After much confusion it is with great relief that we finally have an answer on what constitutes delivery of the Section 129 notice under the National Credit Act  (the “Act”).

The condition that a credit provider is obligated to provide notice in terms of Section 129(1)(a) to the consumer must be understood in the context of Section 130, which requires delivery of the notice.

The statute, though giving no unambiguous meaning to the phrase “deliver”, requires that the provider wishing to enforce a credit agreement, aver and prove that the notice was indeed delivered to the consumer².

Should the credit provider choose to post the notice, proof of registered communication to the address of the consumer, along with proof that the notice actually reached the appropriate post office for delivery to the consumer will, in the absence of contrary indication, constitute sufficient proof of delivery.

Should the proceedings be contested, however, where the consumer alleges that the notice did not reach him/her, the Court must then establish the validity of the claim. If it finds that the credit provider has not complied with Section 129(1) of the Act, it must in terms of Section 130(4)(b) adjourn the matter and set out the correct steps which the credit provider must follow before the matter may be recommenced³.

Mashilo Shadrack Sebola and another v Standard Bank of South Africa and others⁴

On the 7th of June 2012, the Constitutional Court handed down judgment in a case regarding the notice that must be given by a credit provider to the consumer or debtor, in the event of default, before resorting to legal proceedings under the Act.

Section 129, read with section 130 of the Act, necessitates that credit providers must, before taking legal proceedings to recover any debts owed, provide the consumer with a notice advising them of their right to refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court, or ombud, to resolve any dispute under the agreement.

The main enquiry was whether the statute demanded that the consumer actually receives this written notice prior to the creditor commencing any Court proceedings to recover the debt, whether it suffices for the credit provider to simply prove that the notice was sent to the debtor’s chosen address, or whether some other method of drawing the default to the notice of the consumer will suffice⁵.

Mr and Mrs Sebola entered into an agreement for a home loan with Standard Bank which specified a post office box in North Riding, Johannesburg, to which letters, notices and statements may be delivered.  When the Sebola’s found themselves in arrears, Standard Bank’s attorneys sent the section 129 notice to the address they had chosen.

However, Mr and Mrs Sebola stated that they had never received the notice.  It had been diverted in error to a Post Office in Halfway House.  Unaware of this mishap, Standard Bank proceeded to take default judgment against the Sebolas and obtained a writ of execution against their home.
The Sebolas approached the High Court to rescind the judgment in light of the fact that  they had never received the notice or the summons and had not been afforded the opportunity to resolve the dispute outside Court.

Both the High Court and the appeal to the full bench of the High Court refused to rescind the judgment, ruling that the Act did not require actual receipt of the notice and that it was enough for the Bank to show that it had sent the notice to the consumer’s chosen address, regardless of any calamity that may have befallen them due to an administration error outside the control of Standard Bank.

In this Court the Sebolas argued that the Act’s provisions must be interpreted constitutionally to give effect to the protections that the Act had set out to instil.  Standard Bank urged the Court not to decide the issue, as there had been no proper ventilation of the constitutional issues before either the Court a quo or the full bench appeal court⁶.

The Socio-Economic Rights Institute of South Africa , the National Credit Regulator and the Banking Association of South Africa were admitted as amicus curiae.

In a judgment by Cameron J, the majority (with whom Yacoob ADCJ, Froneman J, Khampepe J, Maya AJ, Nkabinde J, Skweyiya J and van der Westhuizen J concurred), held that the Act required the provider to aver and prove that the notice was delivered to the consumer.  The Court did not accept that the notice needed to come to the attention of the consumer, but held instead that the Act required the credit provider to prove delivery of the notice.

The credit provider should ordinarily show delivery of a notice by proving (i) registered despatch to the address of the consumer and (ii) that the notice reached the appropriate post office for delivery to the consumer.

If, however, the consumer contends that the notice was never actually received, the Court must establish whether the credit provider has complied with the terms of the Act.  If not, the Act requires the matter be adjourned for the credit provider to take the steps directed by the court to enable the consumer to exercise her rights⁷.

The Bank had failed to prove that notice did in fact reach the post office chosen by the Consumer.  Indeed, the notice had not reached that post office.  The application for rescission was therefore correctly granted.

In a separate judgment, Zondo AJ (with whom Mogoeng CJ and Jafta J concurred) agreed with the order proposed by Cameron J, but for different reasons.  In Zondo AJ’s opinion, the credit provider had to make the consumer aware of the consumer’s default and the non-litigious options of dispute resolution which is stipulated by section 129 of the Act.  His view is based on the common law principles relating to delivery of notices, judicial interpretations of statutes with similar provisions and a construction of the statute as a whole with an emphasis on its purposes and section 129(1)(a). 
In his view the interpretation attributed by Cameron J will disadvantage people who do not have access to an effective and efficient postal service⁸.

Written and prepared by
Mark Fiandeiro
BOUWER KOBELI MORABE

Please do not hesitate to contact us on +27 11 788-0083 should you have any further enquiries or email enquiries@bkm.co.za.

Notes:

1 34 of 2005.
2 http://www.law24.com/.
3 Ibid.

4(CCT 98/11) [2012] ZACC 11; 2012 (5) SA 142 (CC).
5 http://www.saflii.org/za/cases/ZACC/2012/11.html, last accessed 25 September 2012.

6 Ibid.
7 Ibid.

8 Ibid.