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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 20102/2019

In the matter between:

NEDBANK LIMITED

(MFC Division)                                                                                                        Applicant

and

SIPHIWE SILINDA                                                                                              Respondent

 

J U D G M E N T:

 

NEL AJ

[1] In this opposed application the Applicant seeks payment of a monetary amount, together with interest thereon arising from the breach of an Instalment Sale Agreement, and the voluntary surrender of the motor vehicle purchased in terms of the Instalment Sale Agreement. 

[2] In terms of the Notice of Motion the Applicant seeks, inter alia:

[2.1] Payment of the amount of R134 084.50;

[2.2] Interest on the amount of R134 084.50 at a rate of 12.85% per annum, calculated and capitalised monthly from 15 May 2019 to date of payment; and

[2.3] Costs on the attorney and own client scale.

THE RELEVANT BACKGROUND

[3] On 20 November 2017 the Applicant and the Respondent concluded an Instalment Sale Agreement in terms of which the Respondent purchased a 2017 Isuzu KB250 motor vehicle (“the Isuzu motor vehicle”) from the Applicant (“the Agreement”), for a purchase price of R363 575.05.

[4] The Respondent failed to make payment of his monthly instalment payments, and as at 27 February 2019 the Respondent was in arrears in a total amount of R20 067.35.

[5] On 27 February 2019 the Applicant and the Respondent concluded an agreement described as a “Surrender of Goods by Mutual Agreement” (“the Surrender Agreement”) in terms of which the Isuzu motor vehicle was surrendered to the Applicant, on the basis of the Respondent being unable to afford the monthly payments. 

[6] In terms of the Surrender Agreement the Respondent terminated the Agreement in terms of Section 127 of the National Credit Act, No 34 of 2005, as amended (“the NCA”), and the Respondent undertook to deliver the Isuzu motor vehicle to the Applicant. 

[7] The Applicant accepted the termination of the Agreement, and on 27 February 2019 the Isuzu motor vehicle was delivered to the Applicant. 

THE AFFIDAVITS FILED IN THE APPLICATION

[8] During June 2019 the Applicant filed a Founding Affidavit together with the Notice of Motion, deposed to by a manager in the Applicant’s Recoveries Department. 

[9] The Application was initially set down on an unopposed basis for hearing on 24 July 2019.  On such date, Moshidi J postponed the application and prescribed time periods for the filing of an answering affidavit and a replying affidavit. 

[10] On 12 August 2019 the Respondent filed a document described as “Answering Affidavit of the Case”.  The “Answering Affidavit” that was filed on 12 August 2019 is clearly not an Affidavit as it is not deposed to by the Respondent and appears to be a summary of the arguments the Respondent seeks to raise.  There is reference in such document to a “replying affidavit” and an “answering affidavit”.  Certain portions of the “Answering Affidavit” are written in the style of a judgment.

[11] The “Answering Affidavit” was not deposed to or signed by the Respondent, and it was filed by the Respondent personally, as no attorney had been appointed to represent him by the Legal Practice Council, by the time the Answering Affidavit was due to be filed. The Respondent thereafter obtained pro bono assistance from the Legal Practice Council, and pro bono attorneys and counsel were appointed.

[12] The Applicant, whilst disputing the status of the “Answering Affidavit”, elected to respond to the allegations contained in the “Answering Affidavit”, by way of a Replying Affidavit.

[13] On 12 September 2019, the Respondent’s current attorneys of record filed a Notice of Appointment as Attorneys of Record, and on 15 November 2019 the Respondent’s Answering Affidavit was filed. 

[14] On 29 November 2019 the Applicant filed a Supplementary Replying Affidavit.

THE APPLICANT’S CONTENTIONS

[15] The relevant contentions of the Applicant, as appears from the three affidavits filed on behalf of the Applicant are set out below. 

[16] On 20 November 2017 the Applicant and the Respondent concluded an Instalment Sale Agreement in terms of which the Respondent purchased the Isuzu motor vehicle from the Applicant for a purchase price of R363 575.05. The Respondent admits the conclusion of the Agreement.

[17] In terms of the Agreement the total amount collectable by the Applicant from the Respondent would ultimately be R555 904.74, which amount would be payable in various monthly instalments, of approximately R6 600.00, with a final balloon instalment of R87 488.40, which final amount would be payable on 24 November 2023. The Respondent does not dispute the total amount collectable, or the instalments payable.

[18] In terms of the Agreement the agreed interest rate payable on the total amount would be 12.85% per annum. The interest rate is not disputed by the Respondent.

[19] The Respondent failed to make payment of his monthly instalment payments, and as at 27 February 2019 the Respondent was in arrears in a total amount of R20 067.35. The Respondent admits being in arrears for a period of 2 months.

[20] The ownership of the Isuzu motor vehicle remained vested in the Applicant until the full purchase price has been paid. This is disputed by the Respondent, who contends that he is the owner of the Isuzu motor vehicle.

[21] On 27 February 2019 the Applicant and the Respondent concluded the Surrender Agreement in terms of which the Isuzu motor vehicle was surrendered to the Applicant, on the basis of the Respondent being unable to afford the monthly payments. The Respondent does not dispute the signature of the Surrender Agreement but states that it was signed on 15 February 2019, and not 27 February 2019.

[22] It was a term of the Surrender Agreement that the Respondent wished to terminate the Agreement in terms of Section 127 of the NCA, and the Respondent undertook to immediately deliver the Isuzu motor vehicle to the Applicant. 

[23] The Applicant accepted the termination of the Agreement, and on 28 February 2019 the Isuzu motor vehicle was delivered to the Applicant. The Respondent states that the Isuzu motor vehicle was removed on 15 February 2019.

[24] On 5 March 2019 the Applicant sent a written notice in terms of Section 127(2) of the NCA to the Respondent, recording that the Isuzu motor vehicle had been valued at a forced sale value of R140 000.00, and that the Respondent was entitled to withdraw the Notice of Termination of the Agreement, and would be entitled to the return of the Isuzu motor vehicle, provided that the Respondent was not in default under the Agreement, and provided that such option was exercised within a period of 10 days. The Respondent records that the written notice was not received by him.

[25] In terms of the Section 127(2) notice the Applicant recorded that if the Respondent did not exercise the option to withdraw the Notice of Termination of the Instalment Sale Agreement, the Isuzu motor vehicle would be sold.

[26] The Respondent did not reply to the Section 127(2) notice and did not exercise the rights conferred on the Respondent by such notice.  As set out above, the Respondent states that the notice was not received by him.

[27] On 27 March 2019 the Isuzu motor vehicle was sold by the Applicant for R196 650.00 (including Value Added Tax) being in excess of the forced sale valuation obtained by the Applicant but less than the trade or retail value. 

[28] An amount of R171 000.00, being the difference between the price realised and the default charges was credited to the Respondent’s account, leaving a balance outstanding of R137 523.16.

[29] On 6 April 2019 the Applicant addressed a notice in terms of Section 127(5) of the NCA to the Respondent, recording that:

[29.1] The motor vehicle was sold on 27 March 2019;

[29.2] The capital amount outstanding prior to the sale of the Isuzu motor vehicle was R345 631.77;

[29.3] The sale price realised was R196 650.00;

[29.4] An amount of R171 000.00 was credited to the Respondent’s account; and

[29.5] An amount of R137 523.60 was still due, owing and payable by the Respondent to the Applicant in terms of the Agreement.

[30] The Respondent stated that he did not receive such notice.

[31] The calculation of the amount deducted from the sale price of R196 650.00 is not clear, as the “default charges” are described as charges “including amounts debited and amounts yet to be debited” which is simply nonsensical and contradictory. 

[32] A Certificate of Balance dated 15 May 2019 records the indebtedness of the Respondent as at such date as being R134 084.50.

[33] The Applicant accordingly seeks payment of an amount of R134 084.50, together with interest thereon, being the amount allegedly due to the Applicant by the Respondent as at 15 May 2019, and as set out in the Certificate of Balance. 

[34] The Applicant contends that the Respondent is indebted to the Applicant in the amount of R134 084.50, together with interest thereon, and that the Respondent is obliged to make payment of the costs in terms of the Agreement.

THE “ANSWERING DOCUMENT”

[35] Whilst the contents of the “Answering Affidavit of the Case” cannot be considered as evidence in this application and I have not taken into consideration the contents thereof, it appears from the document that the Respondent suggests  that he was misled as to the conclusion of the Surrender Agreement and the termination of the Agreement, that he never voluntarily surrendered the motor vehicle to the Applicant, that the motor vehicle was only provided to the Applicant’s agent for safekeeping, and not in termination of the Agreement, and that the Respondent remained the owner of the motor vehicle. 

[36] It is also suggested  in such document that the Applicant’s agent that collected the Isuzu motor vehicle was not a Sheriff as required by the NCA, that the Respondent was not provided with an opportunity to repay the arrears by way of “an arrangement” and that the motor vehicle was “marked and wanted by one of the internal syndicates that the banks operates in selling cars”. 

[37] There is also reference in the document to the loss of income that was generated by the use of the Isuzu motor vehicle, that the Respondent’s wife suffered from depression as a result of the return of the Isuzu motor vehicle, and that it has caused the entirely family stress and a loss of income. 

