IN THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)

CASE NO: 53658/2010

IN THE MATTER BETWEEN:

NEDAN (PTY) LTD                                                                                     PLAINTIFF

and

SELBOURNE FOOD MANUFACTURERS CC                          FIRST DEFENDANT
MR HAROON EBRAHIM ABRAMJEE                                   SECOND DEFENDANT

JUDGMENT

TOLMAY, J:

INTRODUCTION
[1]	The plaintiff instituted action against the defendants as a cessionary in terms 	of a written agreement and addendum entered into between plaintiff and 	Nedan Oil Mills (Pty) Ltd (Nedan Oil) in terms whereof Nedan Oil ceded and 	made over to the plaintiff all of Nedan Oil’s right, title and interest in and to all 	of its claims against parties with whom Nedan Oil contracted and/or which are 	indebted to Nedan Oil.

[2]	Nedan Oil entered into a written agreement with the first defendant. In terms 	of this 	agreement Nedan Oil sold and delivered goods to the first defendant.

[3]	The second defendant bound himself as surety jointly and severally with the 	first defendant for the due and punctual performance by the first defendant of 	its contractual obligations to Nedan Oil. 

[4]	The plaintiff alleged on the pleadings that first defendant became indebted to 	Nedan Oil in the amount of R1 275 345-60 and after certain payments were 	made the first defendant remained indebted in the amount of R554 430-00, 	which amount according to the plaintiff was due, owing and payable. The 	parties subsequently however agreed that an amount of R517 180-00 is still 	outstanding.

[5]	The defendants entered a special plea and pleaded that the plaintiff extended 	credit to the first defendant, and that accordingly plaintiff is regarded as a 	credit provider and should have, in terms of sec 40(1)(b) of the National 	Credit Act, Act 34 of 2005 (NCA), applied to be registered as a credit provider, 	in that the debt the first defendant, owes exceeds the threshold amount, 	mentioned in sec 42(1) of the NCA which is R500 000-00. 

[6]	In reply to the special plea no replication was filed, but the plaintiff 	introduced the following amendment to its Particulars of Claim:-
	
“7.
7.1	The written agreement between Nedan Oil Mills (Pty) Ltd and the First and Second Defendants, annexure “B” hereto, is an incidental agreement in terms of the provisions of the National Credit Act, Act 34 of 2005 [as amended] and is therefor exempted from the provisions of the aforementioned Act dealing with registration requirements and the dispute-settlement mechanisms thereof.
7.2	The plaintiff therefor ex abundante cautela complied with the provisions of Section 129 of the aforementioned National Credit Act, as reflected in annexures”F” to “G” hereto.”

[7]	In terms of sec 40(4) of the NCA a credit agreement entered into by a credit 	provider who is required to be registered in terms of sec 40(1) but who is not 	so registered, is an unlawful agreement and void, to the extent provided for in 	sec 89(2)(d) of the NCA.

[8]	The parties agreed that the special plea needed to be determined before they 	proceed to the merits in terms of rule 33(4) of the Uniform Rules of Court.

ISSUES TO BE DETERMINED
[9] The issue to be determined is whether the agreement, attached to the 	Plaintiff’s particulars of claim, is unlawful and null and void for want of 	registration by Plaintiff as a credit provider in terms of the NCA or whether 	the said agreement is an incidental credit agreement resulting in Plaintiff 	being excluded from the requirement to be registered as such.

