Land and Agricultural Development Bank of South Africa v Chidawaya and Another (39106/2013) [2015] ZAGPPHC 856; 2016 (2) SA 115 (GP) (11 September 2015)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

CASE NO: 39106/2013

11/9/2015

(1) REPORTABLE: YES

(2) OF INTEREST TO OTHER JUDGES: YES

(3) REVISED

DATE: 12/10/2015

SIGNATURE:

In the matter between:

THE LAND AND AGRICULTURAL DEVELOPMENT

BANK OF SOUTH AFRICA

Applicant

and

JACOB CHIDAWAYA

First Respondent

AVERAGE CHIDAWAYA

Second Respondent

JUDGMENT

Baqwa J

Summary judgment - Whether claim based on mortgage bond - Competent - Action by creditor - Debtor's entitlement to service in terms of Section 129 of the National Credit Act 34 of 2005 - Service by attachment of the notice to simple summons not sufficient - Debtor's entitlement to a Section 130 (4) (NGA) order in appropriate circumstances.

Summary

The defendants entered into a loan agreement in order to finance an extensive farming enterprise in Ventersdraai, North West. They fell into arrears and the plaintiff having issued and dispatched Section 129 notices to them without any results, proceeded toissue summons. The defendants entered appearance to defend and the plaintiff applied for summary judgment. The application was opposed by the defendants who raised a number of technical defences. They however did not deny the loan and mortgage agreements. They a/so did not deny that they were in arrears.

It transpired during the Summary Judgment application that the Section 129 notices had not reached the defendants. The plaintiff had not filed any track and trace reports but alleged that attachment of the

Section 129 notices to the summons was sufficient compliance with the relevant requirements. Referenceis made to the consumer-friendly and court-avoidant nature of Section 129 notices.

Held, that service of Section 129 notices by attaching them to summonsis not proper notice.

Held, that an order had to be made in terms of Section 130 (4) of the National Credit Act 34 of 2005 to rectify the situation and that application for summary judgment be postponed sine die to enable proper service of Section 129 notices.

Annotations:

Unreported Cases

SA Taxi Development Finance (Pty) Ltd v Phalafala (1512/2013) (2013] ZAGPJHC 55 (28 March 2013) para 10

Standard Bank v Jardine (46797/2013) [2014] ZAGPHC 790 (15 October 2014)

Reported cases

Bank of Lisbon v Boles 1978 (4) SA 724 0fl/) at 726 F

First Rand Bank (Ply) Ltd v Carl Beck Estates (Ply) Ltd and Another 2009 (3) SA 384

President of the RSA and Others v M & G Media Ltd 2012 (2) SA 50 (CC) (28]

Sebola v Standard Bank 2012 (5) SA 142 (CC)

Statutes

National Credit Act 34 of 2005 Uniform Rules of Court

[1] This is an application for summary judgment in which the applicant claims payment from the defendants of the balance due on their loan agreement with the plaintiff together with interest thereon.

[2] The amount claimed is the sum of R11 582 245.22. The defendants filed an appearance to defend and a notice in terms of Rule 30. The plaintiff has responded to the Rule 30 notice and withdrawn the affidavit which was objected to. I therefore do not have to make a ruling on that issue.

[3] The defendants have filed an answering affidavit opposing the application for summary judgment.

[4] Uniform Rule 32 (1) provides as follows:

"(1) Where the defendant has delivered notice of intention to defend, the plaintiff may apply to court to for summary judgment on each of such claims in the summons as is only:

(a) on a liquid document

(b) in a liquidated amount in money

(c) for delivery of specified movable property

(d) for ejectment

together with any claim for interest and costs."

[5] In the present case the plaintiff's case is based on a mortgage bond and in that sense would fall within the provisions of sub-rule 32 (1) (a) and/or 32 (1) (b) to the extent that a mortgage bond is a liquid document and the amount claimed is a liquidated amount in money.