[38] In the Answering Affidavit, the Respondent explained the reasons for the filing of the Answering Document, conceded that the Answering Document should not be considered, and sought condonation for the late filing of the Answering Affidavit.

[39] As set out above, I have not considered the “Answering Document” in making any determination in this Application, and have disregarded the entire contents of such document.

CONDONATION

[40] The Respondent seeks condonation for the late filing of his Answering Affidavit.

[41] An applicant seeking condonation must firstly provide a sufficient explanation for the delay, and must secondly satisfy the Court that there is either a bona fide defence (in the case of a defendant or respondent) or that the claim has reasonable prospects of success (in the case of a plaintiff or a respondent).[1]

[42] In the matter of Van Wyk v Unitas Hospital and Another (Open Democratic Advice Centre as amicus curiae) it was stated by the Constitutional Court as follows:

“An applicant for condonation must give a full explanation for the delay.  In addition, the explanation must cover the entire period of delay.  And what is more, the explanation given must be reasonable.” [2]

[43] As appears from the Answering Affidavit, the Respondent has provided a full and reasonable explanation for the delay in the filing of the Answering Affidavit.  In the circumstances, I am satisfied that the Respondent has met the first requirement for condonation. 

[44] As regards the second requirement of establishing that the Respondent has a bona fide defence, the Respondent must show, as a minimum, that his defence is not patently unfounded, and that it is based upon facts which if proven at a trial, would constitute a valid defence. 

[45] The crux of the Respondent’s defence is that the Surrender Agreement was concluded pursuant to a misrepresentation made by the Applicant, that he had no intention of surrendering the motor vehicle to the Applicant, that the motor vehicle was provided to the Applicant purely for safekeeping, and that he intended to settle the arrear instalments. 

[46] If the allegations of the Respondent were proven in the application, it would constitute a valid defence.  In the circumstances I am satisfied that the Respondent has met the second requirement for condonation. 

[47] There is no prejudice to the Applicant arising from the late filing of the Answering Affidavit, and I accordingly grant condonation for the late filing of the Respondent’s Answering Affidavit. 

THE RESPONDENTS CONTENTIONS

[48] The relevant contentions of the Respondent, as appears from the Respondents Answering Affidavit are set out below.

[49] An agent of the Applicant attended at the Respondent’s residence on 15 February 2019 in order to inspect the Isuzu motor vehicle. This is disputed by the Applicant.

[50] The Applicant’s agent arrived at the Respondent’s place of residence unannounced, and informed the Respondent that he had been sent by the Applicant in order to collect the Isuzu motor vehicle for “safe keeping”.  This is disputed by the Applicant.  The Applicant implies in the Supplementary Replying Affidavit that prior to the Applicant’s agent arriving at the Respondent’s premises, the Respondent had informed the Applicant that he wished to terminate the Agreement in terms of clause 11 of the Agreement.  Such allegation was not set out in the Founding Affidavit or the Replying Affidavit, despite its relevance.

[51] The agent advised the Respondent that the Isuzu motor vehicle should be placed in safe keeping, on the basis that most people who were in arrears with payments tended to damage the vehicles, and the agent convinced the Respondent to surrender the Isuzu motor vehicle.  The Applicant disputes this.

[52] The Respondent advised the Applicant’s agent that his instalment payments were in arrears by 2 months, as a result of the Respondent having been retrenched, and the income that he obtains from the renting out of student accommodation had not yet been paid to him. The Respondent advised the Applicants agent that as soon as the rental was paid, he would pay up the arrear instalments.

[53] The date on the Surrender Agreement, recorded as 27 February 2019 is incorrect, as the agent of the Applicant attended at the Respondents residence on 15 February 2019.  This is disputed by the Applicant.

[54] The Respondent advised the Applicant’s agent that he utilised the Isuzu motor vehicle in order to generate income.

[55] The Applicant’s agent advised the Respondent that the Isuzu motor vehicle would be placed in safe keeping, that the Respondent should sign the Surrender Agreement, and should insert under paragraph 4.2 of the second page the word “affordability”.  This is also disputed by the Applicant.

[56] The Respondent only surrendered the Isuzu motor vehicle on the basis that the Isuzu motor vehicle would simply be taken for safe keeping and that upon payment of the arrears the Isuzu motor vehicle would be returned to him.

[57] The Respondent had no intention of voluntarily surrendering the Isuzu motor vehicle to the Applicant.  The Applicant disputes this.

[58] Had the consequences of the signature of the Surrender Agreement been properly explained to the Respondent he would not have signed the Surrender Agreement.

[59] The Respondent’s intention at all times was to settle the arrear amounts or enter into a payment plan.

[60] When the Respondent had previously fallen into arrears an arrangement was made for the payment of the arrears, which arrears were paid in full.

[61] The Respondent was later informed that the Isuzu motor vehicle had been sold at an auction by the Applicant, and he was indebted to the Applicant in respect of the balance of the shortfall arising from the auction sale.  It is not clear when this occurred. 

[62] The Applicant’s agent advised the Respondent that the removal of the Isuzu motor vehicle was “standard practice” and that once the Respondent had settled the arrears the Isuzu motor vehicle would be returned to him.  This is disputed.

[63] On 4 March 2019 the Applicant advised the Respondent of a release amount in respect of the Isuzu motor vehicle, which release amount would be valid until 18 March 2019, and amounted to R 26 167.35.

[64] On 19 March 2019 the Respondent replied to the Applicant, and set out the reasons for the failure to have made payment of the monthly instalments.

[65] The Applicant criticised the contents of the Answering Affidavit as not setting out sufficient detail, which I found to be somewhat ironic, as despite filing 3 affidavits, the Applicant has dealt with the factual detail in a very superficial manner, thereby hampering a proper and final determination of this application.  The Applicant’s affidavits consist primarily of legal conclusions without the necessary supporting basis, and certain important allegations are made for the first time in the Supplementary Replying Affidavit.

THE IN LIMINE ASPECTS

[66] The Respondent raised one in limine point, and the Applicant raised two in limine points.

The Respondent’s In Limine Point

[67] The Respondent raised an in limine point in the Answering Affidavit, in respect of the Applicant’s non-compliance with Section 129 of the NCA.

[68] The Respondent contended that in terms of Section 129(1)(a) of the NCA, if a consumer is in default under a Credit Agreement, the credit provider “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 intention 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.

[69] It is clear from various judgments dealing with Section 129(1)(a) and the wording of Section 129(1)(b) of the NCA, that the word “may” should not be construed as suggesting that the written notice is optionable, but that it is obligatory to provide notification in terms of Section 129(1)(a) to a consumer, prior to the commencement of legal proceedings.[3]

[70] The Respondent contends that the Instalment Sale Agreement is clearly a Credit Agreement, and that the Applicant failed to address a Notice in terms of Section 129(1)(a) of the NCA to the Respondent.

[71] It was submitted on behalf of the Respondent that the Applicant was obliged to send a Notice in terms of Section 129(1)(a) of the NCA to the Respondent, and that the Applicant’s failure to provide a Notice as contemplated in Section 129(1)(a) prohibits the Applicant from commencing any legal proceedings in order to enforce payments in terms of the Instalment Sale Agreement. 

[72] The Respondent’s counsel submitted that in respect of such omission the Application should be struck from the roll.  The relief as suggested by the Respondent’s counsel is not appropriate as, if the Respondent is correct, the appropriate relief would be to order a postponement of the Application and the provision of directions. 

[73] It was submitted by the Respondent’s counsel that the failure by the Applicant to provide a Section 129(1)(a) Notice deprived the Respondent of an opportunity to enter into settlement negotiations for the arrears.

[74] In support of such submissions Respondent’s counsel referred me to the matter of First Rand Bank Limited t/a Wesbank vs Davel and Another (“the Davel matter”), and particularly the first portion of paragraph 6.[4]

[75] Respondent’s counsel submitted that the Respondent was entitled to the protection as referred to in paragraph 6 of the Davel matter. The relevant portion of paragraph 6 reads as follows:

“If the court is entitled to make an order returning the vehicle to the credit provider upon cancellation of the credit agreement as per the relief sought on these three vehicles, it should also be entitled to take procedural steps in protecting the consumer by ensuring that the vehicles are not sold at a far less price than the vehicle’s value…”.

[76] It must be noted that the quoted extract is a recordal as to what was set out in the High Court a quo’s judgement, with reference to a consideration of Sections 127 and 131 of the NCA, and is not a finding of the Supreme Court of Appeal.

[77] Respondent’s counsel also referred me to the matter of Kubyana v Standard Bank of South Africa Limited[5] at paragraph 46 in support of the submission that the Respondent as a consumer was entitled to the full benefit of the protections afforded by the NCA.

[78] Whilst I am in agreement with the principle as set out in paragraph [46] of the Kubyana matter, it does not assist the Respondent in respect of the in limine aspect raised.

[79] In response, Applicant’s counsel submitted that Section 129 of the NCA is not applicable in circumstances where a consumer surrenders goods as envisaged by Section 127 of the NCA.

[80] Applicant’s counsel also submitted that the Davel matter was distinguishable from the present Application, because in the Davel matter the applicable section was Section 131 of the NCA and not Section 127 of the NCA.

[81] Applicant’s counsel submitted that clause 11 of the Agreement accorded with Section 127 of the NCA, and that clause 11 of the Agreement sets out the procedure to be followed by the Applicant and the Respondent in the event of a voluntary surrender of the Isuzu motor vehicle by the Respondent.

