Standard Bank of South Africa Limited v Schlesinger and Another (3770/2016) [2016] ZAECGHC 158 (13 December 2016)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, GRAHAMSTOWN

CASE NO. 3770/2016

In the matter between:

STANDARD BANK OF SOUTH AFRICA LIMITED Plaintiff

and

ERIKA SCHLESINGER First

Defendant

CHARLES KAGOCHI CHEMA Second

Defendant

JUDGMENT

Bloem J.

[1] The plaintiff issued summons against the defendants wherein it claimed against the first defendant payment of the sum of R2 840 927.12; interest thereon; costs and an order declaring an immovable property specially executable. Against the second defendant it claimed payment of the sum of R350 000.00, interest thereon and costs on the scale as between attorney and client. When the first defendant delivered a notice of her intention to defend, the plaintiff made an application for summary judgment against her only. The first defendant then delivered her affidavit resisting summary judgment. She applied for the condonation of the late delivery of her affidavit.

[2] During 2007 the plaintiff and the first defendant entered into a loan agreement in terms whereof the plaintiff lent and advanced the sum of R1 550 000.00 to the first defendant to enable her to purchase an immovable property. A mortgage bond was registered over the property in favour of the plaintiff. During 2008 the plaintiff and the first defendant entered into a second loan agreement in terms whereof the plaintiff lent and advanced the sum of R1 800 000.00 to the first defendant at her special instance and request. A second mortgage bond was registered in favour of the plaintiff over the property. In terms of the loan agreements, to which I shall hereinafter refer to as the credit agreements, the first defendant was required to make monthly payments to the plaintiff.

[3] In terms of the credit agreements the first defendant made various repayments to the plaintiff but failed to maintain regular monthly repayments. As at 4 January 2016 she was in arrears in the sum of R1 185 781.26. Because of her default, the total sum of R2 840 927.12 became due, owing and payable. Despite demand, the first defendant failed to make any repayment to the plaintiff.

[4] In her affidavit resisting summary judgment the first defendant referred to an affidavit in case number 1822/2010 which she delivered to resist an application for summary judgment which the plaintiff made against her during 2010. On 24 June 2010 the plaintiff issued summons in case number 1822/2010 against the first defendant for substantially the same relief as in the present matter, save that the claim for capital was smaller than the present claim. After delivery of the first defendant’s affidavit resisting summary judgment, the parties reached agreement[1] which culminated in an order which was granted on 14 October 2010. Paragraph 1 of that order reads that “the application for summary judgment be and is hereby dismissed”. On 19 January 2016 the plaintiff delivered a notice wherein it withdrew the action in case number 1822/2010 against the defendants. No tender of costs was embodied in that notice.

[5] The first defendant opposed the application for summary judgment in case number 1822/2010 on the basis that she had fully complied with her obligations in terms of the credit agreements until April 2010. She alleged that, because of her medical condition, she entered into a home loans rehabilitation agreement with the plaintiff during October 2009 in terms whereof she was required to pay 50% of the monthly instalments until April 2010. She did not make payment since April 2010. The first defendant further alleged that prior to the issue of summons in January 2010 the plaintiff gave her written notice in terms of section 129, as read with section 130, of the National Credit Act[2]. However, after notice was sent to the first defendant and summons issued, according to the first defendant, “the [plaintiff] capitulated and abandoned the legal proceedings”.

[6] The plaintiff contended that the abandonment of the legal proceedings rendered the notice “null and void ab initio for purposes of the legal proceedings” which the plaintiff commenced with the issue of summons on 24 June 2010.

[7] Lastly, the plaintiff also contended that this court lacked jurisdiction to hear case number 1822/2010 because her domicilium citandi et executandi at 17 Lanarth Avenue, Bonza Bay, East London, is not situated within the area of jurisdiction of this court and that this court is accordingly not competent to make any order in that case.

