be owing by him pursuant to the
cancellation of the instalment sale agreement
and the return of the
vehicle, the suggestion is untenable. The debt counsellor made the
rearrangement proposal and subsequently
brought the DR application
well before MFC’s purported termination of the debt review.
Insofar as it related to MFC, the
rearrangement proposal and the
subsequent DR application were clearly premised on the continued
existence of the instalment sale
agreement and the modification of
its terms by lengthening its period and reducing the monthly payment.
This proposal, if accepted
by MFC or ordered by the court, would have
entitled Petersen to retain possession of the vehicle because ex
hypothesi the agreement
would not have been cancelled. I have no
doubt that this is the very outcome which MFC attempted to resist in
the magistrate’s
court but it failed.
[33] There is no
reason to read the DRO made by the magistrate as anything other than
an order giving effect to what the debt counsellor
had proposed in
the DR application. The magistrate could not have intended his order
(insofar as MFC is concerned) to relate to
a monetary obligation
arising from the termination of the instalment sale agreement. This
would be contrary to the proposal made
by the counsellor, which was
formulated prior to the purported termination of the debt review.
Furthermore, I have evidence (which,
at the stage of summary
judgment, I must accept) that the magistrate in fact found that the
termination of the debt review was
invalid. And, as a matter of law,
it is far-fetched to suppose that the magistrate had in mind the
termination of the agreement
rather than its continuation. A proposal
originally made with a view to keeping the instalment sale agreement
alive could not,
without material alteration, be transmogrified into
a proposal for the payment of an amount owing upon termination.
Only by sheer (and
highly implausible) co-incidence would the amount owing pursuant to
termination be the same as the amount owing
without a termination. If
the repossessed vehicle reached a good value upon sale by the credit
provider, there might be very little
owing pursuant to a termination.
Yet in terms of the DRO the magistrate ordered Petersen, among other
things, to pay MFC a specified
monthly instalment over a period of
130 months at a specified rate of interest and restricted MFC’s
rights accordingly.
[34] In resisting
this conclusion, Mr Louw submitted that I was reading words into the
DRO which were not there. However, the DRO
must be read in the
context of the application which the debt counsellor brought and the
contentions which were advanced to the
magistrate. Although I do not
have the application itself, I have explained that it must have been
premised on the continuation
in force of the instalment sale
agreement over a lengthened period; and I have also referred to the
fact that Petersen’s
legal representative submitted to the
magistrate that MFC’s s 86(10) was invalid. The DRO is an order
unaccompanied by reasons.
One does not ordinarily find the reasoning
of the court contained in its order. This does not mean that the
magistrate did not
have reasons for doing what he did. One must
assume that a court which makes an order has made all such findings
of fact and law
as were necessary for the making of the order. For
example, if one were shown an order directing a defendant to make
specific performance
of a contract to the plaintiff, one would be
entitled to assume that the court found, among other things, that a
contract existed
between the parties and that the defendant had thus
far failed to make performance.
[35] In assessing
the summary judgment application I am thus entitled to assume that
the magistrate found MFC’s s 86(10) notice
invalid and made a
DRO premised on the instalment sale agreement still being in
existence. That order has not been set aside on
review or appeal
(though one or other of those procedures might yet be pursued by MFC
and the magistrate would then be obliged
or at least entitled to
provide reasons).
[36] What effect
does that have on the present proceedings? The summons in this case
was issued after the launching of the DR application
but prior to the
making by the magistrate of the DRO. The issuing of the summons was
the act by which MFC purported to give notice
to Petersen that it was
cancelling the instalment sale agreement. At the time the magistrate
made the DRO, the high court had not
yet determined whether or not
the s 86(10) alleged by MFC in its particulars of claim was a valid
notice and had not yet determined
whether the purported termination
of the instalment sale agreement in the summons was valid. That is
what I am being asked now
to determine; but another court, albeit of
lower jurisdiction, has already made an order, subsequent to the
issue of summons in
this case, which could not have been made without
a finding that the s 86(10) notice was invalid and that the
instalment sale agreement
continued in force. MFC and Petersen were
parties to that litigation. Although nominally the counsellor
appeared in his own right,
his submissions can be taken to have been
made in what he regarded as the best interests of Petersen and the
body of creditors.
