REPORTABLE
THE HIGH COURT OF SOUTH AFRICA 
[CAPE OF GOOD HOPE PROVINCIAL DIVISION]
Case No: 15692/07
In the matter between:

and

THE MAGISTRATE FOR THE

JUDGMENT DELIVERED: 25 NOVEMBER 2008 FOURIE, J
[1] This is a review application which concerns certain aspects of debt enforcement under the National Credit Act No. 34 of 2005 ("the NCA"). In particular, it involves the interpretation of certain provisions of the NCA dealing with the repossession of property that is the subject of an instalment agreement.
[2] The NCA came into operation incrementally and has been fully in operation since 1 June 2007. It has repealed the Credit Agreements Act No. 75 of 1980 and the Usury Act No. 73 of 1968. In terms of section 3 the purposes of the NCA are 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, 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.

[4] The background to this application may be summarised as follows: On 25 August 2006, first respondent concluded an instalment agreement in terms of which he purchased a motor vehicle on certain conditions from Premier Attraction 650CC. The instalment agreement is a credit agreement as defined in section 8 of the NCA, and the NCA applies to the instalment agreement by virtue of the provisions of section 4 of the NCA. All the rights arising out of the instalment agreement, including ownership of the subject motor vehicle, have been ceded and transferred to applicant, the latter being a registered credit provider in terms of section 40 of the NCA. Subsequent to the cession, respondent breached the instalment agreement by failing to make payment of the monthly instalments due to applicant. Applicant brought an urgent ex parte application in the Simon's Town Magistrate's Court, in terms of section 130 (1) of the NCA, for an order authorising the sheriff to attach the motor vehicle which is the subject matter of the instalment agreement, and to hand same over to applicant for safe-keeping. After hearing argument on behalf of applicant, second respondent dismissed the application.

[7] In his reasons for dismissing the application, second respondent found that applicant had duly complied with the requirements of sections

[10] Before dealing with the debt enforcement provisions of the NCA, I should refer to section 123, which deals with the termination of a credit agreement by the credit provider. Section 123(1) prescribes that a credit provider may terminate a credit agreement, before the time provided in that agreement, only in accordance with section 123. This section, however, does not detail the steps to be taken by a credit provider to terminate a credit agreement before the agreed termination date thereof. Section 123 (2) gives some guidance, in providing that if a consumer is in default under a credit agreement, "the credit provider may take the steps set out in Part C of Chapter 6 of the NCA, to enforce and terminate that agreement".

[11] As mentioned by CM Van Heerden and JM Otto, TSAR 2007.4, page 655, the use of the words "enforce" and "terminate" in section 123 (2), is rather unfortunate. These words are not defined in the NCA and their simultaneous use may be confusing. The ordinary meaning of "enforce", in legal parlance, particularly in a contractual setting, would be the enforcement of an obligation. The use of the word "terminate", on the other hand, conveys the legal notion of the extinguishing of contractual obligations. It is difficult to understand how, as a matter of law, a credit agreement can be enforced and terminated at the same time, as is suggested by the wording of section 123(2). Be that as it may, it is necessary to consider the ambit of the relevant remedies which a credit provider has in terms of the debt enforcement provisions of the NCA.

[12] Part C of Chapter 6 of the NCA (sections 129 to 133) deals with "debt enforcement by repossession or judgment". Section 129(l)(b) provides that if a consumer is in default under a credit agreement, the credit provider may not commence any legal proceedings to enforce the agreement, before complying with the notice requirement of section 129(l)(a), as well as the requirements of section 130. If the word "enforce" in section 129 (1) (b) were to be given the restricted meaning of the enforcement of a contractual obligation, it would mean that where a consumer is in default and the credit provider wishes to invoke the more serious remedy of cancellation, it would not be necessary for the credit provider to comply with the notice provision and other requirements detailed in sections 129 (1) (a) and 130. As stated by Otto 88, this would surely go against the grain of the NCA, one of the declared purposes of which is to protect consumers.

