A few weeks ago the Constitutional Court (CC) handed down judgment in the case of Kubyana v Standard Bank of South Africa Ltd (CCT 65/13) (Kubyana) regarding the interpretation of s129(1) of the National Credit Act, No 34 of 2005 (Act). S129 of the Act deals with the required procedures to be followed by a credit provider before debt enforcement can take place. This section provides that if a consumer is in default under a credit agreement the credit provider:
- may draw the default to the attention of the consumer in writing and propose methods available to the consumer to resolve any dispute under the credit agreement or develop and agree on a plan to bring the payments under the agreement up to date; and
- subject to s130(2) may not commence legal proceedings to enforce the credit agreement before adhering to the aforementioned, or meeting the further requirements set out in s130.
The contentious debate regarding the interpretation of this section centred on when delivery of the s129 notice actually takes place. In other words:
- what steps must a credit provider take to ensure that a notice of default has reached a consumer before the commencement of litigation; and
- what must a credit provider prove to satisfy a court that it has discharged its obligation to effect proper delivery.
In the past, courts held the view followed in Rossouw v First Rand Bank Limited that, since the consumer is entitled to elect the manner of delivery, the legislature intended to place the risk of non- receipt on the shoulders of the consumer. There was no duty on the credit provider to ensure that such notice was actually received by the consumer, or delivered to the correct post office. In Sebola v Standard Bank of South Africa Limited the CC imposed an additional burden on the credit provider that proof by way of a post office 'track and trace' report was required, showing that the notice reached the correct post office. This would constitute proper delivery of the s129 notice. The CC's judgment in Sebola attempted to provide clarity as to the interpretation of s129 of the Act. The wording of the judgement however led to greater confusion regarding whether notices must be brought under the subjective knowledge of the consumer or not.
As such the Sebola judgment led to conflicting decisions in different divisions of the high court. The problems encountered with the s129 notice emanate from the legislature not clearly defining the concept of 'delivery' as envisaged in s130 of the Act. This rendered s129 open to various interpretations, and this led to the disconnect. The issue as to the interpretation of Sebola arose where the credit provider had a track and trace report evidencing that the notice was sent to the correct post office, but the notification from the post office to the consumer to collect the registered post had not been brought to the subjective attention of the consumer and was subsequently returned to the credit provider. The debate on what is required to prove that the s129 notice has in fact been delivered has now been settled by Kubyana.
The facts are that Mr Kubyana had defaulted on his motor vehicle repayments on a number of occasions. After he consistently remained in arrears, Standard Bank sent him a notice in terms of s129(1) of the Act by way of registered mail to his elected registered address. Mr Kubyana failed to collect the notice from the post office, after the post office notified him twice that he had documents for collection. The post office returned the unclaimed s129 notice to Standard Bank, which then issued summons. Mr Kubyana argued that Standard Bank did not comply with its obligations in terms of s129, as he did not receive the notice as was evident by the return of the notice to Standard Bank by the post office.
The CC held that there was no obligation on Standard Bank to use additional measures to ensure that the notice reached Mr Kubyana, as there was no requirement to bring the notice under the subjective knowledge of the consumer. Beyond ensuring that the notice was sent to the correct post office, there was no further expectation on Standard Bank as the placement of additional requirements on the credit provider would impose an excessively onerous standard of performance and afford consumers the advantage of being able to ignore valid notices. There is accordingly an onus on consumers to receive notices and not deliberately fail to collect and rely on this failure to attempt to avoid legal action.