top of page

Rescission of Judgment and the National Credit Act


In the recent decision of KGOMO AND ANOTHER v STANDARD BANK OF SOUTH AFRICA AND OTHERS 2016 (2) SA 184 (GP) the applicants (“Kgomo”) sought rescission of a judgment 'erroneously sought and erroneously granted in the absence of the party affected thereby', as contemplated in Uniform Rule 42(1)(a). Their complaint was that the bank did not comply with the notice requirements of s 129(1) and the relevant parts of s 130 of the National Credit Act 34 of 2005 (“NCA”) before commencing with legal proceedings against them.

The relevant sections require delivery of a notice before legal proceedings are commenced with. The notice draws the debtor's attention to his or her default and invites him to consider using one of the non-judicial mechanisms provided for in the NCA, with a view to agreeing on a plan to bring the payments up to date.

 

Facts of matter

In the particulars of claim, the bank averred that it had sent the requisite notice and annexed a copy of the notice, together with proof that it had been sent by registered mail, and the relevant 'track and trace' report from the website of the post office. However, the address was the incorrect address. As a result, it was common cause that the notice did not reach Kgomo before the bank issued summons.

 

Issue to be determined

Is non-compliance merely 'a dilatory defence' (one that suspended proceedings rather than precluded a cause of action) that did not give rise to an erroneous seeking or granting of default judgment. If so, the bank argued, rescission of judgment must be refused. For this submission the bank relied on the Constitutional Court's dictum in Ferris and Another v FirstRand Bank Ltd 2014 (3) SA 39 (CC) (2014 (3) BCLR 321; [2013] ZACC 46), that 'even if further notice were required, its absence is a purely dilatory defence . . . and is not an irregularity that establishes that a judgment has been erroneously granted, justifying rescission under rule 42(1)(a)'.

 

Ambit of rule 42(1)(a)

The present case was formulated solely on Rule 42(1)(a) which reads: ’The court may, in addition to any other powers it may have, mero motu or upon the application of any party affected, rescind or vary (a) an order or judgment erroneously sought or erroneously granted in the absence of any party affected thereby’.

Based inter alia on the judgments of the Supreme Court of Appeal the following principles govern rescission under rule 42(1)(a):

• the rule must be understood against its common-law background; • the basic principle at common law is that once a judgment has been granted, the judge becomes functus officio, but subject to certain exceptions of which rule 42(1)(a)is one; • the rule caters for a mistake in the proceedings; • the mistake may either be one which appears on the record of proceedings or one which subsequently becomes apparent from the information made available in an application for rescission of judgment; • a judgment cannot be said to have been granted erroneously in the light of a subsequently disclosed defence which was not known or raised at the time of default judgment; • the error may arise either in the process of seeking the judgment on the part of the applicant for default judgment or in the process of granting default judgment on the part of the court; and • the applicant for rescission is not required to show that there is good cause for the rescission as contemplated in rule 31(2)(b).

 

Non-compliance with s 129(1) read with s 130 of the NCA

Section 129(1) of the NCA provides that if the consumer is in default under a credit agreement, the credit provider:

'(a) may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and

(b) subject to section 130(2), may not commence any legal proceedings to enforce the agreement before:

(i) first providing notice to the consumer, as contemplated in paragraph (a), or in section 86(10), as the case may be; and (ii) meeting any further requirements set out in section 130.

Section 130(1) of the NCA provides that subject to subsection (2) a credit provider may approach the court for an order to enforce a credit agreement only if, at that time, the consumer is in default and has been in default under that credit agreement for at least 20 business days and:

(a) at least 10 business days have elapsed since the credit provider delivered a notice to the consumer as contemplated in section 86(10), or section 129(1), as the case may be;

(b) in the case of a notice contemplated in section 129(1), the A consumer has:

(i) not responded to that notice; or

(ii) responded to the notice by rejecting the credit provider's proposal; and (c) in the case of an instalment agreement, secured loan or lease, the consumer has not surrendered the relevant property to the credit provider in terms of section 127.

(2) Despite any provision of law or contract to the contrary, in any proceedings commenced in a court in respect of a credit agreement to which this Act applies, the court may determine the matter only if the court is satisfied that: (a) in case of proceedings to which sections 127, 129 and 131 apply, the procedures required by those sections have been complied with;

(4) In any proceedings contemplated in this section if the court determines that:

(b) the credit provider has not complied with the relevant provisions of this Act, as contemplated in subsection (3)(a). . . the court must:

(i) adjourn the matter before it; and (ii) make an appropriate order setting out the steps the credit provider must complete before the matter may be resumed’.

There are three important decisions of the Constitutional Court dealing with the interpretation of the aforesaid provisions.

Sebola and Another v Standard Bank of South Africa Ltd and Another

After a careful analysis of the relevant provisions, Cameron J, in whose judgment the majority concurred, summarised the position as follows:

'The requirement that a credit provider provide notice in terms of s 129(1)(a) to the consumer must be understood in conjunction with s 130, which requires delivery of the notice. The statute, though giving no clear meaning to deliver, requires that the credit provider seeking to enforce a credit agreement aver and prove that the notice was delivered to the consumer. Where the credit provider posts the notice, proof of registered despatch to the address of the consumer, together with proof that the notice reached the appropriate post office for delivery to the consumer, will in the absence of contrary indication constitute sufficient proof of delivery. If, in contested proceedings the consumer avers that the notice did not reach him or her, the court must establish the truth of the claim. If it finds that the credit provider has not complied with s 129(1), it must in terms of s 130(4)(b) adjourn the matter and set out the steps the credit provider must take before the matter may be resumed.'