[82] Applicant’s counsel submitted that the Applicant complied with Section 127 of the NCA, and that that there was no obligation on the Applicant to comply with Section 129.

[83] Applicant’s counsel submitted that Section 127 dictates its own procedure for the demand of any balance owing, and that the demand is dealt with specifically by Section 127(7) of the NCA.

[84] In the circumstances, and in order to determine the merits of the Respondent’s in limine point, it is necessary for me to determine whether a notice in terms of Section 129(1)(a) should have been provided to the Respondent prior to the commencement of this Application.

[85] In determining the in limine point raised by the Respondent, I have accepted that the Applicant’s cause of action is founded upon the voluntary surrender of the Isuzu motor vehicle and the provisions of Section 127 of the NCA. If the Applicant’s cause of action is defective, or if Section 127 is not applicable, or if the Applicant has not met the requirements of Section 127, such aspects will have to be considered and determined separately. 

[86] I am in agreement with Applicant’s counsel’s submission that the Davel matter is distinguishable from the present Application, and I am also of the view that the Davel matter does not support the submission that a Section 129(1)(a) notice is a prerequisite for any legal proceedings arising from Section 127 of the NCA.

[87] In the Davel matter the Court was required to consider a cancellation of Instalment Sale Agreements by the Bank and the seeking of an order for the return of the motor vehicles purchased in terms of the Instalment Sale Agreements, pursuant to such cancellation, in terms of Section 131 of the NCA.

[88] If a credit provider commences proceedings for the repossession of goods sold in terms of a credit agreement (together with any ancillary relief), the credit provider must comply with the provisions of Section 129 of the NCA.

[89] This Application relates to the voluntary surrender of a motor vehicle as contemplated in Section 127 of the NCA, as opposed to a repossession of a motor vehicle.

[90] Whilst the Davel matter is not authority for the submission that a Section 129(1)(a) Notice is required in circumstances where a consumer surrenders goods in terms of Section 127 of the NCA, it does reiterate that the NCA has as one of its main purposes the protection of the interests of consumers.[6]

[91] It is also recorded in the Davel matter at paragraph [19] as follows:

“It is clear from these provisions that the Legislature was intent on ensuring that sufficient protections are provided to ensure that, upon termination of a credit agreement, a consumer is protected. The Act provides mechanisms for a consumer to challenge the estimated values and the price realised upon a sale of goods after either a surrender of the goods by a consumer or the repossession of the goods after action has been taken by the credit provider. As can be seen from the provisions set out above, the Act also provides for enforcement of the rights of credit providers. Its purpose is directed to ensuring, as far as is practically possible, an equality of arms.”

[92] The reference to “these provisions” in the first sentence of the extract is a reference to Sections 122, 127, 128, 129 and 130 of the NCA.  It is accordingly clear that regardless of whether a credit agreement is terminated by a credit provider or a consumer, the consumer is entitled to the benefit of the protections afforded by the NCA, and particularly those sections of the NCA which are applicable.

[93] In terms of Section 129(1)(b) the prohibition on the commencement of legal proceedings prior to the provision of a Section 129(1)(a) notice (as relied on by the Respondent) is subject to the provisions of Section 130(2) of the NCA.

[94] In Section 130(2) of the NCA it is stipulated that in addition to the circumstances contemplated in Section 130(1), in the case of an instalment sale agreement a credit provider may approach the Court for an order enforcing the remaining obligations of a consumer under a credit agreement at any time if the goods have been sold pursuant to a surrender of the goods in terms of Section 127, and the nett proceeds of the sale were insufficient to discharge all of the consumers financial obligations under the credit agreement.

[95] In the matter of Rossouw and Another v FirstRand Bank Limited[7] (“the Rossouw matter”) it was held, in considering the meaning of Section 130(2) of the NCA as follows:

“What the section means is that in the three types of credit agreements mentioned (i.e. an instalment agreement, a secured loan and a lease), if the further requirements of the section are satisfied (i.e. all relevant property has been sold, pursuant to an attachment order or the surrender of property in terms of Section 127; and the nett proceeds of sale were insufficient to discharge all the consumers financial obligations under the agreement), then the credit provider is excused from complying with sub-section (1) (i.e. the credit provider does not have to send a notice and wait for the days to elapse). The circumstances under which a credit provider in the three types of contract mentioned in sub-section (2) may approach a court for the enforcement of a credit agreement, are in addition to the circumstances set out in sub-section (1) – that is why sub-section (2) commences with the very words ’in addition to the circumstances contemplated in sub-section (1)’".[8]

[96] The reference to “sub-section (1)” in the quoted extract is a reference to Section 130(1) of the NCA.

[97] It is accordingly clear that in legal proceedings arising from a voluntary surrender in terms of Section 127 of the NCA, a credit provider is not obliged to provide a notice as required by Section 129(1)(a) of the NCA, prior to commencing legal proceedings. Whether the credit provider is required to provide any other notification prior to commencing legal proceedings need not be considered for the in limine point, but is dealt with below.

[98] I am also in agreement with the Applicant’s counsel’s submissions that Section 127 of the NCA itself regulates the procedures for the demand and recovery of any outstanding balance arising from a sale of goods pursuant to a voluntary surrender in terms of Section 127.

[99] In the circumstances I find that the Respondent’s point in limine has no merit and falls to be dismissed.

The Applicant’s In Limine Points

[100] The Applicant raised two in limine points, relating to the Respondent’s non-compliance with Rule 6(5)(d)(i) and (ii) of the Rules of Court, in the Replying Affidavit.

[101] The two in limine points were raised in the Applicant’s Heads of Argument that were prepared prior to the Notice of Appointment of the Respondent’s current attorneys, and the Answering Affidavit having been filed.

[102] The first in limine point raised was that the address chosen for the service of legal proceedings on the Respondent, as chosen by the Respondent, fell outside the kilometres radius as provided in terms of the Rules of Court.  The Applicant’s first in limine point was not persisted with at the hearing of the Application, as the appointment of the Respondent’s current pro bono attorneys of record remedied such contravention of Rule 6(5)(d)(i).  

[103] The Applicant’s second in limine point related to the Answering Document not complying with Rule 6(5)(d)(ii) of the Rules of Court, in that the Respondent’s Answering Document was not an affidavit and was not commissioned in the presence of a Commissioner of Oaths.  The second in limine point was remedied by the delivery of a properly commissioned Answering Affidavit, and the second in limine point was also not persisted with at the hearing.

THE RESPONDENT’S DEFENCES

[104] In the Applicant’s Heads of Argument filed on 19 September 2019, reference is made to 8 separate defences raised by the Respondent.

[105] The 8 defences as summarized by the Applicant in the Heads of Argument are clearly based on what was recorded in the Answering Document, the contents of which are not admissible in this Application. The 8 defences referred to by the Applicant are the following:

[105.1] The Respondent contends that the Applicant is not the owner of the Isuzu motor vehicle, and that ownership of the Isuzu motor vehicle never passed to the Applicant;

[105.2] The Respondent seeks the return of the Isuzu motor vehicle on the basis of the legal principle of rei vindicatio;

[105.3] The Respondent contends the motor vehicle was not surrendered, but was provided to the Applicant purely for safe keeping, and not in order to enable the Applicant to realise the amounts outstanding in terms of the Agreement;

[105.4] The Isuzu motor vehicle was surrendered to the Applicant’s agent, and not to the Sheriff of the High Court, and in such circumstances, the Applicant failed to comply with the provisions of the NCA;

[105.5] The Respondent contends that he was lured into concluding the Surrender Agreement under the false pretences that the vehicle was only being handed over for safe keeping;

[105.6] The Respondent provided the Applicant with proof of documents indicating that he was able to pay the arrear instalments in respect of the Isuzu motor vehicle if provided with time, despite which the Applicant sold the Isuzu motor vehicle and ignored the provisions of Section 127 of the NCA;

[105.7] The Respondent utilised the Isuzu motor vehicle in order to generate an income, and after the surrender of the motor vehicle the Respondent’s wife suffered a major breakdown, which culminated in depression; and

[105.8] The Respondent disputed the costs and fees incurred in the surrender of the motor vehicle to the Applicant on the basis that he was lured into concluding the Surrender Agreement.

[106] In the Applicant’s Supplementary Heads of Argument, which were prepared after the delivery of the Respondent’s Answering Affidavit and the Supplementary Replying Affidavit, it is recorded that the Supplementary Heads of Argument will “address any additional defences and/or legal points raised by the Respondent” in the Answering Affidavit. The defences identified in the Applicant’s Supplementary Heads of Argument are the following:

[106.1] The Applicant did not comply with Section 129 of the NCA;

[106.2] It was not the intention of the Respondent to voluntarily surrender the motor vehicle in terms of the provisions of clause 11 of the Agreement and to terminate the Agreement, but rather to provide the Isuzu motor vehicle to the Applicant for safe keeping and that upon payment of the arrears, the motor vehicle would be returned to the Respondent;

[106.3] The Applicant’s agent misrepresented to the Respondent that the vehicle would be surrendered for safe keeping until the arrears had been settled in full, upon which the vehicle would be returned to the Respondent;

[106.4] That it is against public policy to lure the Respondent into entering into a voluntary surrender under false pretences; and

[106.5] The applicant did not afford the Respondent the opportunity of entering into a payment plan to settle the arrears outstanding.

