IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

In the application of:

MERCEDES BENZ FINANCIAL SERVICES

and

JUDGMENT DELIVERED ON 20 SEPTEMBER 2010

[1]    This is an opposed application for summary judgment.

[2] Plaintiff is Mercedes Benz Financial Services South Africa (Pty) Limited, a company having its principal place of business at 123 Wierda Road, Zwartkop, Centurion Defendant is Mr Panana Gideon Dunga, an adult male residing at 11 Block LB2, Mendi Avenue, Langa, Cape Town.

[3] Plaintiff instituted this action for the delivery of a motor vehicle and payment of amounts due in terms of an instalment sales agreement.

[4]    Paras 11 and 12 of the particulars of claim read as follows:

12. in the aforementioned letter the Defendant was informed that he had not satisfied his obligations, and that the Debt Review process the Defendant was thereby terminated as a period of 60 (sixty) days had lapsed since application was made for Debt Review without resolution."

[5] Defendant filed a notice of intention to defend the action and plaintiff applied for summary judgment.
[6] Defendant deposed to an opposing affidavit. He said that he went into debt review and paid the monthly instalments required to the Payment Distribution Agency.

"15. I state that the North Gauteng High court was deliberating over certain legal issues pertaining to various sections of the NCA and only came to a decision on 21 August 2009, The Declaratory Order, which judgment affected all our court processes.

16. I state that the defendant's application for debt review then had to be amended and has been set down again for 3 September 2010."

[8] Plaintiff filed a replying affidavit, deposed to by Ms Kavitha Kaylaser. She confirmed that no agreement had been reached between the parties and that the debt review application had been set down to be heard in the Somerset West magistrate's court on 25 November 2009. She pointed out, however, that, as appears from the court file, the application was withdrawn on 25 November 2009. Defendant issued a new application in the magistrate's court, under a different case number, on 14 July 2010, being the same date that the application for summary judgment was set down for hearing in this court. This application was due to be heard on 3 September 2010. Ms Kaylaser accordingly contended that when plaintiffs notice of termination of the debt review was sent to defendant, ie on 30 November 2009, there was no debt review application pending in the magistrate's court.

[9] Mr Willie Steyn appeared on behalf of plaintiff at the postponed day of the hearing of the summary judgment application. He accepted that plaintiff could not terminate the debt review process in terms of section 86(10) of the NCA whilst there was a debt review application pending in the magistrate's court. At the time when plaintiff sent the section 86(10) notice to defendant there was, however, no application pending in the magistrate's court as the application had been withdrawn.

[11] The first question to be determined in this matter is whether plaintiff was entitled to terminate the debt review in terms of section 86(10) of the NCA when it purported to do so on 30
November 2009. A second question is whether defendant would have any defence to plaintiff's claim if such termination of the debt review was valid.

[12] The provisions of sections 86 and 87 of the NCA are relevant to these questions. For ease of reference I propose to quote these provisions in full (All further references to "section" or "sections" in this judgment will be to sections of the NCA):

"86   Application for debt review
(1)	A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over-indebted.
(2)	An application in terms of this section may not be made in respect of and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 129 to enforce that agreement
(3)	A debt counsellor-
(a)    may require the consumer to pay an application fee, not exceeding the prescribed amount, before accepting an application in terms of subsection (1); and
(b) may not require or accept a fee from a credit provider in respect of an application in terms of this section.

application;

(b)    notify, in the prescribed manner and form-

(a)    comply with any reasonable requests by the debt counsellor to facilitate the evaluation of the consumer's state of indebtedness and the prospects for responsible debt re-arrangement; and

(b) participate in good faith in the review and in any negotiations designed to result in responsible debt re-arrangement

(a)	whether the consumer appears to be over-indebted; and
(b)	if the consumer seeks a declaration of reckless credit, whether any of the consumer's credit agreements appear to be reckless.

