National Credit Regulator v Elavation Trading CC t/a Excelsior Financial Services and Another (NCT/111201/2018/57(1)-Rule34) [2019] ZANCT 96 (23 May 2019)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case Number: NCT/111201/2018/57(1)-Rule 34

In the matter between:

NATIONAL CREDIT REGULATOR APPLICANT

And

ELAVATION TRADING CC

T/A EXCELSIOR FINANCIAL SERVICES 1st RESPONDENT

EXCELSIOR FINANCIAL SERVICES (PTY) LTD 2nd RESPONDENT

Coram:

Ms N Maseti – Presiding Member

CONDONATION RULING

APPLICANT

1. The Applicant in this interlocutory application is the National Credit Regulator, an administrative body established in terms of section 12 of the NCA; with its registered address at 127 15th Road, Randjespark, Midrand, Johannesburg, Gauteng.

2. The Applicant is also an Applicant in the main matter, and will hereinafter referred to as (“the Applicant or the NCR”).

RESPONDENT

3. The First Respondent is Elavation Trading CC, trading as Excelsior Financial Services, a credit provider registered with the Applicant, under registration number NCRCP4752. The Second Respondent is Excelsior Financial Services (Pty) Ltd, also a credit provider registered with the Applicant, under the registration number NCRCP8183.

4. The Respondents are both owned by Mr Roberto Jose Texeira Ribeiro, a Director in both companies, who has deposed to the affidavit filed on behalf of the Respondents in the allegations of unlawful conduct currently before the National Consumer Tribunal.

5. The Respondents filed an answering affidavit opposing this application. The Respondents are represented by Mr Jacobus Ignatius

van Niekerk from JI van Niekerk Inc. Attorneys.

THE APPLICATION

6. This is an application in terms of Rule 34 of the Rules of the National Consumer Tribunal (“the Tribunal”), for condoning the non-compliance with the Tribunal's rules and proceedings.

7. In the main matter, the Applicant filed its founding affidavit with the Tribunal on 19 July 2018, alleging various unlawful acts that the Respondents engaged in; and requested the Tribunal to order cancellation of registration of the Respondents in terms of section 57(1) of the National Credit Act, 2005 (‘the Act”).

8. The Applicant, however, failed to file in time its replying affidavit to the Respondents’ Answering Affidavit, due to reasons set out below. The Applicant had until 5 November 2018[1], to file its replying affidavit refuting issues and averments contained in the Respondents’ answering affidavit.

9. The Applicant seeks the indulgence of the Tribunal to condone its non-compliance.

ISSUES TO BE DETERMINED

10. The issue I am required to determine is whether or not the Applicant’s non-compliance in filing its replying affidavit

should be condoned.

BACKGROUND AND BRIEF FACTS OF THE COMPLAINT

11. I deem it necessary to first give a brief background of the facts of the complaint in the main matter in order to provide a connected picture for purposes of the current application for condonation.

12. The Applicant initiated investigation against the Respondents pursuant to receipt of complaints filed by three consumers; alleging

that the Respondents have engaged in various contraventions of the Act, ranging from, inter alia, excessive loan initiation charges, failure to conduct proper affordability assessment, reckless extension of credit, illegal storage fees, use of consumer motor vehicles as security for loans granted by the Respondents to its clients.

13. Upon conclusion of its investigation, the Applicant filed a founding affidavit on 19 July 2018, with the Tribunal requesting it to order cancellation of the Respondents’ registration, as it found that the Respondents violated various sections of the Act.

14. The Respondents had until 10 August 2018, to file their answering affidavit, but failed to file in time. The Tribunal proceeded to set the matter down for hearing on 21 September 2018. Upon receipt of Notice of set down on 24 August 2018, the Respondents enquired on the basis for the Tribunal to set down the matter when the Respondents received no reply to their answering affidavit filed with the Applicant on 23 August 2018, of which proof was furnished.