[6] The defendants have raised a challenge regarding lack of personal knowledge of the deponent to the supporting affidavit.

[7] The deponent states that she is the Legal Advisor: Commercial Litigation and as such duly authorised to make the affidavit and that in that capacity she has access to all the records in this matter.

[8] She further states that in her capacity as Legal Advisor, she has in her possession and under her control all the plaintiff's records, accounts and other documents relevant to claims forming the subject matter of the actions instituted against the defendants. In the ordinary course of her duties as Legal Advisor and having regard to the plaintiff's records, accounts and other relevant documents in her possession and under her control she has acquired personal knowledge of the defendants' financial standing with the plaintiff and can positively swear to the facts alleged and the amounts claimed in the plaintiff's particulars of claim.

[9] The deponent's office or capacity may indicate how personal knowledge has been acquired. Ngcobo CJ held in President of the RSA and Others v M & G Media Ltd 2012 (2) SA 50 (CC) [28] that:

'The Supreme Court of Appeal held that a deponent's assertion that information is within his or her personal knowledge "is of little value without some indication, at least from the context, of how that knowledge was acquired." I agree. An indication of how the alleged knowledge was acquired is necessary to determine the weight, if any, to be attached to the evidence set out in the affidavit. The key question is whether the deponent would, in the ordinary course of his or her duties or as a result of some other capacity described in the affidavit, have the opportunity to acquire the information or knowledge alleged."

In casu, Scheepers passes this test and I find accordingly that the defendants' objection in that regard has no merit.

[10] A further technical defence raised by the defendants is that of delay in pursuing the matter. Uniform Rule 32 (2) provides that:

"the plaintiff shall within 15 days after the date of delivery of notice of intention to defend, deliver notice of application for summary judgment."

The plaintiff lodged a summary judgment application within the prescribed period of 15 days. The defendants filed notice of intention to defend the action on 1 July 2015, the plaintiff could not have pursued an application for summary judgment sooner than the said date and can therefore not be said to have delayed in pursuing the action.

[11] The defendants further submit that the failure to attach the loan agreement to the summons is fatal to the plaintiff's claim. As already stated, the plaintiff's claim is based on a mortgage bond in which the indebtedness of the defendants is expressly acknowledged and set forth. It therefore stands as an independent written agreement between the parties which is capable of standing as the basis for a course of action and which is a liquid document as defined in Rule 32.

[12] The defendants dispute the interest charged and the certificate of balance. The mortgage bond states that:

''The amount owed at any time by the Mortgagor to the Land Bank and which is secured in terms of this bond (including any interest and the rate at which and the period or periods for which interest is calculated) and the fact that such amounts are claimable and payable, shall be determined and proved by way of a certificate signed by any competent Land Bank official whose appointment and competence to sign such certificate do not have to be

proved."

[13] In the matter of Bank of Lisbon v Botes 1978 (4) SA 724 (W) at 726 F it was held per Nestadt J that it is:

"not sufficient for a defendant simply to say that he disputes the correctness of the amount being claimed by the plaintiff."

In casu, the defendants submit that they have made a number of payments totalling R675 000.00 but strangely enough they provide no detail in that regard neither do they attach any proof of such alleged payments. It is trite that where a defendant raises payment as a defence he or she has to prove to whom such payment was made, when it was made and where it was made. In this regard Uniform Rule 32 (3) provides that:

"Upon the hearing of an application for summary judgment the defendant may­

(a) ············

(b) Satisfy the court by affidavit (which shall be delivered before noon on the court day but one preceding the day on which the application is to be heard) or with the leave of the court by oral evidence of himself or any other person who can swear positively to the fact that he has a bona fide defence to the action; such affidavit or evidence shall disclose fully the the nature and grounds of the defence and the material facts relied upon therefore."

Where a defendant alleges payment the most logical thing to do is to annex proof of payment. Failure to do so to my mind falls foul of Rule 32 (3) (b).

