National Credit Regulator v Credi Worx (Pty) Ltd (NCT/158468/2020/57(1)) [2021] ZANCT 29 (10 August 2021)

IN THE NATIONAL

CONSUMER TRIBUNAL

HELD

IN CENTURION

Case number: NCT/158468/2020/57(1)

In the matter between:

NATIONAL

CREDIT REGULATOR

APPLICANT

and

CREDI WORX (PTY) LTD

RESPONDENT

Coram:

Dr L Best – Presiding Tribunal member

Mr A Potwana – Tribunal member

Prof B Dumisa – Tribunal Member

Date of Hearing: 28 July 2021

JUDGEMENT AND

REASONS

APPLICANT

1. The Applicant in this matter is the National Credit Regulator, a juristic person established in terms of section 12 of the National Credit Act[1] (the Applicant or the NCR). During the hearing, the Applicant’s Senior Legal Advisor, Ms L Schwartz (Ms Schwartz), represented the Applicant.

RESPONDENT

2. The Respondent is Credi Worx Trading (Pty) Ltd, a private company duly registered as such in terms of the company laws of South Africa and a registered credit provider. According to the Disclosure Certificate issued by the Company and Intellectual Property Commission (CIPC) on 15 October 2019, the Respondent’s registered office address is 505 Stock City South, 108 Mears Street, Sunnyside, 0001.

3. The Respondent did not file an answering affidavit and was not represented during the hearing.

TYPE OF

APPLICATION AND JURISDICTION

4. In this application, the Applicant seeks cancellation of the Respondent’s registration with the Applicant and further relief.

5. In terms of section 27 of the NCA, the National Consumer Tribunal (Tribunal) has jurisdiction to hear this application.[2]

6. Due to the Covid 19 pandemic and the resultant social distancing protocol, the hearing took place via a Microsoft Teams video and audio link.

BACKGROUND

7. On 26 March 2020, the Applicant filed an application against the Respondent in terms of section 57(1) NCA with the Registrar of the Tribunal (Registrar). The application documents were served on the Respondent at its physical address being Suite 134 Central House, 278 Pretorius Street, Pretoria,0002, by registered mail.

8. The Applicant’s case is stated in its founding affidavit. The deponent is Anne-Carien Du Plooy (Ms Du Plooy), an acting manageress in the Applicant’s Investigations and Enforcement Department.

9. According to Ms Du Plooy, the Applicant received a tip-off relating to the Respondent’s business activities. The information purported that the Respondent was contravening the NCA by:

9.1. charging excessive interest of 50%;

9.2. not conducting affordability assessments;

9.3. not disclosing the total costs of credit to consumers;

9.4. making consumers sign blank consumer agreements;

9.5. not permitting early settlements; and

9.6. including a consent to judgement which consumers were required to sign in advance.

10. Based on the above-mentioned information, the Applicant formed a reasonable suspicion that the Respondent was conducting its business and extending credit in a manner contrary to the provisions of the NCA and its regulations. The Applicant then initiated a complaint in its own name against the Respondent in terms of section 136(2) of the NCA and authorised an investigation into the business activities of the Respondent in terms of section 139(1)(c) of the NCA.

11. Following the initiation of the complaint, the Applicant appointed two inspectors in terms of section 25 of the NCA to investigate the business activities of the Respondent. On 20 September 2019, the inspectors conducted an onsite investigation at the Respondent’s physical address being Suite 134 Central House, 278 Pretorius Street, Pretoria,0002. During the investigation an interview was conducted with a representative, Gerald Macheka (Macheka), who identified himself as the Manager of the Respondent. Macheka informed the inspectors that credit bureau checks were not performed on consumers and that interest was charged at the rate of 50% as no other fees were charged. As part of the investigation, the Applicant’s inspectors requested ten randomly selected consumer files. On or about 25 September 2019, the Respondent provided copies of 9 consumer files as well as supporting documents. The files were assessed and an investigation report was compiled.