(7) If, as a result of an assessment conducted in terms of subsection (6), a debt counsellor reasonably concludes that-
(a) the consumer is not over-indebted, the debt counsellor must reject the application, even if the debt counsellor has concluded that a particular credit agreement was reckless at the time it was entered into;
(b) the consumer is not over-indebted, but is nevertheless experiencing, or likely to experience, difficulty satisfying all the consumer's obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement; or
(c) the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrate's Court make either or both of the following orders-

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

(bb) postponing during a specified period the dates on which payments are due under the agreement;

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

(8)    If a debt counsellor makes a recommendation in terms of subsection (7) (b) and-

(a) the consumer and each credit provider concerned accept that proposal, the debt counsellor must record the proposal in the form of an order, and if it is consented to by the consumer and each credit provider concerned, file it as a consent order in terms of section 138; or

(b) if paragraph (a) does not apply, the debt counsellor must refer the matter to the Magistrate's Court with the recommendation.
(9) If a debt counsellor rejects an application as contemplated in subsection (7) (a), the consumer, with leave of the Magistrate's Court, may apply directly to the Magistrate's Court, in the prescribed manner and form, for an order contemplated in subsection (7) (c).
(10) If a consumer is in default under a credit agreement that is being reviewed in terms of this section, the credit provider in respect of that credit agreement may give notice to terminate the review in the prescribed manner to-

(a) the consumer;
(b) the debt counsellor, and
(c) the National Credit Regulator, at any time at least 60 business days after the date on which the consumer applied for the debt review.

87    Magistrate's   Court   may   re-arrange   consumer's obligations

(1) If a debt counsellor makes a proposal to the Magistrate's Court in terms of section 86 (8) (b), or a consumer applies to the Magistrate's Court in terms of section 86 (9), the Magistrate's Court must conduct a hearing and, having regard to the proposal and information before it and the consumer's financial means, prospects and obligations, may-
(a) reject the recommendation or application as the case may be; or

(b)    make-

(iii) both orders contemplated in subparagraph (i) and (ii).
(2) The National Credit Regulator may not intervene before the Magistrate's Court in a matter referred to it in terms of this section".

[13] It is necessary to consider the meaning and effect of sections 86(10) and 86(11) in order to deal with the application for summary judgment before me. These sections have given rise to considerable debate in various recent judgments, most of them still unreported. I do not propose to discuss these judgments on a case by case basis. I shall rather attempt to identify the main approaches in them and then comment thereon in order to motivate my own views.

[14] At the outset, before embarking on a discussion of these issues, it may be helpful to state my own conclusions in regard to the interpretation of sections 86(10) and 86(11).

[15] In my view it is necessary to imply a proviso into section 86(10) to the effect that the credit provider may only terminate a debt review if he is acting in good faith.

"...words cannot be read into a statute by implication unless the implication is a necessary one in the sense that without it effect cannot be given to the statute as it stands. In addition, such implication must be necessary in order to 'realise the ostensible legislative intention or to make the [legislation] workable."

If it is a casus omissus, this Court cannot supplement the Act by providing for a casus omissus, its sole duty being to construe the Act as it stands."

"It follows from the above principles that, whereas a Court may in appropriate cases depart from the ordinary meaning of the words used in a statute, or even modify or alter such words, it may only do so where this is necessary to give effect to what can with certainty be said to be the true intention of the Legislature. Once such intention has been established the Court should not hesitate to give effect thereto. The conect approach in this regard is, in my view, that set out in Steyn Die Uitleg van Wette 5th ed at 68 as follows:

The principles enunciated above have been consistently followed and applied in our Courts. Instances thereof are to be found in the cases conveniently collected and referred to in Steyn (op cit at 58 - 61 including footnote 133). It is clear from these principles, and the cases that have applied them, that provided it can be indisputably established that the Legislature intended something different from the ordinary meaning conveyed by the words used in a statutory enactment, a departure from such meaning is justified, even if it involves an alteration or substitution of the words used."

"Dat 'n woordwysigende uitleg nie in beginsel te verwerp is nie, blyk verder uit Santy's Wine and Brandy Co (Natal) Ltd v District Commandant SA Police 1945 NPD 118 waar die volgende uit Halsbury oorgeneem word:

... while terms can be introduced into a Statute to give effect to its clear intention by remedying mere defects of language, no provision which is not in the Statue can be implied to remedy an omission, in the absence of any ground for thinking that such a course is necessary to carry out the intention of Parliament.'

