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IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPETOWN)

CASE NO: 9182/11

In the matter between:

NEDBANK LIMITED .......................................................................................................Applicant

and

STOFFEL JAARS .....................................................................................................Respondent

JUDGMENT DELIVERED 4 JUNE 2012

GANGEN, A.J.:

Introduction

[1] This is an application for summary judgment in terms whereof Applicant seeks delivery of a vehicle sold to Respondent in terms of an instalment sale agreement Applicant seeks an order-

(a) Confirming the termination of the agreement;

(b) For return of the vehicle

(c) Costs on an attorney and client scale.

The Facts

[2] On or about 13 December 2007 the Respondent entered into an instalment agreement with the Applicant whereby Respondent purchased a motor vehicle. In terms of the agreement, the Applicant would remain the owner of the vehicle until Respondent fulfilled his obligations in terms of the agreement. Respondent was to pay a deposit of R10 000,00 and thereafter instalments of R2316.04 commencing from 1 February 2008.

[3] In the event that the Respondent defaulted in his payment, the full balance would become due and payable. Further, if the Respondent breached the agreement, Applicant would be entitled to cancel the agreement, repossess the vehicle and retain ail payments already made by the Respondent to the Applicant.

[4] The Applicants claim is based on Respondents breach of the agreement, the amount in arrears as at 9 February 2011 being R32 658.75 and the full outstanding balance at that date being R83 727.12.

[5] On or about 20 May 2009 Respondent applied to be placed under debt review when he realised his financial situation was deteriorating. On 7 October 2009 the debt counsellor sent an instalment offer to Applicant reducing the monthly instalments from R2183.78 to R1135.29. On 30 March 2010 an application in terms of Section 86(11) was made to the Magistrate’s Court, Vredenburg containing the payment proposal submitted by the debt counsellor to Applicant in October 2009.

[6] On 29 March 2011 Applicant sent a notice in terms of Section 86(10) of the Act by registered post to Respondent whereby Respondent was advised that he was in default of the credit agreement for more than 60 days from date of application for debt review and giving him notice of the termination of the debt review process with immediate effect and affording him 10 days to raise a dispute or to make arrangements.

[7] On 5 May 2011 Applicant instituted action against Respondent wherein it cancelled the agreement and claimed return of the vehicle. Respondent filed a notice of intention to defend the action and Applicant duly applied for summary judgment.

The law and the issues

[8] Respondents opposition to the application is premised solely on the provisions of the National Credit Act(“the NCA”). Respondent argues that at the stage that he applied for debt review, he was up to date with his payments in respect of the instalment sale agreement. He submits that no response was received from the Applicant and that subsequent to the offer he made payments to the debt counsellor as per the proposal.

[9] Respondents defence is that he paid Applicant in terms of the debt counsellor’s proposal as the Applicant had not responded to the proposal, that Applicant did not act in good faith as it made no counter proposal and Applicant only terminated the debt review proceedings some 22 months after the application for debt review. It was argued that the Applicant’s right to terminate the debt review proceedings only arose where Applicant acted in good faith and participated in the debt review process.

[10] Applicant submits that it duly terminated the debt review in respect of the credit agreement by complying with the requirements of Section 86(10) and that Respondent failed to bring an application for reinstatement of the debt review in this Court terms of Section 86(11).

[11] Applicant further submits that there is no application made before this Court for an order reinstating the debt review in terms of Section 86(11) and accordingly the debt review in respect of the credit agreement remains properly terminated. Applicant submits that it is only in the Section 86(11) proceedings that the participation of the credit provider ‘in good faith’ in the debt review becomes relevant.

[12] Applicant further submits that as early as October 2009 Respondent failed to pay the full monthly instalment of R2316.04 and only paid R1103.10 and therefore was in arrears from that stage.

[13] Section 86(10) of the Act states as follows-

*!f 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.’

[14] It us clear from the wording of Section 86(10) that ’If a consumer is in default under a credit agreement that is being reviewed,’ that the credit provider may give notice to terminate the review “at any time at least 60 business days after the date on which the consumer applied for the debt review.’

[15] In Collett v Firstrand Bank (766/2010) [2011] ZASCA 78, the SCA held that a credit provider is entitled to terminate the debt review process at any time after the prescribed 60 day period has expired, even after a referral of the debt review to the Magistrates’ Court.