12. The Applicant seeks an order declaring that the Respondent has repeatedly contravened the following provisions of the NCA and the NCA Regulations:

12.1. Section 81(2)(a)(ii) read with regulation 23A(12)(b) and (13): failure to take reasonable steps to assess the proposed consumer’s debt repayment history as a consumer under credit agreements;

12.2. Section 81(2)(a)(iii) read with regulation 23A(3, (8), (12)(a) and (c): failure to take reasonable steps to assess the proposed consumer’s existing financial means, prospects and obligations;

12.3. Regulation 23A(9) and 23A(10): failure to utilise minimum expenses norm table when conducting affordability assessments;

12.4. Section 81(3) read with section 80(1)(a): reckless credit granting;

12.5. Section 170 read with Regulation 55(1)(b)(vi): failure to keep proper documentation;

12.6. Section 92(1) read with regulation 28(1)(b) and Form 20: failure to provide pre-agreement statements and quotations in the prescribed from to consumers;

12.7. Regulation 23A(15): failure to disclose costs of credit to consumers;

12.8. Section 3(e): preventing consumers from being informed of their obligations and risks associated with entering into credit agreements;

12.9. Section 93(2) read with regulation 30(1) and Form 20.2: failure to provide consumers with credit agreements in the prescribed form;

12.10. Section 100(1)(c) read with section 101(1)(d)(ii) and regulation 42(1): overcharging of interest;

12.11. Section 100(1)(b) read with section 101(1)(b) and regulation 42(2): overcharging of initiation fees;

12.12. Section 91(2) read with section 90(2)(b)(iii): unlawful provision contained in credit agreements;

12.13. Section 100(1)(b) read with section 106(8) and regulation 3(1) of the Credit Life Regulations: charging credit life insurance in excess of the prescribed maximum amiounts;

12.14. section section 91(2) read with section 90(2)(b)(i),(ii) and (iii) read further with sections 129 and 130;

12.15. Section 91(2) read with section 90(2)(h)(ii);

12.16. Section 91(2) read with section 90(2)(k)(iii);

12.17. Section 91(2) read with section 90(2)(k)(iv) of the NCA; and

12.18. section 52(5)(c) read with Regulation 66 of the NCA.

13. Based on the above, the Applicant seeks an order in the following terms:

13.1. Declaring that the Respondent repeatedly contravened the above-mentioned provisions of the NCA;

13.2. Declaring that the repeated contraventions referred to above as prohibited conduct;

13.3. Cancellation of the Respondent’s registration;

13.4. Imposing an administration fine of 10% of the Respondent’s annual turnover or R1000 000; whichever is the greater;

13.5. that the Respondent to appoint an independent auditor within 30 days to compile a list of consumers where loans were extended without proper affordability assessments being conducted for a period of 3 years;

13.6. The independent auditor must also compile a list of consumers who were overcharged on costs of credit;

13.7. Once the independent auditor has compiled the above-mentioned list; the Respondent to refund the amounts it received in the form of fees or charges, which it was not entitled to receive or which exceeded the prescribed maximum amounts allowed by the NCA within 30 days from the date of the auditor’s report;

13.8. Once the refunds have been made, the Respondent must provide a written report to the Applicant detailing the identity of the consumers to whom credit was extended recklessly and the refunds made. This report is to be provided to the Applicant within 120 days from the order;

13.9. Funds intended for any consumer who the Respondent was unable to trace and repay to be paid into a trust account held by the auditor;

13.10. Any appropriate order envisaged under section 150(i) of the NCA; and

13.11. Further and/or alternate relief.

14. On 7 April 2020, the Registrar issued a Notice of Filing and served it on the Respondent by registered mail and the Applicant by email. The Respondent did not file an answering affidavit. On 8 October 2020, the Registrar issued a Notice of Set Down for the matter to be heard on 7 April 2021 and served the same on the Applicant by email and the Respondent by registered mail.

15. On 7 April 2021, there was no appearance by the Respondent or its representative. The Applicant’s representative, Ms Schwartz, informed the Tribunal that on 18 March 2020, the application documents were sent by registered mail to the Respondent’s postal and physical addresses as per the Applicant’s records. However, on 26 June 2020, the Applicant received a return to sender notification from the post office. Ms Schwartz acknowledged on behalf of the Applicant that the application documents were not served on the Respondent and that the CIPC records reflected a different address for the Respondent. Consequently, in the interests of justice and in deference to the audi alteram partem rule, the Tribunal postponed the hearing sine die verbally. In a subsequent written postponement ruling, the Tribunal stated that “The interests of justice will best be served by proper service of the application on the Respondent in order to allow the Respondent the opportunity to be heard.”[3]

16. On 11 June 2021, the Registrar issued a Notice of Set Down for the matter to be heard on 28 July 2021 and served it on the Applicant by email and the Respondent via the following email addresses: phumo@hotmail.co.za; kumacheka@gmail.com; machekagp@gmail.com and macheka@telkomsa.net and by registered mail to the following addresses: Suite 134 Central House, 278 Pretorius Street, Pretoria, 0002; 505 Stock City South, 108 Mears Street, Sunnyside, 0001; P.O. Box 2651, Sunnyside, Pretoria, 0001 and P.O. Box 25070, Monument Park, Pretoria, 0181.

