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Sikosana v First Rand Bank Limited A Division of First National Bank (NCT/2800/2011/128(1)(NCA)) [2014] ZANCT 9 (15 March 2014)

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IN THE NATIONAL CONSUMER TRIBUNAL

Case No: NCT/2800/2011/128(1)(NCA)

In the matter between:

BUTI SEUN SIKOSANA …....................................................................................APPLICANT


and

FIRST RAND BANK LIMITED

A DIVISION OF FIRST NATIONAL BANK ….............................................RESPONDENT


Coram:

Ms PA Beck - Presiding member

Adv N Sephoti - Member

Adv J Simpson - Member


JUDGMENT AND REASONS



[1] Application for review of a sale of good in terms of Section 128 of the National Credit Act, Act 34 of 2005 (“the Act”) – Applicability of Section 127 and 128 of the Act – Where a consumer under an instalment sale agreement, secured loan or lease surrenders goods to a Credit Provider – Where a consumer approaches the Tribunal to review a sale on the basis that goods were not sold as soon as reasonably practicable or for the best price reasonably obtainable.

[2] Applicability of Section 127 and 128 of the Act to a sale of immovable property – In terms of Section 127 a consumer may surrender moveable property in order to satisfy a debt owed under a credit agreement – Tribunal to consider whether Section 131 of the Act applies where immovable property is attached and sold to satisfy a judgment debt – Section 131 is not intended to govern circumstances of execution against immovable property where property is sold to satisfy a judgment debt – This is governed by High Court Rule 46 – Section 127 to 131 of the Act does not apply to a review of a sale of immovable property.

[3] Where there are more than one application pending before the Tribunal – Only one matter set down and currently serving before Tribunal – Tribunal cannot make a finding on a matter not before it.

[4] Application dismissed. No order as to costs.

INTRODUCTION

1. The Applicant in this matter is Buti Seun Sikosana, (“the Applicant”) an adult male residing in Benoni (hereinafter referred to as the Applicant).  At the hearing of the matter the Applicant represented himself.

2. The Respondent in this matter is First Rand Bank Limited a division of First National Bank (hereinafter referred to as the Respondent). There was no representation at the hearing for the Respondent despite the Respondent receiving proper notice of the set down of the matter.

3. This is an application to the Tribunal for the review of the sale of goods as provided for in section 128(2) of the National Credit Act 34 of 2007(“the Act”).  The goods in question involved immovable property which had been owned by the Applicant and which was sold at a sale in execution on 4 September 2009.

BACKGROUND

4. The Applicant purchased certain immovable property known as Erf 2[…], H[…] T[…] situated at 9[…] B[….] Street, H[…], B[…]. In order to finance this purchase the Applicant registered a mortgage bond in the Respondent’s favour as security for the loan of R352 000,00 (Three Hundred and Fifty Two Thousand Rand) and thereafter registered a second mortgage bond, as further security, for a loan of R332 000,00 (Three Hundred and Thirty Two Thousand Rand.)

5. The Applicant breached the terms of the mortgage bond agreements by failing to pay certain instalments. In terms of the bond agreements, upon default by the Applicant, the full balance of the bond loan amounts became due and payable. The total balance owing and payable to the Respondent, according to the certificate of balance of the Respondent was the sum of R347 569,81 (Three Hundred and Forty Seven Thousand Five Hundred and Sixty Nine Thousand Rand and Eighty One Cents) plus interest on this amount calculated daily at the rate of 12,75% per annum calculated monthly in advance from 1 March 2009 to date of the final payment.

6. The Applicant failed to pay the outstanding balance of the bond loan amounts due and the Respondent instituted legal proceedings for the recovery of the full outstanding balance in terms of the mortgage agreements.

7. On 2 June 2009 the Sheriff of Johannesburg seized and placed the mortgaged property under judicial attachment.

8. The property was sold by the Sheriff by way of public auction on 2 September 2009. The sale of the property realised the sum of R290 000,00 (Two Hundred and Ninety Thousand Rand).

