JMV Textiles (Pty) Ltd v De Chalain Spareinvest 14 CC and Others

• Jurisdiction: South Africa
• Judge: Wallis J
• Judgment Date: 20 August 2010
• Citation: 2010 (6) SA 173 (KZD)
• Docket Number: 15136/09
• Hearing Date: 15 August 2010
• Counsel: WN Shapiro for the plaintiff. R Mohamed for the defendants.
• Court: KwaZulu-Natal High Court, Durban

Wallis J:

D [1] On 18 February 2009 the plaintiff, JMV Textiles, and the first defendant, a close corporation trading as Cuts, concluded an agreement in terms of which JMV Textiles would sell fabric to Cuts on credit. The credit limit was described as 'R50 000/R100 000', presumably a monthly limit, and the agreement provided that payment should be made 'sixty days nett'. The second and third defendants bound themselves E as sureties and co-principal debtors with Cuts for its obligations in terms of this agreement. The present action is one by JMV Textiles to recover the price of goods that it claims to have supplied under this arrangement. Whilst Cuts is cited as the first defendant, it has gone into liquidation and accordingly the action proceeds only against the sureties.

F [2] In their plea the defendants have raised various defences in terms of the provisions of the National Credit Act 34 of 2005 (the NCA). These are that:

(a)

JMV Textiles was obliged to be registered as a credit provider in terms of s 40 of the NCA, and, as it was not registered, the credit G agreement is unlawful and void, and JMV Textiles is precluded from recovering the purchase price of the goods;

(b)

the notice in terms of s 129(1)(a) of the NCA given to the defendants before the commencement of proceedings was defective;

(c)

a consent to the jurisdiction of the magistrates' court in terms of the conditions of sale is unlawful in terms of s 90(2)(k)(vi)(aa) of the H NCA, and accordingly the defendants deny that this court has jurisdiction to hear this action;

(d)

the provision in the deed of suretyship, that the sureties waive the benefits of excussion and division, is unlawful and void in terms of s 90(2)(c) of the NCA, and the sureties are entitled to rely upon I these benefits.

Apart from these defences, the defendants simply deny the plaintiff's allegations in respect of the supply of fabric and the amounts outstanding.

[3] At the outset of the trial I was asked to make an order in terms of rule 33(4), J separating the determination of the four defences under the NCA

Wallis J

from the other issues in these proceedings, and such an order was made. A Thereafter the case was argued on the basis of certain agreed facts and in the light of certain documents made available to the court.

[4] The principal issue relates to the question of JMV Textiles' obligation to register as a credit provider in terms of s 40(1) of the NCA. If they B were obliged to register, and did not do so, then any credit agreement concluded by them is an unlawful agreement and void to the extent provided for in s 89. [1] In terms of s 89(5) a credit agreement that is unlawful and void must be declared to be void from the date upon which it was entered into, and all the rights of the credit provider under the credit agreement to recover goods delivered to the consumer are C cancelled, unless the court concludes that such cancellation would unjustly enrich the consumer. As the agreement is void, the credit provider is precluded from recovering the purchase price of goods supplied. In the result, if it were obliged to register as a credit provider JMV Textiles is not entitled to recover the price of the goods supplied to Cuts. D

[5] In terms of s 40(1) a person is obliged to register as a credit provider if -

'(a)

that person . . . is the credit provider under at least 100 credit agreements, other than incidental credit agreements; or E

(b)

the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed in terms of section 42(1)'.

The threshold is R500 000.

[6] For present purposes, the key to whether JMV Textiles was obliged to F register as a credit provider is whether its agreements with Cuts are incidental credit agreements. Whilst a party to an incidental credit agreement is a credit provider as defined in s 1 of the NCA, a distinction is drawn between an incidental credit agreement, which is also defined in s 1, and a credit agreement, which is an agreement that meets the criteria set out in s 8 of the NCA. As is apparent from s 40, if the agreements G concluded by a credit provider are incidental credit agreements, there is no obligation on the credit provider to register in terms of s 40(1). I should add that, for the purpose of determining whether JMV Textiles was obliged to register, the parties agreed that it is party to more than 100 agreements, similar in their form and content to the agreements H concluded with Cuts, that give rise to the present action, and the total amount owing to it in terms of those agreements exceeds R500 000. It is not suggested that, apart from those agreements, there are other agreements concluded by JMV Textiles that would constitute credit agreements and require it to be registered. That means that the only question is whether the agreements that it concluded with Cuts are I incidental credit agreements.

[7] An incidental credit agreement is defined as: J

Wallis J

A '(A)n agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply:

(a)

a fee, charge or interest became payable when payment of an B amount charged in terms of that account was not made on or before a determined period or date; or

(b)

two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.'

C [8] The argument on behalf of JMV Textiles is that the agreements under consideration fall squarely within this definition. They are agreements in terms of which it agrees to sell goods on credit because the obligation to pay the purchase price is deferred for a defined period. If payment of that amount is not made timeously then interest on the overdue amount is to D be paid in terms of clause 4(3) of the standard conditions of sale, at a rate of 2% per month, from due date until date of payment. Accordingly, the condition in ss (a) is satisfied because interest becomes payable when payment of an amount charged in terms of the account is not made on or before a determined date. Subsection (b) is not applicable because E JMV Textiles does...