[8] To summarise the litigation history between the parties, during January 2010 the plaintiff issued summons against the first defendant but that summons was not served on her before that litigation was abandoned. The plaintiff issued another summons in case number 1822/2010 against the defendants on 24 June 2010. When the first defendant delivered a notice of her intention to defend the action, the plaintiff made an application for summary judgment. The first defendant delivered an answering affidavit wherein the above defences were set out. The application for summary judgment was dismissed by agreement on 14 October 2010 and on 19 January 2016 the plaintiff withdrew the action against the defendants in case number 1822/2010. Summons in the present action was issued on 29 July 2016 and served on the defendants on 15 and 25 August 2016 respectively. They delivered their notice of intention to defend the action on 15 September 2016. The plaintiff delivered an application for summary judgment against the first defendant only on 30 September.

[9] In her affidavit resisting summary judgment the plaintiff referred to her opposing affidavit that she delivered on 27 September 2010 in case number 1822/2010 and prayed that the contents thereof be incorporated in her affidavit resisting summary judgment in the present matter.

[10] The first defendant denied that the plaintiff was entitled to terminate the credit agreements and claim repayment of the outstanding balance because, according to her, she had fully complied with her obligations in terms of the credit agreements until April 2010. That is what the first defendant stated in her 2010 opposing affidavit. From that affidavit and the payment history the plaintiff attached to its particulars of claim it is apparent that the last payment the first defendant made to the plaintiff was in April 2010. The plaintiff’s case against the first defendant is that she failed to maintain regular monthly payments to it and, as at 4 January 2016, was in arrears in the sum of R1 185 781. 26, the full outstanding balance due by the first defendant to the plaintiff being R2 840 927.12. These amounts appear from a certificate by Andre Meade, one of the

plaintiff’s managers, who examined the plaintiff’s records relating to the computation of the first defendant’s

indebtedness to the plaintiff. Clause 6 of the last mortgage bond which was registered over the immovable property in favour of the plaintiff provides that a certificate signed by any of the plaintiff’s managers, whose appointment need not be proved,

will on its mere production be sufficient proof of any amount due and/or owing by the first defendant in terms of the bond, unless the contrary is proved. The first defendant did not prove anything to the contrary.

[11] The plaintiff approached this court for an order to enforce the credit agreements because the first defendant has been in default under the credit agreements since at least May 2010. Since the first defendant did not place any evidence before the court to gainsay the plaintiff’s contention that her last payment was made during April 2010, the unavoidable findings that must be made are that the first defendant has been in default under the credit agreements and that the plaintiff was entitled to approach the court for the order that it seeks. In the circumstances, on the merits, the first defendant failed to set out in her affidavit(s) facts which, if proved at the trial, will constitute an answer to the plaintiff’s claim.[3] Simply put, the first defendant did not disclose the nature and grounds of her defence on the merits. The facts that she set out in her affidavit(s) do not constitute a defence which is bona fide and good in law.[4]

[12] The first defendant contends that the plaintiff cannot rely on the letter written in terms of section 129 (1), as read with section 130, of the NCA because that letter was served[5] on her on 14 January 2016 when case number 1822/2010 was still pending as it was withdrawn only on 19 January 2016. The first

defendant contends that after the withdrawal of case number 1822/2010 the plaintiff was required to serve a fresh notice in terms of section 129 (1) on her. She contends that the plaintiff’s failure to serve a fresh notice on her denied her the right to avail herself of the remedies afforded by the NCA.

[13] In my view the answer to the first defendant’s contention is to be found in section 130 of the NCA. Insofar as it is relevant to the facts of this case, section 130 provides that a credit provider may approach the court for an order to enforce a credit agreement only if, at the time of such approach:

13.1. the consumer is in default and has been in default under that credit agreement for at least 20 business days;

13.2. at least 10 business days have elapsed since the credit provider delivered a notice to the consumer as contemplated in section 129 (1)[6];

13.3. the consumer has:

13.3.1. not responded to the section 129 (1) notice; and

13.3.2. responded to the section 129 (1) notice by rejecting the credit provider’s proposals; and

13.4. in the case of an instalment agreement, the consumer has not surrendered the relevant property to the credit provider, as contemplated in section 129 of the NCA.

