FirstRand Bank Ltd v Nkata

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Maya JA, Cachalia JA, Majiedt JA, Willis JA and Saldulker JA
• Judgment Date: 26 March 2015
• Citation: 2015 (4) SA 417 (SCA)
• Hearing Date: 06 March 2015
• Docket Number: 213/2014 [2015] ZASCA 44
• Counsel: A Gautschi SC (with MJ Sawyer) (heads of argument by D van Reenen) for the appellant. L Dzai for the respondent.

Willis JA (Maya JA, Cachalia JA, Majiedt JA, and Saldulker JA concurring):

I [1] The appellant appeals, with the leave of the Western Cape High Court (Rogers J), against the judgment and order which it delivered on 16 January 2014. The respondent, Ms Nomsa Nkata (the debtor), had brought an application for the rescission of a default judgment which the appellant, FirstRand Bank Ltd, trading as First National Bank (the bank), had obtained against her, together with an application for the J cancellation of the sale in execution of an immovable property (the

Willis JA (Maya JA, Cachalia JA, Majiedt JA, and Saldulker JA concurring)

property). The property was erf 8832, Durbanville, situated at A 35 Vin Doux Street, Durmante, Durbanville, Western Cape, under deed of transfer No T42327/2005. A first mortgage bond had been registered over the property in order to secure a loan that the bank had given the debtor to assist her to buy it. The loan is subject to the provisions of the National Credit Act 34 of 2005 (the NCA). Although the High Court B dismissed the application for rescission of the default judgment it, mero motu, reinstated the credit agreement, purportedly in terms of s 129(3) of the NCA. Not only the bank but also the debtor applied for leave to appeal. Although the bank was given leave to appeal, the debtor was not.

[2] The rescission application was the second that the debtor had C brought in respect of the property. The first had been brought in November 2010. Arising from the first application, the parties settled the matter in terms of which a previously scheduled sale in execution of the property was cancelled, the debtor agreed to pay her arrears and, in the event that the debtor failed to make good her arrears, the bank would be able to proceed forthwith to sell the property in execution. The D settlement was reflected in a draft order of court. The debtor herself applied for the draft to be made an order of court but the judge on duty at the time declined to do so as there had not been notice given to the bank. Neither the debtor nor the bank took any further steps in this regard. Nevertheless, in that draft the debtor clearly agreed that the E property could subsequently be sold in execution, should she once again default in respect of the payments that were due.

[3] The property was undeveloped at the time when the debtor bought it in 2005. The debtor, who describes herself as a 'businesswoman', built F a house on the property, taking occupation with her two daughters during 2007. She is a supplier of hospital equipment. She obtained financial assistance from the bank, which was secured by a first mortgage bond registered over the property in May 2006 and a second in 2007. The property is what is colloquially known as 'upmarket'. From the time when the debtor bought the property in 2005 until she took occupation G in 2007 she had been living in a block of flats in Rondebosch, known as Devonshire Hill. It was the address at this flat which she had chosen as her domicilium citandi et executandi.

[4] Between March and November 2010 the debtor received numerous H calls from the bank concerning her arrears. Two letters were addressed by its attorneys to the debtor in terms of s 129(1) of the NCA: the first on 1 June 2010 and the second on 4 June 2010. The debtor claims not to have received these notices and the summons in respect of which the default judgment was obtained. Be this as it may, the debtor approached a debt counsellor on 4 August 2010 and applied for debt review on I 20 August 2010. The debtor acknowledges that she had learned of the default judgment and the first pending sale in execution during the first half of October 2010. This led to her issuing the first application for rescission on 19 November 2010. That application was opposed by the bank but, as has already been mentioned, the matter was settled as reflected in the draft order of court. J

Willis JA (Maya JA, Cachalia JA, Majiedt JA, and Saldulker JA concurring)

A [5] The bank debited the debtor's account with costs related to the recovery of the debt. These were R9050 on 25 October 2010, R14 498 on 21 February 2011 and R4000 on 1 March 2013. The total was therefore about R28 000 — less than the sum of approximately R33 000 which the debtor owed in respect of arrears at the time of the B sale in execution.

[6] The summons was issued on 27 July 2010. Default judgment was granted, in terms of rule 31(5) of the Uniform Rules of the High Court, by the registrar on 28 September 2010, the property being declared executable. The writ of attachment was issued on the same day.

