Nedbank Limited t/a The Motor Finance Corporation v National Credit Regulator (NCT/31680/2017/140(1)(P)) [2018] ZANCT 75 (28 June 2018)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD AT CENTURION

Case number: NCT/31680/2017/140(1)(P)NCA

In the matter between:

NEDBANK LIMITED

trading as

THE MOTOR FINANCE CORPORATION

APPLICANT

and

NATIONAL CREDIT REGULATOR

RESPONDENT

In re

NATIONAL CREDIT REGULATOR

APPLICANT

THE MOTOR FINANCE CORPORATION

RESPONDENT

Coram:

Adv Fati Manamela – Presiding member

Ms D Terblanche – Tribunal member

Mr Trevor Bailey – Tribunal member

Date of hearing – 19 March 2018

STAY AND SEPARATION RULING

APPLICANT

1. The applicant in these proceedings and the respondent in the main application is Nedbank Limited trading as The Motor Finance Corporation (Nedbank), which is duly registered and incorporated in terms of the company laws of the Republic of South Africa, and registered as a credit provider in terms of the National Credit Act, 2005 (the NCA).

2. Nedbank was represented in these proceedings by Advocate M Chohan SC, who was instructed by Werksmans Attorneys.

RESPONDENT

3. The respondent in these proceedings and the applicant in the main application is the National Credit Regulator (the Regulator), a juristic person established by section 12 of the NCA.

4. The Regulator was represented in these proceedings by Advocate C Erasmus SC, who was instructed by C Kgope Attorneys.

APPLICATION TYPE

5. In these proceedings Nedbank applies in terms of rule 3 (2) (c) (vii) of the Rules for the conduct of matters before the National Consumer Tribunal (the rules)[1] for two orders, more specifically:

5.1. For an order directing that all proceedings in the main application be stayed pending the final outcome of the appeal in the matter of the National Credit Regulator/Standard Bank of South Africa Limited under case number NCT/29041/2015/140 (1) (the Standard Bank matter). This application is referred to as "the stay application" in this ruling; and

5.2. For an order that the merits of the main application be heard and adjudicated separately from, and prior to the issue of sanction. This application is referred to as "the separation application" in this ruling.

BACKGROUND

6. On 17 September 2015, the Regulator referred a complaint in this matter to the Tribunal following an investigation into Nedbank's alleged contraventions of the NCA. The contraventions concern granting reckless credit to consumers who purchased motor vehicles under conditions that have become known as the Satinsky scheme.

7. The Regulator seeks the following wide-ranging relief against Nedbank:

7.1. Declaring that the contraventions under the NCA constitute prohibited conduct;

7.2. Declaring the credit agreements to be reckless;

7.3. Setting aside the consumers' rights and obligations under the reckless credit agreements;

7.4. Directing Nedbank to remove, at its own expense, adverse credit bureau listings;

7.5. Declaring the affordability assessment model Nedbank used as being unfair and unreasonable;

7.6. Interdicting Nedbank from contravening the provisions of the NCA; and

7.7. An administrative fine.

8. On 11 October 2017 the Tribunal dismissed the Regulator's application in the Standard Bank matter. The Regulator has subsequently instituted appeal proceedings (the appeal) against the Tribunal's dismissal of the Standard Bank matter.

9. The hearing of the main application in this matter was set down for 29, 30 and 31 January 2018 but did not proceed due to the stay and separation applications that are the subject of this ruling.

THE STAY APPLICATION

Summary of submissions

Nedbank

10. Nedbank contends that the Regulator's case against Standard Bank in the Standard Bank matter is substantially the same as its case against Nedbank in this matter. It is convenient for the Tribunal and for the parties in this matter that the appeal in the Standard Bank matter be finalised before this matter proceeds any further because:

10.1. Proceeding with this matter before the appeal has been finalised could lead to conflicting and contradictory jurisprudence, which will be contrary to the interests of the orderly, consistent and coherent development of the law, and therefore the interests of justice;

10.2. If the appeal is dismissed, the Regulator's prospects of subsequently succeeding in this matter would be minimal, and the Regulator would, in the interests of the responsible use of taxpayers' money, have no alternative but to seriously consider withdrawing this matter. It would therefore be potentially wasteful of state resources to proceed with this matter in circumstances where the jurisprudence on the relevant issues is not yet settled but will evidently be settled in due course; and

10.3. It would be prejudicial to Nedbank for it to incur substantial further legal costs in circumstances where such costs would have in all likelihood been avoided altogether if the appeal is dismissed.

