South Africa: Western Cape High Court, Cape Town

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No 11766/2010

In the matter between:

THE STANDARD BANK OF SOUTH

AFRICA LIMITED ….................................................................................Plaintiff

and

CLEMENT RICHARD ALLARD ….........................................First Defendant

VERONICA CECILIA ALLARD ….....................................Second Defendant

Court: CLOETE, AJ

Heard: 3 March 2011

Delivered: March 2011

CLOETE, AJ

INTRODUCTION

[1) This is an opposed application for summary judgment.

[2] On 28 June 2010 the plaintiff instituted action against the defendants (who are married to each other in community of property) jointly and severally for (a) payment of the sum of R530 033.03; (b) interest thereon at the rate of 8.8% per annum as from 21 June 2010 to date of payment; (c) an order declaring the immovable property registered in the names of the defendants (being remainder Erf 15347 Parow) executable for the aforesaid amounts; and (d) costs of suit on the scale as between attorney and client.

[3] The defendants delivered a notice of intention to defend and the plaintiff then applied for summary judgment which was set down for hearing on 13 August 2010. The defendants delivered an affidavit in opposition to the summary judgment application and after a postponement on that date the matter was further postponed for hearing on the semi-urgent roll, when it came before me

[4] It should be mentioned that applications by the defendants for condonation for late filing of their affidavit and late filing of their heads of argument were granted by agreement between the parties.

[5] The relevant paragraph of plaintiffs summons reads as follows (the reference to the "NCA" is to the National Credit Act no 34 of 2005):

'1. Payment of the sum of R530 033.03 being the balance of the principal debt together with finance charges thereon (both as defined in the NCA) in respect of monies lent and advanced by the Plaintiff to the Defendants under a mortgage agreement (as defined in the NCA) pursuant to Mortgage Bond No. B33786/2006 (a copy of which is annexed hereto and marked "A') for R562 500.00 passed by the Defendants in favour of the Plaintiff, registered in the Deeds Registry at Cape Town on 7 April 2006 and hypothecating as a First Mortgage Remainder Erf 15437 Parow, in the City of Cape Town. Cape Division. Province of the Western Cape, the sum claimed now being due and payable in terms of clause 9.1 of the bond by reason of the Defendants failure to pay on demand the instalments due under the bono the Plaintiff having complied with the provisions of the NCA and in particular the provisions of Sections 86(10). 129 Mb)(\) and 130 thereof, the Plaintiff having terminated the debt review process (My emphasis.)

[6] The defences raised by the defendants are the following:

(a) The plaintiff failed to inform the court of whether "termination notices" as contemplated by the NCA were sent to the defendants, the debt counsellor and the National Creditor Regulator: the plaintiff "does not allege that such a notice was sent to the National Creditor Regulator by registered mail, and makes no reference that the notices were also sent to myself and my Debt Counsellor, as is prescribed in section 86(10) of the Act. (The references to "myself and "my" are accepted to be references to both defendants.)

(b) The plaintiff failed to inform the court of the circumstances under which the debt review process was terminated, and it is on the basis of these circumstances that the defendants contend that the plaintiff was not entitled to terminate the debt review process and to institute proceedings against them.

(c) Even if I find that the debt review process was validly terminated, this court should exercise its discretion in favour of the defendants and order that the debt review must resume (again, in light of the circumstances alleged by the defendants).

[7] The circumstances alleged are the following; (a) when the defendants began experiencing difficulty in maintaining their mortgage bond payments, they approached a debt counsellor who, after considering their position, placed the defendants under debt review as contemplated in s 86 of the NCA: (b) they were informed by their debt counsellor that their creditors (including the plaintiff) had been notified; (c) they were assessed to be over­indebted and all creditors were informed of this "using Form 17.2 as prescribed by the Act. in and during January 2008" from which date the defendants have been under debt review; (d) they indeed defaulted on one payment "in terms of the Debt review process", but state that their debt counsellor, Mr Mouwers informed them that they could do so and at the time they believed this information to be correct in law; and (e) it is on the strength of this one single default that the plaintiff has sought to "terminate" the debt review process.

ISSUES TO BE DETERMINED

[8] What must be determined is if any of the following constitute bona fide defences as envisaged in Rule 32(3)(b) of the Rules of Court;

(a) Whether the allegations by the plaintiff in its summons that it had complied with the provisions of the NCA and in particular the provisions of s86(10), 129(1)(b)(i) and 130 thereof, constitute compliance with the notice requirements of the NCA to terminate the debt review process.

(b) Whether termination of the debt review process in the circumstances alleged by the defendants constitutes valid termination entitling the plaintiff to have instituted legal proceedings.

