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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NUMBER : 27157/2012

In the matter between

NEDBANK LIMITED.................................................................................................Applicant

and

HENDRIK PETRUS GOOSEN THOMPSON..............................................First Respondent

CORNELIA THOMPSON..........................................................................Second Respondent

JUDGMENT

André Gautschi AJ :

[1] In this matter the applicant (“the bank”) sues the respondents for payment of the sum of R949 012.15 and interest thereon from 1 June 2012, and an order declaring the respondents’ immovable property specially executable.

[2] The relief sought arises out of an agreement of loan between the bank and the respondents entered into in 2008 for the purchase of an immovable property (“the property”), secured by a mortgage bond over the property.

[3] The application was launched in July 2012.  By that stage the bank alleged that the respondents were R209 108.25 in arrears and that the balance outstanding on the original loan of R783 807.00 was R949 012.05.  The respondents were by that stage some 20 months in arrears.

[4] Prior to the launching of the application before me, the respondents had commenced debt review proceedings under the National Credit Act, No. 34 of 2005 (“the NCA”), and a debt review order had been made on 16  February 2012 which included the bank’s indebtedness.

[5] The bank’s right to proceed against the respondents depends upon the provisions of and the facts relevant to section 88(3) of the NCA.

[6] Section 88(3) of the NCA provides as follows :

“88(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 a re-arrangement agreed between the consumer and credit providers, or ordered by a court or the Tribunal.”

[7] Relevant parts of the debt review order read as follows :

“…

1. Having regard to the proposal made by the Debt Counsellor, and the information before it and the Consumer’s financial means, prospects and obligations, the Court declares the Applicant to be over0indebted in terms of Section 79 of the National Credit Act, Act 34 of 2005.  And grants an order re-arranging the Consumer’s obligations as per Annexure A to the application by extending the periods of the agreements and reducing the amounts of each payment due accordingly.

…

3. That an amount of R12,000.00 be paid to the National Payment Distribution Agency.

4. That payment must reach the listed Credit Providers within 30 business days after the above date.

…

7. That the Attorney M Grobler legal fee and the Debt Counsellor’s fee paid to the said parties from the first and second payment in terms of this order as a preferment payment before any distribution.

…” (sic)

[8] In terms of what I assume to be annexure “A” to the order (which sets out the rearrangement of the respondents’ obligations), the bank was to be paid R3 898.02 per month and the first estimated date of distribution was 23 March 2012.  The “first collection instalment date” was 2 March 2012.  The total amount available to creditors per month after various fees was R11 189.60.

[9] On a sensible reading of the debt review order it requires the following :

9.1 The respondents have to pay an amount of R12 000 monthly to the National Payment Distribution Agency (“NPDA”).

9.2 The first contribution of R12 000.00 was to be made on 2 March 2012.  Logically, subsequent payments were to be made on or before the second day of each succeeding month. 

9.3 After deducting fees, listed in annexure A as “CLI, DC & PDA fees” (credit life insurance, debt counsellor and payment distribution agency fees), the balance of R11 189.60 had to be distributed by the NPDA to credit providers listed in annexure A within 30 business days after the date on which the R12 000 was received.

9.4 The legal fees due to attorney M Grobler could be deducted from the first and second payments (the R12 000 received on or before 2 March 2012 and 2 April 2012 respectively) as preferent payments, but not thereafter. The fact that the debt counsellor’s fee could be deducted from the first and second payments as preferent payments seems to me to conflict with annexure A to the order, which envisages that the debt counsellor’s fee be deducted as a preferent payment every month.  This conflict must, in my view, be resolved in favour of the respondents.

[10] Argument in the above matter proceeded before me on 28 January 2014 on the assumption, shared by me, that the respondents had breached the debt review order by the time the application was launched, and that, in terms of section 88(3) of the NCA, the bank was entitled to launch the application.  It is now established that, if the consumer is in default under the credit agreement, and defaults on any obligation in terms of a re-arrangement ordered by a court, the credit provider may enforce its rights by litigation without further notice to the consumer[1].  However, after the argument had been concluded, and in course of preparing this judgment, I had careful regard to a “client statement report” which I gathered had been generated by the NPDA, from which it appeared that, at the time of the launching of the application, the respondents either were not in default of the debt review order, or that any default might have been in only a small amount.  I invited counsel to submit further written argument on this aspect, and they requested the opportunity to file further affidavits.  I received the further affidavits and written submissions on 26 March 2014.