Clearly MFC would have standing to attack the DRO
by way of appeal or review; and Petersen would have to be cited in
any such review
or appeal and would be entitled to oppose it.
[37] The fact that
the high court is superior in the judicial hierarchy does not mean
that an order of the magistrate’s court
can simply be
disregarded by a judge because he thinks the magistrate erred. An
administrative decision stands until set aside
on review (Oudekraal
Estates (Pty) Ltd v City of Cape Town & Others 2004 (6) 222 (SCA)
paras 27-38; Opposition to Urban Tolling
Alliance & Others v
South African National Road Agency Ltd & Others
[2013] 4 All SA
639
para 38). The case for adopting that view in regard to an order
of a magistrate given in judicial proceedings is an a fortiori one.
Sound judicial administration would be thrown into disarray if a
litigant could, without challenging a magistrate’s order
on
appeal or review, ask a judge in other proceedings to give a
different decision.
[38] At very least,
the facts disclosed in the affidavits opposing summary judgment
provide a basis for regarding as res judicata
the question whether
the s 86(10) notice was valid and the further question whether MFC
was entitled to cancel the instalment sale
agreement as it purported
to do by way of issue of summons in this case. The form of res
judicata applicable here is so-called
issue estoppel which has been
recognised in number of judgments of the Supreme Court of Appeal over
the last decade (see, for example,
Smith v Porritt
2008 (6) SA 303
(SCA) para 10; Yellow Star Properties 1020 (Pty) Ltd v Department of
Development Planning and Local Government (Gauteng)
2009 (3) SA 577
(SCA) paras 21-23 and 32; Prinsloo NO & Others v Goldex 15 (Pty)
Ltd & Another [2012] ZASCA 18 paras 10-15; Caesarstone
Sdot-Yam
Ltd v World of Marble and Granite 2000 CC
2013 (6) SA 499
(SCA) paras
18-23; Hyprop Investments Ltd & Others v NSC Carriers and
Forwarding CC & Others
[2014] 2 All SA 26
(SCA) paras 5 and
13-14). Both M
FC and Petersen were
parties to the DR application. There has been a final decision by the
magistrate (the DRO), a decision which
could not have been granted
without a determination of the validity or otherwise of MFC’s s
86(10) notice and of MFC’s
resultant cancellation of the
agreement. Put differently, a finding that MFC’s s 86(10)
notice was bad was ‘an essential
element of the judgment on
which reliance is placed’ (per Scott JA in Smith v Porritt para
10). In Boshoff v Union Government
1932 TPD 324
, a leading early
judgment in our law on issue estoppel, Greenberg J quoted with
approval the following passage from an English
text (a passage in
turn quoted by Wallis JA in Caesarstone supra para 20):
‘Where the
decision set up as res judicata necessarily involves a judicial
determination of some question of law or issue
of fact, in the sense
that the decision could not have been legitimately or rationally
pronounced by the tribunal without at the
same time, and in the same
breath, so to speak, determining that question or issue in a
particular way, such determination, though
not declared on the face
of the recorded decision, is deemed to constitute an integral part of
it as effectively as if it had been
made so in express terms…’.
[39] The cases cited
hold that the court has a residual discretion to decide a suit even
though it would involve a fresh decision
on a matter which is already
res judicata. At the stage of summary judgment I am not prepared to
say that, if the present matter
went to trial, reliance by Petersen
on issue estoppel would necessarily fail. There is, in my view, an
important policy consideration
which favours the conclusion that a
creditor should not be permitted to disregard a DRO which includes
its claim. The assessment
of a DR application requires a
consideration of the consumer’s financial position as a whole.
A magistrate who makes a DRO
does so, it must be assumed, on the
basis that he considers all the debts listed in the DRO to be part of
the re-arrangement. If
he finds a particular debt to be excluded (by
virtue, for example, of a valid s 86(10) termination), the existence
of that debt
and the fact that the consumer will be afforded no
relief in respect thereof will be factors to be taken into account in
determining
whether the proposed DRO is realistic. The attitude of a
creditor to the proposed DRO may be affected by whether or not the
debt
of another creditor is or is not part of the re-arrangement.