(c) If the plaintiff is found to have validly terminated the debt review process, whether I should exercise my discretion in favour of the defendants and order the resumption of the debt review process.

WHETHER THERE WAS COMPLIANCE WITH THE NOTICE REQUIREMENTS OF THE NCA TO TERMINATE THE DEBT REVIEW PROCESS

[9] The defendants relied heavily on Rossouw and Another v FirstRand Bank Limited t/a FNB Homeloans (formerly FirstRand Bank of South Africa Limited) (Case No 640/2009) [2010] ZASCA (130). a judgment of the Supreme Court of Appeal handed down on 30 September 2010.

[10] The defendants do not deny delivery of the notices in terms of s129 and 130 of the NCA but deny delivery as required by s86(10) thereof. As set out above, the defendants aver that the plaintiff also failed to allege in its summons that it delivered such notices of termination to all relevant parties as contemplated by the NCA.

[11] The defendants submit that the decision in the Rossouw case illustrates the approach to be adopted when considering the 'delivery" of notices in terms of the NCA albeit that the case concerned the delivery of notices in terms of s129 and 130 thereof. The defendants argue that it is noteworthy that the Supreme Court of Appeal considered that the failure to allege delivery of such notices in the plaintiff's summons, coupled with the denial of such delivery by a defendant, constituted a defence to an application for summary judgment.

[12] It is accordingly necessary to consider the provisions of s86(10) of the NCA in light of the Rossouw case.

[13] Section 86(10) provides that:

(10) If a consumer is in default under a credit agreement that is being reviewed in terms of this section, the credit provider in respect of that credit agreement may give notice to terminate the review in the prescribed manner to -

(a) the consumer:

(b) the debt counsellor; and

(c) the National Credit Regulator,

at any time at least 60 business days after the date on which the consumer applied for the debt review' (My emphasis.)

[14] The credit provider accordingly has a discretion to terminate the debt review process but in the event that it does so. it is obliged to give notice in the prescribed manner to (a) the consumer; (b) the debt counsellor; and (c) the National Credit Regulator. If it was intended that the credit provider could elect to give notice to only one or more of these in its discretion, one would not find the word "and" in s86(10)(b). Accordingly, in order to follow the correct procedure to terminate the debt review process, all three of the aforementioned must be given notice.

[15] In the Rossouw case, the court found that the legislature was satisfied that sending a document by registered mail is proper delivery; that "send" does not include 'receipt" of the sent item; and the legislature's grant to the consumer of a right to choose the manner of delivery inexorably points to an intention to place the risk of non-receipt on the consumer's shoulders; see paragraphs 30 and 31 of the judgment.

[16] The court however found that the credit provider had not complied with the provisions of s129(1) - which in turn refer to the provisions of s86(10) as set out above - in that no allegation was made either in the summons or the summary judgment affidavit regarding the method employed in delivering the notice. The credit provider had merely stated cryptically in its summons that the plaintiff had complied with s129(1) and 130 of the NCA, annexing notices titled "NOTICE IN TERMS OF SECTION 129(1) OF THE NATIONAL CREDIT ACT" and "CERTIFICATE OF COMPLIANCE IN TERMS OF SECTION 129(1) OF THE NATIONAL CREDIT ACT respectively; see paragraph 33 of the judgment. The court found that these allegations were inadequate for purposes of establishing whether the notice was delivered in terms of the relevant provisions.

[17] The credit provider in that case sought to overcome this difficulty in its papers by handing in a transcript of the argument in the court a quo during which proof of postage by registered mail had been handed in on behalf of the credit provider. However the Supreme Court of Appeal found that, since the provisions of rule 32(4) of the Rules of Court limit a plaintiffs evidence in summary judgment proceedings to the affidavit supporting the notice of application, the document which the credit provider handed in at the hearing of the court a quo was simply inadmissible: see paragraphs 34 and 35 of the judgment. It was in these circumstances that the court found that the credit provider did not prove that it had delivered the notice in terms of s129(1).

[18] In my view, there is merit in the defendants' contention that the principles set out in the Rossouw case should apply equally to s86(10). Firstly, the provisions of s86(10) are specifically incorporated by reference into the provisions of s129(1)(b). Secondly, there is nothing in s86(10) to indicate that the provisions of s168 of the NCA are not applicable to that specific section (s168 being the "catch-all" section of the NCA dealing with service of documents which, as stated in the Rossouw case is in the legal context synonymous to delivery of documents see paragraph 30 of the judgment).

[19] In the instant matter:

(a) The plaintiff instituted proceedings against the defendants on 28 June

2010.

(b) In its summons the plaintiff alleged that it had complied with the provisions of the NCA and in particular the provisions of Section 86(10), 129 1(b)(1) and 130 thereof.