Positief gestel, sou ons hiervolgens kan s§ dat nie aileen taalgebreke verbeter kan word nie, maar dat selfs 'n casus omissus aangevul kan word waar dit noodsaaklik is om daardeur aan die bedoeling van die Pariement gevolg te gee."

[25] I turn first to section 86(10). For ease of reference I quote the relevant part of it again:

"(10) If a consumer is in default under a credit agreement that is being reviewed in terms of this section, the credit provider in respect of that credit agreement may give notice
to terminate the review	

at any time at ieast 60 business days after the date on which the consumer applied for the debt review."

[26] It is generally recognised in the judgments that I have seen, that a literal interpretation of section 86(10), read on its own, may give rise to unfortunate results. On a literal interpretation the credit provider may give notice of the termination of the debt review after only two conditions are met, firstly that the consumer is in default under a credit agreement and, secondly, that the period of 60 business days has elapsed since the consumer's initial debt review application. Experience has shown that the typical debt review takes longer than 60 business days, often much longer, before it results in an order by the Magistrate's Court in terms of section 87. By terminating the debt review after 60 business days the credit provider may be able to derail the entire debt review process by way of a single unilateral act, regardless of the reasonableness of the conduct of the consumer or his own conduct.

[27] This unfortunate result is described in the following passage in the judgment of Binns-Ward J in the Western Cape High Court,

[28] I agree with the tenor of Binns-Ward's remarks. I point out, however, that he does not explain on what interpretational grounds he arrives at the conclusions expressed therein. I also do not agree with the logic of the distinction which he draws between the period before and the period after the reference of the debt review application to the Magistrate's Court.

[30] Whilst I agree with Kathree-Setiloane AJ's comments about the unfortunate results that would flow from a literal interpretation of section 86(10), I do not agree with her interpretation of section 86(10). It seems to me that she is in effect attempting to read an implied provision into section 86(10) without motivating or formulating it. It would be anomalous, furthermore, if the credit provider could not terminate the debt review after the application had been referred to the Magistrate's Court but could do so before such reference.

[33] I turn therefore to the interpretation of section 86(11) before reverting to section 86(10). For ease of reference I quote section 86(11) again:
"(11) If a credit provider who has given notice to terminate a review as contemplated in subsection (10) proceeds to enforce that agreement in terms of Part C of Chapter 6, the Magistrate's Court heanng the matter may order that the debt review resume on any conditions the court considers to be just in the circumstances".

[35] As I see it, a literal interpretation of section 86(11) is beset with difficulties. The first is that it gives rise to the problem of inconsistent parallel proceedings. The second is an anomalous result The third difficulty is that it is not practically workable and the fourth is that it is not linguistically sustainable.

[37] The first difficulty with the literal interpretation of section 86(11) is that of inconsistent parallel proceedings. On the literal interpretation the further course of the enforcement action (in either court) remains unexplained. If it continues despite the consumer's application for a resumption order in the Magistrate's
Court, it is likely to render the debt review futile. If it is stayed, by what court and on what grounds will such a stay be ordered?

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

[39] My second difficulty with the literal interpretation of section 86(11) is that it leads to an anomalous result namely that debt review proceedings may only be ordered to resume if there had already been a reference of the debt review to the Magistrate's Court in terms of section 86(8)(b) prior to the termination of the debt review. It is inconceivable that the Magistrate's Court hearing an application for an order in terms of section 87, could, for example, order that the provisions of section 86(7) be by-passed.
[40] The third difficulty with the literal interpretation of section 86(11) concerns its workability in practice. On what basis will the application in the resumed debt review be presented and where will it fit in on the waiting list? What is the status of the debt review in the meantime? It has been terminated but it has not yet resumed. What if the consumer drags his feet? The credit provider would be unable to terminate the debt review again because there is no debt review.

