Background
An application for summary judgement was brought by First Rand Bank Limited (FRB) against Msawenkosi Arthur Dhlamini (MD).
The dispute was over an amount of R825056,74 which, it was alleged, was due and owing by MD to FRB in respect of unpaid instalments on a mortgage bond in favour of FRB (the agreement).
In the application, MD raised the defence that he did not receive the notice and that accordingly FRB could not take judgment.
Applicable law
Section 129(1) of the Act states 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 first providing notice to the consumer.
The notice is required to set out the default of the consumer and to include a proposal that the consumer refer “the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction”.
The Act goes on to require that the consumer must have been in default for a period of at least 20 business days before a s129 notice can be sent and that at least ten business days must pass after the credit provider delivers the notice before further legal action can be taken.
The Act furthermore requires that the consumer must either have failed to respond to the notice or have responded by rejecting the proposals made in the notice.
The regulations to the Act provide that delivery includes delivery “by hand, by fax, by email or by registered mail to an address chosen” in the respective agreement.
Issue
In the case under review, it was agreed that:
• The notice was sent by registered post and addressed to MD.
• The notice was received by MD's local post office.
• The post office, for reasons unknown and immaterial to the issue, did not send MD notification that a registered notice was awaiting him at the post office.
• The notice was not collected and was then returned to sender.
• The agreement is a credit agreement governed by the Act.
• In terms of the agreement MD elected his home address for delivery of notices and the registered letter was correctly addressed in full.
FRB contended that it sent the prescribed notice as required in the Act and that it was irrelevant whether MD actually received it or not.
MD contended that since the notice was not delivered to him, notice as contemplated in s129(1) of the Act had not been given.
These arguments reflect the view points of differing decisions, which had previously been levied by the courts.
Legal argument
As stated above, previously the courts had handed down conflicting judgments regarding compliance with provisions regarding delivery of a s129 notice.
In Munien v BMW Financial Services (SA) (Pty) Limited and Another 2010 (1) SA 549 (KZP), it was held that a notice is delivered if it is sent by registered post to an address selected by the consumer, irrespective whether it comes to the attention of the consumer.
This view was predicated by the judge’s understanding of the word "delivered" in s130(1)(a) of the Act.
On the contrary in the matter of ABSA Bank Ltd v Prochaska t/a Bianca Cara Interiors 2009 (2) SA 512 (D), it was held that s129 creates an obligation to draw the default to the notice of the consumer in writing.
This view is seemingly based on the understanding of the word "notice" in s129.
These two approaches seem to arise from an interpretation of the Act based on the plain language of the Act and the purpose of the Act respectively.
Judgment
Murphy J in making his judgment in the present case came to the conclusion that, in line with the objectives of the Act, the correct question to ask is not whether the notice has been "delivered" but whether "the credit provider had drawn the default to the notice to the consumer in writing".
He goes on further to say that "bringing something to a person's notice requires that it be brought to his or her attention".
He draws the conclusion that the requirement of drawing the default to the notice of the consumer and the prohibition on commencing legal proceedings to enforce the credit agreement cumulatively reflect an intention on the part of the legislature to impose upon the credit provider an obligation, which requires more than the mere dispatching of the notice to the consumer.
An irrebuttable presumption of service or notice on mere dispatch would take insufficient heed of the objectives of the Act.
It must be assumed, he says, that the legislature consciously did not use either of the words "deliver" or "serve" in s129 and instead used the expression "draw to the attention of the consumer in writing".
The court relied on the view that the objectives of the Act to give effect to the "ethos of consumer protection", point unambiguously to a requirement that the consumer must be made aware of the default and the possible alternatives for dispute resolution.
Substantive compliance with the requirements of s129 will accordingly only be met if the consumer's default is brought to his or her notice in writing.
Notwithstanding the aforesaid, the court’s ruling was qualified by stating that, in appropriate cases, the court should not dismiss an application for summary judgement if it is determined that the credit provider has not complied with the notice requirements and has instituted action prematurely but should adjourn the matter and make an appropriate order setting out the steps the credit provider must complete before the matter may resume. Thereafter, if the processes contemplated in s129 are followed without success, summary judgement (or other appropriate remedy) may be granted.
This judgment was borne out in the subsequent case of Carter Trading (Pty) Ltd v Blignaut 2010 (2) SA 46 (ECP) in which it was made clear that failure to have properly effected notice in terms of s129 did not constitute a defence to summary judgment, but was merely a procedural issue in terms of which summary judgment application had been prematurely made.
Conclusion
Flowing from the judgment:
• The mere posting or delivery of a s129 notice is insufficient for the purposes of that section of the Act and the consumer's default must, in actuality, be brought to his attention.
• This creates a cost burden on credit providers and will likely be a controversial topic.
• The judgment certainly goes a long way to protecting the rights of the individual consumer.
• The question that arises is at what cost to the general body of consumers is this protection granted.
This article was first published in the July 2010 edition of De Rebus, the South African Attorneys' Journal, on page 41, and it is republished here with the Editor's permission.