The Regulator

11. The Regulator opposes the application. It contends that the rules do not provide for an application of this kind. An application for a stay of proceedings is not a procedural matter, but a substantive application that has the effect of suspending the adjudicative process. The Tribunal is a creature of statute under the NCA and does not have inherent jurisdiction in the same way as a superior court to stay proceedings in order to prevent an abuse of the judicial process and to protect parties from prejudice.

The issue to be decided

12. The Tribunal is required to decide whether it has jurisdiction to stay proceedings on application and if so, whether Nedbank has made out a case to stay the proceedings.

Analysis

The Tribunal's competence to make an order to stay proceedings

13. The Tribunal must first decide whether it is competent to make an order to stay the proceedings. It must do so in the absence of having inherent jurisdiction and the NCA and the rules expressly empowering it to make such an order. Neither Nedbank nor the Regulator referred the Tribunal to case law in which the superior courts had considered the Tribunal's competence to make an order to stay proceedings. It is also not apparent to the Tribunal that the superior courts have done so. It is therefore opportune to conduct an overview of both the relevant sections in the NCA and the rules.

14. Section 27 of the NCA deals with the functions of the Tribunal. More specifically, it empowers the Tribunal to, amongst other things, adjudicate an application launched in terms of the NCA, make a determination, grant an order for costs and exercise any other power conferred on it by law.

15. Section 145 of the NCA provides that:

''Subject to the rules of procedure of the Tribunal, a member of the Tribunal presiding at a hearing may determine any matter of procedure for that hearing, with due regard to the circumstances of the case and the requirements of the applicable sections of this Act.''

16. Rule 3 deals with the powers of the Tribunal and gives effect to the provisions of section 145 of the NCA. More specifically, it provides for the various applications that the Tribunal may consider, which include the condoning of non-compliance with the rules and amending pleadings. In particular, rule 3 (2) (c) (vii) empowers the Tribunal to consider applications related to an adjudication process that relate "to other procedural matters". In addition, rules 16 and 16A empower the Tribunal to consider applications such as joinder and the consolidation of matters.

17. Rule 10 deals with applications in respect of matters not provided for in the rules. More specifically, rule 10 (1) provides that:

''A person wishing to bring before the Tribunal a matter which is not listed in rule 3, or otherwise provided for in these rules, must first apply to the High Court for a declaratory order confirming the Tribunal's jurisdiction-

(a) to deal with the matter;

(b) to grant an order to be sought from the Tribunal.''

18. Rule 21 deals with hearings. More specifically, rule 21 (1) provides that:

''A hearing must be informal and follow procedures determined by the presiding member in terms of rule 17 (5) (e) or at any time before or during the hearing.''

19. Moreover, the powers of the presiding member at a pre-hearing conference are regulated by rule 17 (5) which include, amongst other things, the power to:

''(e) determine procedures to be followed at a hearing;

(g) attend to any other matter that might assist with the proceedings or to resolve the matter.''

20. It is undisputed that the superior courts in this country possess inherent jurisdiction to prevent the abuse of their process by

staying proceedings in certain circumstances[2] and the power to do so will be used sparingly and only in exceptional circumstances.[3] The circumstances include lis pendens, pending criminal proceedings, previous unpaid costs, arbitration and other special matters. However, the list is not exhaustive given the potential development of the common law. The courts are entitled to invoke section 173 of the Constitution[4] to develop further remedies for which proceedings could be temporarily stayed. A stay of proceedings in the interests of justice

is one such remedy.[5]

21. In the Tribunal's view, Nedbank was correct to point out that the application to stay the proceedings pending the final outcome of the appeal regulates the proceedings and is therefore a procedural matter. This is because the relief sought is purely temporary in nature and can amount evidentially to no more than the granting of a postponement.