[14] Counsel for the applicant submits and I accept that even if the defendants had proved payments in the amount of R675 000.00 such would not constitute a defence. In First Rand Bank (Pty) Ltd v Carl Beck Estates (Pty) Ltd and Another 2009 (3) SA 384 it was held as follows:

"/ can see no reason why the court cannot itself reduce the amount in respect of which summary judgment is granted where it's apparent from the papers that there has been a reduction in the amount claimed in the summons. There is no prejudice to the respondents. To refuse to grant summary judgment in

respect of the balance owing merely because the application failed to reduce the amount claimed in the summons would be, to my mind, to ignore the impart of the provisions of sub-rule (b). In a number of authorities our courts have recognised that a plaintiff may be granted Jess than claimed in the papers because this deviation from that which is claimed in the papers neither adversely affects the defendant's rights nor is it detrimental to him."

[15] The defendants deny that there has been compliance with Section 129 of the National Credit Act 34 of 2005. The requirements to be complied with in this regard are set out in Sebola v Standard Bank 2012 (5) SA 142 (CC).

[16] The plaintiff has conceded that the Section 129 notices were "returned to sender" and that they therefore did not reach the defendants as intended.

[17] Mr Egan, counsel for the plaintiff submits however that notwithstanding non­ compliance as directed by the Sebola judgment there has been compliance with the National Credit Act (NCA) by the plaintiff albeit inadvertently.

[18] In the matter of Sebola and Another (supra) it was held that

"As pointed out earlier, the statute does not demand that the credit provider prove that the notice has actually come to the attention of the consumer, since that would ordinarily be impossible. Nor does it demand proof of delivery to an actual address. But given the high significance of the Section 129 notice, it seems to me that the credit provider must make averments that will satisfy the court from which enforcement is sought that the notice, on a balance of probabilities, reached the consumer."

[19] In casu, the Section 129 notices were attached to the summons which the defendants admit having become aware of on 12 June 2015. In their answering affidavit to the application for summary judgment, they make no reference as to what they proposed to do as per directives contained in the said notices. The answering affidavit was sworn to on 28 August 2015 and the defendants had therefore been in possession of the notices between 12 June 2015 and 28 August 2015.

[20] The plaintiff submits that attaching the Section 129 notice to the summons was more than sufficient notice to the defendants. Support for this submission is sought from SA Taxi Development Finance (Pty) Ltd v Phalafala (1512/2013) [2013] ZA6PJHC 55 (28 March 2013) para 10 where it was held that

"The defendant has had the notice in terms of Section 129 (1) since the date of service of summons and was thus fully apprised of his rights. He has been in default under the credit agreement for at least 20 business days and at least 10 business days have elapsed since the credit provider delivered a notice as contemplated in Section 129 (1). The defendant has had the opportunity to do what the notice invited him to do since receipt of the summons.

He is not asking for any directions in terms of Section 130 (4) (b) (ii), nor does he give any indication of prejudice or of what he would have done had he received the notice prior to the summons."

The decision was quoted with approval in Standard Bank v Jardine (unreported) (46797/2013) [2014] ZAGPPHC 790 (15 October 2014) by Louw AJ (as he then was) as follows:

''The attack on the claim on grounds of non-compliance with Section 129 of the National Credit Act 34 of 2005 is without merit. I accept Mr Ellis' argument that even if it is assured that the defendant did not get notice thereof when the Section 129 demand was posted to him, he still received it together with the summons. Many more days than the periods described in Section 129 expired. I accept the reasoning of van Eeden. AJ in the South Gauteng High Court in the unreported case under case number 151212013 of SA Taxi Development Finance (Pty) Ltd v M. R. Phalafala that Mr Ellis handed up in Court."