[107] There is a clear overlap between the defences as identified by the Applicant in both sets of Heads of Argument filed on behalf of the Applicant.   At the hearing of the Application the Respondent’s counsel relied primarily on the Respondent’s in limine point, and referred to the other defences raised in the Answering Affidavit (and identified in the Applicant’s Supplementary Heads of Argument) in a cursory fashion.

COMPLIANCE WITH THE PROCEDURAL REQUIREMENTS OF THE NCA

[108] Section 130(3)(a) of the NCA reads as follows:

“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, the procedures required by those Sections have been complied with;”

[109] It is clear that the Applicant relies on the provisions of Section 127 of the NCA for the relief it seeks in this application.  In the circumstances, I am obliged to determine whether the procedures required by Section 127 have been complied with, prior to considering the merits of the Application.

[110] Applicant’s counsel submitted that there had been proper compliance with Section 127 of the NCA.  Respondent’s counsel submitted that there had not been compliance with Section 127 of the NCA.  I was not advised in what manner the Applicant had allegedly not complied with Section 127 other than being advised that the Respondent did not receive the Section 127(2) and Section 127(5)(b) notices.

[111] Applicant alleges in the Affidavits that it has complied with the provisions of Sections 127(2), 127(5) and 127(7) of the NCA.  Based on such allegations it was submitted by the Applicant’s counsel that the Applicant had complied with Section 127 of the NCA.  In such regard, Applicant’s counsel referred me specifically to the demand requirements set out in Section 127(7) of the NCA.

[112] It was submitted on behalf of the Applicant that all that is required by the Applicant is to make a demand in the Section 127(5)(b) notice, and if the Respondent fails to settle the amount demanded, the Applicant is entitled to commence with legal proceedings.  It is accordingly necessary to consider the relevant terms of the Agreement and the Surrender Agreement to be read together with the relevant provisions of the NCA in order to determine whether the Applicant has indeed complied with the procedural requirements of Section 127 of the NCA. 

[113] Clause 11 of the Agreement relates to the voluntary surrender of goods by the Respondent.  The relevant sub-clauses read as follows:

“11.1 You may give us written notice to terminate this agreement in accordance with the Act.  You must give us possession of the goods during business hours within 5 (five) business days after the date of the notice.

11.2 After receipt of the goods we will, within 10 (ten) business days send you a written notice setting out the estimated value of the goods and any other information prescribed by the Act.

11.3 After receiving our written notice, you have 10 (ten) business days within which to withdraw unconditionally your notice to terminate this agreement and resume possession of the goods unless you are in default under the agreement.  If you do not respond to our notice we will sell the goods as soon as possible at the best price reasonably obtainable. 

11.4 After selling any goods we will credit or debit you with a payment or charge equivalent to the proceeds of the sale less any expenses reasonably incurred by us in connection with the sale of the goods and give you a written notice stating the following: (i) the settlement value before the sale; (ii) the gross amount realised by the sale; (iii) the nett proceeds of the sale less permitted deductions and costs; and (iv) the amount credited or debited to your loan account.

…

11.6 If the amount credited to your loan account is less than the settlement value prior to the sale or if any amount debited to the account we will demand payment from you for the shortfall when issuing the notice.  You have 10 (ten) business days after receiving the letter of demand to pay the outstanding shortfall amount failing which we will commence with legal proceedings in the Magistrates Court for judgment in order to recover all outstanding amounts.

11.7 If you pay the amount demanded after receiving a notice of demand at any time before judgment is obtained, this agreement will automatically terminate on remittance of that amount.”

[114] In terms of clause 11 of the Agreement the Applicant is accordingly obliged to take the following steps in circumstances where the Respondent has provided written notice to surrender the motor vehicle:

[114.1] The Applicant must within 10 business days after receipt of the motor vehicle send a written notice setting out the estimated value of the goods and any other information prescribed by the NCA to the Respondent;

[114.2] Within 10 business days after having received the written notice the Respondent would be entitled to unconditionally withdraw the notice to terminate the Agreement and resume possession of the motor vehicle, unless he was in default in terms of the Agreement;

[114.3] After the sale of the motor vehicle the Applicant is obliged to record the proceeds of the sale and provide written notice to the Respondent setting out the settlement value before the sale, the gross amount realised by the sale, the net proceeds of the sale and the amount credited or debited to the Respondent’s loan account;

[114.4] If the amount credited to the Respondent’s loan account is less than the settlement value the Applicant is entitled to demand payment from the Respondent for the shortfall, and the Respondent has 10 business days after receiving the letter of demand to pay the outstanding shortfall, failing which the Applicant will be entitled to commence with legal proceedings in order to recover any outstanding amounts.

[115] The relevant portions of the Surrender Agreement read as follows:

“5. The credit provider shall within 10 (ten) busines days after receiving delivery of the goods, deliver to the consumer written notice setting out the estimated value of the goods, of which the valuation shall be done by a sworn appraiser appointed by the credit provider.

6. The consumer may within 10 (ten) business days after receiving the notice as contemplated in paragraph 5 unconditionally withdraw the notice to terminate the agreement and resume possession of the goods unless the consumer is in default (account in arrears) under the credit agreement.

7. In the event that the consumer does not respond to the notice as contemplated in paragraph 5 and/or remedy the default within 20 (twenty) business days from the date of this agreement, the credit provider shall sell the goods as soon as practically possible in accordance with its trade practice and for the best price reasonably obtainable on the date of sale.

8. Upon the sale of the goods in terms of clause 7 above, the credit provider shall credit the consumer with a payment equivalent to the proceedings of the sale, less the permitted default charges and any expenses reasonably incurred by the credit provider in connection with the sale of the goods and shall provide the consumer with a written notice setting out the aforesaid.”

[116] It is clear from the relevant portions of the Surrender Agreement that the Applicant is obliged to take the following steps:

[116.1] The Applicant must deliver a written notice to the Respondent setting out the estimated value of the motor vehicle returned to the Applicant by the Respondent within 10 business days after receipt of the motor vehicle;

[116.2] The Respondent would be entitled to unconditionally withdraw the notice of surrender and resume possession of the motor vehicle unless the Respondent was in default under the Agreement, within 10 business days after receiving the Applicant’s notice, unless he was in default;

[116.3] If the Respondent does not respond to the Applicant’s notice or remedy the default within 20 business days from the date of signature of the Surrender Agreement, the Applicant would be entitled to sell the motor vehicle;

[116.4] After the sale of the motor vehicle the Applicant must credit the Respondent with a payment equivalent to the proceeds of the sale, and must provide the Respondent with a written notice setting out the details of the sale and the amount with which the Respondent’s loan account was credited.

[117] Section 127 of the NCA reads as follows:

“127(1) A consumer under an instalment agreement, secured loan or lease -

(a)  may give written notice to the credit provider to terminate the agreement; and

(b)  if –

(i) the goods are in the credit provider’s possession, require the credit provider to sell the goods; or

(ii) otherwise, return the goods that are the subject of that agreement to the credit provider’s place of business during ordinary business hours within five business days after the date of the notice or within such other period or at such other time or place as may be agreed with the credit provider.

(2) Within 10 business days after the later of -

(a) receiving a notice in terms of subsection (l)(b)(i); or

(b) receiving goods tendered in terms of subsection (l)(b)(ii), a credit provider must give the consumer written notice setting out the estimated value of the goods and any other prescribed information.

(3) Within 10 business days after receiving a notice under subsection (2), the consumer may unconditionally withdraw the notice to terminate the agreement in terms of subsection (1)(a), and resume possession of any goods that are in the credit provider’s possession, unless the consumer is in default under the credit agreement.

(4) If the consumer -

(a) responds to a notice as contemplated in subsection (3), the credit provider must return the goods to the consumer unless the consumer is in default under the credit agreement; or

(b) does not respond to a notice as contemplated in subsection (3), the credit provider must sell the goods as soon as practicable for the best price reasonably obtainable.

(5) After selling any goods in terms of this section, a credit provider must -

(a) credit or debit the consumer with a payment or charge equivalent to the proceeds of the sale less any expenses reasonably incurred by the credit provider in connection with the sale of the goods; and

(b) give the consumer a written notice stating the following:

(i) The settlement value of the agreement immediately before the sale;

(ii) the gross amount realised on the sale;

(iii) the net proceeds of the sale after deducting the credit provider’s permitted default charges, if applicable, and reasonable costs allowed under paragraph (a); and \

(iv) the amount credited or debited to the consumer’s account.

(6) If an amount is credited to the consumer’s account and it exceeds the settlement value immediately before the sale, and -

(a) another credit provider has a registered credit agreement with the same consumer in respect of the same goods, the credit provider must remit that amount to the Tribunal, which may make an order for the distribution of the amount in a manner that is just and reasonable; or

(b) no other credit provider has a registered credit agreement with the same consumer in respect of the same goods, the credit provider must remit that amount to the consumer with the notice required by subsection (5)(b), and the agreement is terminated upon remittance of that amount.