BASIS FOR THE APPLICATION

9. The Applicant based his application for the review of the sale of goods on sections 127 and 128 of the Act. These sections deal with the situation where a consumer under an instalment agreement, secured loan or lease surrenders goods to the credit provider. The credit provider is then required to follow a specific procedure as set out in the Act before the goods are sold. Once the goods are sold, and in the event the sale is disputed, the consumer may approach the Tribunal for the Tribunal to review the sale of the goods. If the Tribunal is not satisfied that the credit provider sold the goods as soon as reasonably practicable or for the best price reasonably obtainable, the Tribunal may order the credit provider to credit and pay to the consumer an additional amount exceeding the net proceeds of the sale.


ISSUE TO BE DECIDED

10. The issue the Tribunal must determine is whether sections 127 and 128 of the Act apply to the Applicant’s case. More particularly, the Tribunal must determine whether the sale of the Applicant’s immovable property at a public auction by the Sherriff of the Court subsequent to an Order of the High Court rendering the property specifically executable can be reviewed in terms of section 128 of the Act.

THE HEARING

11. The hearing was held on 19 February 2014.  The Applicant based his application on sections 127 and 128 of the Act.

12. At the hearing the Applicant alluded the Tribunal to the fact that he launched three applications with the Tribunal flowing from a non-referral by the National Credit Regulator. At the particular time of lodging these applications with the Tribunal, he was under debt review and living in Limpopo. Due to these personal circumstances the Applicant had some difficulty in providing the Tribunal with all the documents required in support of the three applications. He had to request “someone at home can you check X-document, can you find them, so I can provide them to these people” (sic the Tribunal) and in the process some documents were misplaced.

13. In as much that the Applicant experienced difficulties in bringing his applications before the Tribunal he nonetheless was not “happy with the system of the Tribunal” and why only one of the matters had been set down for hearing.  The Applicant acknowledged at the hearing however that in the time it took him to bring his applications before the Tribunal events overtook him and the relief he initially sought fell away.

14. The Applicant further argued that the service provider “bypassed” him and “went to court ...obtained rights and sold the property”. The Applicant requests that the Tribunal “consider the sale, the way it took place, because it was purposefully that they (sic the Respondent) wanted to strip me off financially”.

15. The Applicant placed a valuation of the property before the Tribunal, for consideration in making a finding. This valuation was conducted by an independent valuer, The Property Partnership, who valued the property at R360 000,00 (Three Hundred and Sixty Thousand Rand.)

16. He argued that flowing out of the alleged unlawful act of the Respondent the Applicant computes his loss to be in the sum of R340 006,00 (Three Hundred and Forty Thousand and Six Rand)  which amount the Applicant claims, as damages, from the Respondent.

17. The Applicant referred the Tribunal to the case of V and S Cattigan v First Rand Bank Limited a division of First National Bank[1]. The Applicant submitted that the Tribunal erred in its reasoning when it came to the conclusion that sections 127 and 128 of the Act did not apply to the sale of immovable property.

18. The Applicant re-affirmed his view that sections 127 and 128 of the Act govern the sale of his property and requests that the Tribunal considers the applicability of these sections to the application before the Tribunal.

CONSIDERATION OF THE MATTER

19. Section 127 provides for the surrender of goods under an instalment agreement, secured loan or lease. Both an instalment agreement and a lease as defined in the definition section refer to the sale or lease of movable property. A secured loan is defined as an agreement in terms of which a person advances money or grants credit to another and retains or receives a pledge or a cession of the title of any movable property or other thing of value as security for all amounts due in terms of that agreement. Under this section a consumer may surrender moveable property in order to satisfy a debt which is owed by the consumer to the credit provider under a credit agreement.

20. Section 128 provides that a consumer who unsuccessfully attempted to resolve a disputed sale of goods in terms of section 127 may apply to the Tribunal to review the sale. If the Tribunal is not satisfied that the credit provider sold the goods as soon as reasonably possible, or for the best price reasonably obtainable, the Tribunal may order the credit provider to credit and pay to the consumer an additional amount exceeding the net proceeds of the sale. This section empowers the Tribunal to review the sale, conducted by the credit provider and if it is not satisfied with the sale, the Tribunal may order the credit provider to pay an additional sum of money to the consumer.