Creditors should take DR proceedings in the magistrate’s court
seriously. If the magistrate gives a decision which a creditor
regards as wrong, the creditor should ordinarily pursue the remedy
of
appeal or review. To this may be added the observation of Navsa JA in
Socratous v Grindstone Investments
2011 (6) SA 325
(SCA), in the
context of the kindred defence of lis pendens, that courts are
‘public institutions under severe pressure’
(para 16).
[40] Mr Louw
submitted that, at the time the magistrate made the DRO on 17 April
2014, MFC’s claim for cancellation and return
of the vehicle
was lis pendens because of the high court proceedings. However, this
is an argument that the magistrate erred by
granting the order; it is
not a sufficient basis (assuming the lis pendens contention to be
sound) for disregarding the order without
attacking it on review or
appeal. In the same way, and depending on the answer to the Collett
point, one might say that the magistrate
erred by including MFC’s
claim in the DRO but that does not mean that the DRO can simply be
ignored. A judicial officer,
whether a magistrate or a judge, may
grant an order for reasons subsequently found to be unsound.
Procedures exist for correcting
wrong decisions.
[41] I add that it
is by no means obvious to me that a lis pendens objection to the
magistrate’s order would have been good.
Apart from the fact
that the second court has a discretion whether or not to adjourn its
proceedings because of the first proceedings
(Cilliers et al
Herbstein & Van Winsen The Civil Practice of the High Court of
South Africa 5th Ed at 606), one could just
as well say, if the
magistrate had not yet adjudicated the matter, that I should not
entertain the summary judgment application
because the same issue was
pending in the magistrate’s court. The fact is that the DR
application was launched before the
present proceedings and was
determined prior to the present proceedings.
[42] Section 88(3)
reads as follows:
‘(3) Subject
to section 86 (9) and (10), a credit provider who receives notice of
court proceedings contemplated in section
83 or 85, or notice in
terms of section 86(4)(b)(i), may not exercise or enforce by
litigation or other judicial process any right
or security under that
credit agreement until –
(a) the consumer is
in default under the credit agreement; and
(b) one of the
following has occurred:
(i) An event
contemplated in subsection (1)(a) through (c); or
(ii) the consumer
defaults on any obligation in terms of re-arrangement agreed between
the consumer and credit providers, or ordered
by a court or the
Tribunal.’
[43] The reference
to s 86(10) in the opening words of s 88(3) naturally does not mean
that a notice in terms of s 86(10) may be
given after a DRO has been
made. In terms of s 86(10) notice thereunder can be given only if the
consumer is currently in default
and the agreement is ‘being
reviewed’. If the credit agreement has (usually with other
debts of the consumer) already
been reviewed and the review has
resulted in a DRO, the only circumstance in which the credit
agreement can be enforced by litigation
is if the consumer defaults
on any obligation in terms of the DRO.
[44] In the present
case, the review process has been completed and a DRO is in place.
Although MFC purported to terminate the review
prior to the grant of
the DRO, the magistrate must have concluded that the termination was
invalid and that the resultant summons
in the high court was not a
valid cancellation of the instalment sale agreement. MFC does not
allege that Petersen has defaulted
on his obligations under the DRO.
For as long as the DRO stands, it is my view that MFC is precluded
from enforcing its claim.
[45] I was referred
in argument to numerous judgments, some of them unreported. They are
in the main distinguishable. In Notri Securitisation
3 (Pty) Ltd v
Desmond [2011] ZAECPEHC 3, for example, there was no dispute as to
the validity of the s 86(10) notice and there
was no DRO in place.
What was pending before the magistrate, at the time of the summary
judgment proceedings before the high court,
was an application for
resumption of the debt review in terms of s 86(11). There was also no
DRO in place in Standard Bank of South
Africa Ltd v Botha Case
21726/2011 (unreported judgment of Cloete AJ, as she then was,
delivered on 23 February 2012).
