1 IN THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG HIGH COURT, PRETORIA)? o/tfl^f// In the matter between: DELETE WHICHEVER ts NO APR^ABoTf (1) REPORTABLE: YtS/m. (2) OF INTEREST TO OTHER JUDGES: YES/KO. (3) REVISED. ALPHERA FINANCIAL SERVICE^TO^ION-OFiigfcj^ BMW FINANCIAL SERVICES (SA) (PTY) LTD Plaintiff/Applicant En R05SCAM THIRTEEN CC T/A SUPREME TRAILERSUB Defend ant/responden1 JUDGMENT POSV/A, J INTRODUCTION [1] This is a case in respect of two applications for summary judgments, under case numbers 10006/07 and 10007/07, respectively. They arise out of two summonses in respect whereof the plaintiff/applicant, Alphera Financial Services, a division of BMF Financial Sendees (SA) (Pty) Ltd, sues the defendant/respondent, Rosscam Thirteen CC, trading as Supreme Trailers. By agreement between counsel for the applicant and the respondent, at the hearing of tire applications, the papers under the number 10006/2007 are to be used as a basis for argument. It is further agreed that the issues for determination in the two applications and the nature of the issues in the respective summonses in each case are virtually identical. It is also agreed that cross-references to Case No. 10007/2007, where convenience dictates, can be made to the papers in respect of Case No. 10006/2007. However, any reference to paginated pages will, unless the contrary is specifically stated, be reference to the paginated papers under case number
2 10006/2007. One of the major debates in this application is the question whether the agreement between the parties falls under the National Credit Act 34 of 2005 ("the Act'7"the NCA") or otherwise. FACTUAL BACKGROUND: [2] On 28 May 2004 at Northcliff Johannesburg, the applicant and the respondent concluded a written agreement of lease ("the agreement"'), in terms whereof the applicant leased a 2000 Ducati 996 motor cycle to the respondent (Case No. 10000/2007). It is common cause between the parties - and the applicant's heads argument state it in so many words - that, "due to the nature of the agreement between the parties (a lease), which agreement is also a credit agreement (as contemplated in the Credit Agreements Act 75 of1980 and the National Credit Act of2005), ownership of the [motor cyclejstill vests in the applicant" (emphasis added). The applicant entered into a similar agreement with the respondent, in respect of Case No. 10006/2007, for the lease of a jet ski. Similarly, ownership thereof still vests in the applicant. From now on, reference to facts will be to Case No. 10006/2007, with the understanding already stated that facts in the two applications are, for all intents and purposes, identical. [3] In terms of the agreement, the respondent was to pay monthly rental installments to the applicant and the applicant alleges that the respondent is in arrears with payment of the installments. Consequently, the applicant issued summonses in respect of both agreements, under the respective case numbers, wherein it prays for judgment for, primarily, cancellation of the agreement and return of the motor cycle. The full prayer reads:
WHEREFORE, the Plaintiff claims (sick): 1. Delivery of the motor cycle to the Plaintiff 2. An order declaring that the Lease Agreement is cancelled; 3. An order declaring the amounts paid by the Defendant to be forfeited in favour of the Plaintiff; 4. An order directing the Defendant to pay to the Plaintiff the difference between R70 316-26 and the market value of the motor cycle at date of delivery thereof to the Plaintiff; 5. Interest at the rate of 15.5% a tempore morae to date of final payment; 6. Costs of suit on the scale as between attorney and client; 7. Further and or alternative relief " The respondent duly filed its notice of intention to defend the action, whereupon the applicant filed its notice of application for summary judgment, as provided in Rule 32 of the Rules of the High Court ("the Rules"). [4].In its application for summary judgment, the applicant prays for the following: "a. Delivery of the motor cycle to the Plaintiff; b. An order declaring that the Lease Agreement is cancelled; c An order declaring the amounts paid by the Defendant to be forfeited in favour of the Plaintiff; d. That the prayers 4 to 6 of the Plaintiff's Particulars of Claim be postponed sine die; e Costs of this Application on the scale as between Attorney and Client; f. Further or alternative relief " The respondent opposes the application. In doing so, it raises defences both in limine and on the merits. The former will be dealt with before attending to the latter.
