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REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE – PORT ELIZABETH

Case No: 290/2010

14 February 2013

In the matter between

NEDBANK LIMITED ................................................................Applicant

and

MARK DENZEL SONEMAN ............................................First Respondent

LELANE FRANCISCA SONEMAN ...............................Second Respondent

JUDGMENT

­­­REVELAS J

[1] The applicant (“the bank”), seeks to rescind a judgment in its favour and which it had obtained on 26 February 2010 by default, against the two respondents. The application is brought by consent between the parties, the respondents having compiled with the terms of the order. The purpose of the order is to restore the respondents’ creditworthiness with the relevant credit bureau. The bank had previously applied for default judgment against the respondents for payment of R596 348.35 and interest.

[2] The two respondents, who are married in community of property borrowed R560 000.00 from the bank to purchase a property in Uitenhage which is still their home (“the property”). The home loan (or credit agreement), concluded with the bank was governed by the provisions of the National Credit Act, 32 of 2005 (“the National Credit Act”). The money loaned and advanced by the bank to the respondents was secured by a mortgage bond registered over the property and in favour of the bank.

[3] The respondents fell in arrears with their monthly bond repayments in terms of the credit agreement, which set the monthly instalments at R5628.13 per month, subject to variations in interest. In January 2010 the bank notified the respondents in terms of section 129 of the National Credit Act, that they were in default with their payment to the extent of R50 428.28 plus interest calculated at the rate of 9.45%. As the bank was obliged to do, in terms of the aforesaid section of the National Credit Act, it proposed that the respondents refer the credit agreement in question to a debt counsellor, alternative dispute resolution body, or another similar institution to develop a plan to bring the payments under the credit agreement up to date. In the same letter, the respondents were advised (in bold print) of the bank’s “Notice of Intention to supply adverse information to a credit bureau in terms of Regulation 19(4) of the Regulations made in terms of the National Credit Act No 34 of 2005 (NCA)”. In two further paragraphs in the letter, the “adverse information” is explained to the respondents in same detail. In another paragraph of the same letter, but not in bold print, although it was clearly more important than the former notification, the respondents are notified that if they did not respond to the letter, the bank was entitled to enforce the agreement in court.

[4] Since the respondents did not respond to the letter and twenty business days had expired (a requirement of the NCA) the bank instituted action against the respondents jointly and severally for payment of their whole debt and interest thereon as stated above. In the summons the respondents’ attention was drawn to section 26(1) of the Constitution, which accords to everyone the right to have access to adequate housing. This was done in the light of the order the bank sought for declaring the hypothecated property executable, along with the other relief it sought. The respondents did not defend the action.

[5] The bank satisfied the court that it had complied with all the legal requirements, particularly the provisions of the National Credit Act, and accordingly judgment was granted in its favour. The bank, in support of its application to have the order made in its favour rescinded, states that the respondents have settled the judgment amount, legal interest and costs “to the satisfaction of the applicant [the bank]” and therefore the bank no longer seeks to enforce its judgment against the judgment debtors.

[6] Attached to the founding affidavit was also a letter from the bank’s head office to the respondents declaring that the bank would not oppose any application made by them to rescind the judgment in question. The bank’s official who wrote the letter advised the respondents however, that such an application for rescission would be for their own account.

[7] In April 2011, the first application for rescission was brought. An attorney of the firm Mahomeds Incorporated, in Cape Town, acting on behalf of the bank, deposed to an affidavit setting out the circumstances which led to the order being obtained and requested rescission on the sole basis that the respondents had now paid the full outstanding debt. This application was presumably brought under the mistaken belief that the mere agreement of parties to a rescission of an order, obliges the High Court to grant such rescission. It is also doubtful whether it was open to the bank’s attorney to depose to the founding affidavit in such an application where he was not a party to the litigation or the agreement to have the judgment rescinded.

[8] Not surprisingly, the matter was then removed from the roll on the day it was enrolled for hearing. When the application was enrolled for a second time, the founding affidavit was deposed to by one of the bank’s officials from its retail and credit section, who set out with much more detail the bank’s reasons for the application, as well as some of its legal submissions.

[9] The bank firstly relied on Rule 49(5) of the Magistrates’ Court Rules which makes provision for the rescission of judgments of that court by consent between the parties. The absence of such a provision in High Court’s Uniform Rules of Court was highlighted. In terms of Rule 42 of the Uniform Rules of Court, an order of the High Court may only be set aside where it was erroneously sought or granted in the absence of one of the affected parties, or where there was an ambiguity, a patent error or an omission or a mistake common to the parties.

[10] Reference was also made to Uniform Rule 41(2) which provides that a party in whose favour a judgment has been given, may abandon it by delivering a notice thereof. The Magistrates’ Court Rules have no such provision. As I understand the bank’s argument, the existing procedure providing for a judgment to be abandoned, was justification for extending Uniform Rule 41(2) to incorporate a procedure, such as Rule 49(5) of the Magistrate’s Court Rules, into rescission applications in the High Court.

[11] This type of rescission application (one based on consent between the parties), the bank argued, should be decided on the basis of ‘good cause’ shown and adapting the common law to “the changing landscape of the consumer lending industry”, and in keeping with objectives of the National Credit Act, to inter alia “provide for a fair, transparent, competitive . . . . and accessible credit market industry”.