(7) If an amount is credited to the consumer’s account and it is less than the settlement value immediately before the sale, or an amount is debited to the consumer’s account, the credit provider may demand payment from the consumer of the remaining settlement value, when issuing the notice required by subsection (5)(b)

(8) If a consumer -

(a) fails to pay an amount demanded in terms of subsection (7) within 10 business days after receiving a demand notice, the credit provider may commence proceedings in terms of the Magistrates’ Courts Act for judgment enforcing the credit agreement; or

(b) pays the amount demanded after receiving a demand notice at any time before judgment is obtained under paragraph (a), the agreement is terminated upon remittance of that amount.

(9) In either event contemplated in subsection (8), interest is payable by the consumer at the rate applicable to the credit agreement on any outstanding amount demanded by the credit provider in terms of subsection (7) from the date of the demand until the date that the outstanding amount is paid.

(10) A credit provider who acts in a manner contrary to this section is guilty of an offence.”

[118] As appears from clause 11 of the Instalment Agreement, the wording used in the Agreement is similar to that used in Section 127 of the NCA.

[119] In terms of Section 127 of the NCA, the Agreement and the Surrender Agreement, as read together, the Applicant was required to take the following steps after receipt of the Isuzu motor vehicle from the Respondent:

[119.1] Give the Respondent written notice (a Section 127(2) notice) setting out the estimated value of the Isuzu motor vehicle, and advising the Respondent that the Respondent would be entitled to withdraw the notice to terminate the Agreement and to resume possession of the Isuzu motor vehicle in the Applicant’s possession, within 10 business days after having received the notice, unless the Respondent was in default under the Agreement;

[119.2] In the event of the Respondent failing to respond to the notice in terms of Section 127(2) of the NCA, and failing to remedy the default within 20 business days from the date of the Surrender Agreement, the Applicant must sell the Isuzu motor vehicle as soon as possible for the best price reasonably obtainable, and after selling the Isuzu motor vehicle must provide the Respondent with a written notice (a Section 127(5)(b) notice) setting out the settlement value of the Agreement immediately before the sale of the motor vehicle, the gross amount realised for the motor vehicle for the sale, the net proceeds of the sale after the deduction of permitted charges, and set out the amount credited or debited to the Respondent’s account.

[119.3] If the amount realised at the sale is less than the settlement value in terms of the Agreement, the Applicant may demand payment from the Respondent of the remaining settlement value in terms of Section 127(7) of the NCA which demand may be included in the notice envisaged by Section 127(5)(b) of the NCA, or may accompany such Section 127(5)(b) notice.  The Section 127(7) demand can also be provided separately to the Section 127(5)(b) notice.

[119.4] In the event of the Respondent failing to pay any amount demanded in terms of Section 127(7) of the NCA, within 10 business days after receiving the demand notice the Applicant would be entitled to commence legal proceedings for the enforcement of the Agreement.

[120] It is accordingly necessary to determine whether the notices sent by the Applicant, in the manner sent as alleged by the Applicant, constitutes proper compliance with Section 127 of the NCA, as read with the Agreement and the Surrender Agreement.

[121] In the Founding Affidavit the Respondent alleged that on 5 March 2019 the Applicant “sent” a notice in terms of Section 127(2) of the NCA to the Respondent, setting out the valuation of the Isuzu motor vehicle, recording that the Respondent was entitled to unconditionally withdraw the notice to terminate the Agreement and resume possession of the goods, within 10 business days “of postage of this notice”, subject to the Respondent not being in default and that if no response is received by the Respondent within 10 business days, the Applicant will proceed to sell the Isuzu motor vehicle as soon as possible.

[122] In the Applicant’s Section 127(2) notice it is typed on the top of the page that the notice was sent “PER REGISTERED MAIL”.

[123] It is also recorded in the notice as follows:

“Please note that you are entitled, within 10 (ten) business days of postage of this notice, to unconditionally withdraw the notice to terminate the Agreement and resume possession of the goods, subject to you not being in default under the Agreement.” [my emphasis]

[124] It was furthermore recorded that in the event of the Respondent not replying to the notice within 10 business days from the date of the notice the Applicant would sell the Isuzu motor vehicle as soon as possible for the best possible reasonable price.

[125] It is clear that what is set out in the Founding Affidavit, and what is set out in the Applicant’s Section 127(2) notice is not in accordance with either the wording of Section 127 of the NCA, clause 11 of the Agreement, or paragraph 6 of the Surrender Agreement.  Section 127(3) refers to a period of 10 business days “after receiving a notice under subsection (2)”, which is obviously different to 10 business days after “postage”, and 10 days “from the date hereof”.

[126] In terms of clause 11 of the Agreement it is recorded that the Respondent would have 10 business days within which to withdraw the notice to terminate the Agreement, “after receiving our written notice”.  Clause 6 of the Surrender Agreement also refers to a period of 10 business days after “receiving” the section 127(2) notice. 

[127] The Applicant’s Section 127(2) notice is clearly defective, in that it does not accord with the wording as required by the Agreement, the Surrender Agreement and the NCA. 

[128] As set out above, in the Respondent’s Answering Affidavit it was recorded that the Respondent did not receive the Applicant’s Section 127(2) notice.

[129] In response to such denial the Applicant alleged in the Supplementary Replying Affidavit that the Section 127(2) notice was sent via registered mail on 5 March 2019.[9] The Applicant also referred to a “registered post slip” attached to the Section 127(2) Notice in the Founding Affidavit.

[130] It is also alleged in the Founding Affidavit that on 6 April 2019 the Applicant addressed a notice in terms of Section 127(5)(b) of the NCA to the Respondent in terms of which the Respondent was advised that the Isuzu motor vehicle was sold on 27 March 2019, that the outstanding capital in terms of the Agreement, prior to the sale of the Isuzu motor vehicle was R345 631.77, that the gross amount realised at the sale was R196 650.00, and that the nett proceed of the sale after deduction of the default charges amounted to R170 248.42, and that the amount credited to the Respondent’s account was R171 000.00.

[131] The contents of the Applicant’s Section 127(5)(b) notice complied with the requirements of the Agreement, the Surrender Agreement and the NCA.

[132] In the Applicant’s Section 127(5)(b) notice it is typed on the top of the page that the notice is sent “PER REGISTERED MAIL”.  In the notice, it was recorded with reference to the outstanding balance of R137 523.16, that the Respondent is requested to pay the amount directly into the Applicant’s account.  The Respondent was also advised in the same notice that the amount credited to the Respondent’s account was less than the settlement value of the Isuzu motor vehicle and therefore the amount of R137 523.16 was still due, owing and payable to the Applicant.

[133] The Respondent recorded in his Answering Affidavit that he had not received the Applicant’s section 127(5)(b) notice.

[134] In the Supplementary Replying Affidavit, the Applicant alleged that the Applicant’s Section 127(5)(b) notice had been sent to the Respondent by way of registered post on 6 April 2019.[10] It is also recorded that a “registered post slip” was attached to the Section 127(5)(b) notice.

[135] The annexures to the Section 127(2) and Section 127(5(b) notices, as attached to the Founding Affidavit, record the address of the Respondent, and reflect a pre-printed stamp, particular to the Applicant, recording such document as “Permit Mail”.

[136] Permit Mail is used by large entities that post more than one thousand items of post at a time.  The permit number that appears next to the “stamp” identifies the entity that posted the letter.  Registered Mail is a different service offered by the South African Post Office, and contains a tracking number.

[137] Whilst there are numbers on the annexures to the notices, which appear above a barcode, which in turn appear above the Respondent’s physical address, it is not clear whether such number is a tracking number utilised for registered mail. 

[138] Applicant’s counsel submitted that there was no obligation on the Applicant to provide notification to the Respondent by way of registered mail, but that the Applicant had done so anyway.  Applicant’s counsel also submitted that the Applicant simply had to show, on a balance of probabilities, that the notifications had been sent to the Respondent.

[139] In respect of such submissions Applicant’s counsel relied on the matter of Edwards v First Rand Bank Limited[11] (“the Edwards matter”), in which matter it was stated as follows at paragraph 11:

“It is settled law that the ordinary grammatical meaning of the words used in Section 127(2) of the Act must be interpreted to mean just that. A registered mail is not what the Legislature had in mind when it used the words “give the consumer written notice”. It may be advisable to send the notice in terms of Section 127(2) by registered mail but that is not what the law requires.”

[140] The relevant wording in Section 127(5) in respect of the provision of written notice (“give the consumer a written notice”) is identical and accordingly the same principle would apply to a notice provided in terms of Section 127(5) of the NCA.  The Supreme Court of Appeal has accordingly held in the Edwards matter that the notices to be sent to a consumer in terms of Sections 127(2) and 127(5)(b) need not be sent by way of registered mail. 

[141] Whilst the Edwards matter may be good authority for the submission that notices in terms of Section 127(2) and (5) of the NCA do not ordinarily need to be sent by registered mail, the Applicant cannot ignore the terms of its own Instalment Sale Agreement, which requires notification to be provided by way of registered mail.

[142] Clause 12 of the Agreement is relevant and the relevant portion reads as follows:

“The addresses set out in the Cost of Credit will be the addresses where the parties will accept documents, pleadings and notices relating to this agreement.  … You agree that registered mail will be used for delivery of legal notices to you.” (my emphasis)

[143] The address for the Respondent as set out in the Cost of Credit document is 2376 Swan Road, Riverlea, Ext 3, Johannesburg.  The Applicant is accordingly obliged to provide notification to the Respondent at such address.[12]

[144] In the circumstances, the legal principles established by the Courts in considering notification in terms of the NCA by way of registered mail must apply to the Applicant, and must be considered.

