Section 129(1)(b) of the National Credit Act, 2005 (“NCA”), read together with section 130 of the NCA, compels a credit provider (such as a bank) to deliver a notice to a defaulting consumer under a credit agreement (such as a home loan) before legal proceedings can be instituted against the defaulting consumer. How a bank goes about proving that it has complied with its obligations in this regard has given rise to a number of conflicting judgments. Eventually on 7 June 2012 the Constitutional Court delivered a judgment in Sebola v Standard Bank of South Africa Limited (CCT 98/11) 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 Constitutional Court held that although the NCA did not demand that the bank proves that the notice actually came to the attention of the defaulting consumer, the bank must make averments in the particulars of claim that will satisfy a Court, on the balance of probabilities, that it reached the consumer. The Constitutional Court emphasised that “mere dispatch is not enough” and at the very least, the bank must obtain a “track and trace” print-out from the website of the South African Post Office to show that the notice was delivered to the relevant post office. If the notice reached the relevant post office, the Constitutional Court held that in the absence of an indication to the contrary, a Court could accept that there was adequate proof of delivery of the notice to the defaulting consumer.
The Constitutional Court did not have to deal with the scenario where the track and trace report reflects that the notice had been “returned to sender”. In cases involving “returned to sender” track and trace reports, our High Courts have adopted conflicting positions. The Western Cape High Court in Nedbank Limited v Anelene Binneman (case number 7241/11 and 12 similar cases) concluded 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. The Western Cape High Court was of the view that the Constitutional Court did not overrule an earlier Supreme Court of Appeal decision in Rossouw v FirstRand Bank Limited (2010(6) SA439 SCA) in which the SCA concluded that the proof of the sending of the notice was sufficient.
The Western Cape High Court’s judgment was not followed by the KwaZulu-Natal High Court. In a judgment delivered on 6 July 2012, the KwaZulu-Natal High Court in ABSA Bank Limited v Mkhize (case number 4084/2012, together with two other similar matters) rejected the suggestion by the Western Cape High Court that the Sebola judgment did not overrule the reasoning adopted by the SCA in Rossouw. The KwaZulu-Natal High Court did not agree that the risk of non-receipt rested squarely with the defaulting consumer.
In the KwaZulu-Natal High Court matters, the track and trace report from the post office website revealed that the letter reached the correct post office, but was returned unclaimed. The Court emphasises that there was clearly an indication that the notice did not reach the consumer and accordingly section 129 of the NCA had not been complied with. In the circumstances, the applications for default judgment in each of these cases were postponed and the Court gave directions about delivery of the notice to the defaulting consumer, before the matter could proceed before court again.
The Court suggested that over and above sending it again by registered address, it should be sent by ordinary mail. In addition, if the bank is aware of any other addresses for the consumer (such as a work address or an address of a family member), the notice should also be sent to that address. The Court also suggested that in all future actions, it would be useful not only to send the notice by registered post and by ordinary mail, but also to endorse the summons by drawing to the defaulting consumer’s attention that litigation is only permissible if the section 129 notice had come to the attention of the consumer and that the consumer has the right to defend the action, if the notice was not received, even if the defaulting consumer otherwise admits liability for the claim.
The KwaZulu-Natal High Court pointed out that if the summons was so endorsed, then even if the track and trace report reflects that the notice did not reach the consumer, but it can be shown that in addition it was sent by ordinary mail, the bank may be able to persuade the Court that there was compliance with section 129 of the NCA and the defaulting consumer’s failure to defend the action, despite the endorsement of the summons, points to the probability that the notice reached the consumer.
While the KwaZulu-Natal High Court judgment is not good news for banks and I have no doubt that they would have preferred the approach adopted by the Western Cape High Court, particularly because many defaulting consumers attempt to evade the consequences of the law by failing to collect registered letters from the post office, I suspect that the approach of the KwaZulu-Natal High Court will be followed more often by our Courts. The Western Cape High Court judgment does not clearly identify why the Court was of the view that the Constitutional Court in Sebola did not overrule the reasoning adopted by the Supreme Court of Appeal in the Rossouw case. To the contrary, the KwaZulu-Natal High Court carefully analysed various relevant parts of the Sebola judgment to support its conclusion that the Constitutional Court did not uphold the Rossouw judgment. I am therefore of the view that our Courts will be inclined not to grant applications for default judgment, if the track and trace reports reflects that the registered letter was returned to sender and there is nothing in addition which can be used to prove on the probabilities that the notice must have come to the attention of the consumer.
Written by Aslam Moosajee, director at Norton Rose SA.
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Anusha Mudhai, communications co-ordinator, Norton Rose South Africa
Tel +27 11 685 8947