CONSUMERS
BEWARE - CIVIL JUDGMENTS AND THE IMPACT OF THE
NATIONAL CREDIT ACT
INTRODUCTION
When a consumer is unable
to pay their debts, the credit providers will
usually, but as a last resort issue summons against
that consumer for the recovery of the amount owing.
Should the consumer not enter an appearance to
defend the matter or make acceptable arrangements
with the credit provider or their attorney, the
credit provider will be entitled to apply to court
for a default judgement to be granted against
the consumer. The details of that judgement will
then be listed with the credit bureaux which will
have an adverse effect on the credit rating of
that consumer.
In a recent High Court judgement
in the matter of TP Damon and CY Damon/Nedcor
Bank Ltd delivered by the Honourable
Justice Binns-Ward (AJ) on 30 October 2006 in
the High Court of South Africa (Cape of Good Hope
Provincial Division) the Court considered the
circumstances under which a default judgement
obtained by the High Court could be rescinded.
The court also considered the impact of the National
Credit Act on judgements granted against debtors.
The court noted that it had been held on a number
of occasions that the court does not have the
power to grant a rescission of judgement in circumstances
like this and even if such powers did vest in
the court that it would not be appropriate to
grant relief of a nature that has the effect for
practical purposes of falsifying actual credit
records by allowing the impression to be given
that a default judgement had never properly been
given against the debtor.
There is a significant difference
in the procedure for the rescission of a judgement
granted in the Magistrates Court and the rescission
of a judgement granted in the High Court. In the
Magistrates Court the Magistrates Court Act makes
specific provision for the rescission of a judgement
granted by default with the written consent of
the judgement creditor. No such similar provision
exists in the High Court Act or Rules. The effect
of this is that judgements granted by default
in a Magistrates Court are much easier and a lot
less expensive to rescind than judgements granted
by default in a High Court. In the High Court
judgements can only be rescinded based on considerations
of justice and fairness having regard to all the
facts and circumstances of the particular case.
The court expressed its considerable reservation
about accepting that the judgement creditor’s
consent should by itself be determinative of the
question. The court also stated that fairness
and justice in this context must entail having
regard not only to the interests of the applicant
for rescission, but also to the economic and societal
functions of accurate debt and credit records
in modern commercial life.
CIVIL JUDGMENTS
UNDER THE NATIONAL CREDIT ACT
The full provisions of the
National Credit Act will come into operation on
1 June 2007. In the courts view the National Credit
Act as a whole makes it clear that the legislature
has sought to balance the commercial need for
reliable debtor and credit information with the
social need that an incidence of bad debt in a
person’s life should not, once rectified,
thereafter unduly prevent such person from again
accessing credit. The provisions of the Act also
make it plain that the legislature considers it
to be a matter of public policy that encouragement
should be given to ensuring that the extension,
obtaining and management of credit or debt, as
the case might be, is handled responsibly by all
concerned, whether they be lenders, borrowers
or credit information managers. In the court’s
view it should therefore no longer be necessary
to seek adaptations to the common law, arguably
by uncomfortable and artificial contrivance, to
address the sort of unhappy predicament that the
applicants in this case find themselves in. In
future persons who find themselves in this predicament
through failure to make responsible use of the
machinery which the Act provides should, in the
court’s view, have to wait out the five
year period provided under the regulations to
the Act, after which default judgements fall automatically
and compulsorily to be expunged from the record
maintained by the credit bureaux. In essence what
the court has said is that had the full provisions
of the National Credit Act been in operation at
the time that this action was instituted, the
applicants could have made use of the debt re-arrangement
provisions contained in this Act and would probably
have obtained appropriate relief that would have
permitted them upon the subsequent liquidation
of the debt to obtain the immediate expungement
of any reference to the default judgement from
the records of registered credit bureaux. As a
result, the court granted the application for
the rescission of the judgement.
CONCLUSION
In my view the court has issued
a warning to all consumers to make use of the
machinery provided for in the National Credit
Act for a debt review and in the event that a
consumer fails to take advantage of these provisions,
the courts will not be sympathetic when entertaining
an application for the rescission of a judgement
obtained in a High Court. Unless the judgement
creditor has consented in writing to the rescission
of a judgement in the Magistrates Court, the Magistrates
Court will be bound by the judgement of the High
Court and consumers will experience similar difficulties
in such applications.
Should you require a copy of this judgement, please
send an e-mail to nigel@legaledge.co.za.
Written
by:
Nigel Petzer
PETZER, DU TOIT AND RAMULIFHO
