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Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

CASE NO: 27771/2010

In the matter between:

STANDARD BANK OF SOUTH AFRICA LTD …..................................................Plaintiff

and

CHRISTOPHER NEWMAN ….......................................................................Defendant

JUDGMENT DELIVERED: 15 APRIL 2011

BINNS-WARD, J:

[1] In this matter the plaintiff applies for summary judgment in the form of an order directing the defendant to deliver up to the plaintiff a 2006 BMW Z4 motor vehicle. The vehicle had been the subject matter of an instalment sale agreement concluded between the parties in January 2008. In terms of that agreement the defendant was obliged to pay an initial deposit of R1 000 and, thereafter, 59 monthly instalments of R8 143,18. The agreement provided, as usual, that ownership of the vehicle would remain vested in the plaintiff until the full amount owed under the contract had been settled. The defendant failed to comply with his payment obligations under the agreement and was R25 533,69 in arrears as at 30 November 2010. In terms of the agreement the defendant would be 'in default' if, having breached the agreement, he failed to remedy the breach within the time period specified in a written notice to him by the plaintiff.

[2] The instalment sale agreement was a credit agreement within the meaning of that term in the National Credit Act 34 of 2005 ('the Act'). A consideration of the terms of the agreement makes it clear that many of them were determined with reference to the requirements of the Act. It is evident in that regard that the written notice provision just mentioned was predicated on the requirements of s 129(1)(a) of the Act.

[3] The plaintiff duly gave notice to the defendant in terms of s 129(1)(a) of the Act drawing the fact that he was 'in default' to his attention and proposing that he might wish, amongst other things, to refer the issue to a debt counsellor to develop a plan so that payments under the agreement might be brought up to date. The notice advised the defendant that should he fail to act in accordance with the proposal within ten business days, action would be instituted against him without further notice for cancellation of the agreement, return of the goods and legal costs. The notice was sent to the defendant by registered post at his nominated address on 23 November 2010. The notice given to the defendant in terms of s 129(1)(a) of the

Act also served as the contractually agreed notice-to-remedy-breach provision, mentioned above.

[4] On 22 December 2010, there having been no response by or on behalf of the defendant to the notice given in terms of s 129, the plaintiff obtained the issuance of a summons claiming, amongst other matters, the relief in respect of which it currently seeks summary judgment. The summons was served at the defendant's domicilium citandi et executandi on 17 January 2011. The summons incorporated notice of the cancellation of the contract by the plaintiff.

[5] The plaintiff made the following allegations in paragraph 13 of its particulars of claim:

1. The Defendant has failed to pay the arrears within 10 (TEN) business days from date after {sic) having received the aforesaid notice [in terms of s 129(1)(a) of the Act] from the Plaintiff.

2. The Defendant has failed to refer the agreement to either a debt counsellor....to resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date.

3. The Defendant has not surrendered the ASSET to the Plaintiff as contemplated in Section 127 of the National Credit Act.

[6] The defendant does not take issue with the allegations in para 13 of the particulars of claim in his affidavit in opposition to the application for summary judgment. He avers that he submitted the agreement for debt review to a debt counsellor on 13 January 2011, some four days before summons was served on him. The defendant attached to his opposing affidavit a copy of the debt counsellor's Form 17.1 notice to credit providers of the receipt of his application, which, on its face, confirms his evidence that an application for debt review was submitted on 13 January 2011.

[7] I heard this application in the Third Division in late February. At the time the matter was argued I was of the prima facie opinion that the enforcement provisions in s 29 of the Act found no basis for application in respect of the consequences of a cancellation of a credit agreement. It is trite that in a contractual context the concepts of enforcement and termination (cancellation) are mutually exclusive. When a party to a contract is in breach of its obligations to the extent that the so-called 'innocent party' has a right to cancel the contract, the innocent party is put to an election. It must choose between enforcement (claiming specific performance) or termination (cancelling the agreement). One could be excused for thinking that a statutory draftsperson charged with the formulation of legislation regulating contractual relationships would have had these basic principles in mind when choosing appropriate language to convey the legislative intent. Alas, as by now remarked in an ever-growing number of judgments, the wording of many provisions of the Act leaves much to be desired. This has had the result that in important respects different courts have interpreted the Act's provisions inconsistently, thereby undermining two of the statute's stated objects; namely, the provision of consistent, accessible and harmonised systems of dispute resolution pertaining to credit agreements and of debt restructuring and enforcement. Even the National Credit Regulator has felt impelled to take the extraordinary measure of making application to court for a number of declaratory orders in respect of the meaning of a number of the Act's provisions; see National Credit Regulator v Nedbank Ltd & others 2009 (6) SA 295 (GNP). Therefore it was perhaps not altogether surprising that upon reflection, and a closer consideration of a number of provisions of the statute, I changed my mind and concluded that my prima facie view might have been wrong. It became apparent that the language of enforcement in the Act might also includewhat in common law would ordinarily be comprehended by the very antithesis of the concept - cancellation.¹ The matter can be determined assuming (without deciding) in favour of the defendant that that is so.