COMMON CAUSE FACTS
[10]	The parties agreed on a set of common cause facts on which the special 	plea is to be determined, these common cause facts are inter alia that:
10.1	Plaintiff is not a registered credit provider in terms of the NCA and 	that  the credit provided exceeded R500 000-00.
10.2	First Defendant, as duly represented by the Second Defendant, 	applied for credit in terms of a Credit Application Form, on 18 	September 2006 and the application was accepted by the Plaintiff on 	19 September 2006. 
	10.3	In terms of the aforementioned Credit Application Form goods were 		sold 	and delivered by the Plaintiff to the Defendant as requested 		by the Defendant, on different occasions as inter alia reflected in the 		four invoices attached to the Plaintiff’s particulars of claim.
10.4	The Credit Application Form stipulates furthermore:
10.4.1	that the purchase price shall be the Plaintiff’s ruling price at the date of dispatch of the First Defendant’s order;
10.4.2	 that First Defendant will pay the purchase price, referred to above, in full on due date. 
	10.5	In terms of monthly statements of account, as supplied by the 			Plaintiff to the First Defendant, due date for payment was within 30 		days of the date of the statements.
	10.6	The Credit Application Form stipulates that should the purchase 			price not be paid in full on due date, the Plaintiff would be entitled to 		charge interest on any overdue amounts at an annual finance 			charge rate chargeable from time to time in regard to a credit 			transaction in terms of the Usury Act No. 73 of 1968 as amended.
	10.7	The Plaintiff did not charge interest on outstanding amounts on the 		First 	Defendant’s account when the First Defendant failed to pay 		his account on due date as stated on Plaintiff’s statements.
	10.8	Plaintiff did not quote two prices for settlement of the account, the 		lower 	price being applicable if the account is paid on or before the 		determined 	date on Plaintiff’s statement, and the higher price being 		applicable due to 	the account not having been paid by the 			determined date on Plaintiff’s statement.
	10.9	Before issue of summons against Defendants, Plaintiff did comply 		with the provisions of Section 129 of the NCA.

THE APPLICABLE LEGAL PRINCIPLES AND LEGISLATION
[11]	I need to decide only the limited issue namely whether the agreement 	between the parties is null and void because the plaintiff did not register as a 	credit provider and whether the agreement is an incidental credit agreement 	or not. If it is the plaintiff need not have registered as a credit provider in terms 	of the NCA.

[12]	The distinction between a credit facility and an incidental agreement is 	relevant, sec 8(3) of the NCA states as follows pertaining to a credit facility:
“8  Credit agreements
(3) An agreement, irrespective of its form but not including an 	agreement contemplated in subsection (2) or section 4 (6) (b), 	constitutes a credit facility if, in terms of that agreement-
(a)	a credit provider undertakes-
	(i)	to supply goods or services or to pay an amount or 				amounts, as determined by the consumer from time to 			time, to the consumer or on behalf of, or at the 				direction of, the consumer; and
        (ii)	either to-
		(aa)	defer the consumer's obligation to pay any part of 			the cost of goods or services, or to repay to the credit 			provider any part of an amount contemplated in 				subparagraph (i); or
		(bb)	bill the consumer periodically for any part of the 			cost of goods or services, or any part of an amount, 				contemplated in subparagraph (i); and
(b)	any charge, fee or interest is payable to the credit provider in 		respect of-
	(i)	any amount deferred as contemplated in paragraph (a) 			(aa); or
	(ii)	any amount billed as contemplated in paragraph (a) (ii) 			(bb) and not paid within the time provided in the 				agreement.”

[13]	An incidental credit agreement is defined as follows in the NCA:
“'incidental credit agreement' means an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply:
(a)	a fee, charge or interest became payable when payment of an amount 	charged in terms of that account was not made on or before a 	determined period or date; or
(b)	two prices were quoted for settlement of the account, the lower price 	being applicable if the account is paid on or before a determined date, 	and the higher price being 	applicable due to the account not having 	been paid by that date.”

[14]	Only sub sec (a) is relevant to this case as the parties have agreed that sub 	sec (b) is not applicable in this case.

[15]	Section 5(3) of the NCA provides as follows:
	“5 Limited application of Act to incidental credit agreements
(3) A person may only charge or recover a fee, charge or interest-
(a)	in respect of a deferred amount under an incidental credit agreement as provided for in section 101 (d), (f) and (g) subject to any maximum rates of interest or fees imposed in terms of section 105; or
(b)	in respect of an unpaid amount contemplated in paragraph (a) of the definition of 'incidental credit agreement' only if the credit provider has disclosed, and the consumer has accepted, the amount of such a fee, charge or interest, or the basis on which it may become payable, on or before the date on which the relevant goods or services were supplied.”