[11] The facts relating to the payments made in terms of the debt review order are now the following :

11.1The respondents, presumably in anticipation of the debt review order being granted, commenced paying amounts (“contributions“) of R12 000 by debit order at the end of every month commencing on 29 December 2011.  The funds were cleared a few days later.  I shall ignore the first two contributions and commence with the contribution made on 28 February 2012 (cleared on 2 March 2012), which I shall treat as the first contribution.

11.2 A debt counsellor fee of R400 and a legal fee of R6 000 were paid out of the first contribution, reducing the amount available to creditors to R4 789.60 and the proportionate amount due to the bank to R1 668.51 (R3 898.02 ÷ R11 189.60 x R4 789.60).  The bank received an amount of R1 674.25 on 22 March 2012, which therefore represents an overpayment of R5.74.

11.3 Out of the second contribution paid by the respondents on 2 April 2012, a debt counsellor fee of R400 and a legal fee of R11 000 were paid, which exceeded the amount which should have been available to creditors.  Accordingly, no payment was due to the bank from the second contribution.  It nevertheless received R66.05 on 19 April 2012, which therefore represented an overpayment.

11.4 There should have been no legal or additional debt counsellor fees deducted as preferent payments from the third contribution paid on 2 May 2012.  Nevertheless, legal fees of R2 000 and debt counsellor fees of R400 were paid out of the third contribution, and the applicant received an amount of only R3 201.30, which was a short payment of R696.72.  Up to that point, the respondents were only R624.93 (R696.72 – R5.74 – R66.05) in arrears.

11.5 The fourth contribution was paid by debit order on 30 May 2012.  The bank received the full amount of R3 898.02 on 10 July 2012, which was within 30 business days of 2 June 2012.

11.6 The fifth contribution was paid on 27 June 2012.  The bank received an amount of R4 082.04 on 18 July 2012, a day before the application was launched, which exceeded the payment due of R3 898.02 by R184.02 and therefore reduced the arrears of R624.93 to R440.91.

11.7 Accordingly, at the time when the application was launched, the respondents were technically in default of their obligations under the debt review order, albeit by the relatively insignificant amount of R440.91.

[12] The respondents explained in their answering affidavit that they had been contacted by an employee of the bank in June 2012, who alleged that they had fallen behind in their payments under the debt review order.  They proceeded to investigate the allegation immediately, and as a gesture of good faith commenced to pay an extra amount of R1 000 monthly into the bond account held at the bank.  The information put before me in the further affidavits shows that the bank has received regular monthly payments of between R5 082.84 and R5 550.81 every month from August 2012 until February 2014, save for May 2013 when there was a “system failure”.  The total amount received by the bank until February 2014 exceeds the total amount due to that date under the debt review order by some R20 000.00. 

[13] The question to be answered is what is the effect of the “default” on the debt review order as at the date of the launching of this application.  The reason for the “default” is apparent, and is indeed common cause between the parties.  It is namely that the NPDA paid additional legal fees out of the third contribution as a preferent payment before paying creditors, which resulted in the creditors (or at least the bank) being short paid. 

[14] As far as I am able to ascertain, payment distribution agencies are recognised by the South African Reserve Bank (“the Reserve Bank”) and authorised by the National Payment System Act, No. 78 of 1998.  That Act provides for the management, administration, operation, regulation and supervision of payment, clearing and settlement systems in the Republic of South Africa.  It establishes a payment system management body (section 3) responsible for managing payment systems in South Africa, which body is recognised by the Reserve Bank.

[15] Section 7 of the National Payment System Act provides as follows :

“7. Payments to third persons

A person may as a regular feature of that person’s business accept money or payment instructions from any other person for purposes of making payment on behalf of that other person to a third person to whom that payment is due, if –

…

(c) the money is accepted or payment made in accordance with directives issued by the Reserve Bank from time to time in terms of section 12.”

Section 12 in turn provides inter alia as follows :

“12. Directives by Reserve Bank

(1) The Reserve Bank may from time to time, after consultation with the payment system management body, issue directives to any person regarding a payment system or the application of the provisions of this Act.