"According to Kemp AJ in SA Taxi Secuhtisation v Nako, the Magistrate's Court referred to in section 86(11) is the Magistrate's Court to whom the debt review has been referred in terms of section 86(7) of (8) of the Act, and the phrase "hearing the matter" refers to the review before it in terms of section 87 of the Act With ail due respect to Kemp AJ, I am of the view that his interpretation of section 86( 11) is misconceived for the following reasons. It is clear from a proper reading of section 86( 11) of the Act that the Magistrate's Court referred to in that section is not the Magistrate's Court to which the review has been referred in terms of section 86(7) of (8) of the Act, but rather the Magistrate's Court before which the credit provider seeks to enforce the agreement in terms of Part C of Chapter 6. Hence, the phrase 'the Magistrate's Court hearing the matter' refers to the Magistrate's Court hearing the matter which concerns the enforcement of the agreement in terms of Part C, Chapter 6 of the Act, and not the debt review itself."
The only problem with this interpretation of section 68(11) is that it cannot be reconciled with the words "Magistrate's Court" standing alone Kathree-Setiloane AJ was later criticised for this. On the construction of section 86(11) suggested by me such criticism falls away.

[45] I return then to the interpretation of section 68(10). The question to be determined is whether section 86(11), on my construction thereof, provides such meaningful protection for the consumer that it would justify the literal interpretation of section 86(10).

[46] In my view it would not. Upon a literal interpretation of section 86(10) the consumer may find that the debt review is arbitrarily terminated by the credit provider. It would be in the consumer's interest that the debt review resume as soon as possible but he will have to wait for the credit provider to institute enforcement proceedings. The consumer will have to defend the enforcement action in a litigatory environment. He will be saddled with an onus to show at least that he has prospects of success in the debt review application. The parties will be involved in time consuming,   costly,   and,  for many consumers,  unaffordable litigation, the very event which the debt review procedure seeks to avoid.

[47] It is my view therefore that the suggested protection afforded to the consumer in terms of section 86(11), is fraught with difficulties, costs and delays which are contrary to the purpose of debt review proceedings. It is not a factor that can justify a literal interpretation of section 86(10).

[48] The solution suggested by me is the implication of a proviso into section 68(10) to the effect that a credit provider may only terminate a debt review if he is acting in good faith. The implication of such a proviso would be consistent with the purpose of the debt review provisions of the NCA and avoid the unfortunate results of a literal interpretation It would not jeopardise the workability of section 86(10) and it would fit in with the language of section 86 as a whole, in particular section 86(5)(b).

"Moreover, a strong factor militating against the implication of any such limitation is the difficulty of formulating it. In contract a term will not be implied where considerable uncertainty exists about its nature and scope, for it must be precise and obvious.... I think that the same must apply to implying a term in a statute, for the process is the same...."

"In the Dun and Bradstreet case supra at 218 CORBETT J referred to the fact that in the cases of Geary & Son (Pty) Ltd v Gove (supra) and Combrinck v De Kock (1887) 5 SC 405 emphasis was placed upon criteria such as fairness and honesty in competition and said:
"Fairness and honesty are themselves somewhat vague and elastic terms but, while they may not provide a scientific or indeed infallible guide in all cases to the limits of lawful competition, they are relevant criteria which have been used in the past and which, in my view, may be used in the future in the development of the law relating to competition in trade "

[52] For these reasons I conclude that it is necessary to imply a proviso into section 86(10) to the effect that a credit provider may only terminate a debt review if he is acting in good faith.

[54] I revert to the summary judgment application presently under consideration. I propose to apply sections 86(10) and 86(11) with the implied provisions suggested by me.

[55] Although the wording of the order made by the Somerset West magistrate reads that defendant's application was withdrawn. I shall assume in defendant's favour that the intention at the time was not to terminate the debt review, but to prosecute it with certain amendments.

[56] The problem for defendant, however, is that he did not prosecute the application in such a way after it was withdrawn on 25 November 2009. It would appear, in fact, that defendant did nothing at all until he filed a new application more than seven months later. In my view this was clearly not a reasonable way of prosecuting the debt review.
[57] It seems to me therefore that plaintiffs termination of the debt review in terms of section 86(10) was valid.

[61] As I pointed out above, there has been much confusion in regard to the application of section 86 and defendants attorney might well not have been aware of the defences that are available to him. In these circumstances it seems to me that this is an appropriate case for the exercise of my discretion in favour of defendant.

[62] In the result. I refuse summary judgment and order that costs are to stand over for determination at the trial.