National Credit Act – A Defence Regarding A Section 129(1) Notice Amounting To An Abuse Of Process

Creditor providers know of the difficulties regarding the legal collection of debts, including the requirement of the Section 129(1) notice and its service.  This section reads as follows:

129 Required procedures before debt enforcement

(1)  If the consumer is in default under a credit agreement, the credit provider–

(a)  may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and

(b)  Subject to section 130(2), may not commence any legal proceedings to enforce the agreement before-

(i)            First providing notice to the consumer, as contemplated in paragraph (a), or in section 86(10), as the case may be; and

(ii)          Meeting any further requirements set out in section 130.

 

In the case of Naidoo v Standard Bank of South Africa, Mr Naidoo was sued by Standard Bank after he had fallen into arrears with his payments.

The bank, in its particulars of claim averred the following with regard to the delivery of the section 129(1) notice:

“‘(o)n or about 9 March 2010 it delivered a notice as contemplated by Section 129(1)(a) of the Act to the Defendant [Respondent]’

Mr Naidoo then pleaded stating:

“The Defendant has responded to the Plaintiff’s section 129 Notice. The Defendant’s reply to the Plaintiff was within 20 days of having been made aware of the Plaintiff’s section 129 Notice. The Plaintiff has failed to acknowledge the Defendant’s response to its section 129 Notice.”

After his legal counsel withdrew, the bank took default judgment against Mr Naidoo.

Mr Naidoo then appealed to the Supreme Court of Appeal and alleged that the bank had not strictly complied with Section 129.  He cited non-compliance with the rules laid down in other Constitutional Court judgments placing emphasis on the fact that a credit provider must:

(a)       show that it has effected the notice by registered mail;

(b)       prove that the notice was delivered to the correct post office; and

(c)        in order to prove delivery, furnish a post-despatch (track and trace) printout from the post office website.

The Court found that Mr Naidoo’s defence amounted to an abuse of process given the fact that he admittedly received the notice and dismissed the defence as a “fanciful reliance on a technical argument”.

The appeal was dismissed.

 

What does this judgment mean for credit providers?

It may look like the Supreme Court of Appeal has relaxed the requirement of strict compliance with the provisions of Section 129, however, this is a very specific set of circumstances.

In this case, the fact that Mr Naidoo admitted to receiving the notice was the deciding factor.

Credit providers are advised to rather comply strictly with all the requirements of Section 129, including the Constitutional Court requirements as set out above.

By Dylan Lowe
dylanl@dyason.co.za

Do You Have To Take A ‘Punch In The Face’ To Prove Spoliation?

Spoliation claims

The amendment van spolie is a legal remedy directed at restoring possession to a party which has been unlawfully dispossessed. The Court hearing an application for spoliation does not concern itself with the rights of the parties (whatever they may have been) before the spoliation took place, it merely enquires whether there has been spoliation or not (Rosenbuch v Rosenbuch and another 1975(1) SA 181 (W)).

In order to obtain a spoliation order the person seeking such an order (the Applicant) must prove that he/she was in possession of the property in question and that the other party (the Respondent) deprived him/her of the possession forcibly or wrongfully against his/her consent.

What exactly does it mean to be forcibly deprived of possession against your consent? Does one have to literally put up a fight?

Consider the following scenario:

A building contractor has been contracted to build a house for MR and Mrs X. Everything goes well for a few months however Mr and Mrs x start complaining about the progress of the work and are not satisfied that the contractor is working according to the building contract. Mr and Mrs X then inform the contractor that they are cancelling the building contract. A representative of Mr and Mrs X then goes to the building site and inform the workers to vacate the site seeing that the building contract has been cancelled. The workers then pack their tools and materials and vacate the site without any fuss or fight.

Does voluntarily leaving the site in the above scenario mean that dispossession was consented to?

In the case of Stocks Housing (Cape) (Pty) Ltd vs Chief Executive Director, Department of Education and Culture Services and Others 1996 (4) SA 231 (C), the Court held that “spoliation may take place in numerous unlawful ways. It may be unlawful because it was by force, or by threat of force, or by stealth, deceit or theft, but in all cases spoliation is unlawful when the dispossession is without the consent of the person deprived of possession.” Therefore spoliation will take place if a party is deprived, by the action of another party, of control over the property in question. Force or stealth in the deprivation does not need to be shown.

The above was reiterated by the Western Cape High Court in the case of Top Assist 24 (PTY) Limited t/a Form Work Construction v Cremer and Another [2015] 4 All SA 236 (WCC).

What defenses can be raised against a spoliation order?