C [7] In May 2012 the debtor informed the bank that she was experiencing difficulties meeting her monthly instalments. She had several meetings with the bank concerning the issue but no agreements were concluded as a result thereof. In October 2012 she approached another debt counsellor. The debtor managed to continue with her instalments until February 2013. According to the bank, it attempted, on numerous occasions D between February and April 2013, to resolve the matter, but to no avail. On the debtor's own version of events, she was informed by the bank of the impending sale in execution in March 2013. The property was sold in execution on 24 April 2013.

[8] At that stage the debtor's arrears were R33 716,89. As at 2 July 2013 E the debtor's arrears were R66 918,19. The purchaser at the sale in execution was Kraaifontein Properties and was the third respondent in the motion court. The second respondent was the sheriff. Kraaifontein Properties renovated the property and then sold it 'on'. By agreement between the purchaser at the sale in execution and the new buyer, F registration of the transfer has been suspended, pending the outcome of this matter. A deeds registry search conducted on 2 July 2013 revealed that the debtor was the co-owner of two other properties. One of these properties is in Parklands, which she owns with her attorney. The other property is in Hunters' Retreat, which she owns with one Ms Thembile Maxwell Nkata. G

[9] Relying on the provisions of s 129(3)(a) of the NCA, the High Court declared that the loan agreements had been reinstated because the debtor made good her arrears in both March 2011 and March 2012 and that, accordingly, the default judgment and the writ in execution ceased, H by operation of the law, to have any force and effect. The order also interdicted the transfer of the property which would have ensued consequent on the sale in execution. Because, as will appear later, the decision of this court is based on its interpretation of s 129(4)(b) of the NCA, it is not necessary to deal with the High Court's reasons and its I findings in respect of s 129(3)(a).

[10] Before us, Ms Dzai, counsel for the debtor, sought to argue that the High Court was incorrect to refuse the rescission. The High Court refused to grant leave on this point. Moreover, there was no cross-appeal in regard thereto. This question is therefore not before us. Ms Dzai otherwise supported the judgment of the High Court. She also contended J that the settlement agreement concluded between the parties on

Willis JA (Maya JA, Cachalia JA, Majiedt JA, and Saldulker JA concurring)

10 December 2010 invalidated the writ that gave rise to the sale in A execution. This submission flies in the face of the express terms of the settlement agreement providing that in the event that the debtor failed to make good her arrears, the bank would be able to proceed forthwith to sell the property in execution. Ms Dzai otherwise supported the judgment of the High Court.

[11] Mr Gautschi, counsel for the bank, submitted that the case turns on B the interpretation of ss 129(3) and (4) of the NCA. Subsections 129(3) and (4) of the NCA read as follows:

'(3) Subject to subsection (4), a consumer [ie a person in the position of the debtor] may — C

(a)

at any time before the credit provider [ie a person in the position of the bank] has cancelled the agreement re-instate a credit agreement that is in default by paying to the credit provider all amounts that are overdue, together with the credit provider's permitted default charges and reasonable costs of enforcing the agreement up to the time of re-instatement; and — D

(b)

after complying with paragraph (a), may resume possession of any property that had been repossessed by the credit provider pursuant to an attachment order.

(4) A consumer may not re-instate a credit agreement after —

(a)

the sale of any property pursuant to —

(i)

an attachment order; or E

(ii)

surrender of property in terms of section 127;

(b)

the execution of any other court order enforcing that agreement; or

(c)

the termination thereof in accordance with section 123.'

[12] The High Court concluded that in order for a consumer to be able to reinstate a credit agreement the debtor need not pay the full F accelerated debt but merely the arrear instalments. I agree. This view also has academic support. [1] Although it had originally adopted the position that it was the full accelerated debt that had to be paid, the bank now wisely and correctly accepts that the High Court's conclusion was the proper one to make in this regard. G

[13] The High Court found that the reasonable costs of enforcing the agreement must be either taxed or agreed. I agree, but this point is irrelevant because, at the time of the sale in execution, the aggregate of the charges for recovery of the debt was less than the amount in respect of which the debtor was in arrears. H

[14] The High Court also found that:

'FRB [the bank] in the present case did not present costs to Nkata [the debtor] and invite her to pay them. FRB simply debited the amounts to the bond account. If the amounts in question were owing by Nkata...