Naidoo v Absa Bank Ltd

• Jurisdiction: South Africa
• Judge: Mthiyane JA, Heher JA, Cachalia JA, Shongwe JA and Tshiqi JA
• Judgment Date: 27 May 2010
• Citation: 2010 (4) SA 597 (SCA)
• Docket Number: 391/09
• Hearing Date: 11 May 2010
• Counsel: G Reddy for the appellant. A Stoke SC for the respondent.
• Court: Supreme Court of Appeal

Cachalia JA:

[1] The appellant was sequestrated by an order of Gyanda J, at the B respondent's instance, in the Durban High Court on 25 May 2009. The sequestration order followed the appellant's failure to meet his payments to the respondent under instalment sale agreements relating to six motor vehicles and two home loan agreements. The National Credit Act 34 of 2005 (the NCA) applies to these agreements - the appellant is a 'consumer' and the respondent a 'credit provider' as envisaged in C s 1 of the NCA. [1]

[2] The appellant contends that it was not competent for the respondent to have instituted proceedings for his sequestration before complying with the procedure provided for in s 129(1)(a) of the NCA. (This section is set out in para [3] below.) The appellant did not raise this D defence in his papers opposing the sequestration application in the High Court. Nor did he do so when he appeared personally before the learned judge to resist the application for his final sequestration. His counsel,

Cachalia JA

A however, invoked it as a ground in his application for leave to appeal against the sequestration order. The High Court accordingly referred the dispute to this court by granting the necessary leave.

[3] Mr Reddy, who appeared for the appellant, came into the matter belatedly, after counsel who had prepared written submissions withdrew. B So, adopting his predecessor's written argument, he submits that the procedures before debt enforcement, provided for in s 129(1)(a) read with s 130(3) of the NCA, should be interpreted to cover circumstances relating not only to the enforcement of a credit agreement, but also to sequestration proceedings since the unpaid claims, which are the subject C of the sequestration application, arise from credit agreements to which the NCA applies. The relevant parts of these provisions read as follows:

'129 Required procedures before debt enforcement

(1) If the consumer is in default under a credit agreement, the credit provider -

(a)

may draw the default to the notice of the consumer in writing and D propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and

(b)

. . . may not commence any legal proceedings to enforce the E agreement before -

(i)

first providing notice to the consumer, as contemplated in paragraph (a). . . .'

And:

'130 Debt procedures in a court

F . . .

(3) Despite any provision of law or contract to the contrary, in any proceedings commenced in a court in respect of a credit agreement to which this Act applies, the court may determine the matter only if the court is satisfied that -

(a)

in the case of proceedings to which sections 127, 129 or 131 apply, G the procedures required by those sections have been complied with. . . .'

[4] Mr Reddy's submission, as I understand it, implicitly contains a concession that sequestration proceedings are not in and of themselves 'legal proceedings to enforce the agreement' within the meaning of H s 129(1)(b). That his concession is correct is clear from the recent judgment in Investec Bank Ltd and Another v Mutemeri and Another, [2] where Trengove AJ concluded that an order for the sequestration of a debtor's estate is not an order for the enforcement of the sequestrating creditor's claim, and sequestration is thus not a legal proceeding to I enforce an agreement. [3] He did so after carefully considering the authorities which have held that - 'sequestration proceedings are instituted by a creditor against a debtor not for the purpose of claiming something from

Cachalia JA

the latter, but for the purpose of setting the machinery of the law in A motion to have the debtor declared insolvent' [4] - they are not proceedings 'for the recovery of a debt'. [5] The learned judge's reasoning accords with this court's description of a sequestration order as a species of execution, affecting not only the rights of the two litigants, but also of third parties, and involves the distribution of the insolvent's property to B various creditors, while restricting those creditors' ordinary remedies and imposing disabilities on the insolvent...