The application of section 85 of the National Credit Act in an application for summary judgment

• Pages: 1-21
• Published date: 01 January 2012
• Author: Mareesa Kreuser
• DOI: 10.10520/EJC135317
• Date: 01 January 2012

1

The application of section 85 of the

National Credit Act in an application for

summary judgment

Mareesa Kreuser

LLB

Lecturer, University of Pretoria

OPSOMMING

Die toepassing van artikel 85 van die Nasionale Kredietwet in ’n

aansoek om summiere vonnis

Voor die inwerkingtreding van die Nasionale Kredietwet 34 van 2005 (NKW)

in 2007 was dit ietwat ongehoord om in Suid-Afrika te hoor van wetgewing

gerig op verbruikersbeskerming. Een van die NKW se hoofdoelstellings is die

beskerming van skuldenaars. Skuldberading ingevolge artikel 86 is een van

die wyses waarop die wetgewer aan sodanige beskerming uiting gee. Artikel

85 bepaal dat ’n hof, in enige verrigtinge waarin ’n kredietooreenkoms ter

sprake kom en indien die skuldenaar beweer dat hy oorverskuldig is, die

kredietooreenkoms na ’n skuldberader mag verwys of self die skuldenaar

oorverskuldig verklaar en sy skuld herstruktureer. In die praktyk word artikel

85 hoofsaaklik by aansoeke om summiere vonnis met betrekking tot

ontroerende eiendom deur skuldenaars geopper. Artikel 85 verleen aan die

hof die diskresie om die kredietooreenkoms na ’n skuldberader te verwys

met die gevolg dat summiere vonnis uitgestel of gewysig kan word. Die onus

rus op die skuldenaar om die hof te oortuig om sodanige verwysing te beveel.

Die howe het ’n aantal aspekte geïdentifiseer wat oorweeg moet word by die

toepassing van die hof se diskresie. Hierdie artikel is ’n kritiese bespreking

van artikel 85 asook die uitleg daarvan deur die howe.

1Introduction

The National Credit Act (NCA)1 came into operation at a time when

consumer laws were somewhat unheard of in South Africa. Prior to the

NCA, the Credit Agreements Act2 and the Usury Act3 regulated the

consumer credit industry and the only debt relief remedies available to

the over-burdened consumer were sequestration4 and administration,5

which left a large portion of over-burdened consumers without an

adequate remedy.

The introduction of the debt review process in section 86 of the NCA

created an alternative remedy for over-indebted consumers. A duly

registered debt counsellor is given the task to, firstly, determine whether

the consumer is over-indebted, and secondly, to make a

1 34 of 2005.

2 75 of 1980.

3 73 of 1968.

4 In terms of the Insolvency Act 24 of 1936.

5 In terms of s 74 Magistrates’ Courts Act 32 of 1944.

2

2012 De Jure

recommendation to court as to the restructuring of the consumer’s debt.6

Since the inception of the debt review process in June 2007, more than

184,000 consumers have applied for debt review.7 This figure is not

insignificant and reflects on South Africa’s need for effective credit

regulation and debt relief mechanisms.

One of the provisions pertaining to the debt review process introduced

by the NCA is section 85. This section falls under Part D of Chapter 48

which,

inter alia,

deals with over-indebtedness and reckless credit.

Section 85 allows the court to either refer a matter to a debt counsellor

or to declare the consumer over-indebted and make an order to

restructure the consumer’s debts.

Due to the nature of the remedy provided by section 85 and its wide

application, it has been the subject of a number of High Court cases.

Section 85 is often raised by the consumer in a summary judgment

application involving execution against immovable property. This article

focuses on the courts’ application and interpretation of section 85 in such

instances.

2 Interpretation and Purpose of the NCA

The NCA has been the subject of a great deal of criticism, particularly

relating to the drafting and wording thereof. In

FirstRand Bank Ltd v

Seyffert

9 Wallis J noted:

I share the general frustration of my judicial colleagues around the country at

the lack of clarity that features at least in the parts of the NCA with which one

is concerned in cases of the kind now before me. A court is forced to go round

and round in loops from subsection to subsection, much like a dog chasing its

tail.10

These ambiguities have lead to a number of conflicting High Court

decisions11 and compelled the National Credit Regulator (NCR) to

6 Ss 86(6) & 86(7)(c).

7 “National Credit Regulator Debt Review Task Team” 2010 http://ncr.org.za

(accessed 2011-09-15).

8 Ch 4 is titled “Consumer Credit Policy” and includes provisions on consumer

rights, consumer credit information and records, the credit market, over-

indebtedness and reckless credit.

9 2010 6 SA 429 (GSJ).

10 434. See also

Nedbank Ltd v The National Credit Regulator

2011 3 SA 581

(SCA) par [2] in which Malan JA noted that the NCA cannot be described as

the “best drafted Act of Parliament ever passed”, and that there are a

number of drafting errors and “untidy expressions” which make the NCA

particularly difficult to interpret.

11 See

Standard Bank of SA Ltd v Kruger

2010 4 SA 635 (GSJ);

SA Taxi

Securitisation (Pty) Ltd v Nako

case no 19/2010 (ECB) (unreported);

Wesbank Ltd v Papier

Case no 14256/2010 (WCC) (unreported) in which the

courts discuss the credit provider’s right to terminate a debt review in terms

of s 86(10) after the debt counsellors have set the matter down in the

Magistrate’s Court in terms of s 86(7)(c).