It is common cause that the majority of South Africans, including the unsophisticated, engage daily in credit agreements, where often the repayment of which is in instalments. However, most of them are often not aware of their rights and obligations under the credit agreement except for the duty to pay the instalments. Often, credit consumers do not even know what avenues are available to them subsequent the failure to meet the repayments according to the credit agreement.
On 28 February 2014, the Constitutional Court in Kubyana v Standard Bank of South Africa Ltd (Kubyana) clarified the requirements for delivery of the notice that a credit provider must give to a consumer or debtor, in the event of default.
Section 129 of the National Credit Act (the “NCA”) requires a credit provider to give notice prior to taking steps to enforce a debt. This notice is often referred to as the “section 129 notice”.
There has been some confusion, amongst both credit providers and consumers, created by a series of inconsistent decisions by South African courts on the interpretation section 129 of the NCA.
It is quite apparent that most consumers do not even have knowledge of their statutory right to receive such notice notices.
The Provisions of the NCA regarding the Notice
In terms of section 129 of the NCA, the credit provider has duty, prior to enforcing the debt through legal proceedings, to
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.
Section 129 is, however, subject to section 130.
Section 130 provides that the credit provider may only approach a court for the enforcement of the debt if the consumer has been in default for 20 business days, provided that 10 days has lapsed since the Notice was sent to the consumer. Further, section 130 provides that, a debt is only enforcable if the consumer has not responded to the notice or has not surrendered the goods as per (other provisions) the NCA.
Controversies regarding the delivery of section 129 notice relate to the form and method of delivery of the Notice–as chosen by the consumer. A consumer has a right, in terms of section 65 of the NCA, to receive the Notice: (a) in a manner prescribed, or (b) to choose either to receive it by way of fax, email, printable web-page, ordinary mail (post), or business premises.
In addition, section 96 of the NCA obliges the credit provider to deliver the Notice to the address chosen by a consumer or a recent address of the consumer, provided that it was brought to the attention of the credit provider.
A section 129 notice will be considered “properly delivered” or “served” if it has been delivered by registered mail to the consumer’s chosen address.
Inconsistent decision by the courts prior to Kuybana
The Constitutional Court in Kubyana held that, on one hand, section 129 prescribes what the credit provider must do: indicate in writing to the relevant consumer that she is in default and that she has certain statutory remedies available to her in order to satisfy her outstanding debts without recourse to litigation. On the other hand, section 130 sets out how the credit provider must discharge this obligation: deliver a written notice to the consumer as required by the NCA.
The crucial question, however, is: what must a credit provider do in order to meet the standard prescribed by the Act for the delivery of a section 129 Notice?
Unfortunately, the above provisions do not offer assistance on what is the acceptable mode of delivery, or under what circumstances will the Notice be considered properly delivered.
Will a mere dispatch of the Notice suffice? Will proof of its delivery to the chosen address suffice? Or is there something more required on the part of the credit provider?
In First Rand Bank v Dlamini, the North Gauteng High Court (as it then was) held that a credit provider must do more than just the dispatch the Notice. According to the Court, the Notice must be brought to the “actual attention” of the consumer. Failure to this will bar the enforcement of the debt. The Court explained that the choice of mode of receipt, in terms of section 65, does not create an assumption of receipt of the Notice.
In Standard Bank v Maharaj, the KwaZulu-Natal High Court took a contradictory position. The Court held that, since section 65 gives the consumer of choice of mode of receipt, once the credit provider has complied with the mode, the Notice will be considered delivered.
In Rossouw v Randbank, the Supreme Court of Appeal followed the Maharaj approach. It held that the choice given under section 65 allows the consumer to bear the risk of non-receipt. Therefore, the Court held, in instances where the consumer chooses to receive the Notice by way of post, proof of postage to a correct address will suffice. Actual receipt becomes the responsibility of the consumer, provided that the postal address sent to was registered.
The Constitutional Court attempted to put the matter to rest in Sebola v Standard Bank (2012). Mr and Mrs Sebola entered into a home loan agreement with Standard Bank. The agreement provided for notice to be sent to an address chosen by the Sebolas. When they defaulted on their home loan repayments, Standard Bank sent a Notice by registered post to the selected address. The Notice was delivered to the wrong Post Office, and the Sebolas never received the Notice. Standard Bank proceeded by taking judgement against the Sebolas and obtained a warrant of execution against their property.