[14] It follows, in my view, that in the event of a consumer defaulting under a credit agreement, the credit provider who wishes to invoke any remedy at his/her disposal in terms of the relevant credit agreement, will have to comply with the requirements laid down in sections 129 and 130. As I have mentioned previously, second respondent found that applicant had complied with these requirements. What has to be decided, is whether applicant was legally entitled to an order attaching the vehicle, in the absence of the cancellation of the instalment agreement.

b)	To claim specific performance of his contractual obligations by first respondent; or
c)	To cancel the instalment agreement, repossess the vehicle and claim damages for breach of contract.

[17] The reciprocal obligation of applicant under the instalment agreement, is to provide first respondent with the vehicle which is the subject of the agreement. The principles of our law of contract accordingly dictate that, if applicant wishes to institute a claim for specific performance (ie for payment of the monthly instalments due in terms of the instalment agreement by first respondent), the particulars of claim will have to allege that the vehicle has been delivered to first respondent or delivery thereof should be tendered. It follows that a claim for the repossession of the vehicle is inconsistent with a claim for specific performance. I wish to reiterate that I am not referring to a claim for interim repossession pending the institution of a claim for cancellation of the agreement and damages, but to a claim for a final order authorising the attachment of the vehicle.

[19] It follows from the aforesaid that, in terms of the general principles of our law of contract, an order authorising the attachment of a vehicle which is the subject of an instalment agreement, would be granted by the court as a claim ancillary to the cancellation of the instalment agreement. As mentioned before, second respondent held that, absent a claim for the cancellation of the instalment agreement, applicant was not legally entitled to a final order for the attachment of the vehicle. This decision of second respondent is in accordance with the principles of our common law. What has to be decided, is whether the NCA, and, in particular, Part C of Chapter 6, has introduced a procedure at variance with our common law, which entitles applicant to repossess the vehicle in the absence of the cancellation of the instalment agreement.

[20] The common law remedies of a credit provider have, as previously indicated, to a certain extent been curtailed by the procedures to be complied with prior to the enforcement of a debt (sections 129 and 130). Applicant, however, contends that Part C of Chapter 6 of the NCA, also allows for the repossession of the goods that are the subject of an instalment agreement, as a means of debt enforcement, without the prior or contemporaneous cancellation of the agreement. For this contention applicant, in particular, relies upon the provisions of section 131, read with section 127, of the NCA.

[21] Section 131 is headed "Repossession of Goods" and reads as follows:
"If a court makes an attachment order with respect to property that is the subject of a credit agreement, section 127 (2) to (9) and section 128, read with the changes required by the context, apply with respect to any goods attached in terms of that order. "

[22] Section 127 confers an extraordinary right on the consumer, whereby he or she can rid himself or herself of an instalment agreement, by unilaterally returning the goods which are the subject of the agreement, to the credit provider. The section then prescribes the procedure to be followed for the recovery, by the credit provider, of the outstanding balance due in terms of the instalment agreement. The section reads as follows:

agreement, secured loan or lease-
(a)    may give written notice to the credit provider to terminate
the agreement; and 
(b)    if

(2)    Within 10 business days after the later of-
(a)    receiving a notice in terms of subsection (J) (b) (i); or
(b) receiving goods tendered in terms of subsection (1) (b) (ii), a credit provider must give the consumer written notice setting out the estimated value of the goods and any other prescribed information.

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.

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:

(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.

(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.

(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 contraiy to this section is guilty of an offence".
[23] I should mention that section 128, which is also referred to in section 131 and deals with the situation where a consumer is not satisfied with the sale of the goods, is not applicable in the instant case.