[46] Closer to home
is the decision of Murphy J in Changing Tides 17 Pty Ltd v Grobler &
Another
[2012] 3 All SA 518
(GNP). In that case the magistrate had
made a DRO after the plaintiff had given a s 86(10) notice and issued
summons foreclosing
on an indemnity mortgage bond. In the summary
judgment proceedings before Murphy J there was agreement that the
plaintiff’s
s 86(10) notice had been valid; what the defendants
wanted was a resumption of the debt review. Murphy J found that the
magistrate
had had no jurisdiction to include the plaintiff’s
claim in the DRO, given the valid s 86(10) notice (see para 26). (I
mention
in passing that this is consistent with my view that the
magistrate in the present case could not have included MFC’s
claim
in his DRO without a finding that MFC’s s 86(10) notice
was invalid.) Murphy J had doubts as to whether the invalid DRO
allowed
a sufficient monthly instalment to the plaintiff to justify
the resumption of the debt review. But importantly, for present
purposes,
his conclusion on the overall case was the following (para
28):
‘ … The
difficulty though is that the order is invalid and has not yet been
set aside, and the full facts and circumstances
pertaining to the
debt review are not properly before the court. In the premises, I
believe it will be in the interests of justice
in this case to
adjourn the application for summary judgment to afford the
respondents an opportunity to bring an application for
resumption of
the debt review and for the applicant to bring a counter-application
to set aside the order of the magistrate. Such
a course is
justifiable on grounds of the law having been in a state of
uncertainty until the SCA recently brought welcome clarity
in
Collett.’
[47] It will be
noted that Murphy J, though he did not elaborate upon the matter, was
not prepared simply to disregard the DRO,
even though he believed it
was invalid. He clearly thought that it was necessary for the
plaintiff to bring an application to set
aside the magistrate’s
order. If it were otherwise, he would simply have postponed the
summary judgment application to allow
the defendants to bring a
resumption application in terms of s 86(11). See also Mostert &
Another v Standard Bank of South
Africa Ltd & Another
[2013]
ZAFSHC 83
para 15 where the court was not prepared to disregard an
existing DRO made subsequent to a purported s 86(10) termination.
[48] The only other
case I need mention is the unreported judgment of Gangen AJ delivered
on 15 May 2012 in Motor Finance Corporation
(Pty) Ltd, a division of
Nedbank Ltd v Baradien Case 6455/12 (coincidently the same plaintiff
as in the present case). In that
case the magistrate made a DRO after
the plaintiff had given a s 86(10) notice but before the issuing by
the plaintiff of summons
in the high court for the cancellation of an
instalment sale agreement and the return of the vehicle. The
defendant opposed summary
judgment on the basis that the s 86(10)
notice had not been properly served. She said that she had faithfully
complied with her
obligations under the DRO. In the high court Gangen
AJ found that the s 86(10) had been duly delivered and that there was
no allegation
that the notice had not been received. On the basis
that the magistrate should not have included the plaintiff’s
claim in
the DRO, Gangen AJ proceeded to grant summary judgment. It
does not appear from the judgment that the question I have considered
at some length in this judgment received attention. To the extent
that her approach differs from mine, I am satisfied that her
decision
was incorrect and should not be followed.
[49] Mr Louw
referred me to several authorities in support of the proposition that
a resumption of debt review ordered pursuant
to s 86(11) does not
have the effect of undoing a valid cancellation of a contract
relating to the sale of a motor vehicle. Mr
Louw submitted that such
cases were distinguishable from those dealing with mortgage bonds
over immovable property since in the
latter instance there was no
cancellation until the mortgage bond was cancelled at the deeds
office. It is unnecessary to deal
with these submissions. They would
arise only if I were to find that I could disregard the DRO and to
find, further, that MFC’s
s 86(10) termination was valid, since
then there would remain the question whether I should in my
discretion refuse summary judgment
because of the possibility of a
successful application for resumption in terms of s 86(11). On the
view I take of the matter, I
do not reach that stage.
[50] The conclusion
I have reached naturally does not mean that the magistrate’s
order, insofar as MFC is concerned, was correct.