22. The absence in the NCA to specifically refer to stay applications is also, in the Tribunal's view, not fatal to the Tribunal's power to consider such an application. The survey of the NCA and the rules to which the Tribunal has referred in this ruling and when read as a whole, gives to the Tribunal wide powers to determine any matter of procedure, which must include stay applications. This accords with the informality that is provided for in rule 21 (1) and the powers of a presiding member in rule 17 (5) to attend to any matter that might assist with the proceedings at a hearing.

23. Consequently, the Tribunal is competent to consider an application to stay the proceedings before it.[6] When doing so, it must exercise its discretion judicially with proper regard to all relevant facts and circumstances pertaining to its exercise.[7]

The merits of the stay application

24. The Tribunal now turns to consider whether Nedbank has made out a case for the Tribunal to stay the main application in this matter.

25. The Regulator was correct to point out that a stay of proceedings is a drastic step which should be taken after carefully considering the circumstances and should not be based on "speculation and hypothetical outcome" of the appeal in the Standard Bank matter. Although there may be similarities in this matter and the Standard Bank matter concerning the Satinsky scheme and the relief sought, Nedbank is not a party in the proceedings in the Standard Bank matter. Nor is it apparent to the Tribunal that there is a separate and distinct point of law to be decided in the Standard Bank matter that may be relevant in this matter.

26. The Tribunal exercises its jurisdiction concerning, amongst other things, prohibited conduct and reckless lending under the NCA. Each case is dealt with on its merits. In this matter, the Tribunal is required to decide whether or not Nedbank failed to comply with the provisions of the NCA. This requires the Tribunal to assess the evidence placed before it, which must include assessing Nedbank's affordability assessment model and whether or not Nedbank applied its model in such a manner that resulted in reckless

lending and amounted to prohibited conduct. In doing so, the procedure that Nedbank followed together with the weight of evidence

presented at the hearing will serve as the tectonic plate for the Tribunal's assessment.

27. Moreover, consumers in this matter lodged their complaints with the Regulator about four years ago. Not only are the grounds of appeal in the Standard Bank matter wide ranging but at the time when this application was heard the record had still to be filed and a date still to be set for the hearing of the appeal in the Standard Bank matter.

28. Accordingly, the Tribunal is persuaded that it is in the interests of justice that this matter proceed to a hearing.

THE SEPARATION APPLICATION

29. Nedbank contends that it will be convenient for the Tribunal and the parties if the merits are adjudicated prior to the Tribunal entering into the question of sanction. Nedbank also contends that its constitutional rights in terms of section 34 of the Constitution to have a dispute decided in a fair public hearing before a court or independent and impartial tribunal will be grossly violated if the issue of sanction is heard simultaneously with the issue of merits.

30. According to Nedbank, the question of sanction will not arise if Nedbank is successful on the merits. There are strong prospects that Nedbank will succeed on the merits because the Tribunal has dismissed the Regulator's referral of the Standard Bank matter in respect of the Satinsky scheme. If the question of sanction were to arise then it would probably entail the leading of additional evidence and substantial additional preparation by the parties' legal representatives. In these circumstances, it would waste both the time and resources of the Tribunal and the parties.

31. Moreover, the Tribunal is obliged to ensure that its proceedings are always fair. The purpose of a fair hearing lies at the heart of the rule of law and is fundamental to a just and credible legal order. Nedbank stands to be severely prejudiced if the separation is not granted whereas the Regulator will not suffer prejudice should the Tribunal exercise its discretion to grant the relief sought.

32. The Regulator opposes the separation application on the grounds that the Tribunal is a creature of statute and has no inherent powers to confer jurisdiction upon itself beyond that circumscribed in the NCA and the rules. Neither the NCA nor the rules provide for a separation application.

33. Even if such power did exist, an order for separation would be inappropriate because a separation of issues will delay the prosecution of the matter; has an additional cost implication for the Regulator; consumers will continue to be exposed to legal action being taken against them as a result of Nedbank having granted the loans recklessly to them; and the evidence that will be canvassed in the merits will overlap with that required to consider appropriate relief. Moreover, a consideration of the matter as a whole will not encroach the rights enshrined in section 34 of the Constitution.