In the High Court, it was established that the Sebolas did not receive the Notice, but the court nevertheless rejected the argument which stated that the NCA does not require actual delivery of the section 129 Notice. It adopted the Rossouw approach.
However, on appeal before the Constitutional Court, the court held that a mere dispatch of the Notice and reliance on section 65 does not suffice the delivery requirement under the NCA.
The Court held that the NCA does not require that the notice comes to the subjective attention of the consumer, but circumstances must be that there is a probability that the Notice reached the consumer. Where a postal address is a chosen method, the credit provider will only have to show through track and trace report that the Notice was sent to a registered address and correct Post Office, that the Post Office did notify the consumer of the Notice to be collected, and the notification reached the consumer (which can be deduced from the correctness of the postal address sent to).
This Judgment has been misconceived by many consumers to mean that if there is evidence that the section 129 Notice was sent by registered post but was returned to the credit provider unclaimed, this shows that there has not been proper delivery as required by the NCA as it indicates that the Notice has not come to the attention of the consumer for whom it was intended. As such, in these instances, consumers have incorrectly called upon courts to adjourn the legal proceedings for the enforcement of the debt as contemplated in section 130 of the Act.
The Kubyana decision: the correct meaning of section of 129 Notices
Mr Kubyana and Standard Bank entered into an agreement regulated by the NCA, in terms of which Kubyana purchased a motor vehicle and was obliged to repay the purchase price in 60 monthly instalments. He chose an address as his domicilium (an address for purposes of all notices and correspondence sent by Standard Bank in relation to the instalment sale agreement).
Kubyana fell in arrears with his payments and Standard Bank tried in various ways to bring this to his attention, including by way of telephone calls upon which he promised to settle the debt, and visits to his workplace. After several months without his avail, Standard Bank then sent the section 129 Notice to Kubyana on his nominated registered address, subsequent which two notifications by the Post Office was sent to Kubyana, with neither response nor avail to collect the Notice. After three months, the unclaimed section 129 Notice was returned to Standard Bank.
The main contention by Kubyana was that the return of the unclaimed Notice was proof that the Notice was never properly delivered or brought to his attention as required by the NCA. Rejecting this averment, the court stated that the meaning of the Notice must be understood within the purpose and context of the objects of the NCA:
to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers. (Section 3 of the NCA)
Both the credit providers and the consumer have responsibilities to bear if the dispute is to be resolved without recourse to litigation.
Obligation to deliver the Notice
Mhlantla AJ, with reference to the Sebola case, held that:
there is no general requirement that the Notice be brought to the consumer’s subjective attention by the credit provider, or that personal service on the consumer is necessary for valid delivery under the Act.
She explained that if the credit provider has taken all required steps to apprise the consumer of the Notice, unreasonable failure on the part of the consumer to engage entitles the credit provider to enforce the debt.
What this appears to mean is that the obligation, where delivery by postal address was a chosen mode of receipt, will be fulfilled if: (a) the Notice was dispatched by registered mail, (b) where it was ensured that the notice reached the correct branch of the Post Office for collection, (c) and where it was ensured that the Post Office notified the consumer (at her designated address) that a registered item is awaiting her collection. The track and trace report will probably play a significant role in this regard.
The aforementioned is subject to the narrow qualification that, if these steps would not have drawn a reasonable consumer’s attention to the section 129 Notice, then delivery will not have been affected. That is, if the circumstances are such that despite the steps being taken properly the Notice would not have been brought to the attention of the consumer, then delivery will not be said to have been affected. This is discussed in details below.
According to the Constitutional Court, this reflects an appropriate balancing of interests. While the obligation to deliver the section 129 notice rests on the credit provider, if the consumer acts unreasonably the credit provider may go ahead and seek enforcement of the credit agreement notwithstanding the consumer’s failure to engage with the contents of theNnotice.
Proof of Delivery of the Notice
The inconsistent approaches discussed above all varied on what will suffice as proper proof of delivery of the Notice. While providing clarity on the misconceptions of its earlier decision in the Sebola case, the Constitutional Court stated that again that the credit provider need not to prove actual or personal receipt of the Notice. This is consistent with Sebola: the NCA “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.
In my view, this is the correct approach. It takes into account circumstances such as that in the Kubyana, where the consumer is notified in other methods other than the chosen one, and the consumer unreasonably and deliberately ignores the notification to collect the Notice with intent to abuse the provisions of the NCA and escape legal proceedings.