[16]	Section 101(1) (d), (f) and (g) provides as follows:

	“101 Cost of credit
(1) A credit agreement must not require payment by the consumer of any money or other consideration, except-
(a)	………
	(b)	………
	(c)	………
	(d)	interest, which-
(i)	must be expressed in percentage terms as an annual rate calculated in the prescribed manner; and
(ii)	must not exceed the applicable maximum prescribed rate determined in terms of section 105;
(e)	………
	(f)	default administration charges, which-
(i)	may not exceed the prescribed maximum for the category of credit agreement concerned; and
(ii)	may be imposed only if the consumer has defaulted on a payment obligation under the credit agreement, and only to the extent permitted by Part C of Chapter 6; and
(g)	collection costs, which may not exceed the prescribed maximum for the category of credit agreement concerned and may be imposed only to the extent permitted by Part C of Chapter 6.”

[17]	The terminology used to describe a credit agreement, when certain 	requirements are met, as an incidental credit agreement has been 	discussed and lamented. I can contribute nothing 	further to what has 	already been stated but to agree with the sentiments raised in this regard.

 [18]	As mentioned hereinbefore, it is common cause that the Plaintiff at no 	stage charged any interest on outstanding amounts on the account of the 	First Defendant, despite the fact that the agreement between the parties 	made provision for it. The statements provided that the applicable interest 	rate is 0.00%.	 

 [19]	As the agreement makes provision for the charging of interest the 	pertinent question is whether the fact that the plaintiff didn’t actually charge 	interest, despite the entitlement thereto, excludes the credit agreement 	from the definition as an incidental credit agreement. It must also be 	determined, whether the fact that the agreement provided for interest to be 	charged under the repealed Usury Act, 30 of 1968 has the effect that the 	clause should be regarded as pro non scripto.

[20]	The wording of the contract and the wording of the NCA should be interpreted 	in order to establish whether the agreement is 	indeed an incidental credit 	agreement.  In doing so, one must also keep in mind the objects of the NCA.

[21]	The objects of the NCA are set out in sec 3 which reads as follows:
	“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.”

[22]	The main objective of the NCA is to protect consumers, in Sebola it was 	also stated that the interest of credit providers should not be minimised or 	disregarded in the process of interpretation. This is obviously important as 	undue interference with business relationships should be avoided as it could 	impact on the ability to effectively conduct business, which in the end could 	also impact on the economic welfare of both credit providers and consumers.

[23]	The rules pertaining to the interpretation of documents, was set out in 	Natal Joint 	Municipal Fund v Endumeni Municipality and states as 	follows:
	“[18] Over the last century there have been significant developments in  the 	law relating to the interpretation of documents, both in this country and in 	others that follow similar rules to our own. It is unnecessary to add unduly to 	the burden of annotations by trawling through the case law on the 	construction of documents in order to trace those developments. The relevant 	authorities are collected and summarised in Bastian Financial Services (Pty) 	Ltd v General Hendrik Schoeman Primary School. The present state of the 	law can be expressed as follows: Interpretation is the process of attributing 	meaning to the words used in a document, be it legislation, some other 	statutory instrument, or contract, 	having regard to the context provided by 	reading the particular provision or provisions in the light of the document as a 	whole and the circumstances attendant upon its coming into 	existence. 	Whatever the nature of the document, consideration must be given to the 	language used in the light of the ordinary rules of grammar and syntax; the 	context in which the provision appears; the apparent purpose to which it is 	directed and the material known 	to those responsible for its production. 	Where more than one meaning is possible each possibility must be weighed 	in the light of all these factors. The process is objective, not 	subjective. A 	sensible meaning is to be preferred to one that leads to insensible or 	unbusinesslike results or undermines the apparent purpose of the document. 	Judges must 	be alert to, and guard against, the temptation to substitute what 	they regard as reasonable, sensible or businesslike for the words actually 	used. To do so in regard to a statute or 	statutory instrument is to cross the 	divide between interpretation and legislation; in a contractual context it is to 	make a contract for the parties other than the one they in fact made. The 	'inevitable point of departure is the language of the provision itself', read in 	context and having regard to the purpose of the provision and the background 	to the 	preparation and production of the document.”