4 Arguments in limine: [5] Respondent submits that the applicant's claim is fatally defective, in that; (a) the agreement falls within the provisions of the National Credit Act, 34 of 2005 ("NCA'V "Act"); and that (b) it must, therefore, be dealt with in terms of the provisions of that Act, more specifically the provisions of s 169. The applicant's claim, as pleaded in its particulars of claim, is the respondent's alleged failure to pay rentals due in terms of the agreement. [6] The respondent denies the alleged failure to pay rentals as follows in paragraphs 27 and 28 of its opposing affidavit; "2 7 / deny that xxxxx Claim. 281 deny that the amount of xxxxxxx or at all. " {Pp 45-461 [6a] Earlier in the opposing affidavit, the respondent states the following, in paragraphs 14 and 15, "14 During xxxxx 16Mmarch 2007. 15 I therefore xxxxx the agreement. " [P43J f 16b] A lot of debate ensued during argument, between the two counsel, Mr Kruger on behalf of the applicant and Mr Van Bergen on behalf of the respondent, as to whether the respondent had not admitted liability in paragraphs 14 and 15, respectively. Pointing out that he was not responsible for the drawing of the opposing affidavit, Mr Van Bergen conceded that its draftsmanship left a lot to be desired in a number of respects, paragraphs 14 and 15 being such examples. He submitted, however, that the court cannot regard paragraphs 27 and 28 as nonexistent. Whilst I agree with this submission, for purposes of the summary judgment application, I am of the view that it is irrelevant that a
5 consumer admits being in default if the agreement falls under the NCA. I return to this aspect later in the judgment. [16c] The respondent submits that, notwithstanding the fact that it, in its opposing affidavit, denied being in arrears, it endeavoured to obtain details from the applicant, which would enable it to "determine what the exact state of affairs was, " so as, "if [it] was at fault (which is denied), to make good that fault. " [Para 5.2.11, pi6] [8] It is, in my view, very important to appreciate that the NCA has introduced a new era in creditor-debtor relationships, which has revolutionalised the approach to be adopted by credit-providers, consumers, legal practitioners and courts when dealing with credit agreements. It is not for nothing that the legislature has enacted the NCA. It cannot be business after this Act. It is, therefore, important to determine whether the relationship between the applicant and the respondent in the present case falls within the provisions of the NCA or otherwise. Mr Van Bergen, on the respondent's behalf, submits that, in terms of s 4 of Schedule 3 of the Act [P 142], the Act applies to this lease agreement. In paragraphs 4.2.1 and 4.2.2 of its heads of argument in respect of Case No. 10006 (also applicable to Case No. 10007), the applicant, though not in so many words, disputes that the NCA applies to the lease agreement. Those paragraphs read as follows: "4.2.1 The Respondent fails to fully disclose to this honourable Court the material facts it relies on in its submission that the National Credit Act 34 of2005... regulates the specific contractual relationship between the parties. In this regard, the Respondent's allegations are unnecessarily bald, vague and sketchy and it should not be deemed enough to successfully oppose the Applicant's application for summary judgment (Trust Bank of Africa Ltd v Wassenaar 1972 (3) SA 139 (D) and Appliance Hire (Natal) (Pty) Ltd v Natal Fruit Juices (Pty) Ltd 1974 (2) SA 287(D).
