The full bench of the Mpumalanga High Court has ruled that registrars are entitled to grant default judgments in matters related to the National Credit Act (NCA) – thereby either clarifying or adding to the diversity of views of how section 103(3) of the Act should be interpreted and applied.
The acting registrar at the Middleburg Local Seat referred two cases, in which the applicants were Nedbank and FirstRand Auto Receivables, to the Mpumalanga High Court for a practice directive.
The Banking Association of South Africa was admitted as amicus curie to the High Court’s proceedings.
In some divisions of the High Court, default judgments involving credit agreements are not being considered by registrars, but are referred to open court, say Aslam Moosajee and Shenaaz Munga, of ENSafrica’s dispute resolution department.
In other divisions, default judgment applications relating to credit agreements are being determined by judges in chambers (after the registrar has considered the application and is satisfied that a default judgment should be granted). And then there are divisions in which registrars are granting default judgments relating to credit agreements.
This divergence in practice is a result of different interpretations of the NCA, particularly sub-section 130(3).
Cost to credit providers and consumers
The inability of registrars to grant default judgments has significant cost implications for credit providers.
In his judgment, the Judge President of the Mpumalanga Division of the High Court, Francis Legodi, said it cost a credit provider about R500 to make an application for a default judgment before a registrar, whereas a substantive application through the court costs between R5 000 and R10 000.
He said requiring all applications for default judgments to be heard in open court, which were already flooded with cases dealing with procedural issues, would only exacerbate the delays in finalising NCA-related matters, at “a huge prejudice” to consumers.
“The costs of bringing a substantive application for default judgment in an open court for enforcement in every matter under the Act, in my view, will be a burden on an already financially distressed consumer. That would only serve to defeat the purpose of the Act, in particular for the previously disadvantaged South Africans who in the past had problems in accessing financial credit facilities.
“Promotion and advancement of social and economic welfare, sustainable, efficient and effective credit market of those who have historically been unable to access credit, as envisaged in section 3(a) of the Act, would be made difficult to achieve due to the escalating costs if every time when the enforcement of credit agreement was to take place, the bank has to do so in an open court and by filing a substantive application,” Judge Legodi said.
Meaning of the word ‘court’
Judge Legodi said the word “court” is not defined in the NCA, and another statute, the Superior Courts Act, needs to be looked at to determine how “court” in section 130(3) of the NCA should be interpreted.
He said section 23 of the Superior Courts Act “makes it plainly clear that a default judgment granted and entered by the registrar is deemed to be a judgment of a court of the division concerned”.
Section 23 vests the registrar with the powers to grant and enter default judgment provided he or she does so in a manner in the circumstances prescribed in the rules – namely, rule 31(5)(a) of the Uniform Rules of Court.
He said the nature of the work of the registrar in considering the granting of a default judgment was about procedural compliance – something that should be clear from the wording in sub-section 130(3) of the NCA. In terms of this sub-section, the “court” would only consider an application for default judgment after having been satisfied that:
- In the case of proceedings in which sections 127, 129 or 131 apply, the procedures prescribed in those sections have been complied with;
- There is no matter arising under the credit agreement and pending before the National Consumer Tribunal that would result in an order affecting issues to be determined by the court; and
- The credit provider has not approached the court (as set out in the NCA).
He said all the above amount to “a checklist or ticking of the box without hearing evidence on a complicated issue or deciding on substantive law”.
Judge Legodi also found that, in terms of rule 31(5)(a), the registrar is empowered to grant an order for the cancellation of a credit agreement and the return of the moveable property forming part the credit agreement on a debt, liquidated demand or claim.
Nkata judgment ‘does not apply’
The full bench addressed the judgments in which the courts have interpreted the NCA as prohibiting the registrar from granting default judgments.
It rejected the contention that the oft-quoted Constitutional Court case of Nkata v FirstRand Bank Limited (2016) shed light on how section 130(3) should be interpreted.
It agreed with Nedbank’s counsel that the question before the court in Nkata was whether the credit agreement had been reinstated – which question had to be answered by interpreting section 129, not section 130.
ENSafrica said it remains to be seen whether other divisions of the High Court will agree with the approach adopted by the Mpumalanga full bench.
Click here to download the full judgment.