[145] Whilst the majority of the judgments in which the provision of notice in terms of the NCA have been considered have been in respect of Section 129, the principles established in such matters would apply equally to notifications to be provided in terms of Section 127 of the NCA, provided that such notification must be by registered mail, as may be required by the credit agreement applicable.

[146] Prior to the judgement by the Supreme Court of Appeal in the Rossouw matter, already referred to above, various divisions of the High Courts of South Africa had delivered conflicting judgements, relating to the provision of notification in terms of Section 129 of the NCA.

[147] In the Rossouw matter the Court a quo had held that delivery of a notice in terms of Section 129 occurred when the notice was sent by registered mail, regardless of whether the notice was received by the consumer or not. In coming to such finding, the Court a quo relied on the terms of the Instalment Sale Agreement being considered in that particular matter.[13]

[148] The Supreme Court of Appeal held in the Rossouw matter that a dispatch of a notice required by the NCA, in accordance with the manner chosen by the consumer is sufficient for compliance with Section 129 and actual receipt of such notice would be the consumer’s responsibility.[14]

[149] In the matter of Sebola and Another v Standard Bank of South Africa Limited and Another[15] (“the Sebola matter”) the Constitutional Court considered the notice requirements of the NCA.  The Constitutional Court stated that the issue to be determined by the Constitutional Court in Sebola was whether the provisions of the NCA entitle a debtor to receive written notice before the credit provider may institute action.[16]

[150] In the Sebola matter it was held (by the majority) (Cameron J) that the mere dispatch of a notification is not sufficient. The Court held that registered mail is essential, as the NCA requires the credit provider to take reasonable measures to bring the notice to the attention of the consumer, and the credit provider must make averments that would satisfy a Court that the notice “probably” reached the consumer.  It was also held that a credit provider must obtain a post-dispatch “track and trace” printout from the website of the South African Post Office.[17]

[151] The credit provider is then required to make the necessary averments in the pleadings or the affidavits coupled with proof that the notice was delivered to the correct post office, and it may then be reasonably assumed “in the absence of contrary indication” that the notification reached the consumer and that a reasonable consumer would have retrieved the notice from the post office.[18]

[152] In the Sebola matter it was stated that in contested proceedings, if the consumer asserts that the notice was not received, the Court must make a finding on whether such allegation is true or not and if the Court finds that it is indeed true, the Court must adjourn the hearing as required by Section 130(4)(b) of the NCA[19], and must give directions as to the steps to be taken before the credit provider can resume with the litigation.[20]

[153] It is clear that in determining whether there has been compliance with the notification requirements, a Court must have regard to the relevant Sections of the NCA, which Sections must be read together with the terms of the credit agreement applicable to the consumer.

[154] In the Sebola matter the Constitutional Court held that delivery is satisfied by proof that the credit provider sent the notice by registered mail to the correct address, as set out in the credit agreement, and proof that the notice was delivered to the correct post office, which “proof” would be in the form of a “track and trace” printout.[21]

[155] In the matter of Kubyana v Standard Bank of South Africa Limited[22] (“the Kubyana matter”), the Constitutional Court (Mhlantla AJ) again considered delivery of a Section 129 notice to a consumer, and elaborated on what was decided in the Sebola matter.

[156] It was held that while a credit provider is obliged to take certain steps in terms of the NCA, the credit provider cannot be non-suited if the consumer unreasonably fails to engage with the credit provider or fails to make use of the information provided to the consumer.[23]

[157] The argument raised in the Kubyana matter on behalf of the consumer was that as the registered letter had been returned to the credit provider, it was proof that there was no compliance with the notification requirements of the NCA, and that in such circumstances the matter must be postponed.

[158] The Constitutional Court held that there is no general requirement that a Section 129 notice must be brought to the consumer’s attention by the credit provider or that personal service is necessary.[24]  It was held that if the credit provider meets the notification requirements of the NCA it is up to the consumer to show that the notice did not come to the consumer’s attention and why it did not come to the consumer’s attention.[25] 

[159] The Constitutional Court clarified that the obligation of the credit provider is to dispatch the notice by registered mail, to show that the notice reached the correct branch of the post office, and that the post office notified the consumer that a registered letter was awaiting collection.[26]  The Constitutional Court also held that if a consumer ignores such a notification, it cannot be held that the credit provider did not comply with the notification requirements.[27]

[160] As regards the concept of “contrary indication” as referred to in the Sebola matter, the Constitutional Court held that a consumer must show that the notification did not reach the consumer despite the consumer acting reasonably. A consumer is not entitled to simply ignore the notification.[28] The Constitutional Court held that “unreasonable behaviour” by a consumer does not assist a Court, and in such circumstances a Court would not come to the assistance of an unreasonable consumer.

[161] The Constitutional Court held that a credit provider must set out facts to show that the notification as required by the NCA, has, on a balance of probabilities, reached the consumer. Each Court is required to decide, based on the particular set of facts before it, whether there has been compliance with the notification requirements.[29]  There are many ways in which notice can be brought to the attention of a reasonable consumer.  Proof that a notice sent by registered mail reached the correct post office would not in every matter satisfy the requirement that notice has on a balance of probabilities reached the consumer.  The views set out in the Sebola matter in such regard were fact specific and were obiter.[30]

[162] The requirement that notices in terms of Section 129 of the NCA must be provided by way of registered mail has now been entrenched by the amendments to Section 129 of the NCA, as set out in the National Credit Amendment Act, No.19 of 2014

[163] Whilst the Rossouw, Sebola and Kubyana matters related to notification in terms of Section 129 of the NCA, the requirements discussed in such matters relating to notification by way of registered mail will apply to any notice referred to in the NCA that is required to be sent by way of registered mail, regardless of the particular section of the NCA that is applicable.  The requirement of notice by way of registered mail in respect of sections other than Section 129 of the NCA will usually be dictated by the terms of the particular credit agreement. 

[164] In the matter of Baliso v First Rand Bank Limited t/a Wesbank [31] (“the Baliso matter”) it was held by the Constitutional Court (Froneman J) that a Court can only determine a matter if the procedures required by the particular section are complied with.[32]

[165] It was held by the Constitutional Court that a failure to comply with a Section 127(2) notice requirement has a more serious effect than a failure to comply with the Section 129 notification.[33]  It was stated that a Court requires proof that a Section 127(2) notice was probably received by, or came to the attention of a reasonable consumer.[34] If no proper notice is given, the entitlement of the credit provider to sell the goods that were returned falls away, and any claim for a shortfall will fail in circumstances where a sale has followed upon an invalid notice.  A credit provider risks losing its claim for repayment for any outstanding monies.[35]  An invalid notice may provide a consumer with substantive, as opposed to a dilatory ground to rebut the claim for repayment.[36]

[166] In respect of the Section 127(5)(b) notice, there will also have to be proof that the Section 127(5)(b) notice came to the attention of, or was received by, a reasonable consumer. 

[167] It was also stated that there was no logical reason to distinguish between the notification requirements of Section 129 of the NCA and the notification requirements of Section 127 of the NCA.[37]  This view appears to be obiter, and no finding was made in such regard.

[168] In the minority judgment (Zondo J) in the Baliso matter it was recorded that where a Court concluded that there was no compliance with Section 127(2) after a credit provider had sold the goods, it would be fatal to the credit provider’s action as against the consumer, because a credit provider can no longer put right its failure to comply with Section 127(2) since that compliance is required to precede the sale of the goods.[38] Such a defect cannot be effected or remedied after a sale.  It was also stated in the minority judgment that the provision of a Section 127(2) notice by ordinary mail would not constitute proper compliance.[39]

[169] It was also recorded in the minority judgment that a Court cannot competently order a credit provider to take steps to comply with Section 127 after the goods had been sold, and that the only order a Court could competently make in such circumstances was to dismiss the action.[40]

[170] In the Edwards matter notices in terms of Section 127(2) and 127(5)(b) of the NCA were addressed to the consumer’s chosen address and sent by ordinary mail. The consumer contended that he had not received the Section 127(2) and (5) notices.

[171] In the Edwards matter the Supreme Court of Appeal (Shongwe JA) stated that the view expressed in the Baliso matter that it would be illogical to make a distinction between the manner of giving notice under Section 127(2) of the Act, with that required in terms of Section 129(1) of the Act, was obiter.[41]  I respectfully agree with the Supreme Court of Appeal that such views were obiter, and accordingly the finding by the Supreme Court of Appeal that the NCA does not required that notices sent in terms of Section 127 have to be sent by registered mail prevails, and is binding on me. Such finding does not however impact on the requirement of registered mail imposed on the Applicant in this Application by the terms of the Instalment Sale Agreement. 