[14] In my view the plaintiff has complied with all the jurisdictional requirements of section 130 before it approached this court on 29 July 2016 for an order to enforce the credit agreement, in that, as at the latter date:

14.1. the first defendant was in default and has been in default under the credit agreement for more than 20 business days, she having been in default since at least May 2010;

14.2. more than 10 business days have elapsed since the plaintiff caused the section 129 (1) notice to be served on the first defendant on 14 January 2016;

14.3. the first defendant did not respond to the section 129 (1) notice; and

14.4. the first defendant has not surrendered the immovable property to the plaintiff, as contemplated in section 129 of the NCA.

[15] In the circumstances of this case it is absurd to expect of the plaintiff to have delivered a fresh notice in terms of section 129 (1) on the first defendant simply because case number 1822/2010 was pending when that notice was served on the first defendant on 14 January 2016. The purpose of such a notice is firstly to notify a consumer in writing of his or her default under the credit agreement and secondly to make proposals to the consumer that he or she refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date.

[16] In the notice that was served on the first defendant on 14 January 2016 she was notified that she was in default under the credit agreements in that the arrears amounted to R1 185 781.26 and the total amount payable was R1 201 483.50. The above proposals were also made to her in that notice. There was no response from the first defendant after that notice was served on her. A fresh notice in terms of section 129 (1) would have served no purpose because such a notice would have informed the first defendant what she had already known, namely that she was in default under the credit agreement and the above proposals would again have been made to her. There was, in my view, no need for a fresh section 129 (1) notice to have been served on the first defendant. Mr Knott, counsel for the first defendant did not refer to any authority in support of his submission that a fresh section 129 (1) notice was required to have been served on the first defendant and I was unable to find such an authority. An acceptance of the first defendant’s submissions would be to put form before substance. The first defendant’s submissions in this regard cannot be sustained and is rejected.

[17] Even if I am wrong in holding that there was no need for a fresh notice in terms of 129 (1), in the circumstances of this case where the first defendant did not satisfy this court that she has a bona fide defence, the failure to deliver a fresh notice in terms of section 129 (1) does not constitute a bona fide defence for purposes of summary judgment.[7]

[18] In her affidavit the first defendant claimed that the plaintiff’s “claim is lis pendens in law and prima facie vexatious”. She made that claim against the background that on 1 April 2011 she instituted a counterclaim against the plaintiff in case number 1822/2010 for R100 000.00 arising from the plaintiff’s alleged breach of contract alternatively wrongful and unlawful conduct when the plaintiff allegedly unilaterally and unlawfully appropriated the sum of R38 337.55 from her current account towards her loan account. Such appropriation allegedly caused her to be unable to repay personal loans and other creditors, with the result that she was blacklisted, which caused her tremendous stress. Although the plaintiff withdrew its action in case number 1822/2010 the first defendant has not withdrawn her counterclaim in that case. The documents in the relevant court file suggest that the first defendant has taken no step to prosecute her counterclaim after she had instituted it.

[19] The first defendant’s counterclaim is for an unliquidated amount of R100 000.00, which amount is smaller than the amount claimed by the plaintiff from the first defendant. In Citybank NA, South Africa Branch v Paul NO and another[8] Visser AJ stated that, in summary judgment proceedings:

“where the alleged counterclaim would not wipe out the claim of the plaintiff, it was not a good defence” and “[i]nsofar as the alleged counterclaim in the first instance has not been liquidated, I find that the defendants cannot rely thereon to resist summary judgment. In regard to the second ground (the alleged agreement) I regard it also as insufficient to ward off summary judgment. After all, if the defendants do have claims against the plaintiff, they are not going to disappear if summary judgment is entered for the plaintiff.”

