Standard Bank of South Africa Ltd v Panayiotts

• Jurisdiction: South Africa
• Judge: Masipa J
• Judgment Date: 06 February 2009
• Citation: 2009 (3) SA 363 (W)
• Docket Number: 08/00146
• Hearing Date: 27 October 2008
• Counsel: A Bester (with F Bezuidenhout) for the applicant. NJ Tee for the respondent.
• Court: Witwatersrand Local Division

Masipa J:

Introduction B

[1] This is an application for summary judgment. Plaintiff's claim is based on a mortgage agreement entered into between the parties on 2 June 2006 (for almost four million rand) and registered over Erf 86, Quellerina Township, Registration Division IQ, Province of Gauteng, and held by deed of transfer T9469/2003 (the property). C

[2] The defendant admits his indebtedness to the plaintiff as claimed in the summons and raises, as his defence, his over-indebtedness as envisaged by s 79(1) of the National Credit Act 34 of 2005 (the NCA).

[3] The defendant alleges that he is over-indebted as defined in s 79(1) D of the NCA and seeks an order in terms of s 85(a) alternatively, in terms of s 85(b) of the NCA.

[4] It is not disputed that the NCA applies to the agreement in question. In terms of Item 4(2) of Schedule 3 to the NCA (the transitional provisions), the provisions of Part D of Ch 4 of the NCA (ss 78 - 88) E apply to a pre-existing credit agreement to the extent that it does not concern reckless credit. No allegations of credit recklessness have been made.

[5] The defendant specifically concedes that (1) the plaintiff's papers correctly reflect his indebtedness; and (2) the plaintiff complied with s 129 of the NCA (which is a prerequisite for the institution of legal F proceedings).

[6] The relevant provisions of the NCA

[6.1]

Section 79 defines when a consumer is over-indebted. The section provides as follows: G

79 Over-indebtedness

(1) A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, having regard to that consumer's - H

(a)

financial means, prospects and obligations; and

(b)

probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer's history of debt repayment.

(2) When a determination is to be made whether a consumer is over-indebted or not, the person making the determination must apply I the criteria set out in ss (1) as they exist at the time the determination is being made.

(3) When making a determination in terms of this section, the value of -

(a)

any credit facility is the settlement value at that time under that credit facility; and J

Masipa J

(b)

A any credit guarantee is -

(i)

the settlement value of the credit agreement that it guarantees, if the guarantor has been called upon to honour that guarantee; or

(ii)

the settlement value of the credit agreement that it guarantees, discounted by a prescribed factor.

B [7] The National Credit Regulations, 2006 (the regulations), promulgated under the NCA, provide that a debt counsellor, when assessing the consumer's application for a debt review, must refer to s 79 and further consider the following:

(a)

A consumer is over-indebted if his/her total monthly debt C payments exceed the balance derived by deducting his/her minimum living expenses from his/her net income.

(b)

Net income is calculated by deducting from the gross income, statutory deductions and other deductions that are made as a condition of employment.

(c)

D Minimum living expenses are based upon a budget provided by the consumer, adjusted by the debt counsellor with reference to guidelines issued by the National Credit Regulator.

[8] A party (the consumer) who raises a defence of over-indebtedness must plead and prove the defence, which includes proving that he is E over-indebted as envisaged in s 79 of the NCA.

[9] Having regard to the wording of s 79, such proof must inevitably involve details of, inter alia, the consumer's financial means, prospects and obligations. Financial means would include not only income and expenses, but also assets and liabilities. Prospects would F include prospects of improving the consumer's financial position, such as increases, and, even, liquidating assets.

[10] In the case of an instalment agreement, secured loan, lease or mortgage agreement (all of which involves goods as the subject-matter of the agreement), the consumer's financial means and prospects must G include the prospect of selling the goods in order to reduce the consumer's indebtedness.

[11] Section 85:

[11.1]

Section 85 of the NCA sets out the two possible ways in which a court may come to the assistance of a consumer who cannot H pay a debt, the payment of which he has been sued for.

[11.2]

It provides as follows:

85 Court may declare and relieve over-indebtedness

Despite any provision of law or agreement to the contrary, in any court proceedings in which a credit agreement is being considered, if it is alleged that the consumer under a credit agreement is over-indebted, I the court may -

(a)

refer the matter directly to a debt counsellor with a request that the debt counsellor evaluate the consumer's circumstances and make a recommendation to the court in terms of section 86(7);

(b)

declare that the consumer is over-indebted, as determined in accordance with this part, and make any order contemplated in J section 87 to relieve the consumer's over-indebtedness.

Masipa J

[12] An action for the balance outstanding under a bond is clearly A 'court proceedings in which a credit agreement is being considered', as is a summary judgment application. In the latter case the indebtedness must be admitted before a court may exercise its powers under s 85 forthwith.

[13] Referral to debt counsellor: s 86(7) provides for the debt counsellor, B after receiving an application, to declare the consumer over-indebted, and to make certain recommendations to the magistrates' court.

[14] Section 86(7)(c) reads:

(7) If, as a result of an assessment conducted in terms of subsection (6), a debt counsellor reasonably concludes that - C

. . .

(c)

the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrates' Court make either or both of the following orders -

(i)

that one or more of the consumer's credit agreements be D declared to be reckless credit, if the debt counsellor has concluded that those agreements appear to be reckless; and

(ii)

that one or more of the consumer's obligations be re-arranged by -

(aa)

extending the period of the agreement and reducing the amount of each payment due accordingly;

(bb)

postponing during a specified period the dates on which E payments are due under the agreement;

(cc)

extending the period of the agreement and postponing during a specified period the dates on which payments are due under the agreement; or

(dd)

recalculating the consumer's obligations because of contraventions of Part A or B of Chapter 5, or Part A of Chapter 6. F

[15] The NCA makes frequent reference to the magistrates' court, and in other places simply to'the court'. The distinction is clearly deliberate, and the expression'court' would therefore not be limited to the magistrates' court. G

[16] Section 86(7)(c) makes it clear that the debt counsellor must make his or her recommendation to the magistrates' court, and it is that court which must make the orders provided for in that subsection.

[17] Section 85(a) by contrast requires the debt counsellor to make a H recommendation'to the court', which is not limited to the magistrates' court and, in context, is clearly a reference to the court which referred the matter to the debt counsellor. Accordingly, if the High Court refers the matter directly to a debt counsellor, the recommendation would be made to the High Court.

[18] Any other interpretation could lead to absurdity, since, if different I courts were involved, a magistrates' court would be adjudicating a matter whilst it is pending in the High Court. The element of policing would also be problematic, since the High Court would not necessarily know if its request has been heeded and carried out in the magistrates' court. J

Masipa J

A [19] The effect of s 85(a) is therefore that a High Court, if it refers the matter directly to a debt counsellor, would have to receive the debt counsellor's recommendation and deal with the matter, as would a magistrates' court making an order in terms of s 86(7)(c).

Declaring the consumer to be over-indebted B

[20] Section 87 allows the magistrates' court to rearrange a consumer's obligations. The relevant parts of this section read:

87 Magistrates' Court may re-arrange consumer's obligations.

(1) If a debt...