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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

CASE NO:86063/2016

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

DATE:21 SEPTEMBER 2018

In the matter between:

PHANGELA, MUSA GOODWILL                                                APPLICANT

and

BMW FANCIAL SERVICES                                                     RESPONDENT

JUDGEMENT

MOSOPA AJ:

[1] This is application for rescission of default judgement in terms of Rule 31(2) (b) of the Uniform Rules of Court. The Applicant seeks relief in the following terms;

1.1.    That the default judgement granted against the applicant on the 13^th January; 2017 be rescinded; and

1.2.      Costs.

BACKGROUND

[2]   On the 13 April 2007 the Applicant and Respondent entered into a written instalment sale agreement wherein the Applicant financed a motor vehicle, a Porsche 9 J 1 Carrera 45(996), the Respondent purchased from a third party car dealer.

[3]    The Respondent took possession of the motor vehicle on the 13th April 2007. It was a term of contract that the Respondent shall remain the owner of the motor vehicle until the Applicant has paid all amounts and has complied with all its obligation in terms of the agreement.

[4]  The Applicant paid a deposit of R274,5200,00 and the total amount payable in respect of the vehicle was a sum of Rl,528,390,96 with a monthly instalment of Rl8,044,076 over a period of 59 months commencing on 28 May 2007.

[5]    It was a further term of the contract that upon default of payment or loss, damage or destruction of the vehicle, the Respondent may, cancel; the agreement, take possession of the vehicle and discover from the Applicant a pre- estimated liquidated damages and total sum of payable amount not paid by the Applicant.

[6]     The Applicant defaulted in his payment from the 11 August 2009 in the amount of R50,000,00. The Applicant took the vehicle for repairs at GT One (Pty) Ltd but could not make payment for such repairs and the vehicle was detained as lien by GT One (Pty) Ltd as a result of repairs done to the vehicle. The Respondent paid the lien holders outstanding invoices ofR34,041,40 and recovered the vehicle during May 2015.

[7]    The Respondent valued the vehicle, through an independent valuator and informed the Applicant during July 2015 of the valuation as contemplated by section 127(2) of the National Credit Act 34 of 2005(The "Act"). The vehicle was eventually placed on auction and sold during August 2015 by way of an auction. The Applicant was informed of the sale during October 2015 as contemplated by Sect ion 127(5) of the Act and the shortfall was then demanded. The Respondent issued summons against the Applicant on the 3 November 2016 for the cancellation of the agreement and payment of the amount of Rl,211,305,73. The Applicant did not defend the action which resulted in the Respondent obtaining

' default judgement on the 11 January 2017.

ISSUES FOR DETERMINATION

[8]      The following are issues for me to determine;

8.1   Whether does a claim for the shortfall constitute a debt as envisaged by the Prescription Act;

8.2    Whether or not the Respondent's claim was prescribed at the time the Respondent obtained a default judgement.

LEGAL PRINCIPLE

[9]   Rule 31(2) (b) of the Uniform Rules provides;

"31(2) (b) - A Defendant may within twenty days after he or she has knowledge of such judgement apply to Court upon notice to the Plaintiff to set aside such judgement and the Court may, upon good cause showen, set aside the default judgement on such terms as to it seems meet."

[10] The requirements for an application for rescission under this sub-rule have been stated to be as follows;

10.1    The Applicant must give a reasonable explanation of his default;

10.2     The application must be bona fide and not made with the intention of merely delaying Plaintiff's claim, and;

10.3     The Applicant must show that he has a bona .fide defence to the Respondents claim.

(See Chetty v Law Society, Transvaal 1985(2) SA 756(A));

Vosal Investments (Pty) Ltd v City of Johannesburg 2010 (1) SA 595

(GSJ) at 599 A-BJ.