[24] Mr. Coetsee submitted that by incorporating the provisions of section 127 (2) to (9) in section 131, the legislature intended to create a procedure for the attachment of goods where a consumer is in breach of his contractual obligations in terms of an instalment agreement, while the agreement remains extant. In fact, he argued that the credit provider is precluded from cancelling the instalment agreement, as the legislature intended to keep the agreement alive, to enable the parties to deal with the repossessed goods in accordance with the provisions of section 127 (2) to (9). Mr. Coetsee accordingly submitted that the NCA has introduced a procedure at variance with the common law concept of the cancellation of an instalment agreement, upon breach thereof by the consumer. He contended that it is evident from section 127, that the relevant instalment agreement is only terminated in accordance with the provisions of section 127 (6) (b) or section 127 (8) (b). Therefore, Mr. Coetsee submitted, the repossession of goods which are the subject of an instalment agreement, is no longer dependent on a cancellation of the instalment agreement.

[25] In sum, it is applicant's case that in the event of the consumer defaulting, section 131 of the NCA provides for the granting of a final order attaching the goods which are the subject of an instalment agreement, whereupon the credit provider has to realise same in accordance with the provisions of section 127 (2) to (9). Applicant contends that, in such event, the credit provider only has to prove compliance with the requirements set out in section 130 (1) of the NCA. There is, according to applicant, no need for the issuing of a summons claiming cancellation of the relevant credit agreement, either prior to, or simultaneously with, the application for an attachment order in terms of section 131 of the NCA. Such application, applicant submits, may be brought ex parte by the credit provider in terms of section 30 of the Magistrates' Courts Act No. 32 of 1944.

[26] Mr. Coetsee pointed to the following provisions of section 127, to substantiate his submission that the legislature has introduced this procedure whereby the credit provider is entitled to the return of the goods, without cancelling the relevant instalment agreement. Firstly, subsection 127 (3), which allows the consumer a window period of 10 business days after receiving a written notice from the credit provider regarding the value of the repossessed goods, within which he or she can resume possession of the goods by purging his or her default. Mr. Coetsee submitted that, had there been a prior cancellation of the instalment agreement, there would be no basis for the consumer to resume possession of the goods. Secondly, subsections 127 (6) and (8), which provide for the "termination" of the instalment agreement pursuant to the sale of the goods. These subsections state that upon the remittance of any excess by the credit provider to the consumer, or the remittance of any shortfall by the consumer to the credit provider, the instalment agreement terminates. Mr. Coetsee submitted that the termination of an instalment agreement in terms of these subsections, is irreconcilable with the concept of the prior cancellation of the instalment agreement by the credit provider, as such cancellation would have resulted in the prior termination of the instalment agreement. He contended that the "termination" of the instalment agreement in terms of sub-sections 127 (6) (b) and 8 (b), would then not make any legal sense, as the instalment agreement had already been cancelled prior to the repossession of the goods.

[28] In my view, applicant's interpretation of the relevant sections of the NCA, and, in particular sections 131 and 127 (2) to (9), does not take proper account of the purpose for which the provisions of section 127 (2) to (9) were incorporated in section 131. I hold the view that, upon a proper construction of this legislation, all that the legislature intended was to prescribe, with reference to section 127 (2) to (9), the execution and realisation process of goods attached by the credit provider in terms of a court order. The relevant court order would be obtained upon cancellation of the agreement by the credit provider, pursuant to the breach thereof by the consumer, which cancellation terminates the respective obligations of the parties. Thereafter the execution and realisation procedure prescribed by section 127 (2) to (9), is to be followed. I do not agree with the submission on behalf of applicant, that the legislature intended, by incorporating section 127 (2) to (9) in section 131, to change the common law by doing away with the requirement of the cancellation of an instalment agreement prior to the repossession of the goods. If this is what the legislature intended, I would have expected it to have been conveyed in clear and uncertain terms and not by means of a process of inferential reasoning, as contended for by applicant.