15. On 10 September 2018, the Respondents filed, with the Tribunal, their answering affidavit together with an application for condonation,

which was subsequently granted by the Tribunal on 22 October 2018. The Tribunal ordered the Applicant to file its replying affidavit

within ten (10) days of receipt of this condonation ruling. The Applicant failed to file its replying affidavit within the stipulated

period being the 5th of November 2018.

16. Following the granting of condonation in favour of the Respondents, the Tribunal has, on 19 November 2018, issued a notice of removal of the matter from the hearing roll, of which both parties accepted; This was followed up with a Notice of set down for hearing of the main matter on 19 January 2019. This date was again postponed in order to give the Applicant an opportunity to file a replying affidavit and condonation application; which it filed on 15 February 2019, approximately 66 days outside the prescribed period.

17. The Respondents filed an answering affidavit on 1 March 2019, opposing this condonation application for reasons set out below.

18. On 15 March 2019, the Applicant filed a replying affidavit to the Respondents’ answering affidavit, refuting the reasons advanced by the Respondents in opposing its condonation application.

APPLICABLE SECTIONS OF THE NCA[2] AND RULES[3]

19. In deciding on this matter, it is crucial to set out the relevant statutory and regulatory provisions as well as the case law governing the condonation application.

Rule 34 (1) [4]states “A party may apply to the Tribunal in Form TI r.34 for an order to:-

(a) condone late filing of a document or application;

(b) extend or reduce the time allowed for filing or serving;

(c) condone the non-payment of a fee; or

(d) condone any other departure from the rules or procedures.”

20. Rule 34 (2) states “The Tribunal may grant the order on good cause shown”.

21. To condone means to “accept or forgive an offence or wrongdoing”. The word stems from the Latin term condonare, which means to “refrain from punishing”[5]. It can also be defined to mean “overlook or forgive (wrongdoing)”[6].

22. In Cairns' Executors v Gaarn[7] the court stated that it is impossible to frame an exhaustive definition of what would constitute sufficient cause to justify the

granting of indulgence. It also opined that any attempt to do so; would merely hamper the exercise of a discretion which the Rules have purposely made very extensive. The court held that it is highly desirable not to abridge the court's discretion. Thus, the Applicant seeking condonation, must demonstrate that which entitles it to ask for the indulgence of the court. It also held that the demonstration thereof, depends on the circumstances of each application.

23. In Head of Department, Department of Education, Limpopo Province v Settlers Agriculture High School and Others[8] the court held that the standard of considering an application of this nature is the interests of justice. Whether it is in the

interest of justice to grant condonation; depends on the facts and circumstances of each case. This requires the exercise of a

discretion on an objective conspectus of all the facts.

24. Relevant factors to consider include but are not limited to:

24.1 The nature of the relief sought;

24.2 the extent and cause of the delay;

24.3 the effect of the delay on the administration of justice and other litigants;

24.4 the reasonableness of the explanation for the delay;

24.5 the importance of the issue to be raised in the intended appeal; and

22.6 the prospects of success.[9]

25. In Melane v Santam Insurance Company Limited[10] it was held that:

“The approach is that the Court has a discretion, to be exercised judicially upon a consideration of all the facts, and in essence it is a matter of fairness to both sides. Among the facts usually relevant are the degrees of lateness, the explanation therefore, the prospects of success and the importance of the case. These facts are inter-related: they are not individually decisive. What is needed is an objective conspectus of all the facts. A slight delay and a good explanation may help to compensate for prospects of success which are not strong. The importance of the issue and strong prospects of success may tend to compensate for a long delay.”

26. The court further held that “[…] without prospects of success, no matter how good the explanation for the delay, an application for condonation should be refused […]”

CONSIDERATION OF THE MERITS

27. In evaluating the merits of this application, the Tribunal will consider the following factors –

27.1 Degree of lateness;

27.2 Cause of delay thereof;

27.3 Prejudice; and

27.4 Prospects of success

Lateness and Importance of the matter

28. Applicant filed its replying affidavit refuting issues and allegations contained in the Respondents’ answering affidavit,

on 15 February 2019, approximately 66 days outside the period prescribed by the Tribunal.