[11]    Section 127 5(b) of the Act provides;

"127: After selling any goods in terms of this section, a credit provider must-

(a)      Give the consumer a written notice stating the following;

(i)       The settlement value of the agreement immediately before the sale;

(ii)      The gross amount realised on the sale;

(iii)      The net proceeds of the sale after deducting the credit provider's permitted default charges, if applicable, and reasonable costs a]lowed under paragraph( a), and

(iv)       The amount credited or debited to the consumer account".

[12]     Section 127(7) provides;

"127(7) - If an amount is credited to the consumer's account and it is less than the settlement value immediately before the sale, or an amount is debited to the consumers account, the credit provider may demand payment from the consumer of the remaining settlement value, when issuing the notice required by subsection 5(b).''

[13]     The provisions of the Prescription Act 68 of 1969 also deserves mention;

13.1 Section l O(I) provides ; "Subject to the provisions of this Chapter and Chapter LV, a debt shall be extinguished by prescription after the lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt".

13.2   Section J 1 provides

"11 - The periods of prescription of debt shall be the following;

(a)     Thirty years in respect of:

(i)      Any debt secured by mortgage bond;

(ii)     Any judgement debt,

(iii)      Any debt in respect of any taxation imposed or levied by or under any law;

(iv)     Any debt owed lo the State in respect of any share of the profits royalties or any similar consideration

 payable in respect of the right to mine minerals or other substances;

(b)     Fifteen years in respect of any debt owed to the State and

arising out of an advance or loan of money, or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a);

(c)    Six years in respect of a debt arising from a bill of exchange or other negotiable instrument or from a normal contract, unl ss a longer period applies in respect of the debt in question in t rms of paragraph (a) or (b).

(d)    Save where an Act of Parliament provides otherwise, three years in respect of any other debt."

(14]       Section 12 provides;

"12 (1) - Subject to the provisions of subsection (2) and (3), prescription shall commence to run as soon as the debt is due. (3) A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care''.

[15]         The Court in Absa Bank Ltd v Keet 2015(4) SA 474 (SCA) Para 20 per Zondi JA when dealing with the issue of whether or not repossession of a motor vehicle amounts to a debt stated; ''In my view there is merit in the argument that a vindicatory claim, because it is a claim based on ownership of a thing, cannot be described as "debtn as envisaged by the Prescription Act. The High Court in Staegemann (para 16) was correc,t t ) say that the solution to the problems of prescription is to be found in the basic distinction on our law between a real right (}us in re) and a personal right (jus in personam). Real rights are primarily concerned with the relationship between the person and the thing and personal rights are concem d with relationship between two persons. The person who is entitled to a real right over a thing can, by way of vindicatory action, claim that thing from any individual who interfere with his right. Such a right is the right of ownership. If, however the right is not absolute, but relative right to a thing, so that it can only be enforced against a determined individual or a class of individuals, then it is a personal right."

"Par 25" In the circumstances the view that the vindicatory action is a Hdebt" as contemplated by the Prescription Act, which prescribes after three years is in my opinion contrary to the scheme of the Act. It would if upheld unde1mine the significance of the distinction which the Prescription Act draws between extinctive prescription on the one hand and acquisitive prescription on the other.. . The creditor does not lose a right to a thing. To equate the vindicatory action with a "debt" has an unintended consequence in that by was of extinctive prescription the debtor acquires ownership of a creditor's property after three years instead of 30 years that is provided in sl of the Prescription Act. This is an absurdity and not a sensible interpretation of the Prescription Act".

[16]         In dealing with the question when does prescription starts to run the Court in Standard Bank of South Africa Ltd v Miracle A.file Investments 67 (Pty) Ltd and Another 2017(1) SA 185 (SCA) at par 15, Mbha JA stated; "However as Prof Laubser emphasises, contrary to the provisions of the

