Sections 129(1)(b) and 130 of the National Credit Act, compels a credit provider (such as a bank) to deliver a default notice to a defaulting consumer under a credit agreement (for example a home loan) before legal proceedings can be instituted.

How a bank goes about proving delivery has given rise to numerous judgments, including a judgment on 12 December 2012 by the Eastern Cape High Court in Barry Balkind v ABSA Bank, where it was held that what is required is that reasonable steps are taken to ensure that the notice probably reached the consumer who would have reasonably collected the item from the post office.  But if there is proof that the notice through no fault of the consumer, was not delivered, the summons will be premature.

While this judgment is another blow for banks, it contains useful pointers for the banks about what additional allegations can be made in order to overcome the difficulty of dealing with a recalcitrant consumer who tries to evade receipt of the notice, to frustrate enforcement of the debt.  In the Balkind case, the court pointed out that banks often have contact numbers of their clients and allegations can be made in the summons that telephonic enquiries have established that the consumer resides at the address to which the notice was sent, was advised telephonically of the sending of the notice by registered post, was provided with the requisite tracking number and was telephonically requested to collect the notice within a given period of time. 

If the bank has an email address or a fax number, the bank can fax and/or email the notice in addition to sending it by registered post and should also consider sending it by ordinary post.  An SMS to a cell phone number verified correct by a voice call will also help.  If after having taken additional steps to bring the notice to the consumer’s attention, the track and trace report reflect that the notice was returned to the sender, the Eastern Cape High Court suggested that there is room for a finding that the consumer deliberately evaded service of the notice.  Then a court can adopt the view that in such circumstances the institution of the legal proceedings was not premature.  This will always be trumped by evidence that, for reasons not attributable to the consumer’s conduct, the notice did not come to their attention.

On 7 June 2012, the Constitutional Court delivered a judgment in Sebola v Standard Bank of South Africa Limited 2012 (5) SA 142 (CC) and held that it was not sufficient for the bank to allege and provide proof that the notice had been sent by registered post to the address chosen by the defaulting consumer.  The bank must obtain a “track and trace printout” from the website of the South African Post Office to show that the notice was delivered to the post office for the chosen address.  If the notice reaches the relevant post office, in the absence of any indication to the contrary, a court could accept that there was adequate proof of delivery of the notice to the defaulting consumer.

The Western Cape High Court in Nedbank Limited v Binneman 2012 (5) SA 569 (WC) held that where there was proof that the notice reached the correct post office, the risk of non-receipt of the notice rested with the defaulting consumer.  Proof of delivery to the relevant post office is sufficient, regardless of whether the notice was collected by the debtor.

The Western Cape High Court approach was not followed by the KwaZulu Natal High Court.  In ABSA Bank Limited v Mkhize 2012 (5) SA 574 (KZN), the court held that since the track and trace report from the post office revealed that the notice was returned unclaimed, there was a clear indication that the notice did not reach the consumer.  Therefore Section 129 of the NCA had not been complied with.  The court refused to grant default judgment.

In the Balkind case, the Eastern Cape High Court disagreed with the reasoning adopted by the Western Cape High Court and preferred the approach adopted by the KwaZulu Natal High Court in the Mkhize case.

Mr Balkind had signed a suretyship and chose 92 Basroyd Drive, Bassonia, East London, as his chosen address for receipt of legal notices.  Prior to the bank suing Mr Balkind, the bank sent a Section 129 notice by registered post to Mr Balkind’s chosen address.  However, Mr Balkind had sold the property in East London and, in breach of his obligations in the deed of suretyship, failed to advise the bank of his change of address.  Therefore the Section 129 notice did not come to his attention.  The summons that was subsequently delivered to the chosen address also did not come to his attention. 

Mr Balkind only became aware of the default judgment that was granted against him, when a warrant of execution was served on him at his new address in Johannesburg.  He then applied for rescission of the default judgment.

The Eastern Cape High Court rescinded the default judgment that was granted against Mr Balkind on the basis that the Section 129 notice was not brought to his attention and therefore the legal proceedings that were instituted by the bank against him were premature.

The KwaZulu Natal High Court decision in ABSA Bank v Mkhize is subject to an appeal to the Supreme Court of Appeal and hopefully there will be greater clarity once the Appeal Court delivers its judgment.

Written by Aslam Moosajee, director at Norton Rose in South Africa.