On 10 December 2012, in the case of The National Credit Regulator v Filippus Albertus Opperman and Others3, the Constitutional Court upheld a judgment by the Western Cape High Court to the effect that section 89(5)(c) of the NCA is inconsistent with the right to property enshrined in section 25(1) of the Constitution.

Section 89(5)(c) provides that a credit provider forfeits its right to recover money lent to a consumer if it is not a registered credit provider in terms of the NCA. The NCA imposes an obligation on a credit provider to register as such if it is the credit provider of over 100 credit agreements or if it has granted credit in excess of ZAR 500 000, failing which any credit agreements concluded by such an unregistered person are unlawful and void.

The case arose after Filippus Opperman, who was not a registered credit provider, lent Jacobus Boonzaaier ZAR 7 million in 2009. When Boonzaaier admitted he could not repay the debt, Opperman applied for the sequestration of Boonzaaier's estate.

The Western Cape High Court found that the provision permits the arbitrary deprivation of property, contrary to section 25(1) of the Constitution, because it denies the credit provider any claim against the consumer for the repayment of money, without leaving a discretion to a court to decide otherwise.

The NCR and the Minister of Trade and Industry both opposed the confirmation of the High Court order of invalidity.

The majority of the Constitutional Court, in a judgment by Van der Westhuizen J (with whom Mogoeng CJ, Moseneke DCJ, Khampepe J, Nkabinde J and Skweyiya J concurred), found the provision to be a punitive measure to protect consumers against unregistered credit providers. The provision compels a court to declare the agreement void and order that the unregistered credit provider’s right to claim restitution based on unjustified enrichment of the consumer, be cancelled or forfeited to the state; with no discretion to a court to keep the restitution claim intact.

The Constitutional Court held that by removing the unregistered credit provider’s restitution claim, it deprives him of property. It further held that the reason provided for this deprivation was not sufficient and the means used to achieve the purpose of the provision was disproportionate. The Constitutional Court accordingly concluded that the provision results in arbitrary deprivation of property in breach of section 25(1) of the Constitution; and that the deprivation was not a reasonable and justifiable limitation of the right as there are less restrictive means to achieve the purpose of the provision.

To view the media summary relating to this judgment, click here.

First published by Webber Wentzel