HEARING

OF THE APPLICATION ON A DEFAULT BASIS

17. On the day of the hearing, there was no appearance by the Respondent or its representatives.

18. Ms Schwartz informed the Tribunal that the Respondent consented to receive service of the application documents by email. The Applicant served the documents to the Respondent via email on 22 April 2021. As proof that the Respondent consented to be served by email, Ms Schwartz referred the Tribunal to the Applicant’s request addressed to the four email addresses cited above to serve the application documents on the Respondent by email and a response from machekagp@gmail.com dated 21 April 2021 wherein it is stated: “Yes I may send via email”. The Applicant argued that the Respondent reacted to the Applicant’s request to serve the documents by email, and there would be no reason to suggest that the application was not received by the Respondent. Ms Schwartz argued that the Respondent’s response to the requests of the Applicant to serve the application documents by email is a factor that needs to be considered by the Honourable Tribunal.

19. The Tribunal pointed out to Ms Schwartz that the words used in response to the Applicant’s request to serve the application to the Respondent by email do not reflect that the Respondent consented to be served by email. She argued that the words: “Yes I may send via email” mean that the Respondent agreed to be served via email. Clearly, the words: “Yes I may send via email” do not convey the Respondent’s acquiescence to receive the documents by email. This problem is exacerbated by the lack of evidence that the Applicant delivered the application documents to the Respondent or sent them by registered mail within three days after sending the same by email as envisaged in rule 30(2)(a) read with rule 30(1) of the Tribunal Rules.[4] Rule 30(2)(a) of the Tribunal Rules states –

“Parties may expedite service by sending notices and documents by fax or e-mail, provided that this is followed within 3 business days with service in accordance with rule 30(1)(a). Parties to proceedings may agree in writing to service of notices and documents by way of fax or email only, in which event service in terms of rule 30(1) will not be required.”

20. Rule 30(1) of the Tribunal Rules states –

“A document may be served on a party by-

(a) delivering it to the party; or

(b) sending it by registered mail to the party’s last known address.”

21. In view of the above, we are of the view that the Applicant’s attempt to serve the application documents by email does not meet the requirements of rule 30(2)(a) read with rule 30(1) of the Tribunal Rules.

22. Ms Schwartz submitted that in addition to service by email, on 30 April 2021, the Applicant further sent the application documents to the Respondent via registered mail to the following addresses:

22.1. 505 Stock City South, 180 Mears Street, Sunnyside, 0001. This is the Respondent’s address listed on the CIPC report. The first notification was submitted to the Respondent on 11 May 2021. However, the parcel was returned to the Applicant as undelivered due to the failure of the Respondent to collect same. The latest CIPC report clearly reflects the registered status of the Respondent, the registered address of the Respondent and confirms that the Respondent is still in business;

22.2. P.O Box 2651, Sunnyside, Pretoria, 0001. This is the Respondent’s last known registered address as per the Respondent’s conditions of registration. From the track and trace results, it is evident that a first notification was submitted to the Respondent on 11 May 2021, and this remains the status quo. To date, the Respondent has not collected the application documents, and the same remain available for collection at the relevant post office;

22.3. Suite 134 Central House, 128 Pretorius Street, Pretoria, 0001. This is the Respondent’s last known registered physical address as per the Applicant’s records and the address where the onsite investigation was conducted at. Once again, a first notification was submitted to the Respondent on 12 May 202. However, the parcel was returned to the Applicant as undelivered due to the failure of the Respondent to collect the same; and

22.4. P.O. Box 25070, Monument Park, Pretoria, 0181. This is an address the Applicant had on record as another postal address of the Respondent and was seemingly so updated with the Applicant’s Registration Department. A first notification was submitted to the Respondent on 11 May 2021. However, the parcel was returned to the Applicant as undelivered due to the failure of the Respondent to collect the same.

23. Ms Schwartz submitted that the above proves that the application documents were served in accordance with rule 30(1) of the Tribunal Rules and that the Applicant acted in accordance with its requirements. In support of her contention that the Applicant properly served the application documents, she referred the Tribunal to the following cases:

23.1. Sebola and Another v Standard Bank of South Africa Ltd and Another,[5] where the Constitutional Court held that a party is obliged to show that the notice actually reached the correct post office;

23.2. Nedbank Ltd v Binneman,[6] (Binneman) where the Court held that the plaintiff had duly provided a notice to the consumer as required and the risk of non-receipt therefore rested squarely with the defendant when a section 129 of the NCA notice was sent by registered post to the mortgaged property and had actually reached the appropriate post office;

23.3. Munien v BMW Financial Services and 1 Other,[7] whereat the Court held that the onus rested on the Applicant and the Respondent in regards to service of a section 129 notice, specifically if the address used for service via post was chosen by the consumer; and

23.4. Wessels and Another v Brink N O and others,[8] where the Court held that provided relevant notice was given in the prescribed manner, the fact that it was returned by the postal service as undelivered was immaterial.