[8] When the draft judgment was at an advanced stage of preparation it came to my attention that the Supreme Court of Appeal was shortly expected to decide an appeal against parts of the High Court's judgment in the abovementioned matter of National Credit Regulator v Nedbank. From the indications given in the SCA bulletin in respect of matters pending before that court in the first term of this year it seemed to me that judgment in that matter might deal to some extent with issues concerning the interpretation of the Act that are germane in the current matter. I therefore decided to withhold the completion of the draft judgment to allow myself the advantage of a consideration of the SCA's decision. The SCA handed down judgment in Nedbank v The National Credit Regulator [2011] ZASCA 35 on 28 March 2011.² That explains the delay of nearly two months from the hearing of this application and the handing down of this judgment.

[9] One of the matters that the SCA judgment deals with is the meaning of s 86(2) read with s 129(1) of the Act. The SCA concluded, differing in this regard from the construction of the provisions by Wallis J in BMW Financial Services (SA) Pty Ltd v Mudaly at para 13 and by Andre Gautschi AJ in Starita v Absa Bank Ltd & another 2010 (3) SA 443 (GSJ) at para 12, that the effect of s 86(2) was that an application for debt review was not competent under s 86 of the Act in respect of a debt that had been the subject of a notice in terms of s 129(1)(a) by the credit provider. A consumer who receives such a notice may apply to have any othercredit agreement-related debt reviewed and restructured under the provision, but the debt in respect of which a s 129 notice has been received is excluded from any such debt review.

[10] The primary purpose of a notice in terms of s 129 of the Act is thus to afford the indebted consumer the opportunity to settle arrears or arrive at a negotiated agreement with the credit provider in respect of the breach of contract concerned. See Nedbank v The National Credit Regulator at para 4-14. The defendant did not avail himself of that opportunity. The credit agreement in issue in this matter is, by reason of the incidence of s 86(2) of the Act, thus not subject to the debt review process initiated by his reference to a debt counsellor on 13 January 2011.

[11] However, as also appears from the judgment of Malan JA in the SCA,³ the effect of s86(2) does not exclude what the learned judge of appeal labelled 'a general debt review' pursuant to. ss 83 and 85 of the Act. There is nothing on the papers to suggest that s 83 (which concerns credit agreements in respect of which credit has. been 'recklessly' extended) might find any application on the facts. And there was no request by the respondent that I should exercise the court's discretion in favour of making either of the two kinds of order contemplated by s 85 of the Act. I would in any event have been disinclined to do so. The plaintiff has cancelled the instalment sale in question and, in the language of the Act, seeks at this stage only to 'enforce its security'⁴ by obtaining repossession of the motor vehicle. I do not consider that the object of debt review and restructuring is to enable a consumer in terms of an instalment sale agreement to continue in possession and use of the credit provider's property after the relevant contract has been cancelled.⁵ The object of debt review is directed at a restructuring of monetary debt with the object of the ultimate settlement of such debt. After the cancellation of an instalment sale agreement the only consideration of monetary debt that would be centrally relevant would be that arising if the proceeds of the realisation of the res vendita did not settle the balance of the purchase price still outstanding at the time of the cancellation of the contract. Thus different considerations might applied in respect of s 85 if the plaintiff had been seeking summary judgment for payment of any deficit between the amount owed in terms of the contract and the amount realised by the plaintiff on the disposal of the vehicle, but I have no cause to determine that question in this matter.

[12] In the result the following orders are made:

(a) The termination of the instalment sale agreement concluded between the plaintiff and the defendant on 10 January 2008 in respect of a 2006 BMW Z4 2.0i motor vehicle with engine no. B453H929 and chassis no. WBAZ12030LY61427 is confirmed.

(b) The defendant is directed to forthwith deliver the said vehicle up to the plaintiff.

(c) All amounts paid by the defendant to the plaintiff up to date of termination of the agreement are declared forfeit in favour of the plaintiff.

(d) The plaintiff's claims in terms of para (d), (e) and (f) of the summons are stood over for later determination.

(e) The defendant is ordered to pay the plaintiff's costs of suit incurred thus far in the action.

A.G. BINNS-WARD

Judge of the High Court

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