29. The main reason for this delay is due largely to confusion created when the former Senior Legal Advisor, Ms Katherine Germishuys, of the Applicant opined that no reply was necessary given the basis advanced by the Respondents in their answering affidavit; served on the Applicant on 23 August 2018. Since the Respondents omitted to file this affidavit with the Tribunal, they were allowed to file their answering affidavit and a condonation application, which they did on 13 September 2018.

30. The Tribunal condoned the late filing of the Respondents’ answering affidavit on 22 October 2018, and ordered in its condonation ruling, that the Applicant file its replying affidavit within ten (10) days of receipt of this ruling. The Applicant

contends that it was not aware of this requirement, hence failed to file on 5 November 2018. Furthermore, the Applicant asserts that its Senior Legal Advisor, Ms Katherine Germishuys, who had personal knowledge of and handled this matter, had since left the employ of the Applicant in December 2018, and immigrated abroad.

31. The Applicant’s omission to file in time occurred during the period when its former Senior Legal Advisor was in the process of leaving the Applicant’s employ; and the Applicant had relied on the initial view provided by this former Advisor. The Applicant’s Manager responsible for the division that handles matters of this nature, Ms Jacqueline Peters contends that her main role is to supervise all matters, however, she does not scrutinise all voluminous documents filed under each matter handled by her division. Hence, the Applicant was not aware of this requirement stated in the Tribunal’s condonation ruling issued on 22 October 2018.

32. The Respondents opposed the Applicant’s condonation application on the grounds that the explanation is superficial and that the Applicant failed to fully explain the reasons for delay. The Respondents also pick on why the Applicant could not state the exact date when the former Senior Legal Advisor vacated her office.

33. The Applicant replied to the Respondents’ objection to the condonation, mainly reiterating that it was not aware of the order to file on 5 November 2018, and that the Manager’s role is to supervise quite a large number of investigations and cases. The Applicant also contends in its replying affidavit filed on 15 March that it had to employ a person with technical and legal expertise to take over legal matters and provide legal analysis and advice.

34. Having considered the reasons advanced by the Applicant, and the fact that the Respondents did not furnish any evidence contrary to facts provided by the Applicant, I found the explanation excusable.

35. Furthermore, this matter is of great importance to both parties given the seriousness of the conduct alleged in the founding affidavit, and the consequences of the orders requested. It is in the interest of justice to allow the Applicant to argue its allegations before the Tribunal, and present evidence of all consumers adversely affected by the actions of the Respondents. The Respondents raised serious objections in their answering affidavit which deserve to be ventilated before the Tribunal.

36. The Respondents presented no evidence of, and have not advanced any arguments that they will be prejudiced by the granting of the condonation.

Prospects of success

37. In addition to consideration of other factors for condonation, it is also important to note that when dealing with prospects of success; it is necessary for the Tribunal to consider the merits of the matter.

38. The Applicants states that:

“In Penrice v Dickinson,[11] the Appellate Division held that, in an application for condonation, the merits of the appeal may in some cases be an important factor. It also held that, if there is sufficient information before the court to enable it to decide whether the appeal has or has not a reasonable prospect of success, it had to decide the question. And the court stated the reason for this as being that if the appeal is hopeless, the "great expense of prosecuting it would be a mere waste of money”.

39. This view was reiterated in the Melane case where the court stated that, “without prospects of success, no matter how good the explanation for the delay, an application for condonation should be refused.” The Tribunal aligns itself with this reasoning.

40. In the current matter before this Tribunal, the Applicant alleges that the Respondents violated several provisions of the Act by:

40.1 Failing to conduct proper affordability assessment;

40.2 extending credit recklessly;

40.3 charging excessive fees, excessive storage fees, annual fees, initiation fees;

40.4 excessive monthly service fees, insurance charges, and

40.5 entered into short-term credit agreements disguising them as pawn agreements.

