Ferris and Another v FirstRand Bank Ltd

• Jurisdiction: South Africa
• Judge: Moseneke ACJ, Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van Der Westhuizen J and Zondo J
• Judgment Date: 12 December 2013
• Citation: 2014 (3) SA 39 (CC)
• Docket Number: CCT 52/13 [2013] ZACC 46
• Hearing Date: 05 November 2013
• Counsel: P Pauw SC (with S Cohen) for the applicants. AR Gautschi SC (with M Reineke and K Serafino-Dooley) for the respondents.
• Court: Constitutional Court

Ferris and Another v FirstRand Bank Ltd
2014 (3) SA 39 (CC)

2014 (3) SA p39

Citation	2014 (3) SA 39 (CC)
Case No	CCT 52/13; [2013] ZACC 46
Court	Constitutional Court
Judge	Moseneke ACJ, Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van Der Westhuizen J and Zondo J
Heard	November 5, 2013
Judgment	December 12, 2013
Counsel	P Pauw SC (with S Cohen) for the applicants.; AR Gautschi SC (with M Reineke and K Serafino-Dooley) for the respondents.

Flynote : Sleutelwoorde D

Credit agreement — Consumer credit agreement — Debt rearrangement — Order — Breach — Credit agreement enforceable without further notice — Notice of termination of debt review not required. E

Credit agreement — Consumer credit agreement — Debt review — Good-faith requirement — Once debt-rearrangement order granted, good-faith requirement falling away — National Credit Act 34 of 2005, s 86(5)(b).

Headnote : Kopnota

A credit agreement is enforceable without further notice once a debt-rearrangement F order is breached. The credit provider need not give notice of termination of debt review before doing so — it is independently entitled to enforce the loan on the basis of the breach of the rearrangement order and the provisions of the rearrangement order itself. (Paragraphs [17] – [18] at 45E – 46B.)

The good-faith requirement for debt-review negotiations by s 86(5)(b) of the G National Credit Act is aimed at the parties reaching agreement on debt- restructuring before a debt-rearrangement order is needed. Once such an order is granted, agreement is no longer necessary and the good-faith requirement for participating in the debt-review proceedings becomes irrelevant. (Paragraph [19] at 46C – E.)

Cases Considered

Annotations H

Case law

Absa v Dircon Industrial Properties (Pty) Ltd and Others [2011] ZAGPPHC 2: referred to

Bertie van Zyl (Pty) Ltd and Another v Minister for Safety and Security and Others I 2010 (2) SA 181 (CC) (2009 (10) BCLR 978; [2009] ZACC 11): applied

Brummer v Gorfil Brothers Investments (Pty) Ltd and Others 2000 (2) SA 837 (CC) (2000 (5) BCLR 465; [2000] ZACC 3): referred to

Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape) 2003 (6) SA 1 (SCA) ([2003] 2 All SA 113; [2003] ZASCA 36): referred to J

2014 (3) SA p40

eThekwini Municipality v Ingonyama Trust 2013 (5) BCLR 497 (CC) ([2013] ZACC 7): referred to A

Ex parte Neethling and Others 1951 (4) SA 331 (A): referred to

FirstRand Bank Ltd v Fillis and Another 2010 (6) SA 565 (ECP) ([2010] ZAECPEHC 50): dictum in para [16] applied

General Council of the Bar of South Africa v Geach and Others 2013 (2) SA 52 (SCA) ([2012] ZASCA 175): referred to B

Giddey NO v JC Barnard and Partners 2007 (5) SA 525 (CC) (2007 (2) BCLR 125; [2006] ZACC 13): referred to

Grootboom v National Prosecuting Authority and Another [2013] ZACC 37: referred to

Kekana v Society of Advocates of South Africa 1998 (4) SA 649 (SCA) ([1998] 3 All SA 577; [1998] ZASCA 54): referred to C

Liebenberg NO and Others v Bergrivier Municipality 2013 (5) SA 246 (CC) (2013 (8) BCLR 863; [2013] ZACC 16): referred to

Mthanthi v Pepler 1993 (4) SA 368 (D): compared

Mutebwa v Mutebwa and Another 2001 (2) SA 193 (TkH) ([2001] 1 All SA 83): referred to

Phillips and Others v National Director of Public Prosecutions 2006 (1) SA 505 (CC) (2006 (1) SACR 78; 2006 (2) BCLR 274; [2005] ZACC 15): referred to D

Saloojee and Another NNO v Minister of Community Development 1965 (2) SA 135 (A): dictum at 141B – E applied

Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) SA 142 (CC) (2012 (8) BCLR 785; [2012] ZACC 11): applied E

Topol and Others v LS Group Management Services (Pty) Ltd 1988 (1) SA 639 (W): referred to

Van Wyk v Unitas Hospital and Another (Open Democratic Advice Centre as Amicus Curiae) 2008 (2) SA 472 (CC) (2008 (4) BCLR 442; [2007] ZACC 24): referred to.

