Recent case law pertaining to the national credit act with reference to instalment sale agreements and section 129 notices by Trevor Simon

  1. In the judgment of Amardien and Others vs Registrar of Deeds and Others (CCT212/17) [2018] ZACC 47, the Constitutional Court was asked to determine 2 issues:-
     
    1.1.   What is the legal effect of a late recordal of an instalment sale agreement with the Registrar of Deeds upon a seller and purchaser in terms of Sections 20 and 26 of the Alienation of Land Act (“ALA”);
     
    1.2.   Must a notice in terms of Section 129(1) of the National Credit Act (“NCA”) indicate the amount that a creditor alleges is owed by a debtor.
     

    Applicable legislation


     
    1.3   Section 20 of ALA requires a seller of immovable land on instalments to cause the contract to be recorded by the Registrar of Deeds within a certain time period.
     
    1.4   Section 26 of ALA provides that if the Deed of Alienation has not been recorded within the time period prescribed in Section 20, the seller shall not be entitled to receive any consideration pursuant to such agreement.
     
    1.5   Section 129(1) of the NCA requires a credit provider to draw to the attention of a consumer default of the notice in writing to propose that the consumer refer the credit agreement to a debt counsellor before commencing any legal proceedings against the consumer.
     

    Background facts

  2. The 12 applicants were beneficiaries and purchasers of homes bought between 2000 and 2003 under a state subsidized housing programme administered by the Cape Town Community Housing Company (Pty) Ltd (“the housing company”) through instalment sale agreements with the housing company as the seller.
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  4. In 1998, the City of Cape Town established a housing initiative to deliver government subsidized housing to disadvantaged members of the Cape Town community. The housing company received housing subsidies on behalf of the beneficiaries and applied those subsidies towards the construction of new houses.
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  6. The applicants moved into their respective homes at various times only to discover that the buildings were of an inferior quality. As a result, the applicants paid their instalments with varying levels of regularity.
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  8. First issue – what is the legal effect of a late recordal of an instalment sale agreement with the Registrar of Deeds upon a seller and purchaser in terms of Sections 20 and 26 of ALA.
     
    5.1   On 25 April 2014, the housing company sent notices in terms of Section 129(1) of the NCA (“the Section 129 notice”) to the applicants informing them that firstly, they were in arrears in terms of their respective instalment sale agreements and secondly, threatening them with the cancellation of the instalment sale agreements. Following this, eviction proceedings against the applicants were launched.
     
    5.2   The applicants submitted that they could not have been in arrears or in default because the housing company was only entitled to receive consideration after the recordal of the instalment sale agreements with the Registrar of Deeds. The applicants submitted that the housing company had failed to inform them of the exact date of the recordal of the instalment sale agreements and that notices of the recordal of the agreements were only brought to their attention for the first time when they received the Section 129 notices. The applicants were thus unable to ascertain when the debt became due and payable, and therefore were unable to make payments as required.
     
    5.3    In determining this issue, the Court considered various legal principles pursuant to which the Court found as follows:-
     
    5.3.1   The housing company was obliged to record the instalment sale agreements with the Registrar of Deeds within 90 days of concluding the agreements with the applicants but failed to do so timeously. The housing company only recorded the instalment sale agreements with the Registrar of Deeds more than 10 years after the conclusion thereof. The Section 129 notices alerted the applicants for the first time that the instalment agreements had been recorded at the Registrar of Deeds.
     
    5.3.2   In the same Section 129 notice, the housing company claimed cancellation of the instalment sale agreements as well as providing notices of default to the applicants. The Court found this to be irregular because it by-passed compliance with Section 19 of the ALA which limited the seller’s right to take immediate and unilateral action by providing for certain steps to be taken before it could cancel an agreement with the purchaser.
     
    5.3.3   As the housing company was statutorily barred from accepting payment, the applicants could not have been in breach of the instalment sale agreements at the time of receipt of the Section 129 notice as they had not been notified of the recordal of the instalment sale agreements before that date.
     
    5.3.4   The housing company should have alerted the applicants to the recording of the instalment sale agreements at the Registrar of Deeds before issuing the Section 129 notices and claiming cancellation of the agreements.
     
    5.3.5   The Court accordingly found that the Section 129 notices were premature and invalid insofar as they were relied upon as a basis for the cancellation of the instalment sale agreements. The effect of this was that the subsequent cancellation of the instalment sale agreements were held to be invalid.
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  10. Second issue – must a notice in terms of Section 129(1) of the NCA indicate the amount that a creditors alleges is owed by a debtor. 
     
    6.1   The Section 129(1) notice which was issued by the housing company against the applicants failed to stipulate the amount of arrears that the housing company alleged were due to it by the applicants.
     
    6.2   The Court was asked to consider the legal effect of failing to include the amount of arrears in the Section 129(1) notice. The Court considered the purpose of the Section 129(1) notice with reference to the NCA which was as follows:-
     
    6.2.1   to bring the default status of the credit agreement to the attention of the consumer;
     
    6.2.2   to provide the consumer with an opportunity to rectify its default status in terms of the credit agreement in order to avoid legal action being instituted against it as well as notifying the consumer of the credit providers’ intention to regain possession of the assets which were subject to the credit agreement;
     
    6.2.3   to provide a gateway to the credit provider to institute legal action against the consumer who is in default under a credit agreement.
     
    6.3   The Court accordingly found that it was a necessary requirement to specify the amount due by the consumer to the credit provider in the Section 129 notice. As Section 129(1) specifically requires the credit provider to “draw the default to the notice of the consumer”, it was clear that this requirement would only be met if the amount of the arrears was specified in the notice, since the consumer’s attention would otherwise not have been drawn to the amount of the default.
     
    6.4 Accordingly, the Section 129 notices which were issued by the housing company against the applicants were held to be invalid.

 

Conclusion


This judgment is the latest in a long line of authorities where our Courts have interpreted the provisions of the NCA in favor of the consumer. This judgment furthermore illustrates the approach taken by our Courts in interpreting the provisions of the NCA by having regard to the purpose of the NCA which is to promote and advance the social and economic welfare of South Africans and to promote a fair and transparent credit market and industry and to protect consumers.