24. Ms Schwartz argued that it is clear from the track and trace results that the application documents reached the correct post offices. The Applicant has used all known addresses to effect service, including the email addresses of the Respondent.

25. The Tribunal is aware that the golden thread in the case decisions that the Applicant relies on to prove proper service is that service is deemed sufficient when it is proved that the documents reached the relevant post service. However, these decisions were superseded by the decision of the Constitutional Court in Kubyana v Standard Bank of South Africa Ltd,[9] (Kubyana) where the Court clarified the decision of that Court in Sebola. As per Jafta J, the Court held that:

“[97] Therefore, the ratio of Sebola, as I see it, is that the words “providing notice to the consumer” are synonymous with the phrase “delivered a notice to the consumer”, which appears in section 130. Both of them mean that the notice must be taken to the consumer. It must reach the consumer but this does not mean that the notice must actually be viewed by the consumer. (Emphasis added)

[98] The determination of the facts that would constitute adequate proof of delivery of a notice in a particular case must be left to the Court before which the proceedings are launched. It is that Court which must be satisfied that section 129 has been followed. Therefore, it is not prudent to lay down a general principle save to state that a credit provider must place before the court facts which show that the notice, on a balance of probabilities, has reached a consumer. This is what Sebola must be understood to state. It follows that the interpretation of Sebola in Binneman was incorrect.” (Emphasis added)

26. From the above, it is clear that superficial compliance with a prescribed method of service does not constitute adequate service if there is evidence to the contrary. In the present matter, by the Applicant’s own admission, there is no evidence that the application documents reached the Respondent.

27. On the day of the hearing, the Tribunal decided to reserve its finding on whether there was sufficient service and permitted Ms Schwartz to argue the Applicant’s case.

ISSUE TO BE

DECIDED

28. The issue to be decided is whether the Tribunal can grant the orders sought by the Applicant on a default basis.

THE LAW

29. Rule 25(3) of the Tribunal Rules states-

“The Tribunal may make a default order—

(a) after it has considered or heard any necessary evidence; and

(b) if it is satisfied that the application documents were adequately served.”

CONCLUSION

30. In view of the provisions of rule 25(3)(a) of the Tribunal Rules, the dictum of the Constitutional Court in Kubyana, and the lack of evidence that the Respondent received the application documents, the Tribunal finds that there is no evidence that the application documents were adequately served on the Respondent. It follows that, as per per the provisions of rule 25(3)(a) of the Tribunal Rules, the Tribunal cannot make a default order.

31. It is peculiar that, despite the fact that the hearing of the matter was previously postponed to afford the Applicant an opportunity to properly serve the application documents of the Respondent, the Applicant did not attempt to serve the same via substituted service, nor did it try to deliver the documents to any of the Respondent’s physical addresses by hand. When the Tribunal asked Ms Schwartz why the Applicant did not attempt to serve the documents by substituted service, she alluded to the dificculties that the Applicant, as a public entity, experiences in getting qoutations and following the prescribed procurement procedures to effect service by substituted service. When the Tribunal asked whether the Applicant was unable to seek diviation from following the prescribed procurement procedures, she advised that the Applicant will look into the matter.

ORDER

32. The Tribunal makes the following order: -

32.1. The application for a default order is refused; and

32.2. There is no order made as to costs.

Thus, done and signed at Centurion on 10 August 2021.

{signed}

Mr A Potwana

Tribunal Member

Dr L Best (Presiding Tribunal Member) and Prof B Dumisa (Tribunal Member) concur.

[1] 34 of 2005 as amended (NCA/Act).

[2] Section 27(a)(i) of the NCA provides that: ‘The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008 may adjudicate in relation to any application that may be made to it in terms of this Act in respect of such an application.’

[3] At paragraph 13.

[4] Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters before the National Consumer Tribunal published under GN 789 of 28 August 2007 in Government Gazette No. 30225, as amended.

[5] 2012 (5) SA 142 (CC).

[6] 2012 (5) SA 569 (WCC)

[7] 16103/08 [2009] ZALZDHC6, 2010 (1) SA 549 (KZD) (Reportable).

[8] 1950 (4) SA 352 (T).

[9] [2014] ZACC 1.