[24] 	Using the above approach one needs to look at the language used, read in 	context and having regard to the purpose of the provision and the background 	to the provision. If one looks at the definition of an incidental agreement the 	wording requires, for purposes of the facts of this case that interest becomes 	payable when payment is not made on due date. The agreement between the 	parties meets this requirement. Section 101(d) requires that such interest be 	expressed in percentage terms which must not exceed the applicable 	maximum rate. As 0.00% interest was charged the agreement also meets 	these requirements. There is no 	indication in the wording of the Act that 	there is a duty on the credit provider to 	actually charge interest. To interpret 	the wording in the definition to mean that interest must actually be 	charged 	would in my view be to read requirements in which the legislature did not 	provide for. Furthermore such an 	interpretation would interfere unduly with 	the business relationship 	between parties. A credit provider might for various 	reasons, despite the entitlement to charge interest, decide not to do so, and 	certainly there is nothing sinister or unlawful about that.
[25]	In JMV Textiles the difference between a credit facility and an incidental 	credit agreement was discussed and the following was stated which is 	relevant to this case:
	[15] The agreement between JMV Textiles and Cuts is fundamentally different 	from this. The agreement is that JMV Textiles will sell goods on credit to Cuts. 	The expectation is that the price of the goods will be paid each month as it 	falls due. There is no fee paid for this and there is no entitlement to pay less 	than the full amount due each month. The obligation to pay interest flows from 	default in making timeous payment, not from a legitimate decision not to pay 	the full amount that is due each month. There is no contemplation that MV 	Textiles will ever send a bill for only part of what is due or at periodic intervals. 	This type of transaction is so wholly distinct from those that are manifestly 	intended to fall within s 8(3), that the language should not be stretched to 	encompass it. Even if it does, I am mindful of the warning given by De Villiers 	ACJ in Town Council of Springs v Moosa and Another 1929 AD 401 at 417, 	that:   
	'An interpretation clause has its uses, but it also has its dangers, as is obvious 	from the present case. To adhere to the definition regardless of subject-matter 	and context might work the gravest injustice by including cases which were 	not intended to be included.'
	In my view s 8(3) is directed at the provision by credit providers of charge 	cards and credit cards and similar arrangements, and not at conventional 	sales on credit. It accordingly does not cover the transactions before me.
	[16] Viewed from a broader perspective, that conclusion is consistent with the 	thrust and purpose of the NCA. In a broad sense it is concerned with the 	activities of those whose business it is to provide credit to the public and who 	seek to profit from that business by way of fees, charges and interest. The 	distinction, drawn between an incidental credit agreement and a credit facility, 	reflects the fact that, with the incidental credit agreement, the fee, charge or 	interest only arises when the consumer is in default. There an entitlement to 	charge interest on default would in any event be permissible, if the contractual 	terms were silent on the point, by virtue of the provisions of the Prescribed 	Rate of Interest Act 55 of 1975. By contrast, in the case of a credit facility it is 	a term of the facility that the consumer is entitled to defer payment in full and 	make lesser payments, subject to paying interest. Thus, in the case of the 	credit facility described in s 8(3), part and parcel of the arrangement between 	the consumer and the credit provider is agreement that the consumer may 	take advantage of the offer of credit. Indeed, the usual expectation is that 	most consumers will, either on a regular basis or at least from time to time, 	take advantage of the availability of credit and be willing to incur the charges, 	usually by way of interest, resulting from their doing so. That is largely how 	the credit provider profits from the agreement”. (my underlining)
 