21. Section 131 reads as follows:

If a court makes an attachment order with respect to property that is the subject of a credit agreement, section 127 (2) to (9) and section 128, read with the changes required by the context, apply with respect to any goods attached in terms of that order.’

22. The key point to note about section 131 of the Act is that it does not appear to be limited to instalment agreements, secured loans or leases as specifically provided for in terms of section     127 of the Act. The Tribunal must therefore decide whether section 131 of the Act extends the application of section 127 to the Applicant’s case before the Tribunal.

23. The question to be decided therefore is whether section 131 of the Act applies when immovable property is attached by the court and sold to satisfy a judgment debt.

24. Section 131 states that where the court grants an attachment order with respect to property that is the subject of a credit agreement, section 127 (2) to (9) and section 128 apply subject to changes which are required by the context.

25. Sections 127(2) to (9) deal with the processes which a credit provider must follow when property which has been sold to a consumer is returned to the credit provider because the consumer is unable to meet its obligations under the credit agreement. This property is returned to the credit provider either because the consumer surrenders the goods voluntarily (under section 127) or because a court has issued a writ of execution (under section 131).

26. Section 131 is discussed in the case of Absa Bank Ltd v De Villiers[2]. The Court explains that when a consumer is in default, the credit provider may apply for a Court Order to attach the goods which were the subject of the credit agreement. (It must be noted that where a consumer does not voluntarily return the goods to the credit provider, the credit provider can only regain possession of the goods with a Court Order even in circumstances where the credit provider is the owner of the goods). The De Villiers-matter involved the attachment of a motor vehicle which was the subject of an installment sale agreement. In terms of the agreement, ownership of the vehicle was ceded and transferred to the credit provider.

27. In the De Villiers-matter the consumer failed to pay the required installments and consequently  the credit provider brought an application in terms of section130 (1) of the Act for an order authorizing the sheriff to attach the motor vehicle and to hand the vehicle over to the credit provider for safe keeping. The matter was governed by section 131, because a court attachment was involved rather than a voluntary surrender.

28. In terms of section 131 of the Act the credit provider must then follow the process set out in section127 (2) – (9) in order to realize the value of the goods. Once the goods have been sold, this amount is credited to the consumer’s outstanding account. If the amount is less than the settlement value, the credit provider may demand payment from the consumer of this outstanding balance.

29. If the consumer fails to pay this outstanding amount within 10 days after receiving the required notice, the credit provider may apply for judgment in terms of the Magistrate’s Court Act for the recovery of the remaining settlement value. If however, the consumer pays the amount demanded after receiving the demand notice, judgment against him or her will be prevented. (see section 127 (8) (a) and (b). See also judgment at 49E – 50E).

30. A different process is followed when a creditor seeks to enforce a judgment debt. In order to enforce a judgment debt, one may issue a writ of execution (in the High Court) or a warrant of execution (in the Magistrates Court). In both these scenarios, the effect of the writ or warrant is to instruct the Sheriff of the Court to attach the property of the judgment debtor so that if the judgment remains unpaid after the attachment, the other property of the debtor can be sold at a public auction and the proceeds used to pay the money owed still owed to the judgment creditor (see Pete Hulme Du Plessis and Palmer Civil Procedure: A practical guide 359).

31. When the Applicant defaulted on his mortgage loan repayments the mortgage bond holder would have taken judgment against him for the full amount of the outstanding loan. The property which was rendered as security for the loan rather than “the subject of the loan agreement” was then attached so that the sale proceeds could be used to pay off the judgment debt (or at least a portion of the outstanding judgment debt). The property would have been attached by the Sheriff of the Court pursuant to a writ of execution issued by the High Court.