34. The Tribunal is required to decide whether it has jurisdiction to separate the issues on application and if so, whether Nedbank has made out a case for the merits of the main application to be heard and adjudicated separately from, and prior to the issue of sanction.

The Tribunal's competence to make an order to separate proceedings

35. The Tribunal has ruled that it has wide powers to determine procedural matters. Since a separation application is a procedural matter, it follows that the Tribunal is competent to consider the separation application.

The merits of the separation application

36. In deciding whether issues should be separated or not, notions of convenience, appropriateness, fairness and the possibility of a curtailment of issues will play a determinative role. It is not the convenience of specific parties or the forum hearing the matter, but the convenience of all concerned that must be taken into consideration.[8] The Tribunal should also weigh up the advantages and disadvantages likely to follow upon the granting of a separation order. If it appears that the advantages would outweigh the disadvantages, a court would normally grant the order.[9] Similarly, the Tribunal is required to consider whether there is an overlap of evidence which may make it inconvenient to separate.[10]

37. The NCA aims to expeditiously resolve disputes and provide remedial action for consumers. It is therefore incumbent on the Tribunal to facilitate the convenient and expeditious disposal of disputes before it. The referral in the main application concerns wide-ranging and serious allegations of prohibited conduct that date back beyond four years. The relief the Regulator seeks goes beyond an administrative fine and includes additional remedial action. The Regulator, who must discharge the onus on it to prove the alleged prohibited conduct, has indicated that the evidence that will be canvassed on the merits will overlap with that required to consider appropriate relief, and the inter-relatedness of the issues militates against a separation.

38. The Tribunal has taken into account the Standard Bank matter, inter-relatedness, resources, convenience, fairness and cost implications and is satisfied that the advantages to be gained in the anticipated course of the hearing of the main application in this matter as a whole outweigh the disadvantages and are best served by adjudicating the matter without separating the issues and will bring

finality to the main application.[11]

39. Moreover, the Tribunal is not persuaded that Nedbank's rights to a fair hearing that are provided in section 34 of the Constitution will be violated if the merits and sanction are heard simultaneously. In the Tribunal's view, the separation of the enquiry into guilt and sanction is not an absolute requirement, provided that the overall result is fair.[12] It follows that the Tribunal's consideration of the matter as a whole cannot therefore violate the rights accorded to Nedbank in section 34 of the Constitution.

40. Consequently, the merits of the main application are to be heard together with the issue of sanction.

ORDER

41. Accordingly, the Tribunal orders that:

41.1. The stay application is dismissed;

41.2. The separation application is dismissed; and

41.3. The main application in this matter is to proceed to a hearing before the Tribunal.

DATED AT CENTURION ON THIS 28th DAY OF June 2018

TREVOR BAILEY

Tribunal member

With Ms Terblanche and Adv Manamela concurring.

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

Tribunal, 2007

[2] Minister of Public Works v MXN Development Construction CC, (7015/2006) 2007 ZAWCHC 38, paras [10] and [11]

[3] Herbstein and Van Winsen: The Civil Practice of the Supreme Court of South Africa, Fourth Edition, page 245

[4] Constitution of the Republic of South Africa, 1996

[5] Minister of Public Works v MXN Development Construction CC, (7015/2006) 2007 ZAWCHC 38, paras [10] and [11]; Ntswaki Joyce Mokona v Tassos Properties CC and another, Constitutional Court of South Africa, CCT 113/16 and 291/16

[6] See also Mr Price Group Limited v National Credit Regulator, NCT/81672/2017/140(1)

[7] Naude v Fraser [1998] ZASCA 56; 1998 (4) SA 539 (SCA) at 551G-552A

[8] Minister of Health and Another NO v New Clicks SA (Pty) Ltd 2006 (2) SA 311 (CC) at 354J-355C

[9] S v Malinde & Others 1990 (1) SA 57 (A) at 68B-C

[10] Cape Empowerment Trust Ltd v Fisher Hoffman Sithole 2013 (5) SA 183 (SCA) at para [35]

[11] Denel (Edms) Bpk v Vorster 2004 (4) SA 481 SCA at para [3]

[12] Eddels (SA) (Pty) Ltd v Sewcharan & Others (2000) 21 ILJ 1344 (LC)