Absa Bank Ltd v De Villiers and Another

• Jurisdiction: South Africa
• Judge: Fourie J, Saldanha J and Madima AJ
• Judgment Date: 25 November 2008
• Citation: 2009 (5) SA 40 (C)
• Docket Number: 15692/07
• Hearing Date: 17 October 2008
• Counsel: P Coetsee SC for the applicant. No appearance for the respondents.
• Court: Cape Provincial Division

Fourie J: C

[1] This is a review application which concerns certain aspects of debt enforcement under the National Credit Act 34 of 2005 (the NCA). In particular, it involves the interpretation of certain provisions of the NCA dealing with the repossession of property that is the subject of an instalment agreement. D

[2] The NCA came into operation incrementally and has been fully in operation since 1 June 2007. It repealed the Credit Agreements Act 75 of 1980 and the Usury Act 73 of 1968. In terms of s 3 the purposes of the NCA are to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, E responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by, inter alia, providing for a consistent and harmonised system of debt enforcement which places priority on the eventual satisfaction of all responsible consumer obligations under credit agreements. F

[3] Academic writers have commented on various aspects of the NCA, including the provisions that deal with debt-enforcement procedures. Apart from articles in law journals, two works have recently been published, namely JM Otto The National Credit Act Explained (Otto) and JW Scholtz et al Guide to the National Credit Act, 2008 (JW Scholtz et al). G The views expressed in these two publications, and in the articles published in law journals, have been of great assistance in the preparation of this judgment. I am not aware of, nor have we been referred to, any decisions of our courts dealing with the aspects of debt enforcement that are the subject of this judgment.

[4] The background to this application may be summarised as follows. H On 25 August 2006 first respondent concluded an instalment agreement in terms of which he purchased a motor vehicle on certain conditions from Premier Attraction 650 CC. The instalment agreement is a credit agreement as defined in s 8 of the NCA, and the NCA applies to the instalment agreement by virtue of the provisions of s 4 of the NCA. All I the rights arising out of the instalment agreement, including ownership of the subject motor vehicle, have been ceded and transferred to applicant, the latter being a registered credit provider in terms of s 40 of the NCA. After the cession respondent breached the instalment agreement by failing to make payment of the monthly instalments due to J

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A applicant. Applicant brought an urgent ex parte application in the Simon's Town Magistrates' Court in terms of s 130(1) of the NCA for an order authorising the sheriff to attach the motor vehicle which is the subject-matter of the instalment agreement, and to hand same over to applicant for safekeeping. After hearing argument on behalf of applicant, B second respondent (the magistrate) dismissed the application.

[5] Applicant now seeks an order reviewing, setting aside and correcting second respondent's decision to dismiss the application for the attachment of the motor vehicle. Service of these proceedings was effected upon first respondent at his chosen domicilium citandi et executandi, but C he has failed to give notice of his intention to oppose. Second respondent abides the decision of the court, but has filed written reasons for his order dismissing the application. At the hearing of the review application, applicant was represented by Advocate P Coetsee SC, to whom we are indebted for his most helpful submissions, both written and oral.

D [6] At the outset I should emphasise that the application in the court below was not for relief pendente lite, but for a final order authorising the attachment of the subject vehicle. Applicant did not institute an action for cancellation of the instalment agreement, nor was it alleged that applicant intended instituting such an action. Applicant maintained that, E as a credit provider, it is entitled to obtain possession of the vehicle sold in terms of the instalment agreement, by means of an attachment order, in circumstances where the consumer (first respondent) is in default and refuses or neglects to return the vehicle to applicant. Applicant contended that it only had to prove compliance with the requirements set out in s 130(1) of the NCA to be entitled to the order of attachment.

F [7] In his reasons for dismissing the application second respondent found that applicant had duly complied with the requirements of ss 129 and 130 of the NCA for the commencement of legal proceedings to enforce the instalment agreement. However, he held that a final order for the attachment of the vehicle could not be granted in the absence of G an action for cancellation of the instalment agreement by applicant. Second respondent was of the view that applicant's interpretation of the provisions of the NCA would lead to an unacceptable result, in that it would place applicant in final and permanent possession of the vehicle while maintaining the agreement, thereby absolving applicant from H performance in terms of the agreement, but requiring performance from first respondent, whilst at the same time depriving first respondent permanently of possession. In addition, second respondent held that the facts set out in the affidavit in support of the application were insufficient and fell short of the requirements for the granting of urgent applications I of this nature.