[172] The Supreme Court of Appeal also stated that the failure by a credit provider to comply with Section 127(2) of the NCA will be detrimental to the credit provider because the recovery of damages by way of the shortfall cannot be pursued in such circumstances.[42]

[173] As regards the consumer’s contention in the Edwards matter that the notices in terms of Section 127(2) and 127(5) as sent by the credit provider were not received by him, the Supreme Court of Appeal held that it was purely as a result of the conduct of the consumer, in electing an address for the receipt of notifications, knowing that at the address chosen no postal street delivery occurs. The conduct of the consumer was accordingly unreasonable.[43]

[174] The Supreme Court of Appeal referred in this regard to the Kubyana matter, where it was stated as follows:

“The Act does not imply, and cannot be interpreted to mean, that a consumer may unreasonably ignore the consequences of her election to receive notices by registered mail, when the notifications in question have been sent to the address which she duly nominated. While it is so that consumers should receive the full benefit of the protections afforded by the Act, the noble pursuit of that statute should not be open to abuse by individuals who seek to exercise those protections unreasonably or in bad faith”.

[175] In a supporting (not dissenting) judgment (Cachalia AJ) , it was stated that in the Edwards matter there was no obligation on the credit provider to provide a notice in terms of Section 127(2) of the NCA to the consumer, as the goods were not surrendered voluntarily, as the Agreement had been cancelled and the Court had ordered the attachment of the motor vehicle, and in such circumstances no purpose would be served by sending a notice in terms of Section 127(2) to the consumer.

[176] It was also stated by Calchalia JA in the supporting judgment that the consumer bore the burden of rebutting the inference of delivery, and to show that his conduct was reasonable, once it was proven that the notices were sent to the consumer. It was held that if the consumer did not receive the notices because of his own unreasonable conduct it would not matter whether or not he actually received delivery because, in such circumstance he would not have rebutted the inference of delivery.[44]

[177] It was held that even though there was an obligation to send a Section 127(5) notice to the consumer the defence of having not received such notice must fail, for the reasons relating to the consumers failure to provide a domicilium address at which postal delivery could actually be effected.

THE PURPOSE OF THE NOTICE PROVISIONS

[178] In the matter of ABSA Bank Limited v De Villiers and Others[45] (“the De Villiers matter”) it was stated that the purpose of the National Credit Act is, inter alia, to “…protect consumers by, inter alia, providing for a consistent and harmonised system of debt enforcement which places priority on the eventual satisfaction of all responsible consumer obligations under credit agreements”.[46]  The statement is based on the wording of Section 3(i) of the NCA.

[179] It is clear that Section 2(1) of the NCA requires the provisions of the Act to be interpreted in a manner that gives effect to the purpose of the Act as set out in Section 3.

[180] In terms of Section 3 of the NCA the purpose of the Act is to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.

[181] In terms of Section 3(e)(ii), consumers are to be provided with adequate disclosure of standardise information in order to enable the consumers to make informed choices.

[182] In the Sebola matter it was stated that the interpretation of the NCA calls for a careful balancing of the competing interests of the consumer and the credit provider. Whilst the main object is the protection of the consumer, the interests of the credit provider should not be ignored.[47]

[183] As set out in the Kubyana matter, a consumer is entitled to the full protection afforded to consumers by the NCA[48]  Such protection must however be balanced with the rights of credit providers to enforce the terms of credit agreements.

[184] It is clear that the NCA envisaged the giving of notice to consumers prior to legal proceedings being commenced by credit providers to enable the consumers to make use of the provisions of the NCA that provide protection to consumers, including the resolution of disputes other than by way of debt enforcement, as contemplated by Chapter 7 of the NCA. 

[185] The nature and requirements of the notice to be provided will be dictated by the relevant sections as set out in Chapter 6 of the NCA that the credit provider may rely on in order to enforce any indebtedness of a consumer. 

[186] The failure to provide a consumer with notice of the institution of legal proceedings, prior to the institution of such legal proceedings would negate, and be in conflict with, the purposes of the NCA.  The NCA provides for various ways in which notices as required by the relevant provisions may be furnished. The clear purpose of providing the various methods is to facilitate the provision of notice to consumers, prior to commencing with debt enforcement procedures. 

[187] In the Sebola matter it was stated as follows, in respect of the provision of notification to consumers, prior to the institution of legal proceedings:

“…one of the statute’s core innovations is significantly consumer-friendly and court-avoidant procedures.  These procedures are designed to help debtors to restructure their debts, or find other relief, before the guillotine of cancellation or judicial enforcement falls.”[49]

“But access to debt counselling and extra judicial resolution will undoubtedly have their most potent impact when the guillotine is about to fall.  And it is at this point, before the credit provider resorts to court process, that the legislation insists the consumer should have the benefit of a notice.”[50]

[188] The principle that consumers should receive notification as envisaged by the NCA prior to the commencement of legal proceedings must be taken into account in considering whether there has been compliance with the notice requirements of Section 127 of the NCA.

HAS THE APPLICANT COMPLIED WITH SECTION 127 OF THE NCA?

The Section 127(2) Notice

[189] The Applicant was clearly obliged, in terms of the Agreement as read with the NCA to send a Section 127(2) notice to the Respondent by way of registered mail.  The Applicant alleged that the notice was sent by way of registered mail, but there was no allegations or proof that the Section 127(2) notice was sent to the correct post office, or that notification of the registered mail was sent to the Respondent by the post office, as required and referred to in the Sebola and Kubyana matters.

[190] In the absence of the proof of notification by way of registered mail, the Applicant has failed to establish that the Section 127(2) notice, on a balance of probabilities, reached the Respondent.  The Applicant did not set out all of the required allegations in the Founding Affidavit (or any other affidavit).

[191] The Respondent alleged that he did not receive the Section 127(2) notice.

[192] Sections 127(3) and (8) of the NCA both require a consumer to receive notices in terms of Section 127(2) and (7) respectively.

[193] A credit provider can only sell goods surrendered in terms of Section 127(4) if the consumer has received a Section 127(2) notice and has not responded to the notice within 10 business days after receipt of such notice. 

[194] A credit provider can only commence legal proceedings in terms of Section 127(8) if the consumer has received a demand for payment in terms of Section 127(7) and has failed to make payment within 10 business days after receipt of such a notice.

[195] Section 129 of the NCA does not refer to a requirement of “receipt” and there is a clear distinction in the wording of Sections 127 and 129, relating to the “receipt” of notices.

[196] The requirement of receipt as set out in Sections 127(4) and (8) must be balanced against the conduct of a consumer in enabling the receipt of notices sent to a consumer.

[197] If a consumer acts unreasonably, and prevents the credit provider from ensuring receipt of notices in terms of Section 127, the credit provider will be excused from having to prove actual receipt by the consumer.  If a credit provider follows the procedures as set out in the NCA and the applicable credit agreement, in respect of the provision of notices, and the consumer unreasonably prevents or avoids actual receipt of the notices, the consumer will be presumed to have received the notices. 

[198] In the Baliso[51] and the Edwards[52] matters, the Constitutional Court and the Supreme Court of Appeal respectively did not find that receipt of the relevant notices sent in terms of Section 127(2) and (7) is not a requirement, but found, for different reasons, that the issue of actual receipt need not be considered in the matters before the two Courts. 

[199] In the Edwards matter it was stated as follows, by Cachalia AJ:

“His insistence on the notice having to be sent by registered mail is to resort to form over substance.  The question, surely, is whether or not he had actually received the notice or rebutted the inference that he had, not whether it was sent to him by registered mail.”[53]

[200] In the circumstances of this matter, where the Respondent denies the receipt of the Section 127(2) notice, the Applicant must show, on a balance of probabilities that the Respondent did receive the Section 127(7) notice. 

[201] It must of course be taken into account that in application proceedings the test as set out in the matter of Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd[54] is applicable, and the denial of receipt of the Section 127(2) notice by the Respondent, having regard to what is set out in the Applicant’s affidavits, cannot be rejected on the papers.

[202] Insofar as I am obliged, in the face of “contrary indications” to determine whether the Respondent’s allegation is true or not, I must find that the Respondent’s denial of receipt must be accepted as being correct.[55]

[203] In the circumstances, the Applicant has failed to establish that it has complied with the requirements of Section 127(2) of the NCA.

[204] In addition, and as set out above, the Applicant’s Section 127(2) notice is also defective, and would not constitute compliance with Section 127, even if it had been received by the Respondent.

[205] It was stated in the Baliso matter that if no proper Section 127(2) notice is provided, the credit provider’s right to claim any shortfall would fall away, and that the only competent order that a Court could make in such instance would be to dismiss the action or application. 

[206] It is accordingly necessary to determine whether the Applicant was required to give notice to the Respondent in terms of Section 127(2). 

[207] The Applicant was of the view that it was obliged to provide such notice, and that it complied with the requirements in terms of Section 127 of the NCA.  As already set out above, the Applicant did not comply with the notice requirements. 

[208] The purpose of providing a consumer with a Section 127(2) notice is to enable a consumer to consider, having regard to the valuation amount, what the effect of a sale of returned goods would have on the credit agreement, and to elect whether to withdraw the notice of termination of the agreement and resume possession of the Goods. 

[209] In terms of Section 127(3) (and Section 127(4)) of the NCA, the consumer is entitled to exercise such election, provided that the consumer is not “in default under the credit agreement”. 