6 4.2.2 Besides, the Respondent is a close corporation. The Credit Act has a limited application, and sometimes no application, in instances where the consumer (the Respondent) is a juristic person (Sections 4(l)(a)(i) and 6 of the Credit Act). The Respondent gives no indication that the preclusive provisions of section 4(l)(a)(i) of the Credit Act are not applicable to the Respondent. " The following comments need to be made in respect of these submissions by the applicant: 1. Whether a given credit agreement falls under the NCA or otherwise is a question of law. It should not be for a consumer to prove that. Section 4(l)(a)(i) reads: "4. Application of Act - (1) Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm's length and made within, or having an effect within the Republic, except - (a) a credit agreement in terms of which the consumer is - (i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, below the threshold value determined by the Minister in terms of section 7 (1). " 2. Section 6 reads: "Limited application of Act when consumer is juristic person. - The following provisions of this Act do not apply to a credit agreement or proposed credit agreement in terms of which the consumer is a juristic person:
7 (a) Chapter 4 - Parts C and D: (b) Chapter 5 - Part A - section 89 (2) (b); (c) Chapter 5 - Part A - section 90 (2) (o); and (d) Chapter 5 - Part C. " 3. Sections 74 (Negative option marketing and opting out requirements), 75 (Marketing and sales of credit at home or work), 76 (Advertising practices), and 77 (Required market information) of Part C of Chapter 4 of the NCA deal with "credit marketing prices." 4. Sections 78 (Application and interpretation of this Part), 79 (Over-indebtedness) and 80 (Reckless credit), of Part D of Chapter 4 of the NCA, deal with over-indebtedness and reckless credit. [9] The applicant does not state why the respondent is disqualified by the provisions of ss 4(1 )(a) and 6 of the NCA. It does not, for instance, aver that the Respondent is the type of juristic person described in s 4(l)(a)(i). Section 78 specifically states that Part D of the Act "does not apply to credit agreement in respect of which the consumer is a juristic person. " A consumer that, like the respondent, is a juristic person, may not challenge a credit agreement to which it is a party simply because the credit provider that is also a party to that credit agreement (a), was involved, in marketing its business, in conduct forbidden in ss 74, 75,76 and 77 in Part C of Chapter 4 of the Act; (b). is, as prescribed in Part D of the Act, guilty of conduct that amounts to granting credit to an over-indebted consumer, in the manner described in s 79 or of granting reckless credit in the manner described in s 80 or failing to take steps detailed in s 81. to ensure that a prospective consumer has "fully and truthfully answerefdj any requests for information by the credit provider as part of the assessment required by this section, " with a view to preventing the credit provider from entering into "a reckless credit agreement with a prospective consumer ";
s (c) has failed to "determine for itself the evaluative mechanisms or models and procedures to be used in meeting its assessment obligations under section 81... [which] mechanismfs], model[s] or procedurefs] result in a fair and objective assessment, " as prescribed in s 82. [10] Sections 89 and 90 Of the Act deal, respectively, with "unlawful credit agreements 1 * and "unlawful provisions of credit agreements."' Subsection 89(2)(b) reads; "(2) Subject to subsections (3) and (4), a credit agreement is unlawful if - (a)... (b) the agreement results from an offer prohibited in terms of section 74 (1). " Section 74(1) is, of course, one of the sections that fall within Part C, being one of the Parts of the Act whose provisions, according to s 6 of the Act, do not apply to a credit agreement "in terms of which the consumer is a juristic person". [11] According to s 90(2)(b), a consumer that is a juristic person may not challenge a credit agreement on the basis that, "(b) it directly or indirectly purports to - (i) waive or deprive a consumer of a right set out in this Act; (ii) avoid a credit provider's obligation or duty in terms of this Act; (Hi) set aside or override the effect of any provision of this Act; (iv) authorise the credit provider to (aa) do anything that is unlawful in terms of this Act; or (bb) fail to do anything that is required in terms of this Act." [12] Significantly, s 6 of the Act isolates, for example, s 89(2)(b) and s90(2)(o) in Part A of Chapter 5, as provisions that "do not apply to a credit agreement... in terms of which
the consumer is a juristic person." That means that a consumer that is a juristic person is protected by the rest of the provisions of s 89 and the rest of the provisions of s 90. Consequently; a consumer which is a juristic person is, for instance, entitled to challenge the lawfulness of a credit agreement which is contrary to the provisions of section 89(2)(a).(c).