[20] I am in respectful agreement with the two quoted statements made by Visser AJ. In the circumstances, the fact that the first defendant has a counterclaim against the plaintiff in case number 1822/2010 does not disentitle the plaintiff to summary judgment in this matter.

[21] In addition, the defence of lis pendens is not available to the first defendant. A party who raises lis pendens as a defence must allege and prove that litigation on the same cause of action is pending between the same parties in respect of the same subject matter.[9] When the plaintiff issued summons against the first defendant on 24 June 2016 the litigation that was pending between them was only in respect of the cause of action set out in the first defendant’s counterclaim. The plaintiff’s claim in the present matter is neither based on the same cause of action as the one set out in the first defendant’s counterclaim nor is the plaintiff’s claim in respect of the same subject matter as the one set out in the first defendant’s counterclaim. The first defendant has accordingly not proved at least two of the requirements of the defence of lis pendens.

[22] In all the circumstances, since the first defendant has failed to set out a bona fide defence to the plaintiff’s claim and since there is no merit in the other defences raised by the first defendant, the plaintiff is entitled to summary judgment.

[23] In the result, it is ordered that summary judgment be and is hereby granted in favour of the plaintiff against the first defendant for:

23.1. payment in the sum of R2 840 927.12;

23.2. interest on the aforesaid sum calculated at the rate of 7.750% per annum from 5 January 2016, together with monthly Insurance Premiums of R576.24, to date of final payment;

23.3. an order declaring the immovable property described as Erf […]5 Beacon Bay, Local Municipality of Buffalo City, Division of East London, Province of the Eastern Cape, held by deed of transfer No. T3183/2007 executable; and

23.4. payment of costs.

________________________

G H BLOEM

Judge of the High Court

For the plaintiff: Adv C van der Merwe, instructed by Huxtable Attorneys, Grahamstown

For the first defendant: Adv J Knott, instructed by Phillip Cloete Attorneys, Grahamstown

Date heard: 1 December 2016

Date of delivery of the judgment : 13 December 2016

[1] The terms of the settlement agreement were not disclosed to this court.

[2] National Credit Act, 2005 (Act No. 34 of 2005)(the NCA).

[3] Breytenbach v Fiat SA (Edms) Bpk 1976 (2) SA 226 (T).

[4] Maharaj v Barclays National Bank Ltd 1976 (1) SA 418 (A) at 426.

[5] The plaintiff’s attorney caused the sheriff to serve the letter on the first defendant. It was served on her personally.

[6] Section 129 (1) of the NCA reads as follows: “129 Required procedures before debt enforcement (1) If the consumer is in default under a credit agreement, the credit provider- (a) may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt

counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and (b) subject to section 130 (2), may not commence any legal proceedings to enforce the agreement before- (i) first providing notice to the consumer, as contemplated in paragraph (a), or in section 86 (10), as the case may be; and (ii) meeting any further requirements set out in section 130.”

[6] Section 129 (1) of the NCA reads as follows:

“129 Required procedures before debt enforcement

(1) If the consumer is in default under a credit agreement, the credit provider-

(a) may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt

counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and

(b) subject to section 130 (2), may not commence any legal proceedings to enforce the agreement before-

(i) first providing notice to the consumer, as contemplated in paragraph (a), or in section 86 (10), as the case may be; and

(ii) meeting any further requirements set out in section 130.”

[7] Standard Bank of South Africa Ltd v Rockhill and another 2010 (5) SA 252 (GSJ) at 258D-G.

[8] Citybank NA, South Africa Branch v Paul NO and another 2003 (4) SA 180 (T) at 196H-197H and the authorities referred to therein.

[9] Sikatele and others v Sikatele and others [1996] 1 SA 445 (Tk) at 448g-h.