Statutes Considered

Statutes F

The National Credit Act 34 of 2005, 86(5)(b): see Juta's Statutes of South Africa 2012/13 vol 5 at 1-472.

Case Information

P Pauw SC (with S Cohen) for the applicants. G

AR Gautschi SC (with M Reineke and K Serafino-Dooley) for the respondents.

Application for leave to appeal against a high-court decision. The application was denied.

Judgment

Moseneke ACJ (Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van der Westhuizen J and Zondo J concurring): H

Introduction

I [1] This is an application to overturn a high court's refusal to rescind a default judgment granted in the context of the National Credit Act [1] (Act).

2014 (3) SA p41

Moseneke ACJ (Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van der Westhuizen J and Zondo J concurring)

Background A

[2] In October 2007 Mr and Mrs Ferris, the applicants, borrowed money from FirstRand, the first respondent, to buy their home. This loan was secured by a mortgage bond over the property. Thereafter, Mr and Mrs Ferris fell into arrears with their loan repayments. In B February 2009 they applied to a debt counsellor for debt review in terms of s 86(1) of the Act. [2] In March 2009 the debt counsellor made an offer to FirstRand for repayment of the loan on terms more favourable to Mr and Mrs Ferris than initially agreed. Mr and Mrs Ferris claim that this offer was ignored while FirstRand claims that this offer was refused because it was not permissible under the Act. It does not appear that C FirstRand made a counter-offer.

Litigation history

[3] In September 2009 and in terms of s 86(7) [3] the debt counsellor brought an application in the Randburg Magistrates' Court to have D Mr and Mrs Ferris declared over-indebted and to rearrange their debt obligations. On 20 April 2010, and while this application was pending, FirstRand sent a notice under s 86(10) to Mr and Mrs Ferris and the debt counsellor purporting to terminate the debt review. [4] Mr and

2014 (3) SA p42

Moseneke ACJ (Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van der Westhuizen J and Zondo J concurring)

A Mrs Ferris argued throughout that this notice was not properly delivered. After initially contesting this, FirstRand conceded before this court that the s 86(10) notice had not been properly delivered. Soon after dispatch of the notice, on 30 April 2010, the magistrates' court granted a debt-restructuring order, based on terms requested by Mr and B Mrs Ferris. It (a) declared Mr and Mrs Ferris over-indebted; [5] (b) rearranged their debt obligations; and (c) specified that the original credit agreement would 'be revived and be fully enforceable' if the restructuring order were breached.

[4] On 7 May 2010, a week later, Mr and Mrs Ferris fell behind on their C payments under the debt-restructuring order. On 14 June 2010, after they had fallen even further behind on their payments, having paid only R1000 out of almost R9000 owed, FirstRand issued summons for payment of the full balance of the loan plus interest and for an order declaring their home specially executable (enforcement action). Mr and D Mrs Ferris then filed a notice of intention to defend and a plea in which they contended that the debt review had not been terminated by virtue of the s 86(10) notice. FirstRand filed a replication. It argued that it was entitled to enforce the loan because Mr and Mrs Ferris had breached the debt-restructuring order. On 20 August 2010 FirstRand applied for summary judgment. This was successfully resisted. Mr and Mrs Ferris E then failed to make discovery on time. On 8 November 2011 FirstRand applied to strike out their defence and for default judgment. An order in its favour was granted the following day.

[5] On 23 May 2012, more than six months after default judgment was entered, Mr and Mrs Ferris applied for its rescission under rule 42(1)(a) F of the Uniform Rules of Court [6] or the common law or the provisions of rule 31. In the application they blamed the negligence of their attorneys for their failure to defend the summary-judgment application. They also argued that the default judgment was wrongly granted because FirstRand's s 86(10) notice was not properly delivered and the sale in execution would unjustifiably infringe their right of access to adequate H housing.

[6] On 5 October 2012 the high court (Kgomo J) dismissed the rescission application on the grounds that (a) there was no basis for rescission under rule 42(1)(a) because FirstRand's s 86(10) notice had validly terminated the debt review; and (b) even if the debt review were I still in place, this would not be a complete defence on the merits. The court concluded that there was no bona fide defence to the enforcement

2014 (3) SA p43

Moseneke ACJ (Skweyiya ADCJ, Cameron J, Dambuza AJ, Froneman J, Jafta J, Madlanga J, Mhlantla AJ, Nkabinde J, Van der Westhuizen J and Zondo J concurring)

action, precluding rescission. Mr and Mrs Ferris applied for leave to A appeal in the high court. It was refused. They then petitioned the Supreme Court of Appeal for leave to appeal, which was refused on 22 February 2013. Two months later, on 23 April 2013, they applied to this court for leave to appeal, well outside the time afforded under our rules.

Jurisdiction B

[7] The parties agree that this matter raises constitutional issues and thus falls within the jurisdiction of this court. In Sebola [7...