(d) and (e). Similarly a consumer which is a juristic person may challenge the lawfulness of a credit agreement which is contrary to the provisions of s 90(a) to (n), inclusive. As it turns out in this application, the respondent challenges the validity of the credit agreement on the basis that "(o) it states or implies that the rate of interest is variable, except to the extent permitted by section 103(4). " [13] It is, in my view, for the applicant to state why the respondent is, because it is a juristic person, excluded from the benefits and obligations flowing from those provisions of the NCA from which it is not expressly excluded without qualification. The purposes of the Act will be better achieved, in my view, if all credit agreements - except those that, for specified reasons, do not qualify - are assumed to fall under it. In view of what must be some of the main purposes of the Act, "to prohibit certain unfair credit and creditmarketing practices" (see the preamble) and "promoting equity in the credit market by balancing the respective rights and responsibilities of credit providers and consumers" (s 3(d)). make it essential that every credit agreement be assumed to fall within the provisions of the NCA until shown otherwise. The applicant adopts a very casual matterof-fact attitude in its submission that the respondent may not rely on the provisions of the NCA. In any event, as earlier mentioned, the applicant itself submits that the agreement is "a credit agreement (as contemplated in... the National Credit Act 34 of 2005)." [14] Differences between the effect of the Rule 32 (summary judgment) procedure on a debtor (consumer) that cannot establish a bona fide defence to a creditor's (credit provider's) claim, on the one hand, and the effect of the NCA procedures on a debtor, who, undisputedly, is in breach of a credit agreement is so vast that caution should, in my view, for that reason alone, be taken not to lightly declare a credit agreement as falling outside the NCA. Whist, in the summary judgment procedure, the credit provider is often
10 the only winner, both parties" interests are protected under the NCA procedures. The following sections of the NCA, and this is not intended to be an exhaustive list of such sections, demonstrate differences in approach between Rule 32(summary judgment) procedure and the approach introduced by the NCA to a consumer's admitted indebtedness, with the NCA's policy of, "Placfing] priority on the eventual satisfaction of all responsible obligations under credit agreements" (s 3(i). emphasis added); consumer 1. Section 15 provides for the National Credit Regulator ("the NCR") to, inter alia; (a)... (b) "promofte] informal resolution of disputes arising in terms of [the] Act between consumers, on the one hand, and a credit provider or credit bureau... " (c) [receive] complaints concerning alleged contraventions of [the] Act" (obviously including complaints by consumers in respect of credit provider's conduct). 2. Section 27(a)(i) provides for a National Consumer Tribunal ("the Tribunal") to adjudicate in respect of any alleged prohibited conduct; 3. Section 83 provides for the declaring of a credit agreement a reckless credit and the setting aside of all or part of a consumer's obligations under that agreement; or suspension of the force and effect of such an agreement. Significantly, s 84, dealing with the effect of suspension of a credit agreement, reads; "(J) during the period that the force and effect of a credit agreement is suspended in terms of this Act - (a) the consumer is not required to make any payment required under the agreement; (b) no interest fee or other charge under the agreement may be charged to the consumer; and
11 (c) the credit provider's rights under the agreement, or under any law in respect of that agreement, are unenforceable, despite any law to the contrary"; 4. Cost of credit and interest rate are regulated in s 101 and s 103 respectively; 5. In terms of s 105, the Minister, as defined in the "Definitions" section (s 1), "may prescribe a method for calculating - (a) a maximum rate of interest; [and] (b) the maximum fees contemplated in this Part"; 6. Section 108(1) provides as follows; "(1) A credit provider must offer to deliver to each consumer periodic statements of account in accordance with this section ". I pause to remark that there is a long debate in this matter about just how much is due to the applicant, a debate that would not have arisen if the applicant treated this credit agreement as one under the NCA and complied with the provisions of this section. 7. Section 127(1), dealing with the surrender of goods, reads; "(1) A consumer under an installment agreement, secured loan or lease - "(a) may give written notice to the credit provider to terminate the agreement; and (b)tf- (i) the goods are in the credit provider's possession, require the credit provider to sell the goods; or (ii) otherwise, return the goods that are the subject of that agreement to the credit provider's place of business during ordinary business hours within five business days after the day of the notice or within such other period or at such other time or place as may be agreed with the credit provider; (2) Within 10 business days after the later of- (a) receiving a notice in terms of subsection (l)(b)(i); or
12 (b) receiving goods tendered in terms of subsection (l)(b)(ii), a credit provider must give the consumer written notice setting out the estimated value of the goods and any other prescribed information. (3) Within 10 business days after receiving a notice under subsection (2), the consumer may unconditionally withdraw the notice to terminate the agreement in terms of subsection (1) (a), and resume possession of any goods that are in the credit provider's possession, unless the consumer is in default under the credit agreement. (4) If the consumer - (a) responds to a notice as contemplated in subsection (3, the credit provider must sell the goods as soon as practicable for the best price reasonably obtainable," (emphasis added). Subsections (5) to (9) deal, primarily, with procedure related to proper accounting for the proceeds of the consumer's goods in terms of the provisions of this section and payment, by the consumer, of costs incidental to the sale of the goods; (10) a credit provider who acts in a manner contrary to the provisions of this section is guilty of an offence" (emphasis added). The significance of this section, with provisions such as in, for instance, subsections (4) (b) (selling of the goods "for the best price reasonably obtainable"), and (10) (the possibility of the credit provider being criminally charged for contravening any of the provisions of the section), is too obvious to require elaboration. 8. Section 128 reads: "128* Compensation for consumer. - (1) A consumer who has unsuccessfully attempted to resolve a disputed sale of goods in terms of section 127 directly with the credit provider, or through