[8] Mr Coetsee submitted that these findings of second respondent amounted to errors of law constituting a gross irregularity in the proceedings. He accordingly argued that the findings of second respondent are reviewable by this court in terms of s 24(c) of the Supreme Court Act 59 of 1959. In this regard Mr Coetsee relied on the decisions in J Oosthuizen v Landdros, Senekal, en Andere2003 (4) SA 450 (O) at 455A - B;

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and Hira and Another v Booysen and Another1992 (4) SA 69 (A) at 93A - I. A

[9] In dealing with the relevant provisions of the NCA, it has to be borne in mind that s 2(1) of the NCA requires its provisions to be interpreted in a manner that gives effect to the purposes set out in s 3. As explained by JW Scholtz et al at 2-2, the NCA is an improvement on the previous B legislation in this field. There is no doubt that the provisions, aimed at the prevention of the overindebtedness and exploitation of consumers, are laudable. However, as emphasised by the learned authors, the NCA is unfortunately not always a model of legal accuracy or elegance. As will be illustrated below, the use of confusing terminology by the legislature, C particularly with regard to debt-enforcement procedures, tends to hamper the process of interpreting the relevant provisions of the NCA.

[10] Before dealing with the debt-enforcement provisions of the NCA I should refer to s 123, which deals with the termination of a credit agreement by the credit provider. Section 123(1) prescribes that a credit D provider may terminate a credit agreement before the time provided in that agreement only in accordance with s 123. This section does not, however, detail the steps to be taken by a credit provider to terminate a credit agreement before the agreed termination date. Section 123(2) gives some guidance in providing that, if a consumer is in default under a credit agreement, 'the credit provider may take the steps set out in Part E C of Ch 6 of the NCA, to enforce and terminate that agreement'.

[11] As mentioned by CM van Heerden & JM Otto 'Debt Enforcement in Terms of the National Credit Act' 2007 TSAR 655, the use of the words 'enforce' and 'terminate' in s 123(2) is rather unfortunate. These F words are not defined in the NCA and their simultaneous use may be confusing. The ordinary meaning of 'enforce', in legal parlance, particularly in a contractual setting, would be the enforcement of an obligation. The use of the word 'terminate', on the other hand, conveys the legal notion of the extinguishing of contractual obligations. It is difficult to understand how, as a matter of law, a credit agreement can be enforced G and terminated at the same time, as is suggested by the wording of s 123(2). Be that as it may, it is necessary to consider the ambit of the relevant remedies which a credit provider has in terms of the debt- enforcement provisions of the NCA.

[12] Part C of Ch 6 of the NCA (ss 129 to 133) deals with 'debt H enforcement by repossession or judgment'. Section 129(1)(b) provides that, if a consumer is in default under a credit agreement, the credit provider may not commence any legal proceedings to enforce the agreement before complying with the notice requirement in s 129(1)(a) as well as with the requirements of s 130. If the word 'enforce' in I s 129(1)(b) were to be given the restricted meaning of the enforcement of a contractual obligation, it would mean that where a consumer is in default and the credit provider wishes to invoke the more serious remedy of cancellation, it would not be necessary for the credit provider to comply with the notice provision and other requirements detailed in ss 129(1)(a) and 130. As stated by Otto at 88, this would surely go J

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A against the grain of the NCA, one of the declared purposes of which is to protect consumers.

[13] I accordingly share the view of Otto at 87 - 8 that it appears that the legislature has used the word 'enforce' in a wide sense, namely the exercising of any of its remedies by a credit provider. In addition to what B has been said above, there are other indicia of this intention of the legislature, eg the use of the words 'enforce' and 'terminate' in s 123(2) in describing the steps which a credit provider may take in terms of Part C of Ch 6 of the NCA. In addition, s 129(3), which forms part of Part C of Ch 6, provides that a consumer may, at any time before the credit C provider has 'cancelled' the agreement, rectify his or her breach and resume...