[29] I am of the view that applicant's interpretation fails to pay sufficient regard to the restriction imposed by section 131, ie that section 127 (2) to (9) should be "read with the changes required by the context". If this is borne in mind, it appears to me that the legislature intended to provide the following with regard to the execution and realisation of goods attached by virtue of a court order in terms of section 131 of the NCA:
(a)	Within 10 business days after receiving the goods that are the subject of the instalment agreement, the credit provider must give the consumer written notice setting out the estimated value of the goods and other prescribed information. (Section 127 (2) (b)).
(b)	Section 127 (3), which deals with the right of the consumer, who is not in default, to unconditionally withdraw his or her notice to voluntary terminate the agreement, obviously does not find application, as the goods have not been voluntarily surrendered, but attached in terms of section 131. For the same reason section 127 (4) (a), which allows for the return of the goods to the consumer, will not apply.
(c)	If the consumer fails to respond to the notice in terms of section 127 (2) (b), advising him or her of the estimated value of the goods, the credit provider must sell the goods as soon as practicable for the best price reasonably obtainable. (Section 127 (4) (b)).
d)	After selling the goods, the credit provider must 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 give the consumer a written notice stating the following:

(Section 127 (5) (a) and (b)). 
(e) If an amount is credited to the consumer's account and it exceeds the settlement value immediately before the sale, and 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 National Consumer Tribunal established by section 26 of the NCA, which may make an order for the distribution of the amount in a manner that is just and reasonable. However, if 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). (Section 127 (6) (a) and (b)).
(f)	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). (Section 127 (7)).
(g)	If a consumer fails to pay an amount demanded in terms of section 127 (7), within 10 business days after receiving the required demand notice, the credit provider may apply for judgment in terms of the Magistrates' Courts Act for the recovery of the remaining settlement value. If, however, the consumer pays the amount demanded after receiving the demand notice, judgment against him or her will be prevented. (Section 127 (8) (a) and (b)).

[30] I should add, that when the provisions of section 127 (6) (b) and 127 (8) (b) are read with the changes required by the context, it is, in my opinion, clear that the references to the "termination" of the instalment agreement are to apply only in the case where the goods have been voluntarily surrendered. These references do obviously not find application where the goods have been attached in terms of section 131, pursuant to the cancellation of an instalment agreement by the credit provider. The "termination" of the instalment agreement would then have been brought about by the exercising of its right of cancellation by the credit provider.

[31] Mr. Coetsee argued that by incorporating the provisions of section 127 (2) to (9) in section 131, the legislature intended to keep the instalment agreement alive to ensure compliance with the provisions of section 127 (2) to (9). I am of the opinion that, upon a proper construction of the relevant provisions of the NCA, there is no basis for this conclusion of applicant. As I have already indicated, when section 127 (2) to (9) is read with the changes required by the context, it regulates the execution and realisation procedures to be followed by the credit provider after cancellation of the instalment agreement. The consumer is protected from disadvantageous practices during the realisation process, by the measures introduced by section 127 (2) to (9), which provide for the orderly sale of the goods which are the subject of the instalment agreement. Put differently, there is no need to keep the instalment agreement "alive", to ensure that the protection of section 127 (2) to (9) is afforded to the consumer.

[33] I also share the concern of second respondent, that applicant's interpretation will lead to an unfair result. On this interpretation the consumer is finally and permanently dispossessed of the goods, thereby absolving applicant from performance in terms of the agreement. However, in view of the extant agreement, the consumer, while having been deprived of the goods, remains liable to pay the instalments due in terms of the agreement. It should be borne in mind, that in terms of section 127 (5) (b) (i) of the NCA, the settlement value of the agreement for purposes of the realisation process, is determined immediately before the date of the sale of the goods by the credit provider. Although section 127 (4) (b) provides that the goods are to be sold as soon as practicable, such a sale may, especially in difficult financial times, take some time to eventuate. This would mean that the consumer, although having being dispossessed of the goods, will remain liable for payment of the instalments which have fallen due since the date of the repossession of the goods. Once again, it seems to me that the legislature, who, by means of this legislation, intended to promote and advance the social and economic welfare of South Africans, would not have intended the consumer to be prejudiced in this manner.