… “

[16] The Reserve Bank has issued two directives, of which directive no. 1 of 2007 is relevant.  After defining a “payer service provider” in paragraph 2.2 to mean “a person who accepts money or the proceeds of payment instructions, as a regular feature of that person’s business, from a payer to make payment on behalf of that payer to multiple beneficiaries;”, it provides inter alia as follows :

“3 DIRECTIVE

3.1 Any person … who, as a regular feature of that person’s business, acts as … a payer service provider shall :

3.1.1 ensure that it is appointed … as an agent of each payer when acting as payer service provider;

…

4. CONCLUSION

…

4.2 Persons who undertake the business of payments to third persons are obliged to act in accordance with the [National Payments System] Act and, in particular, this directive.  Contravention of this directive is an offence in terms of section 12 of the [National Payments System] Act.”

[17] The National Credit Regulator (“the NCR”) approves payment distribution agencies and make it a condition of registration of debt counsellors that payments from consumers in respect of debt obligations and/or debt counsellors’ fees must be received and distributed to the respective parties by payment distribution agencies approved by the NCR. The NCR’s right to do so was recognised in the North Gauteng High Court, Pretoria (as it was then known) in the matter of Debt Monitoring SA (Pty) Ltd v National Credit Regulator and Others[2].

[18] I assume that the NPDA is a payment distribution agency approved by the NCR.  I have not been shown or advised of the existence of any document in terms of which it ensured that it was appointed as an agent of the respondents as payers.

[19] Although section 7 of the National Payment System Act refers to the actions of the payment distribution agency in question as “making payment on behalf of that other person [in this case, the consumer] to a third person to whom that payment is due”, that does not in my view create a relationship of agency between the NPDA and the consumer.  It seems that the debt counsellor in question appoints the payment distribution agency (which must be an agency approved by the NCR) in order to receive the consumer’s contributions and pay them to persons to whom payments are due.  It is an administrative appointment, in this case demanded and sanctioned by the court order, over which the consumer has no control.  In my view, in the absence of agreement between the payment distribution agency and the consumer that the former will act as the latter’s agent, it cannot be held that the payment distribution agency in question acts as the agent of the consumer, and that its actions or inactions would bind the consumer.  It seems clear that the respondents did not choose the NPDA or have any say in its appointment.  The respondents do not enjoy any contractual relationship with the NPDA (certainly none that I have been advised of), and have no control over or say in its actions.  Errors of the NPDA cannot under the circumstances be laid at the door of the respondents.

[20] I am accordingly of the view that the “default” was not a default by the respondents, and the requirement in section 88(3)(b)(ii)[3] has not been met.

[21] The application was therefore launched at a time when the requisites of section 88(3) of the NCA were not all present, and the bank was not entitled to launch the application.

[22] I have come to this conclusion on the basis that the default was caused by the NPDA which was not the respondents’ agent.  Even if I am wrong in this conclusion, I baulk at the idea that I should grant judgment against the respondents for R949 012.15 and interest thereon, and declare their immovable property specially executable, because of an inadvertent default by their agent in the relatively insignificant net amount of R440.91 at the time that the application was launched, when the respondents had made regular monthly contributions in terms of the debt review order until then and had even commenced such contributions two months prior thereto, and had increased and regularly maintained their contributions after the “default” had been discovered, to the extent that by February 2014 they were some R20 000.00 in advance.  In terms of section 2(1) of the NCA I am enjoined to interpret that Act in a manner that gives effect to the purposes set out in section 3.  Section 3 includes as a purpose of the NCA to protect consumers by “promoting equity in the credit market by balancing the respective rights and responsibilities of credit providers and consumers”[4].  These sections would, I consider, require me to interpret the word “defaults” in section 88(3)(b)(ii) to exclude minor, unwitting and excusable defaults of the nature which occurred here, with the result that I would for that reason too find that the requirements of section 88(3) had not been met.

[23] In the premises, the application is dismissed with costs.

ANDRÉ GAUTSCHI

ACTING JUDGE OF THE HIGH COURT

Date of hearing: 28 January 2014

Date of judgment: 23 April 2014

Counsel for the applicant: Ms K Howard, later Mr D van Niekerk

Instructed by: Hammond Pole Majola Attorneys

Counsel for the respondents: Ms R Carvalheira

Instructed by: Marita Venter Attorneys

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