Contrary Indications or Reasonable Failure to Respond
As stated above, the following shields the consumer against enforcement of the debt: (a) There must be reasonable failure on the part of the consumer to respond to the notification or to collect the Notice at the Post Office; nd (b) It may only be reasonably assumed that the Notice reached the consumer in the absence of contrary indication.
The mere return of an unclaimed Notice will not qualify as a contrary indication that bars a reasonable assumption of delivery. That is, the NCA does not allow a consumer to ignore, or unreasonably fail to respond to notifications from the Post Office and thereby stave off enforcement proceedings by the credit provider.
The concept of contrary indications or reasonable failure, according to the Constitutional Court in the Kubyana, will lead to two inferences that a court may make: the inference that the notification from the Post Office (indicating that a registered item is available for collection) reached the consumer; and the inference that a reasonable consumer would have responded to that notification and retrieved the notice.
The court explained that, as regards the first inference, a contrary indication would be a factor showing that, in the circumstances and despite the credit provider’s efforts, the notification did not reach the consumer’s designated address.
As regards the second inference: reasonable failure is based on the assumption that a consumer acting reasonably would, having received the notification from the Post Office to retrieve a registered item, proceed to collect the notice. The absence of such circumstances will mark the absence of contrary indications and the presence of unreasonable failure.
These inferences were the basis for the court’s finding against Kubyana, as he had not provided evidence why he reasonably could not have responded to the notifications sent by the Post Office. As such, there was no basis to understand why it was reasonable for Mr Kubyana not to have taken receipt of the notice.
It stands to reason, therefore, that each case will be determined on its own facts. This may create another problem. However, reasonableness of the failure will be judged objectively taking into account all relevant circumstances.
Change of Address or Mode of Receipt
What happens when the consumer changes his or her chosen, postal and residential, address or mode of receipt and fails to communicate such change to the credit provider?
Implicit to the provisions of section 65 and section 96 is that the consumer is obliged to give notice of change of address or nominated mode of receipt of Notices to the credit provider.
The following concerns arise: what happens if all evidence shows that the credit provider took all relevant steps as per the Kubyane case and the NCA, and there are no contrary indications or reasonable failure? What if through proof of the track and trace report it shows that the Notice did reach the correct destination of the chosen address?
Clearly, if one follows the reasoning in Kubyana – that the consumer will be exonerated if despite the steps taken by the credit provider the consumer would not have received the Notice – then it becomes clear that the delivery will not be affected. Change of a nominated address does make impossible for the consumer to receive the Notice.
The problem with the Kubyana approach is the existence of fault on the part of the consumer– the breach of the implied obligation under the NCA or that expressed in a credit agreement, as the case may be.
This question came before the court in Balkind v Absa Bank, where the consumer failed to notify the credit provider of his change of both postal and residential address which he was required to by the credit agreement. This clearly amounted to a breach of the credit agreement.
The court in Balkind held that despite fault on the part of the consumer, in these circumstances, the fact remains that the Notice is not brought to the attention of the consumer in such circumstances. The court further held that, since courts rely on evidence before them, if there are indications that notwithstanding dispatch by registered post to the chosen address and proof that the Notice reached the correct post office, the Notice did not come to the consumer’s attention as required by Sebola case. In the absence of any indication that the debtor deliberately avoided receipt of the notice, the consumer will be exonerated from legal proceedings.
This reasoning is somewhat worrisome. It overlooks the principles of contract: that an agreement must always be honoured.
Who proves that there was lack of deliberate evasion of the Notice? In terms of the decision in the Kubyana case, once it has been established that all the steps were properly taken by the credit provider, the burden shifts to the consumer to show reasonableness of his or her failure to respond or receive the Notice. Who adduces evidence of lack of deliberate evasion? Is it the consumer himself or herself?
It is difficult to agree with the court’s finding– that the contractual failure on the part of the consumer to notify the credit provider of his or her change of domicilium address does not operate as a form of estoppel which estops the consumer from raising a defence based on non-receipt of the Notice. It is an established principle of contract that he who enters into a contractual agreement that waives his rights loses such rights accordingly.
The position would be much different if the consumer can show that, due to compelling circumstances, he or she could not abide by the credit agreement, and public policy dictates that he or she exonerated from the legal proceedings.
Neither the Constitutional Court nor Supreme Court of Appeal has addressed this issue. As it stands, approaches will vary in each High Court jurisdiction.
It is therefore paramount that consumers clearly understand their duties under the credit agreement, other than that of paying the premiums.
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