Nedbank Ltd and Others v National Credit Regulator and Another

• Jurisdiction: South Africa
• Judge: Mpati P, Navsa JA, Brand JA, Maya JA and Malan JA
• Judgment Date: 28 March 2011
• Citation: 2011 (3) SA 581 (SCA)
• Docket Number: 662/2009 and 500/2010
• Hearing Date: 21 February 2011
• Counsel: O Rogers SC for the first appellant. G Farber SC (with N Konstantinides) for the second appellant. M Kuper SC (with J Cane SC) for the third appellant. DE van Loggerenberg SC (with GH Meyer) for the fourth appellant. KJ Kemp SC for the fifth appellant / second respondent. PF Louw SC (with SG Gouws) for the sixth appellant. CDA Loxton SC (with MA Chohan) for the first respondent.
• Court: Supreme Court of Appeal

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring): E

Introduction

[1] The National Credit Act 34 of 2005 (the NCA) came into full force and effect on 1 June 2007. The NCA is not an amendment of previous F legislation dealing with consumer credit. It seeks to achieve much more and replaces legislation that governed consumer credit for more than a quarter of a century. [1] The objects are set out in s 3 and are directed at providing protection for the consumer and addressing imbalances that exist between consumers and credit providers. The NCA seeks —

'to promote and advance the social and economic welfare of G South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by —

. . .

(g)

addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over-indebtedness based on H the principle of satisfaction by the consumer of all responsible financial obligations;

(h)

providing for a consistent and accessible system of consensual resolution of disputes arising from credit agreements; and

(i)

providing for a consistent and harmonised system of debt restructuring, I enforcement and judgment, which places priority on the

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring)

eventual satisfaction of all responsible consumer obligations under A credit agreements.'

[2] The NCA must be interpreted in a manner that gives effect to these objects. [2] Appropriate foreign and international law may be considered in construing the NCA. [3] Unfortunately, the NCA cannot be described as B the 'best drafted Act of Parliament which was ever passed,' [4] nor can the draftsman be said to have been blessed with the 'draftsmanship of a Chalmers'. [5] Numerous drafting errors, untidy expressions and inconsistencies make its interpretation a particularly trying exercise. [6] Indeed, these appeals demonstrate the numerous disputes that have arisen C around the construction of the NCA. The interpretation of the NCA calls for a careful balancing of the competing interests sought to be protected, and not for a consideration of only the interests of either the consumer or the credit provider. [7]

[3] This is an appeal by the Credit Regulator on the construction of D ss 86(2) and 129 as well as appeals by the other parties relating to further sections of the NCA. I will deal with them under the appropriate headings.

Sections 86(2) and 129

[4] The Credit Regulator's appeal concerns prayer 1.13 of the notice of E motion for a declarator in the following terms:

'The reference in section 86(2) to the taking of a step in terms of s 129 to enforce a credit agreement is a reference to the commencement of legal proceedings mentioned in section 129(1)(b) and does not F include steps taken in terms of section 129(1)(a) . . . .'

[5] None of the other parties opposed the relief sought in prayer 1.13 in the court below. In this court, however, the declarator sought was opposed. Du Plessis J refused to grant the order applied for because he G

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring)

A was not satisfied that the parties were correct in their interpretation of s 86(2) and, in the absence of full argument, declined to make the order. [8]

[6] Section 86(2) reads as follows:

'(2) An application in terms of this section may not be made in respect of, and does not apply to, a particular credit agreement if, at the B time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 129 to enforce that agreement.'

Section 129(1) provides:

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

(a)

C may draw the default to the notice of the consumer in writing and 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)

D subject to section 130(2), may not commence any legal proceedings to enforce the agreement before —

(i)

first providing notice to the consumer, as contemplated in paragraph (a), or in section 86(10), as the case may be; and

(ii)

meeting any further requirements set out in section 130.'