[16] The question is whether the Respondent was in default under the credit agreement. The monthly instalment due by the Respondent was R2183.78. The proposal made in terms of the debt review was R1135.29 per month. No order was made in that regard. Respondent states that he was not in arrears at the time of applying for debt review. From the information provided by the Respondent, it appears that from October 2009 Respondent paid amounts of approximately R1103.10 and in some months amounts less than R600. This is not in accordance with Respondents contention that “From these statements the Court will note that I have been making regular payments since I have applied for debt review and have never skipped a single payment”. !t is clear that the Respondent was not only in arrears with his payments in terms of the credit agreement at the time that Applicant gave notice to terminate the debt review but also in default of the payments per the debt review proposal.

[17] The question is then raised as to the consideration of the bona fides of the credit provider and delay in terminating the review proceedings. The delay in terminating the review proceedings is not on its own an indication of mala fides. In fact, it may be argued that the delay in the termination of the review proceedings was to the advantage of the Respondent.

[18] The Applicants case that the question of good faith and the credit provider’s participation in the debt review proceedings is only relevant in the Section 86(11) proceedings is supported by the dictum in the Collett case(supra) where it was stated -

“However, the right of the credit provider to terminate the review is balanced by Section 86(11) which provides that is the credit provider has given notice to terminate and proceeds to enforce the agreement ‘the Magistrate’s Court may order that the debt review resume on any conditions that the Court considers to be just in the circumstances. It is at this moment that the participation of the credit provider in the debt review becomes relevant"

[19] The Respondent confirms that he applied to be placed under debt review in May 2009. He further states that the application for restructuring was placed on the roll for the first time in June 2010 and that at the time of making the affidavit, the matter was still pending and would be heard again in July 2011. The Respondent has however not placed information before this Court as to why an order was not made in June 2010, the reason for the postponement or what had transpired in the intervening period.

[20] The Respondent in this matter does not indicate that he or the debt counsellor made any attempt to communicate with the Applicant and in the absence of such information, it cannot be said that the Applicant did not act in good faith.

[21] In the unreported case of S A Taxi Securitisation (Pty) Ltd v Ndobeia Joseph case no 9162/2010 (March 2011) in the South Gauteng High Court, Mokhari A J considered the duty of the parties to act in good faith in participating in the debt review process and at p12 held as follows-

“The duty to act in good faith is not only confined to credit providers, it extends to consumers as well. It is a reciprocal duty on both parties to engage meaningfully in debt review negotiations. What I imply is that a consumer is not permitted to sit back when he or she does not receive any counter proposal or response from the credit provider and allow the 60 business days to pass before raising an argument that the credit provider acted in bad faith. The consumer has a reciprocal duty to act diligently and proactively the moment it becomes clear that the credit provider is not engaging in good faith or does not respond to his or her proposals for debt review. In this regard, debt counsellors have a meaningful role to play.”

And further at p14 the Court held -

“In my view a consumer who can demonstrate that he or through his or her debt counsellor acted proactively the moment it became clear to him/her that the credit provider does not act in good faith, and refer the matter to the Magistrate within 60 business days, is entitled to raise a point that the credit provider failed to act in good faith."

[22] The further issue in this matter is that the Applicant is claiming return of the vehicle. The position where a credit provider was proceeding to recover his security was set out in detail in SA Taxi Securitisation (Pty) Ltd v Mbatha and Two Similar Cases 2011 (1) SA 310 (GSJ) at p317, where the Court held as follows:

“ I stress that all of these objectives are directed at the consumers indebtedness - ie the claim for the outstanding deficiency after realisation of the lender's securities (the deficiency claim). The intention is not to unfairly deprive lenders of their security.

Where a consumer is over-indebted, the credit provider's prospects of recovering from the consumer are often effectively limited to the recovery of the creditor's security. If lenders are unable to recover deteriorating security, such as motor cars, promptly, the consequences would be economically disastrous for asset-based lenders, especially those lending to the less affluent. It would have the effect of reducing available credit and pushing up the cost of credit for those consumers who are performing their obligations. Taking these practical factors into account is part of balancing the interests of credit providers and consumers.

And further at p319

“It seems unlikely that the legislature ever intended that the consumer could keep the 'money and the box'. If the consumer obtained possession and use of a motor vehicle in circumstances in which no credit should have been extended to the consumer, it would be fundamentally unfair and counterproductive for the consumer to continue to use the vehicle, while at the same time not making any payments under the agreement.”

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