'

 old Act, s12(1) of the current Act provides that prescription begins to run when the debt becomes "due" and not when first accrued. Thus where an acceleration clause affords the creditor the right of election to enforce the clause upon default by the debtor, the debt in terms of the acceleration clause only becomes due when the creditor has elected to enforce the clause. Before an election by the creditor, prescription does not begin to run. The policy consideration that a creditor should not be able to determine of his own accord his prescription will run against him by deferring his election to enforce an acceleration clause, cannot override the clear provisions of the Act. Whilst the creditor holds in abeyance his decisions whether or not to enforce an acceleration clause, prescription will continue to run in respect of the individual arrear instalments, payable by the debtor. The creditors election to enforce the acceleration clause has the effect of transforming the existing instalment debts, into a single debt for the full amount outstanding under a contract. If a creditor elects not to enforce the acceleration clause, he is entitled to wait until all the individual instalments have fallen due before instituting action, albeit at the risk that prescription may then have taken effect in respect of earlier instalments."

Par 18 "Similarly, Joubert point out that:

"Where the contract contains an acceleration clause entitling the creditor to payments in full if a debtor falls in arrears with the payment of one instalment, then prescription in respect of the balance, commences as soon as the balance can be claimed. When the clause a]lows the creditor an election, it commences when he exercised his right to claim payment in full, where the clause operates automatically prescription commences as soon as the debtor falls in arrears".

Par 26 " ... the creditor cannot be said to be in default, or guilty of dilatoriness, until he has made his election. The election and communication thereof in the form of the requisite notices are essential preconditions to create a cause of action in the first place. The election is one which Standard Bank does not have to take at all. Prescription would therefore commence to run only from the date of notice claiming the outstanding balance in terms_of clause 12.2".

DISCUSSION

[17]         Mr Thompson in argument contended that the Applicant was not in wilful default as he had no knowledge of the swru11ons as when the summons was instituted Applicant was no longer staying at the chosen domicilium. However immediately after the Applicant became aware of the situation he immediately within 20 days brought the current application. There is no delaying in bringing this application. Further that the Applicant has a bona fide defence as the Respondents claim has prescribed.

[18]     Mr Van Niekerk on behalf of the Respondent contended that the shortfall damage is not depended on the acceleration clause but on the return of the vehicle. The prescription did not start to run from the time of the last payment but from the time the election was made. The claim for the return of a vehicle is not a "debt" and the period of prescription is 30 years and the action was brought within 30 years period.

[19]      It appears that the is sue of wilful default is not a bone of contention in this matter. It is not in dispute that when summons was served at the chosen domicilium the Respondent was no longer staying at the address. The Applicant failed to inform the Respondent of the change in address. However immediately when the Applicant became aware of the proceedings brought against him, he then applied for the rescission of the default judgement within the required 20 days period.

[20]      The Applicant raises a defence of prescription. The Applicant content that the last date of payment in accordance with the instalment agreement was on the 11 April 2009. As a result prescription started running from that date. The Respondent issued summons against the Applicant on the 3 November 2016 which is a period of approximately 7 years and 7 months after such default, which is a period of more than 3 years. As such the Respondent' s claim is prescribed.

[21]      Clause 12 of the instalment agreement deals with "Breach" by the Purchaser (Applicant) and provides as follows;

"21.1. upon an event of default or the Joss, damage or destruction of the goods as determine in 9.3. Seller may, at its election and without prejudice to any other remedy which it may have in terms of this agreement or otherwise.

21.1.1 without notice claim immediate payment of all payable, whether due for payment or not provided, however, that if purchase does not make immediate payment seller may, notwithstanding the election to claim immediate payment in terms of the sub-clause, claim the relief set out in 12.2.2.below, or 21.l .2. after due demand, cancel this agreement obtain possession of the goods and recover from purchaser, as pre-estimated liquidated damages, the total amount of payables not yet paid by the purchaser, whether same are due for payment or not, less the value of the goods as the date on which seller obtains possession of same or the proceeds of any insurance policy paid to seller in respect of the goods. In addition, seller shall be entitled to recover from purchaser any value added tax payable in respect of such damages. For the purpose of this sub­ clause \• due demand" shall mean immediately on demand unless purchaser is entitled to notice in terms of section 11 of the Creditor Agreement Act("CAA") in which case " due demand" shall mean the giving of notice as required by CAA."