32. Section 131 is not intended to govern the process in the circumstances of this case. The process is governed instead by the High Court Rule 46 which deals with execution against immoveable property when property is sold to satisfy a judgment debt. Sections 127 - 131 of the Act are intended to deal with the situation where the credit provider initially had possession of the property (either actual physical possession or ownership was transferred to it), the property was then sold to the consumer under a credit agreement and then the property was finally returned to the credit provider (which must assume responsibility for disposing of the property) because the consumer was unable to meet his obligations under the credit agreement. If the property is sold and the price realized is sufficient to settle the full amount of the debt, or the consumer is able to pay off the outstanding amount after the sale, there will be no judgment debt.

33. In summary, section 127-131 has been considered in a number of earlier decisions of the Tribunal where the Tribunal held that section 127-131 of the Act does not apply to the review of the sale of immovable property.

34. In Legoabe v Absa Bank[3] the Applicant entered into a mortgage agreement with the Respondent. The Tribunal stated the following:

Section 1 of the Act defines a mortgage agreement as a credit agreement that is secured by a pledge of immovable property. This throws out the applicability of section 127 as the latter only applies to instalment agreements; secured loans and leases. A secure loan is defined in section 1 of the Act and refers only to a pledge or a cession of title in respect of immovable property. An instalment agreement is also defined as the sale of movable property. The Supreme Court of Appeal, in the matter of Rossouw and Another vs First Rand Bank Limited [2010]ZASCA 130, confirmed the assertion that a mortgage agreement does not fall within the definition of an installment agreement, secured loan or lease. Section 127 is thus only applicable to agreements involving movable property”.

35. The Tribunal also referred to the Rossouw-judgment in McKeen v First National Bank (A division of First Rand Bank Limited)[4] and confirmed that these agreements, namely an instalment sale agreement, a secured loan and a lease as defined in section 1 of the Act all relate to moveable property. The Tribunal further held:

Therefore this section does not apply to the sale of immovable property. (Although the SCA was dealing specifically with section 130 (2), both section 130(2) and section 127 refer to the same types of agreements. As the SCA found that section 130(2) does not apply to immovable property, likewise, section 127 does not apply to immovable property as the same types of agreements are specified in the sections)”.

36. The facts in the current matter, before the Tribunal, do not give the Tribunal any cause to differ from prior decisions of the Tribunal and for this reason and the reasons stated above, the application cannot succeed.

CONCLUSION

37. The Tribunal considered the Application with specific reference to section 128 of the Act.  We take note of two previous applications lodged by the Applicant. The latter two applications were not set down for hearing and we are unable to provide any reasons for this. Should the Applicant wish to take this aspect up, he is at liberty to do so with the Registrar of the Tribunal. The Tribunal is not in a position to make a finding on a matter not placed before the Tribunal and we are accordingly unable to make a specific finding on those matters.

38. Furthermore, the circumstances at the time the applications were lodged have changed substantially and the relief sought does not appear to be relevant any longer. However, and for the benefit of the Applicant in the matter, we can remark that it appears highly improbable that the Tribunal would have been in a position to grant the relief sought in those particular applications because the relief sought does not appear to be within the Tribunal’s powers.

39. It is also noted that the Applicant acknowledged at the hearing that events overtook him and that the relief he initially sought does not have applicability at the time of the hearing of this particular application.

40. In summary therefore, the Tribunal finds that sections 127 and 128 of the Act apply to the sale of moveable property only and that section 131 does not apply in the circumstances of this matter.

ORDER OF THE TRIBUNAL

41. Accordingly, the Tribunal makes the following order:-

41.1 The Application is dismissed; and

41.2 No order as to costs.


DATED THIS 15TH DAY OF MARCH 2014

PA Beck

Presiding Member

Adv N Sephoti (Member) and Adv J Simpson (Member) concurring.



[1] NCT/1537/2011/128(1).

[3] NCT/3032/2011/128(10(P) [2012] ZANCT 5 (30 March 2012).

[4] NCT/943/2010/149(1)(P) [2012] ZANCT 2 (26 January 2012).