sale-in-execution - notice - National Credit Act - Constitutional Court
SERI has been admitted as amicus curiae in the Sebola case.
This case is about what is required to demonstrate compliance with section 129 of the National Credit Act. Section 129 requires a consumer in default of a credit agreement to be given notice of his default and the opportunity to refer the agreement to a debt counsellor or to a form of alternative dispute resolution. The section applies to all mortgage bonds and a range of other credit agreements. The question before the Constitutional Court is whether a consumer can raise non-receipt of the notice as a defence to an application to enforce the credit agreement (for example, by means of a sale-in-execution of their home).
The Supreme Court of Appeal (SCA), together with a number of High Courts, has decided that it is no defence to an application to enforce a credit agreement that a consumer did not receive the notice.
The applicant in this matter, Mr Sebola, had his house attached for sale-in-execution of his mortgage bond he concluded with Standard Bank. He did not receive either the summons or a section 129 notice. In an application for rescission of judgment, he raised as a possible defence to the main claim the fact that he did not receive a section 129 notice. His application was dismissed on the basis that the bank need only show that it sent the notice, not that Sebola received it. He appeals to the Constitutional Court on the basis that non-receipt of the notice is a defence to a claim for an enforcement of a credit agreement to which section 129 applies.
SERI’s intervention stresses that a section 129 notice informs a consumer of important statutory rights which are essential to ensure that sales in executions of homes are constitutionally valid. Its actual receipt by a consumer must be required before a credit provider can enforce a credit agreement. Nonetheless, the credit provider need not prove in advance that a consumer has received a notice in terms of section 129, and it will always be for a consumer to raise non-receipt of the notice before court – with judicial prompting if necessary. Once it is established that a section 129 notice has not made its way to a consumer, SERI contends, a Judge should ordinarily postpone the proceedings to allow the consumer to consider the contents of a section 129 notice and decide whether to exercise any of the options set out in it.
Since the application was launched, Standard Bank has abandoned the judgment it obtained against the applicant and intends to argue that the matter is now moot. SERI submits that, even though the matter is moot, it is nonetheless in the interests of justice for the Court to consider the interpretation of section 129 of the National Credit Act.
The matter was heard in the Constitutional Court on 14 February 2012. Judgment was handed down on 7 June 2012. Cameron J, writing for a majority, held that a notice under section 129(1) of the National Credit Act must be properly delivered to the consumer, who will be entitled to contest the enforcement of the credit agreement in the event that she did not receive the notice. Until today, it was sufficient for a credit provider to show that it had sent the notice to the consumer’s address. It did not matter if the consumer had not received it.
In a separate concurring judgment, Zondo AJ (with whom Mogoeng CJ and Jaftha J agreed) said that a creditor must go further and demonstrate that the consumer was actually aware of her rights in terms of section 129. While SERI agrees that this is the goal of section 129, the judgment of Cameron J leaves sufficient space within which a consumer can contest proceedings on the basis that she was unaware of her rights because the notice did not reach her.