[22]    

For the purpose of deten11ination of whether the Respondent's claim is prescribed or not the relevant clause is clause 12.2.2 as the Respondent elected the use of this clause. The Respondent sent the Applicant a notice in terms of section 127(2) of the Act on the 16 July 2015 informing the Applicant of the estimated value of the vehicle and that if not in default of the terms and condition of the agreement, the Applicant may within 10 business days after receiving this notice, withdraw notice to terminate the:. agreement dated 13 April 2015 and resume possession of the vehicle. The Applicant failed to respond to the notice and the vehicle was then sold.

[23]     On the 9 October 2015 the Applicant was notified by notice in terms of section 127(5) of the Act that the vehicle was sold on the 6 August 2015 for the amount of R548,000,00. Further informed that the net proceeds of the sale amount to R501,915,99 which is credited to his account and that the amount of R1,136,074,06 is due, owing and payable in terms of the agreement and that agreement has been cancelled. The Applicant also failed to respond to this letter.

[24]     The Respondent in casu, elected to use the acceleration clause 12.2.2. and following the dictum as laid in Standard .Bank of South Africa v Miracle Mile Investments 67 (Pty) Ltd and Another (supra) the prescription period started to run when the debt became due, that is when the section 127(5) notice was sent on the 9 October 2015 not when the debt first accrued, that is on the 11 April 2009. Clause 12.2.2 is clear on what "due demand" means and it says it means immediately on demand unless purchaser is entitled to notice. Notice was issued on the 9 October 2015 which is the date of demand. I cam1ot for this reason support argument by Mr Thompson that the Respondent's claim is prescribed. If one has regard to the date of notice then it simply means that the prescription date would have started running from the 9 October 2015. Summons in this matter was issued on the 3 November 2016 which is not the lapse of 3 year period.

[25]     This is claim for a sh01tfall which Mr Van Niekerk contend that it is not a claim for the recovery of d6bt as it was held in the matter of Absa Bank v Keet 2015(4) SA 474 (SCA). In the Absa matter as already explained it was held that a claim for the recovery of the vehicle is not a debt. As a result the period of 3 years prescription does not apply instead a period of 30 years prescription. The legal principle ca1U1ot be distinguishable and find application in this matter. The summons in this matter was issued within 30 years from the time the Applicant defaulted in this matter.

[26]    The Applicant despite succeeding in showing that he was not in wilful default, failed to show that he has a bona fide defence and that the application is not made with the intention of delaying Respondent's claim. It is for that reason that the application cannot succeed.

COSTS

[27]     Mr Van Niekerk on behalf of the Respondent contended that in the event the application is dismissed, costs should be ordered on an attorney and client scale as contained in the instalment agreement. Clause 13 of the instalment agreement governs jurisdiction and cost and provides,

"13.1. Purchaser consent to the jurisdiction of the l\1agistrate' s Court, having jurisdiction over its person, irrespective of the amount in dispute should seller choose to institute action in the Supreme Court , Seller shall not be limited to recovering costs Magistrate's Court scale.

13.2. Purchaser agrees to pay costs which may be awarded against it on

an attorney and client scale."

14.        The Respondent elected to institute its claim in the High Court and according to the instalment agreement is entitled to costs on a High Court scale on an attorney and client scale.

ORDER

[28]      Having regard to be above, I made the following order;

(1)   The application for rescission of default judgement is dismissed;

(2)   The Applicant is ordered to pay Respondent's costs on an attorney and client scale.

M.J.MOSOPA

ACTING JUDGE OF THE HIGH COURT

Appearances

For Applicant                          Adv. Thompson

Instructed by                         Joubert Attorneys

For the Respondent              Adv. Van Niekerk

Instructed by                         Munuik Basson Dagama Inc.

Date of hearing                     14^th August 2018

Date of Judgement                21^st September 2018

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