Section 129 of the NCA sets out the procedures a credit provider must follow before enforcing a debt.

It provides that inter alia: “if the consumer is in default under a credit agreement, the credit provider may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to:
a) a debt counsellor,
b) alternative dispute resolution agent,
c) 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 before taking legal proceedings to recover the debt.”¹

Two important questions now arise, namely:

1. What steps should a credit provider take in order to ensure that a section 129 notice (of default) actually reaches a consumer before it may commence litigation?

2. Which essential requirements showing that a credit provider (in order to satisfy a court) has discharged its obligations to effect the proper delivery of a section 129 notice should be met?

In the case of Kubyana v Standard Bank of South Africa Ltd² the issue regarding a credit provider’s obligations under the NCA to notify a consumer of his or her default before approaching a court in order to enforce a credit agreement was raised. The facts of the case were as follows: Mr Kubyana and Standard Bank entered into an agreement regulated by the NCA, in terms of which Mr Kubyana purchased a motor vehicle and was obliged to pay off the purchase price in monthly instalments. Mr Kubyana chose an address as his domiculium citandi et executandi for purposes of all notices and correspondence sent by Standard Bank in relation to the instalment sale agreement. Mr Kubyana failed to make regular payments and fell into arrears.

Standard Bank sent a notice in terms of section 129(1) of the NCA to him, setting out his statutory rights and requesting him to pay his outstanding debts. The notice was sent by registered mail to the address nominated by Mr Kubyana in the instalment sale agreement. After the first notification was sent to his address, he failed to collect the registered mail. Seven days later, a second notification was sent to the same address. He again failed to collect the mail and the post office returned the section 129 notice to Standard Bank.

Standard Bank then subsequently issued summons against Mr Kubyana for the cancellation of the instalment sale agreement, the return of the motor vehicle and the payment of damages. Mr Kubyana in return filed a special plea on the grounds that the High Court did not have jurisdiction to hear the matter because Standard Bank had failed to comply with its obligations in terms of section 129 of the NCA. 

North Gauteng High Court, Pretoria

Mr Kubyana subsequently averred that he did not receive the notice until he was served with the summons. The matter proceeded to trail in the North Gauteng High Court, Pretoria before Ledwaba J. Standard Bank adduced evidence to establish that: Mr Kubyana’s account was and had been in arrears; it had taken steps to bring this  to his attention; the section 129 notice had been sent via registered post to the address nominated by Mr Kubyana in the instalment sale agreement; the notice had reached the correct branch of the Post Office; and the notification from the Post Office had been sent to Mr Kubyana’s address.

Ledwaba J upheld Standard Bank’s claim and held that it had no obligation to use additional means to ensure that Mr Kubyana received the section 129 notice. Mr Kubyana had a duty to explain why the notice had not reached him, notwithstanding Standard Bank’s efforts, and that his failure to do so had to count against him.

The Supreme Court of Appeal dismissed Mr Kubyana’s application for leave to appeal against the decision of Ledwaba J.  As a result the matter was subsequently referred to the Constitutional Court.

Constitutional Court

Mhlantla AJ³ upheld the decision of the North Gauteng High Court and found in favour of Standard Bank. Mhlantla AJ found that, under section 129 of the NCA, a credit provider wishing to enforce a credit agreement must deliver a notice to a consumer setting out the consumer’s default and drawing the consumer’s attention to his or her rights. The Act requires an acceptable mode of delivery from the credit provider, but not the bringing of the contents of the section 129 notice to the consumers subjective attention by the credit provider, or that personal service on the consumer is necessary for a ‘valid delivery’ under the NCA.

The section 129 obligation on a credit provider to ‘draw the default to the notice of the consumer in writing’, is discharged, in the words of section 65 (2) (a) by the credit provider ‘making the document available to the consumer’. The steps that a credit provider must take in order to effect delivery are those that would bring the section 129 notice to the attention of a reasonable consumer.

When a consumer has elected to receive notices by way of post, a credit provider must prove (i) dispatch of the notice by way of registered mail; (ii) that the notice reached the correct branch of the Post Office; (iii) that the notification from the Post Office requesting that the consumer collect the section 129 notice was sent to the chosen address and (iv) a reasonable consumer would have ensured retrieval of the registered item from the post office.

Conclusion

Credit providers have to provide a track and trace report indicating that a section 129 notice was sent to the consumer by the post office, discharging its obligation under the Act to effect delivery, and has done what is lawfully required to ensure that the notice actually reaches the consumer. It is then for the consumer to explain why it had not reached him or her, if he or she wishes to escape the consequences of the notice. In this instance the consumer bears the onus of proof .

Written by Meegan Henkeman, Schoeman Tshaka Attorneys (Cape Town)

Notes:

1. Section 129 read in conjunction with section 130 of the National Credit Act 34 of 2005
2. Kubyana v Standard Bank of South Africa Ltd (2014) ZACC 1
3. Kubyana v Standard Bank of South Africa Ltd CC (unreported case no CCT65/13,20-2-2014)