[26]	The learned judge went further and also stated that: 	
	“[18]	There are, of course, countless business transactions in which 			goods and services are provided on credit, where the supplier only 		charges interest if payment is not received timeously or offers the 		other party a discount if they pay early. Experience suggests that 		almost all manufacturers supply goods to their customers, whether 		wholesale or retail, on that basis.  Whilst one does encounter sales 		on a COD basis, in modern conditions of trade that may well be the 		exception, rather than the general rule.  At the day-to-day level of 		the ordinary citizen it is common place to find that people have an 		account with their pharmacy or, in poorer communities, with the 			local general dealer or traders’ store.  School-children may have 			accounts at the school shop, and students may run accounts at a 		student book shop.  It would be surprising to discover that all these 		institutions are credit providers required to register in terms of the 		NCA.  Their focus is not the provision of credit and the securing of 		profit therefrom, but the simple task of profiting from the buying and 		selling of goods.  It is into that category that JMV Textiles’ 				agreement with Cuts falls”

[27]	I agree with the contention that sec 8(3) is directed at those institutions that 	provide credit and secure profit therefrom and not at conventional sales on 	credit when goods are sold on credit and in truth only become chargeable on 	default. Different viewpoints than that expressed in the aforementioned case 	have been raised but I am of the view that the approach set out in JMV 	Textiles should be followed. It would create an untenable 	situation if it is 	required of businesses who sold products or services to register as 	credit 	providers. This in turn could frustrate business and could lead to situations 	where businesses who sell products or services are not entitled to supply 	goods on credit or even worse may not be entitled to payment for goods 	properly delivered. This could lead to unjust and unfair results, which certainly 	could not have been the objective of the 	legislator.

[28]	In Seaworld Frozen Foods it was stated that it could never have 	been the 	intention of the legislator to burden ordinary businesses to register 	as credit 	providers when they sell their goods on account to regular customers. I agree 	wholly with this sentiment, it is inconceivable that under circumstances like the 	one we find in this case that  a credit provider would be required to register 	in terms of the NCA.

 [29]	In this agreement the parties agreed that interest could be charged 	on 	overdue amounts in accordance with the repealed Usury Act 30 of 1968. The 	parties signed the agreement during September 2006 and the Usury Act was 	repealed on 1 June 2006.

 [30]	The defendant argued that as a result of the fact that the Usury Act was 	repealed this clause should be regarded as pro non scripto. I do not agree 	with this submission. This requirement merely leads to the result that interest 	could, if the 	plaintiff did wish to charge interest, only be charged in 	accordance with sec 2 of the NCA. The plaintiff charged 0.00% interest which 	obviously did not exceed the maximum prescribed rate.

[31]	This matter should in my view be distinguished from the Independent 	Plumbers matter where the learned judge concluded that the agreement in 	that case was an incidental credit agreement because of the inclusion of 	provisions that allowed for the charging and recovery of collection costs and 	collection commissions which he regarded as charges that are permissible in 	terms of sec 5(3) of the NCA when payment is not made on or before the 	determined date. In this instance, contrary to the situation in that case, the 	agreement did make provision for the charging of interest. 

CONCLUSION
 [32]	In the light of all the facts I am of the view that the agreement entered into 	between the parties is an incidental credit agreement as defined by the Act 	and consequently the plaintiff did not need to register as a credit provider.

[33]	The agreement between the parties makes provision for costs on an attorney 	and client scale and consequently the plaintiff is entitled to such an order.

[34]	Consequently I make the following order:
	1.	The special plea is dismissed.
	2.	The defendants are ordered to pay the costs on attorney 			and client scale jointly and severally the one paying the other to 		be absolved.

_____________
R G TOLMAY
JUDGE OF THE HIGH COURT