13 alternative dispute resolution under Part A of Chapter 7, may apply to the Tribunal to review the sale. (2) If the Tribunal considering an application in terms of this section 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 next proceeds of sale. (3) A decision by the Tribunal in terms of this section is subject to appeal, or review by, the High Court to the extent permitted by section 148" (emphasis added). Section 148 deals with a procedure that is available in the event of a consumer deciding to proceed by way of appeal or review and is not relevant for purposes of the current discussion. What is important about section 128 is the fact that in a credit agreement which falls under the NCA. the consumer has a leeway to take legal steps to ensure that his /her/its goods are not sold for the proverbial song, where the credit provider is at will to decide the price at which they are sold. Hopefully, sections 127 and 128 of the NCA will bring about greater justice in one area of credit agreements in which consumers have frequently, if not always, been cheated to the extreme, that of their re-possessed property being resold for ridiculously low prices. This has resulted in proceeds of re-possessed goods not as much as denting the amount of the outstanding debt. Courts have not, in the past, been readily in a position to intervene on behalf of debtors in such circumstances, because legislation did not provide ready machinery for such consumers to approach the courts. The respondent in the present case cannot, in my view, resort to the provisions of the NCA mentioned above, including those contained in sections 127 and 128, which protect a consumer that is in default with its payments, if the credit agreement is to be dealt with under Rule 32 (summary judgment procedure). 9. Section 129 reads; "Requiredprocedures before debt enforcement -
15 [15] The sections of the Act referred to in paragraphs 1 to 10, under the main paragraph 114) hereof, should make it abundantly clear that the legislature intended, in enacting the NCA. to bring about total departure from the way in which disputes between credit providers and consumers were handled prior to the commencement of the Act. The Respondent's Defence in respect of Summary Judgment [15a] Mr Kruger, on the applicant's behalf, and Mr Van Bergen, on the respondent's behalf addressed the Court eloquently, referring to both the facts of this application and ample authority on summary judgment procedure. In view of the decision I have arrived at, viz., that the agreement between the applicant and the respondent falls under the provisions of the NCA, it is not necessary for the Court to go into these submissions. Suffice it to say that summary judgment cannot be granted in these circumstances, seeing that I am of the view that the agreement falls under the provisions of the NCA, which take the agreement outside the ambit of Rule 32, in circumstances where the consumer, as is the case here, pertinently seeks that the case be dealt with under such provisions. It is only where the consumer has been afforded the opportunity to take advantage of such applicable provisions of the NCA as it decides to rely upon. [16] In arriving at my decision, I am not unmindful of the fray between decisions in Standard Bank Limited v Kruger; Standard Bank of South Africa Limited v Pretorius 2010(4) SA 635 (GSJ) and SA Securitisation (Pty) Limited v Matlala, Gideon (unreported judgments by Kathree-Setiloane AJ, in Case No. 6359/10 (SGI)), dated 29 July 2010 [2010 JOL 26095 (GSJ)), on the one hand, and a decision in Firstrand Bank Ltd v Colletf (an unreported judgment by Eksteen J, in Case No. 1819/10, dated 02 September 2010 [2011] JOL 26642 (ECG)), including decisions in judgments cited with approval in the latter judgment, on the other hand, on the interpretation to be given to s 86 of the NCA. Neither view, has, in my view, a bearing on the outcome of the application before me. Regardless of which of the interpretation is the correct one, regarding which I am not called upon to make a decision, a consumer has available to it the option to rely on
-APR-2011 THU 09:32 P. 002/00 16 the provisions of s 86 of the NCA and related provisions thereto, an option that is net open to it under Rule 32, (the summary judgment process). [17] In the circumstances I make the following order: (a) The application for summary judgment is dismissed; (b) The respondent is given leave to defend the action ; (c) The applicant is to pay costs of this application. JMVIFOSWA JUDGE OF THE HIGH COURT OF THE NORTH GAUTENG HIGH COURT BascsraKso Nel Applicant Attorneys 548 Charles Street Menio Park Pretoria Tel: (012) 346 5669 Ref: CNO13405/ta/NEH077 J E Kruger Applicant's Counsel Selepe Keet Inc Respondent's Attorneys 10A Clamart Road Richmond Johannesburg Private Bag X9,
Melville 2109 Johannesburg CH Van Bergen Respondent's Counsel