E [7] The question posed by the Credit Regulator has been and still is the subject of considerable academic debate. [9] Boraine and Renke [10] remarked that '[t]o interpret s 86(2) to read that the delivery of the s 129(1)(a) notice to the consumer means that the credit provider has proceeded to take steps to enforce the agreement (with the effect that no application for debt review may be made) would be nonsensical as it is F proposed in the s 129(1)(a) notice that the consumer refer the matter to a debt counsellor'.

[8] Despite the use of the word 'may' in s 129(1)(a) the notice referred to therein is indeed a mandatory requirement prior to litigation to

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring)

enforce a credit agreement. [11] This is apparent when the subsection is A read with ss 129(1)(b) and 130(1). Section 129(1) has been described as a 'gateway' or 'new pre-litigation layer to the enforcement process'. Delivery of the s 129(1)(a) notice was said to be a compulsory step 'devised by the legislature in an attempt to encourage parties to iron out their differences before seeking court intervention'. [12] As such it was said B to give effect to the object of the NCA set out in s 3(h), [13] by encouraging 'a consistent and accessible system of consensual resolution of disputes arising from credit agreements', and as such it is also consistent with s 3(i). This construction is the subject-matter of the appeal by the Credit Regulator. It is not only the subject of the academic debate referred to but also of conflicting decisions. [14] An analysis of the relevant provisions C is thus required.

[9] The notice required by s 129(1)(a) refers to a specific credit agreement in respect of which the consumer is in default. It must 'propose' that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or D ombud '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'. The s 129(1)(a) notice deals with one credit agreement only and seeks to bring about a consensual resolution relating to that agreement. It does not contemplate a general debt restructuring E as envisaged by ss 86 and 87. [15] As was stated by Wallis J in Mudaly's case, [16] '[t]he proposal is directed at achieving a situation where the consumer and the credit provider, through the agency of the debt counsellor, negotiate a resolution to the consumer's particular difficulties

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring)

A under a particular credit agreement. It is a consensual process, the success or failure of which will depend upon whether the parties can arrive at a workable basis upon which to resolve the issues caused by the consumer's default.'

[10] The scope of s 86, on the other hand, is general and deals with an B application by a consumer to be declared over-indebted. [17] It is concerned with the obligations under all the credit agreements to which he is a party. [18] A consumer is over-indebted if the preponderance of the available information at the time the determination is made, indicates that he will be unable to satisfy in a timely manner all his obligations under all the credit agreements to which he is a party having regard to his C financial means, prospects and obligations and the probable propensity to satisfy them in a timely manner, as is indicated by his history of debt repayment. [19] The application to be declared over-indebted or, as it is referred to in the heading of s 86, for debt review, is made to a debt counsellor. [20] The outcome of this application may be an order of the D magistrates' court declaring one or more of the credit agreements reckless or rearranging one or more of the consumer's obligations. [21] As I have said, the notice envisaged by s 129(1)(a) is specific and refers to a particular credit agreement calling on the parties to resolve their dispute and agree on a plan to bring the payments up to date. It is not E directed at a declaration of over-indebtedness at all.

[11] Section 86(2) states that an application for debt review 'may not be made in respect of, and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in s 129 to F enforce that agreement'. The section thus contemplates a debt review under which a specific credit agreement may be excluded. But even if a particular credit agreement falls outside the scope of debt review a court may, nevertheless, as provided for by s 85, in any court proceedings 'in which a credit agreement is being considered' and in which it is alleged that the consumer is over-indebted, refer that matter to a debt counsellor G for evaluation and a recommendation in terms of s 86(7) or declare that the consumer is over-indebted and make any of the orders contemplated in s 87. Moreover, a court may also, in terms of s 83(1), in proceedings where a credit agreement is being considered, declare it to be reckless and make any of the orders provided for in s 83(2) and (3).

Malan JA (Mpati P, Navsa JA, Brand JA and Maya JA concurring)

[12] Section...