[12] The bank submitted that the only purpose of the judgment presently under consideration was to serve as an impediment and an “unwarranted hindrance” to the respondent to gain access to credit from commercial institutions. An analogy was drawn between the respondents who have rehabilitated themselves from their previous poor management of their debt obligations, and an insolvent who may approach a court to be rehabilitated, the latter being able to make a fresh start.

[13] The bank also pointed out that the respondents’ stated reason for falling into arrears with their bond repayments, was that the first respondent’s father was suffering from motor neuron disease which was managed at great expense to the respondents. Here I must pause to observe that it is doubtful that this fact would have deterred the bank from pursuing the judgment it ultimately obtained . More importantly, it was not a matter which was raised at any time before the judgment was sought .

[14] The bank acknowledged (and properly so) that the majority of cases the courts did not regard a person’s affected creditworthiness as sufficient reason for the rescission of judgment by consent of the parties. The general approach adopted in these cases is that it was improper to falsify the past to assist a judgment debtor, (See: Saphula v Nedcor Bank Ltd 1999 (2) SA 76 (W); Lazarus and Another v Nedcor Bank Ltd; Lazarus and Another v ABSA Bank Ltd 1999 (2) SA 782 (W); Venter v Standard Bank of South Africa [1999] 3 All SA 278 (W); Marais v Standard Credit Corporation Ltd 2002 (4) SA 892 (W) 895F - H; and Harris v ABSA Bank Ltd t/a Volkskas 2006 (4) SA 527 (T) 528I – 529F; Weare v ABSA Bank 1997 (2) SA 212 (D))

[15] The bank placed particular reliance on the judgment in RFS Catering Supplies v Bernard Bigara Enterprises CC 2002 (1) SA 869 (C), where it was held that the common law was suitably malleable to erase a judgment which no longer served any useful life, after it has been complied with by the judgment debtor.

[16] An order granting the bank’s application for rescission, would of course mean that I have to find that the aforementioned decisions, were all wrongly decided and follow the approach of Josman and van Reenen JJ in the RFS Catering decision, which dealt with a magistrate’s refusal to rescind his judgment, which was permissible from a purely procedural point of view, by virtue of Rule 49(5) of the Magistrates’ Court Rules. I decline to do so for the reasons that follow.

[17] The purpose of the present application is, in the words of the bank “to assuage the First and Second Respondent’s poor credit rating” and the application is brought in terms of the common law.

[18] The point of departure in application of this nature should be the circumstances under which the judgment was obtained. The purpose of a rescission application is to restore the opportunity to ventilate a real dispute. Once it has been established that the judgment was properly granted or obtained, the question arises as to what justification could there be to “falsifying the past (altering what is judicata) only in order to make life easier for a party” as put by Flemming DJP in the Saphula matter (supra) at 78 A-B.

[19] In my view, the following comments by the learned judge in Saphula at 78 H-J about credit bureaus are also applicable in the present matter:

“What they are seeking is that courts participate in falsifying a true perspective of the past. To them the only way to say that a judgment should no longer weigh (or weigh too much) against creditworthiness is to require court records to create a false impression that the person never had any adverse default. . . Instead of giving a correct and updated version of the past and of later events they want courts to set aside orders as if there is still a defence to them”.

[20] I respectfully associate myself with the aforesaid views of Flemming DJP, particularly since the sentiments expressed by him are even more valid today, in circumstances where banks are obliged to comply with the provisions of the National Credit Act, Act (section 81(2)(a)(ii) thereof), which obliges the bank, as part of preventing the granting of reckless credit, to assess the proposed consumer’s “debt-repayment history as a consumer under credit agreements”. One of the most obvious and efficient ways of determining a person’s debt-repayment history, would include enquiring into the existence of any judgments previously obtained by creditors against the person. Such an enquiry would be futile and contrary to the provisions of the National Credit Act, if repayment histories were obliterated. The relief sought by the bank, if granted, would raise the question the legality of court orders in general. The Constitution of South Africa, Act 108 of 1996 (the Constitution) tells us that South Africa is a State founded on the value of the rule of law, amongst others (section 1 (c) of the Constitution).

[21] If courts were to rescind its judgments properly made and complied with, merely to improve or obliterate a judgment debtors poor credit record, the legality of its orders in general will be seriously undermined. In an economic climate where the Legislator has prescribed measures to combat the reckless granting of credit and the risks involved in granting credit have increased, courts should not become complicit the type of obfuscation described by Flemming DJP.

[22] The rescission of judgment as foreshadowed by the bank in this case would also set a dangerous precedent. For example, where frequent defendants such as the Road Accident Fund and the Minister of Safety and Security have complied with court orders, nothing would prevent them from applying for rescission of judgments legitimately and properly obtained against them. That would have serious consequences for the development of the law of delict on issues such as quantum etc. as the application of the of stare decisis principle would be undermined to some degree.

[23] In my view, the application has no merit and is accordingly dismissed.

_____________________

E REVELAS

Judge of the High Court

Council for the Applicant: Adv Zietsman

Port Elizabeth

Instructed by: Mahomeds Incorporated

Cape Town c/o

Gray Moodliar Attorneys

Port Elizabeth

Date Delivered: 14 February 2013

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