[210] In the minority judgment in the Baliso matter, it was held that even if the consumer was in default, the credit provider must still comply with Section 127(2), as the steps to be taken as set out in Section 127(5) and the demand for payment in terms of Section 127(7) can only follow on a sale “in terms of” Section 127, but it cannot be said that the goods were sold “in terms of” Section 127 if there was no compliance with Section 127(2) of the NCA.[56]

[211] In the Edwards matter, it was held that the requirement to comply with Section 127(2) of the NCA is not applicable when a consumer is in default under the credit agreement, that it would in such circumstances serve no purpose to send a Section 127(2) notice, and that a Section 127(2) notice need only be sent when the consumer is not in default.[57]

[212] It is common cause that the Respondent was in default at the time of the surrender of the motor vehicle. 

[213] I am bound by the decision of the Supreme Court of Appeal in the Edwards matter, and accordingly find that the Applicant was not obliged to give notice to the Respondent as set out in Section 127(2) of the NCA. 

[214] In the circumstances, the defective nature of the Applicant’s Section 127(2) notice, and the failure to prove that such notice was provided to, and received by, the Respondent is irrelevant to this Application.

The Section 127(5)(b) Notice

[215] The Applicant was obliged, in terms of the Agreement and the NCA to send the Section 127(5)(b) notice to the Respondent by way of registered mail.  The Applicant alleged that the notice was sent by way of registered mail, but there were no allegations or proof that the Section 127(5)(b) notice was sent to the correct post office, or that notification of the registered mail was sent to the Respondent by the post office, as required and referred to in the Sebola and Kubyana matters.

[216] The Respondent alleged that he did not receive the Section 127(5)(b) notice.  In the absence of the proof of notification by way of registered mail, the Applicant has failed to establish that the Section 127(5)(b) notice, on a balance of probabilities, reached the Respondent. 

[217] The Applicant did not set out all of the required allegations in the Founding Affidavit (or any other affidavit) relating to compliance with Section 127(5)(b).  As already set out above, having regard to the Plascon-Evans test, the denial of receipt of the Section 127(5)(b) notice by the Respondent cannot be rejected on the papers.

[218] Insofar as I am required to determine whether the Respondent’s denial of receipt is true or not, I must find that the denial of receipt is to be accepted as being correct.

[219] In the circumstances, the Applicant has not complied with the requirements of Section 127(5)(b) of the NCA. 

[220] The purpose of the provision of a Section 127(5)(b) notice is to ensure that a consumer is placed in a position to be able to contest the values and calculations set out, as well as the price at which the goods were sold.  This will enable the consumer to raise any issues or disputes relating to whether there was any delay in the sale of the goods, whether the goods were sold for the best price possible, and the calculations of the settlement value, the default charges, the reasonable costs and the shortfall amount. 

[221] The consumer may then attempt to resolve any issues or disputes directly with the credit provider, and if such attempts are unsuccessful, approach the Tribunal to review the sale in terms of Section 128 of the NCA. 

[222] In the Davel matter, it was stated, with reference to the Court a quo, as follows:

“More particularly, it did not have sufficient regard to the provisions of section 128, which allows for a contestation in relation to a disputed sale of goods.  That contestation can take place by direct engagement with the credit provider, after referral of the dispute to the Tribunal, or after the submission of a complaint in terms of Section 136 with the National Credit Regulator.”[58]

[223] It is clear from the contents of the Answering Affidavit that the Respondent disputes that the Applicant was entitled to sell the Isuzu motor vehicle.

[224] The Applicant’s failure to provide the Section 127(5)(b) notice to the Respondent has deprived the Respondent of the remedies at his disposal in terms of Section 127, Section 128, Section 134 and Section 136 of the NCA. 

[225] The Applicant has not proven that a Section 127(5)(b) notice was sent to the Respondent, and has accordingly not complied with the requirements of Section 127. 

The Section 127(7) Demand

[226] In terms of Section 127(7) of the NCA a credit provider is entitled to demand payment of the remaining settlement value, after a sale, from the consumer.  The credit provider is entitled to make such demand when issuing the Section 127(5)(b) notice, but the demand can also be made separately. 

[227] In the Founding Affidavit it was not specifically alleged that demand for payment of the shortfall was made from the Respondent.  It was recorded that the Respondent was advised that the amount of R137 523.16 was still due, owing and payable to the Applicant. 

[228] In the Section 127(5)(b) notice itself, the Respondent was requested to pay the amount to the Applicant, was advised that if the Respondent was unable to pay the whole amount in one instalment, he should contact the Applicant in order to make payment arrangements, and that if he failed to pay the shortfall, this may result in further legal action being taken against him. 

[229] There was no statement that in the event of the Respondent failing to make payment within 10 days of receipt of the demand notice, legal proceeding for judgment may be commenced. 

[230] The wording used in the Section 127(5)(b) notice does not accord with what is set out in clause 11.6 of the Agreement. 

[231] I am of the view that the contents of the Section 127(5)(b) notice do not include a demand for payment, as envisaged by Section 127(7) of the NCA. 

[232] The Applicant failed to prove that a Section 127(5)(b) notice was provided to the Respondent, and even if the request for payment as set out in the Section 127(5)(b) notice constituted a demand, no demand in terms of Section 127(7) was sent to the Respondent. 

[233] The demand envisaged by Section 127(7) is clearly a precursor to any legal proceedings being commenced. 

[234] As set out above, a credit provider can only commence legal proceedings if the consumer has received a demand for payment, and the consumer has failed to timeously make payment.

[235] The Applicant has failed to show, on a balance of probabilities, that the Respondent received a demand as required by Section 127(8).

[236] The Applicant has in respect of the Section 127(7) notice also not complied with the requirements of Section 127 of the NCA. 

THE EFFECT OF NON-COMPLIANCE

[237] In the Baliso matter it was held that a Court is required to determine if there had been compliance with the procedures in Section 127 of the NCA, prior to determining the matter.[59]

[238] It was held that if a credit provider has not complied with the notification procedures as set out in Section 127 a Court is obliged to postpone the application or action and to give directions in respect of a future hearing.[60]

[239] Whilst it may seem somewhat artificial to postpone this Application on the basis that the Respondent did not receive the Section 127(5)(b) notice, and did not receive a Section 127(7) demand for payment, in circumstances where the Respondent has been aware of the information that would have been set out in a Section 127(5)(b) notice had it been properly served or had it been properly provided to the Respondent, and he is aware that the Applicant is demanding payment of the shortfall, since receipt of the Notice of Motion and Founding Affidavit, it is clear that a Court has no discretion in such regard, as Section 130(4)(b) is peremptory and once a Court determines that the credit provider has not complied with the relevant provisions of the NCA, the Court “must” adjourn the legal proceedings and make an appropriate order setting out the steps the credit provider must follow prior to the matter being resumed. 

ORDER

[240] In the circumstances, and having found that the Applicant did not comply with the requirements of Section 127 of the NCA, I make the following order:

[240.1] The Application is postponed sine die;

[240.2] The Applicant is to provide the Respondent with a Notice in terms of Rule 127(5)(b) of the National Credit Act, No. 34 of 2008, as amended (“the Act”), setting out the following information:

[240.2.1] The settlement value of the Instalment Sale Agreement concluded between the Applicant and the Respondent, immediately before the sale of the Isuzu motor vehicle;

[240.2.2] The gross amount realised in respect of the sale of the Isuzu motor vehicle;

[240.2.3] The net proceeds of the sale after deduction of the Applicant’s permitted default charges, if applicable, and the reasonable costs allowed in respect of the sale of the motor vehicle; and

[240.2.4] The amount credited or debited to the Respondent’s account.

[240.3] The Section 127(5)(b) notice shall also set out that:

[240.3.1] If the Respondent disputes the amount of the proceeds of the sale, or any other charges or expenses incurred, he may engage directly with the Applicant in relation thereto;

[240.3.2] If the engagement with the Applicant does not yield, from the Respondent’s perspective, the desired result, he may refer any dispute relating to the sale of the Isuzu motor vehicle to the National Consumer Tribunal, or submit a complaint in terms of Section 136 of the Act to the National Credit Regulator.

[240.4] The Applicant will be entitled to demand payment from the Respondent by notice in terms of Section 127(7) of the Act, of the remaining settlement value as set out in the Applicant’s Section 127(5)(b) notice, after the expiry of a period of 20 business days after the receipt of the Section 127(5)(b) notice by the Respondent.

[240.5] The Applicant’s Section 127(7) notice must record that in the event of the Respondent failing to make payment of the amount demanded in such Section 127(7) notice within a period of 10 business days from date of receipt of the Section 127(7) notice, the Applicant will be entitled to proceed with the Application instituted under case number 20102/2019.

[240.6] The Notices in terms of Sections 127(5)(b) and 127(7), referred to in paragraphs 240.2 and 240.4 above, are to be served on the Respondent by way of service by Sheriff of the High Court;

[240.7] The Applicant is to file, together with any Notice of Set Down of this Application, an affidavit confirming that the requirements set out in paragraphs 240.2 to 240.6 above have been complied with.

[240.8] The Applicant is to pay such costs that the Respondent may be entitled to.

 

_______________________________

G NEL

[Acting Judge of the High Court,

Gauteng Local Division,

Johannesburg]

 

Date of Judgment:               4 September 2020

 

APPEARANCES

For the Applicant:                Adv K Mitchell

Instructed by:                        Tim du Toit & Co. Incorporated

(N Erasmus)

 

For the Respondent:           Adv M O Mudimeli

Instructed by                         Theron and Mayberry Attorneys

(A Theron)

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