41. As a result of the above prohibited conduct, the Applicant requests the Tribunal to make an order for cancellation of the Applicant’s registration, and pay an administrative fine of 10%.

42. While the Respondents did not dispute certain allegations of charging insurance for motor vehicles pawned and kept at rented storage location unknown to the customers and the Applicant, Respondents argue that their business model is not well understood by the Applicant, and that it complies with the provisions and objectives of the Act. The Respondents argue that they grant short-term loans to small businesses and persons, and use their motor vehicles as security for the loans. The amount of loan granted depends largely on the value of the motor vehicle, which the Respondents employ an assessor to do thorough inspection and assessment, and present that value to the potential customer. The loan is granted subject to the motor vehicle being handed over to the Respondents who will return it back to the customer, after 30 days, if the entire loan amount is repaid. The motor vehicles are allegedly covered for insurance, and are stored in a storage location that is not disclosed to anyone for security purposes.

43. At the centre of the arguments raised by both parties, is the interpretation of whether the Respondents are involved in short-term credit agreements or pawn agreement with the consumers. The Respondents contend that they do not enter into pawn agreements, and that their business model cannot be classified as pawn agreements.

44. Furthermore, the Respondents seem to suggest that the affordability assessment depends largely on the retail value of the motor vehicle rather than the income of the consumer. This appears to be inconsistent with the affordability criteria contemplated in the Act.

45. Given the nature of the allegations against the Respondents, and the evidence contained in the Applicant’s founding affidavit, the Applicant has good prospects of success if the matter proceeds to the hearing before the Tribunal.

46. In view of the above, including the dire consequences of the orders requested by the Applicant, it is my view that this matter deserves a hearing. The Applicant has good prospects of success in securing a prohibited practice ruling and the cancellation of the registrations of the Respondents, and payment of an administrative fine.

47. The Tribunal, in terms of section 150, has powers to make certain orders. Amongst these orders, is an order condoning any non-compliance with its rules and procedures on good cause shown. The test here is on "good cause" for such an order to be made.

48. Once more, the Applicant has succeeded in showing these grounds; and the Tribunal rules in favour of the Applicant.

ORDER

49. Accordingly, for the reasons set out above, the Tribunal makes the following order:-

a. The application for condonation is granted; and No order is made as to costs.

DATED ON THIS 23rd day of May 2019

[signed]

Ms Nomfundo Maseti

Presiding Member

[1] The Tribunal ordered the Applicant through its condonation ruling issued on 22 October 2018, to file its replying affidavit 10 days from the date of receipt of the condonation judgment.

[2] National Credit Act 34 of 2005

[3] Regulations for Matters Relating to the Functions of the Tribunal and Rules for the Conduct of Matters before the National Consumer

Tribunal, 2007

[4] Regulations for Matters Relating to the Functions of the Tribunal and Rules for the Conduct of Matters before the National Consumer

Tribunal, 2007

[5] Oxford English Dictionary, Second Edition at pg 151.

[6] Collins English Dictionary and Thesaurus, Fourth Edition 2011, at pg170.

[7] 1912 AD 181 at 186.

[8] 2003 (11) BCLR 1212 (CC) at para[11]. [9] Van Wyk v Unitas Hospital and Others 2008(4) BCLR 442 (CC) at para 20 as applied in Camagu v Lupondwana Case No 328/2008 HC Bisho.

[8] 2003 (11) BCLR 1212 (CC) at para[11].

[9] Van Wyk v Unitas Hospital and Others 2008(4) BCLR 442 (CC) at para 20 as applied in Camagu v Lupondwana Case No 328/2008 HC Bisho.

[10] 1962 (4) SA 531 (A) at 532C-F.

[11] 1945 AD 6