I entertain
considerable doubt as to whether the passage I have underlined in
para 12 of Collett was intended by Malan JA to have
the meaning for
which Petersen contends, though I can understand why the magistrate,
taking the passage in its literal sense, reached
the conclusion he
did. It is also questionable whether, in the case of an instalment
sale agreement relating to a vehicle, it is
equitable to make a DRO
which extends the period of the transaction so that its total length
from beginning to end will be (as
here) more than 14 years. The value
of the security afforded to the creditor by its retained ownership of
the vehicle might be
negligible well before the end of the extended
period.
[51] However, I do
not think I should prejudge those questions or the further factual
question as to whether Petersen was in default
when he applied for
debt review, since on the approach I take to the present application
for summary judgment they will fall to
be determined in review or
appeal proceedings against the DRO. Other questions may also arise,
for example whether the magistrate’s
order refusing condonation
for the late filing of MFC’s opposing papers is impeachable.
[52] I should
mention that Petersen did not, in his opposing papers, specifically
raise the contention that the validity of the
s 86(10) termination
could not be determined in the present proceedings because of the
existence of the DRO. Ms Wade likewise did
not raise this contention
in her written submissions. She dealt directly with the merits of the
termination. However, the point
is one of law, based on the facts
alleged in the opposing papers. I put it at the outset of oral
argument to Mr Louw. Ms Wade embraced
it at the commencement of her
oral argument but proceeded to address the other matters in case they
arose for decision.
Conclusion
[53] The only point
I decide in this judgment is that MFC is precluded from obtaining
summary judgment for as long as the DRO stands.
I leave the other
questions open.
[54] I do not think
the correct course is to refuse summary judgment. If MFC were to have
the DRO set aside on review or appeal,
it might appear from the
review or appeal judgment that Petersen has no remaining defence to
the claim for summary judgment. I
thus propose to follow the same
course as Murphy J did in Changing Tides, namely to postpone the
application for summary judgment
sine die.
[55] Although Murphy
J’s order in Changing Tides directed the defendant to bring a s
86(11) resumption application within
a specified time and
contemplated a counter-application for review by the plaintiff, I
respectfully consider that the correct course
is for MFC (if so
advised) to bring an application for review or appeal against the
DRO, in reaction to which Petersen may (again,
if so advised) bring a
conditional application or counter-application for a s 86(11)
resumption of the debt review. This seems
to me to be the correct
order of events, because for as long as the DRO stands it would make
no sense for Petersen to apply for
the resumption of the debt review.
I see no need to put MFC to terms in regard to the review or appeal;
the DRO will apply unless
and until MFC takes one of these steps. The
effect of any delay on MFC’s part will be for another court to
decide.
[56] As to costs,
MFC has not succeeded at this stage in obtaining summary judgment
and, on the view I take, should not have pursued
the case for summary
judgment while the DRO stood. On the other hand, Petersen may be
gaining only a temporary respite. Furthermore,
the point on which I
have declined to grant summary judgment is not one which was raised
by Petersen or his counsel, and it is
by no means clear that I would
have decided the other points in his favour had it been necessary to
decide them. Although I could
reserve the costs of the hearing, I
doubt that a fair outcome in that respect will be affected by
anything that happens in the
future. I thus propose to direct that
the parties bear their own costs of the hearing on 21 May 2014 but
that for the rest the
costs of the application for summary judgment
stand over for later determination.
[57] I make the
following order:
[a] The application
for summary judgment is postponed sine die.
[b] The plaintiff
may re-enrol the application for summary judgment if the debt
rearrangement order granted by the magistrate’s
court on 17
April 2014 is set aside, whether on review or appeal.
[c] The parties
shall bear their own costs in relation to the hearing on 21 May 2014.
Save as aforesaid, the costs of the application
for summary judgment
shall stand over for later determination.
ROGERS J
APPEARANCES
For Plaintiff:
Mr J Louw
Instructed by:
Strauss Daly Inc
15t floor, The
Terraces
34 Bree Street
Cape Town
For Defendant:
Ms L Wade
Instructed by:
Morkel & De
Villiers Inc
Somerset West
c/o Herold Gie
Attorneys
Wembley 3
80 McKenzie
Street
Cape Town