There are a limited number of defences which a party can raise in spoliation proceedings and these are: denial; restoration impossible and counter spoliation. A party may deny that the act alleged was one of spoliation or claim that it was legally justified. However that the allegations that a contractor was in default and in breach of the building contract and that the owners where entitled to cancel the contract, and did so and that they were entitled in terms of the contract to demand that the contractor vacate the site, does not serve as a defense to the claim of spoliation. The aforesaid does not justify the owner of depriving the contractor of possession of the building site without the contractors’ consent and without proceeding lawfully against the contractor for an ejectment order from the site.

Going back to the given scenario, it can be said that the fact that the workers on the site left voluntarily does not in itself show that there was consent from the contractor for the dispossession of the site. Arguably the position would still be the same if the contractor himself had left the site without a fight when asked to do so.

Conclusion

One does not have to tack a ‘punch to the face’, as it were, in order to prove a claim for spoliation. The notion of force in the deprivation does not in itself need to be shown in order to obtain a spoliation order, the Courts are concerned with the wrongful of dispossession against the consent of the party being dispossessed. However, that being said, when a party seeks a spoliation order it is not sufficient for him/her to simply make out a prima facie case for the order: he/she must ‘prove the facts necessary to justify a final order. The burden of proof still lies with the person seeking the spoliation order to show on a balance of probabilities that he/she did not consent to the dispossession of the property that was in his/her possession.

By Kgolofelo Makhuthudisa
kgolofelo@dyason.co.za

Is Lifo The Only Way To Go: With Reference To Numsa Obo Members // Kenco Engineering

The Applicant on behalf of its members applied to court to challenge their retrenchment alleging that it was substantively unfair and the relief sought before the court was their reinstatement or alternatively compensation of the union members who had been retrenched on the 29 May 2011.The Respondent, Kenco Engineering sub-contractor came to an end on 31 March 2011 and as a result, the company was faced with a possible retrenchment and there was no other viable alternative that could have been explored. The Respondent offered the employees severance packages at the company’s discretion and that it will re-employ some of the employees should it obtain a new contract within three months. Subsequent to the announcement both parties commenced with consultations however they failed to engage meaningfully .Ultimately the employees received notices of retrenchment at the end of April 2011.

Kenco Engineering successfully acquired alternative source of work from another sub-contractor, a design firm, Gauge Engineering, on condition that the Respondent provides a workforce that will be able to perform and deliver work that is in line with the nature and the standards of the new sub-contractor. As a result of these requirements, retrenchment was inevitable. Both the Respondent and the new sub-contractor agreed on a selection criteria to be used in order to determine the employees’ best suited to provide the workforce required by the new sub-contractor. The criteria which was adopted assessed skills, work performance, attendance record and safety records. Each criteria was allocated a score of 40%.

The Respondent further submitted that it was vital for them to adhere to the strict requirements set by the new sub-contractor in order to sustain their business. Failure to comply would result in the loss of the contract and for those circumstances they found themselves in, there was a general need to retrench and retain those employees that had the character of the workforce required by the new sub-contractor.

The Applicant disputed the submissions made by the Respondent and argued that the retrenchment was substantively unfair as it failed to follow fair and objective procedure i.e. LIFO. They further submitted that the employees were retrenched as a result of their union affiliation and according to the Applicant they were experienced employees who could carry out the work as per the new sub-contractor’s requirement and they were not part of the Bateman’s contract. Lastly they argued that the Respondent failed to consider possible alternatives to the retrenchment.

The court in determining whether the adopted criteria was substantively unfair, it evaluated the presentations made by both parties and found that based on the evidence before the court ,there was no indication that both parties agreed that the selection criteria should be adopted. On the other hand the Applicant failed to submit any cogent challenge to the general need to retrenchment and therefore their reasons where not justiciable. Their only focus was on the section criteria.

The court found that the was a general need to retrench in order for the Respondant to be able to deliver the workforce required by the new sub-contract, which will ensure the sustainability of their Joint venture and ultimately their business. Failure to adopt LIFO does not necessary render the chosen criteria substantively unfair. However in this case the Respondent failed to submit evidence to demonstrate than the employees were evaluated and that the retrenched employees scored far less than the employees who were retained. Therefore for those reasons the criteria was found to be substantively unfair and the Respondent was ordered to pay each applicant a remuneration for a period of eight months.

This judgement elaborates that employers intending to substitute the LIFO requirement with an alternative criteria, they must be in a position to prove and demonstrate before the court that the followed criteria is both fair and objective and failure to do so, the employer will encounter an unfavorable outcome where the court may grant an order directing the employer to either reinstate or compensate the employees.

By Boitumelo Shongwe