[34] In the course of his argument, Mr. Coetsee was constrained to submit that it is only in the case of instalment agreements that the legislature introduced this procedure, which entitles a credit provider to repossess the goods in the absence of the cancellation of the instalment agreement. As I understand his submission, the legislature did not intend to tamper with the common law remedy of cancellation with regard to other credit transactions, as defined in the NCA. I would have thought that, had it been the intention of the legislature to single out instalment agreements for this drastic departure from the normal principles of our law of contract, it would have been done in clear and unambiguous language. However, one searches the NCA in vain for a clear indication of such an intention.

[35] In view of the aforegoing, I conclude that applicant's reliance on the provisions of section 131, read with section 127 (2) to (9), as substantiation for the submission that the legislature has introduced a procedure whereby the credit provider is entitled to the return of the goods, without cancelling the relevant instalment agreement, is without merit.

[36] Mr. Coetsee further relied on section 123 of the NCA, as placing a limitation on a credit provider's right to cancel an instalment agreement. I do not agree. Section 123 (2) expressly provides that where a consumer is in default under a credit agreement, the credit provider may take the steps set out in Part C of Chapter 6, to "enforce and terminate" the agreement. As mentioned previously, the use of the word "terminate", conveys the legal notion of the extinguishing of contractual obligations, which would normally include the cancellation of an agreement.

[37] I also understood Mr. Coetsee to rely on section 129 (4) (a) (i) of the NCA, as support for the submission that the NCA has introduced a procedure at variance with the common law concept of the cancellation of an instalment agreement upon breach thereof. Section 129 (3) and (4) makes provision for the reinstatement of a credit agreement as part of the procedure available before debt enforcement. Section 129 (3) provides that, subject to section 129 (4), a consumer may at any time before the credit provider has cancelled the agreement, re-instate same by paying to the credit provider all amounts that are overdue. Section 129 (4), however, precludes the re-instatement of a credit agreement after:

e)	the execution of any other court order enforcing that agreement; or
(c)	the termination thereof in accordance with section 123.

[40] I am of the view that, within the context of the issues in this matter, the legislature only intended encroaching upon a credit provider's common law rights in two respects. Firstly, by prescribing procedures to be complied with prior to the enforcement of the debt (sections 129 and 130), and, secondly, by means of the prescribed execution and realisation process to be followed after cancellation of the instalment agreement by the credit provider (section 131 read with section 127 (2) to (9)).

[41] I am satisfied that the conclusion which I have reached, regarding the interpretation of the relevant provisions of the NCA, is in harmony with the declared purposes of the NCA. In my view the construction contended for by applicant, is not only foreign to the principles of our common law, but is, for the reasons furnished hereinbefore, inconsistent with the declared aim of the legislature to provide for a consistent and harmonised system of debt enforcement, in which the consumer's rights are protected.

[42] In my opinion the common law principle (as embodied in the instant instalment agreement), requiring the cancellation of the instalment agreement prior to the attachment and repossession of first respondent's vehicle, is a necessary requirement for a consistent and harmonised system of debt enforcement and for the protection of the consumer's rights. A critical re-evaluation of this common law principle, does not, in my view, show that the retention thereof will impact negatively on the values enshrined in our Bill of Rights. On the contrary, I reiterate that I am of the opinion that the retention of this principle of our law of contract, is necessary for the protection of the rights of consumers.

[43] I accordingly agree with the finding of second respondent that, absent a claim for the cancellation of the instalment agreement, applicant was not entitled to a final order for the attachment of the vehicle in terms of section 131 of the NCA. It accordingly follows that the application for review cannot succeed. In view of my conclusion, it is not necessary to deal with second respondent's finding that the allegations in applicant's founding affidavit fell short of what is required for the granting of applications of this nature.

[44]   In the result, the application for review is dismissed.

I agree 

I agre