[21] To my mind, the reasoning in both the Phalafala and the Jardine decisions is flawed and should be rejected. It is flawed because it does not take into account one of the basic purposes for which the NCA was brought into existence. That purpose is captured succinctly in Sebola v Standard Bank 2012 (5) SA at 161 (para 59 - 60) where the following was stated:

"[59] So the notice requirement cannot be understood by focusing solely on Section 129. But this does not diminish the significance of that provision. As SERI and the NCR contended, one of the statute's core innovations is significantly consumer-friendly and court-avoidant procedures. These procedures are designed to help debtors to restructure their debts, or find other relief, before the guillotine of cancellation orjudicial enforcement falls.

[60] It is true that those procedures are available to consumers from the outset of the credit relationship. Indeed, as the Bank pointed out, the regulations require that most credit agreements include, from their inception, a statement of the consumer's right to apply for alternative dispute resolution and for debt counselling. But access to debt counselling and extra-judicial resolution will undoubtedly have their most potent impact when the guillotine is about to fall. And it is at this point, before the credit provider resorts to court process, that the legislation insists the consumer should have the benefit of a notice. This plain statutory objective must significantly influence the meaning we give to 'deliver' in Section 130."

[22] A Section 129 notice may be attached to a summons as proof of compliance with the Act but not as constituting compliance. It is clear from the wording of the Act that it is a pre-litigation step and must accordingly precede litigation. If litigation is embarked upon without compliance with Section 129 then Section 130 (4) provides the procedural mechanism to remedy this defect. To hold otherwise would render Section 130 (4) irrelevant and would ignore the directives of the legislature as well as undermine the purpose of the Act as set out in Section 3, namely to address issues such as over indebtedness and debt restructuring. These would be undermined if the pre-litigation notice is dispensed with.

[23] Mr Davis, counsel for the defendants submits and I accept, that it could not have been contemplated by the legislature that attachment of a Section 129 notice to summons should be taken as proper service as intended by the NCA. That would not make sense because by that time the

guillotine has fallen and the service provider has commenced with judicial enforcement.

[24] In the circumstances, I cannot but come to the conclusion that the plaintiff did not comply with the requirements of Section 129 of the NCA as defined in the Sebola decision. Neither can it seek refuge in the Phalafala and Jardine decisions.

[25] That is however not the end of the matter. In Sebola (supra) at 160 C it was held that:

"The proceedings have life, but a court 'must' adjourn the matter, and make an appropriate order requiring the credit provider to complete specified steps before resuming the matter. The bar on proceedings is thus not absolute, but only dilatory. The absence of notice leads to a pause, not to nullity."

[26] It is not for the plaintiff to use its non-compliance as a shield against a defendant who has his back against the wall by submitting that no purpose would be served to give him the notice for a second time as this would be placing form above substance to require a further notice to be sent to the defendant. The fact of the matter is that where a defendant has not been served with a notice as required by the law, proper service as ordered by the court is not a second service and can therefore hardly be termed as placing form above substance.

[27] The defendants run a multi-million rands farming enterprise at Ventersdraai 176, Registration Division IP, North West Province. They also reside on the farm. Inter alia, they do poultry farming and supply broiler meat to Nandos, KFC, OK Bazaars, Pick 'n' Pay and others. Given an opportunity as entitled in law, they may well find it within their means to turn the situation around.

[28] I note nevertheless that despite all the technical defences they have attempted to raise, they do not deny in the papers before me that they are in arrears with their payments to the plaintiff.

[29] The procedure to be followed where there is non-compliance with the requirements in serving a Section 129 notice is set out in Section 130 (4) which reads as follows:

"(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) or has approached the court in circumstances contemplated in subsection (3) (c) 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."

[30] In the circumstances I deem that an appropriate order is as follows:

30.1. The application for summary judgment is postponed sine die.

30.2. The plaintiff is directed to serve Section 129 (1) (a) notices on the defendants.

30.3. There is no order as to costs.

S. A. M. BAQWA

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Heard on: 08 September 2015 Delivered on: 11 September 2015 For the Plaintiff: Adv. G. R. Egan Instructed by: Diale Mogashoa Attorneys For the First Defendant: Adv. N. M. Davis SC Instructed by: Marshall Attorneys