(c) At the date when plaintiff instituted action against the defendants, practice note 33 of the Consolidated Practice Notes of this division provided that:

'(1) In any action instituted in terms of the National Credit Act 34 of 2005 (the Act), the summons or particulars of claim must allege that there has been compliance with the relevant provisions of sections 127. 129 and 131 (as the case may be), read with section 130 of the Act.

(2) In order to satisfy the court of the matters referred to in section 130{3) of the Act. an affidavit by the credit provider must be filed when judgment is applied for.'

(d) Prior to the hearing of this matter the plaintiff filed an affidavit of compliance as envisaged in terms of practice note 33(2) from which it is clear that it had indeed fully complied with the provisions of s86(10).

[20] The plaintiff would not have been aware of the requirements regarding pleading in NCA matters laid down in the Rossouw case at the time of institution of the action, as the decision in that case was only handed down on 30 September 2010 which was more than a month after the summary judgment application was ripe for hearing. Further, practice note 33(1) was only amended on 1 February 2011 to provide that founding papers in NCA matters must contain "sufficient allegations or averments to enable the court to be satisfied that the procedures required by those sections, read with s130(1) and (2) of the Act. as may be applicable to the claim had been complied with before the institution of the proceedings."

[21] In my view, it could not reasonably have been expected of the plaintiff to have to withdraw and reinstitute proceedings in order to ensure compliance with the requirements laid down in the Rossouw case and the amended provisions of practice note 33(1). To my mind, the plaintiff complied fully with what was required of it at the time the proceedings were instituted and it took all of the steps which it could reasonably take to ensure compliance with the Rossouw case prior to the matter being heard before me

[22] I accordingly find that the first defence raised by the defendants must fail.

WHETHER THE PLAINTIFF WAS ENTITLED TO TERMINATE THE DEBT REVIEW PROCESS

[23] The plaintiff submitted that the defendants' affidavit does not reflect that any application has been made to a magistrate's court for debt review and that, on the defendants' own version, the plaintiff was entitled to terminate the debt review process. The plaintiff further submitted that the recent full bench decision of this division in Wesbank, a Division of FirstRand Bank Limited v Papier (case no 1245/2010) is thus not applicable to the present matter.

[24] It is correct that in that case the full bench granted an order staying an application for summary judgment pending the resumption of a hearing before a magistrate in terms of s86(11) as read with s87 of the NCA.

[25] In the instant matter the defendants allege that they were placed under debt review by a debt counsellor. To my mind, a consumer cannot be placed "under debt review" by a debt counsellor in terms of s86(8)(b) of the NCA. A consumer can only be placed under debt review by a court since the debt counsellor's powers only extend to (a) making a recommendation to the consumer's creditors to accept debt restructuring; and (b) failing their acceptance, referring the matter to the court with the recommendation which the creditors have rejected so that the presiding officer can decide whether to place the consumer under debt review with the attendant restructuring of his or her debts: see s86(7)(c)(ii) as read with s86(8)(b) of the NCA. (Specific reference is made to a magistrate's court in s86, but see Mercedes Benz Financial Services South Africa (Pty) Limited v Papana Gideon Dunga (case no. 9222/2010) a decision of this division on 20 September 2010, where the court found that s86(11) should be interpreted to include a reference to the high court and not to the magistrate's court only).

[26] It should also be noted that even in those instances where the creditors accept the debt counsellor's proposal for restructuring, their formal consent must be filed by the debt counsellor as a consent order in terms of s138; see s86(8)(a) of the NCA. Section 138 makes it clear that the consent order must be confirmed by either the National Consumer Tribunal or a court, as the case may be. The acceptance by the creditors of the debt counsellor's proposal for restructuring will thus only constitute being "under debt review" once the consent order is made.

[27] Defendants allege that their creditors were informed of their over-indebtedness (which clearly implies that a debt review process had commenced in terms of s86(7)(c) of the NCA) by "using Form 17.2". The defendants did not however annex a copy of the duly completed form 17.2. nor did they refer to or annex a copy of any s138 consent order.

[28] For ease of reference a blank form 17.2 is reproduced hereunder:

NCR Form 17.2

(On the letterhead of the debt counsellor)

TO: (An individually addressed notification must be sent to credit department

of each credit provider listed in application for debt review)

AND TO: (An individually addressed notification must sent to each registered credit bureau)

FROM: Name of Debt Counsellor...........................................................
NCR registration number............................................................
Address …................................................

Contact Number..........................................................................

DATE: ….....................................................................................................

Full name of Consumer …........................................

Identity number of Consumer.................................................

This notice serves to advise you that