FirstRand Bank Ltd v Kona and Another

• Jurisdiction: South Africa
• Judge: Mpati P, Cachalia JA, Mbha JA, Van Der Merwe AJA and Meyer AJA
• Judgment Date: 13 March 2015
• Citation: 2015 (5) SA 237 (SCA)
• Docket Number: 20003/14 [2015] ZASCA 11
• Hearing Date: 26 February 2015
• Counsel: L Meintjies for the appellant. SS Cohen for the respondents.
• Court: Supreme Court of Appeal

Meyer AJA (Mpati P, Cachalia JA, Mbha JA and Van der Merwe AJA concurring):

[1] This is an appeal against an order of the North Gauteng High Court, F Pretoria (Phatudi J) on 7 March 2014 discharging a provisional order of sequestration of the joint estate of the respondents, who are married in community of property. The appeal is with leave of the High Court.

[2] It is common cause that the appellant has a liquidated claim against the respondents. As at 26 August 2011 their indebtedness to the G appellant amounted to R953 903,48, plus interest thereon at the rate of 7,30% per annum. The indebtedness arose as a result of an overdraft facility the appellant had granted to the respondents pursuant to the conclusion of a written loan agreement on 7 August 2006. The facility was subsequently increased. The moneys borrowed from the appellant H were secured by a first and a second mortgage bond registered in favour of the appellant over an immovable property owned by the respondents and in which they reside. The National Credit Act 34 of 2005 (the NCA) applies to the loan agreement. The appellant is a 'credit provider' and each respondent a 'consumer' as contemplated in s 1 of the NCA.

[3] During the year 2008 the respondents applied to a registered debt I counsellor, Mr Rael Zimmerman, for a debt review in terms of s 86(1) of the NCA. They submitted an application, as required in terms of reg 24(1)(a) read with form 16 of the regulations promulgated in GN R489, GG 28864, 31 May 2006 (the NCA regulations), to the debt counsellor. The debt counsellor dispatched notices dated 25 July 2008 in accordance J with s 86(4)(b) read with reg 24(2) and form 17.1 to credit

Meyer AJA (Mpati P, Cachalia JA, Mbha JA and Van der Merwe AJA concurring)

bureaux and the respondents' credit providers that were listed in their A application, advising them that the respondents had applied for debt review in terms of s 86 of the NCA. He conducted an assessment in terms of s 86(6) and concluded that the respondents were overindebted. He thereafter sent further notices dated 3 September 2008 in accordance with reg 24(10) and form 17.2 to credit bureaux and the respondents' B credit providers, advising them that the respondents' application for debt review had been successful and that their debt obligations were being restructured.

[4] The proposal which the debt counsellor made to the respondents' credit providers, including the appellant, reflects a substantial monthly C shortage of their income over their expenditure. The debt counsellor recommended that the period for payment in respect of each credit agreement be extended and that the monthly payments be reduced accordingly. He also recommended that the interest accruing on the debt owed to the appellant be reduced to a rate of 5% per annum. Interest reductions in respect of other debts were also recommended. The D appellant was one of the credit providers which did not consent to the debt counsellor's proposal.

[5] The debt re-arrangement order proposed was put before the Magistrate's Court, Alberton, in terms of s 86(7), read with ss 87 and 79 of the NCA, by means of a substantive application. BMW Financial Services E (SA) (Pty) Ltd and the appellant opposed the application. On 20 August 2009 the magistrates' court issued an order declaring the respondents to be overindebted and rearranging their obligations in accordance with the debt re-arrangement proposed by the debt counsellor. (Whether the reduction in contractually agreed interest rates renders the F debt re-arrangement order invalid as contended for by the appellant is a matter that need not be decided in this matter.) The respondents failed to effect proper and punctual payment to the appellant of the reduced monthly instalments due to it in terms of the debt re-arrangement order.

[6] Because the respondents were in default under the loan agreement G and with their obligations in terms of the debt re-arrangement order, the appellant adopted the stance that it was entitled to enforce its rights and securities under the loan agreement and mortgage bonds in terms of s 88(3) of the NCA. Section 88(3) reads as follows:

'Subject to section 86(9) and (10), a credit provider who receives notice H of court proceedings contemplated in section 83 or 85, or notice in terms of section 86(4)(b)(i), may not exercise or enforce by litigation or other judicial process any right or security under that credit agreement until —

(a)

the consumer is in default under the credit agreement; and

(b)

one of the following has occurred: I

(i)

An event contemplated in subsection (1)(a) through (c); or

(ii)

the consumer defaults on any obligation in terms of a re-arrangement agreed between the consumer and credit providers, or ordered by a court or the Tribunal.'

(Section 86(4)(b)(i) referred to in s 88(3), read with reg 24(2) and form 17.1, enjoins a debt counsellor to notify all credit providers listed in a J

Meyer AJA (Mpati P, Cachalia JA, Mbha JA and Van der Merwe AJA concurring)

A consumer's application that the consumer has applied for debt review in terms of s 86 of the NCA. The...