Given that the credit provider in that matter was not able to prove that the notice had been delivered to the correct post office, the Constitutional Court reversed the order of the High Court, which had refused rescission, and replaced it with an order granting rescission.

Ferris and Another v FirstRand Bank Ltd

The Constitutional Court held that the Ferris' breach of the debt-restructuring order entitled FirstRand to proceed against them without further notice, regardless of any failure to deliver the s 86(10) notice. The debt-restructuring order gave the bank this right expressly.

The Constitutional Court, in upholding the High Court's dismissal of the Ferris' application for rescission of judgment, found:

'However, even if further notice were required, its absence is a purely dilatory defence — a defence that suspends proceedings rather than precludes a cause of action — and is not an irregularity that establishes that a judgment has been erroneously granted, justifying rescission under rule 42(1)(a)’.

The bank in Kgomo argues that, although the notice was not delivered, the defence raised based on non-compliance with s 129(1) and s 130 is purely dilatory and therefore does not justify a finding that the judgment was erroneously granted.

Kubyana v Standard Bank of South Africa Ltd

The Constitutional Court herein revisited its decision in Sebola. It was argued, based on certain dicta in Sebola, that the fact that the registered item was returned to the bank, as not having been delivered, meant that it had been shown that the notice had not been delivered. This was rejected in both the main and the concurring judgments.

The court held that:

• the bank was not required to prove that the notice had in fact come to the subjective attention of the debtor (or 'consumer' in the language of the statute); • a debtor must respond reasonably when the creditor has properly taken steps to bring the notice to his or her attention; and • not bothering to respond to a notice requiring him or her to go to the post office and collect a registered item did not amount to reasonable conduct on the part of a debtor.

Applying the above to the present case

The bank failed to comply with the requirements of Sebolaas qualified in Kubyana. Moreover, the error on the bank's part is apparent from the particulars of claim and the annexures to it.

The question that arises is whether non-compliance with s 129(1) and the relevant parts of s 130 is merely a dilatory defence that does not give rise to an erroneous seeking or granting of default judgment. If so, rescission of judgment must be refused.

The language of the relevant provisions of the NCS is peremptory. Consistent with this, extracts from the judgment of the majority in Sebola suggest that strict compliance with s 129(1) is required. This then had to be reconciled with the approach reflected in the extract from the Ferris judgment, which held that: 'However, even if further notice were required, its absence is a purely dilatory defence, (a defence that suspends proceedings rather than precludes a cause of action) and is not an irregularity that establishes that a judgment has been erroneously granted, justifying rescission under rule 42(1)(a).'

The court held that the judgments are not to be reconciled on the basis of the rescission having been sought under a different rule. Furthermore that it was not necessary to reconcile the Sebola judgment and the Ferris dictum for two reasons. Firstly, the Ferris dictum seems to be an obiter dictum. The main thrust of the judgment in Ferris was that the respondent was entitled to proceed to enforce the debt without further notice because Mr and Mrs Ferris had defaulted under the debt-restructuring order granted by the magistrates' court. Secondly, the present matter is distinguishable from the Ferris matter because it dealt with a notice in terms of s 86(10) and the present matter involves a notice in terms of s 129(1). Although notices in terms of ss 129(1) and 86(10) are treated in an identical way in s 129(1)(b)(I) and s 130(1)(a), the functions performed by the notices are markedly different.

In those circumstances, the court found that the absence of a s 86(10) notice is more appropriately described as a purely dilatory defence than the absence of a s 129(1) notice, and that Ferris is also partially distinguishable from the present matter insofar as the Ferris dictum relates only to the erroneous grant of rescission. In the present matter Kgomo assert that the judgment was both sought and granted erroneously.

Consideration was also given to the fact that the Sebola judgment received the endorsement of the Constitutional Court in the Kubyana judgment, which is more recent than the Ferris judgment. Based on Kubyana, strict compliance with s 129(1) remains the order of the day. Strict compliance requires that where s 129(1) is not complied with, s 130(4)(b) comes into play. It peremptorily requires that the court 'must . . . adjourn the matter . . . and make an appropriate order setting out the steps the credit provider must complete before the matter may be resumed'.

The bank, as plaintiff, pleaded delivery of the notice to Kgomo as defendants in its particulars of claim. Yet it is clear that its pleading was erroneous and that there was no such delivery. In terms of s 129(1)(b), the bank was precluded from commencing any legal proceedings without delivering a s 129(1) notice beforehand. In terms of s 130(1)(a), 10 business days had to have elapsed after any notice, before legal proceedings were commenced. That too was not complied with. The judgment was therefore erroneously sought.

Furthermore, the error was apparent on the record when default judgment was granted. In any event, it is not necessary for compliance with the requirements for rescission in rule 42(1)(a) that the error be apparent on the record.

The judgment was granted in the absence of the applicants.

On that basis Kgomo was entitled to and granted a rescission of the judgment granted against them.

 

Conclusion

BBanks and credit providers must ensure that there has been compliance with the relevant provisions of s 129 of NCA prior to commencing with legal proceedings, to avoid having judgments rescinded because they were erroneously sought and erroneously granted in the absence of the party affected thereby.

Featured Posts
Recent Posts
Archive
Search By Tags
No tags yet.
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
bottom of page