Section 129(3) of the National Credit Act, No 34 of 2005 (NCA) provides a novel and extraordinary remedy only to a consumer who is in default in respect of a credit agreement to which he or she is a party. This section provides that a consumer may at any time before the credit provider has cancelled the credit agreement, remedy a default in such credit agreement by paying to the credit provider all amounts that are overdue, together with the credit provider’s prescribed administration charges and reasonable costs of enforcing the agreement up to the time the default was remedied.
The recent Supreme Court of Appeal (SCA) decision in Mostert v Firstrand Bank t/a RMB Private Bank (198/2017)  ZASCA 54 considered whether Firstrand Bank t/a RMB Private Bank (RMB) should be stopped from taking steps to execute a judgment in respect of a property when a consumer has raised the remedy contained in s129(3).
During March 2005, Mr Mostert and RMB entered into a written loan agreement. In terms of this loan agreement RMB advanced, after numerous amendments, an amount of R30 million to Mr Mostert. The loan was secured by suretyships provided by Carpe Diem Trust (Trust) (administered by Mr Mostert and the appellants), New Port Finance Company (Pty) Ltd (New Port) and TPC Marketing (Pty) Ltd. In support of the suretyship provided by the Trust, a mortgage bond was registered in the amount of R30 million over Mr Mostert’s family home in Bishops Court, Cape Town.
During December 2009, due to Mr Mostert’s failure to make payment to RMB in terms of the loan agreement, RMB issued summons against Mr Mostert and the sureties for payment of the full outstanding balance of the loan, interest and costs. On 3 March 2010, Mr Mostert and RMB entered into a settlement agreement which agreement required specified payments in order to settle the arrears in terms of the loan agreement by 1 March 2011. This agreement further provided that Mr Mostert would cede his shares in CSHELL 374 (Pty) Ltd (CSHELL) to RMB as further security.
Mr Mostert reneged on the settlement agreement and RMB brought an application for default judgment which application was successful. In addition to the relief granted, the property was also declared immediately executable.
In order to stop RMB from proceeding with execution proceedings and selling the Trust’s property, Mr Mostert provided RMB with an undertaking that he would make specified payments to RMB in terms of the default judgment order.
When Mr Mostert once again failed to perform, RMB informed him that it was going to proceed with execution proceedings. In response, Mr Mostert and the Trust launched an action against RMB and the sheriff arguing that the arrears had been settled in terms of the settlement agreement and RMB was accordingly no longer able to proceed against the property and would have to start its litigation afresh. RMB defended this action and persisted that it was entitled to proceed against the property. In addition to his action, Mr Mostert launched an application seeking an interim interdict prohibiting the sale of the property pending the final determination of the action. Interestingly, in his replying affidavit, Mr Mostert for the first time alleged, in terms of s129(3), that the loan agreement had been reinstated due to payments made during 2013 and 2015.
It was common cause that payments had been made in terms of the loan. These payments were as follows, R925,181 on 31 May 2013, R3,178,554.94 on 31 March 2015 and R4 million on 30 September 2015. RMB, however, argued that even though the payments made in 2015 settled the arrears owing, the payments were not made by Mr Mostert (the consumer) but rather by New Port. In addition, RMB also alleged that an applicant cannot make his case in reply as the remedy contained in s129(3) was only raised in Mr Mostert’s replying affidavit. The High Court dismissed Mr Mostert’s application which resulted in this appeal.
The SCA held that in general an applicant will not be permitted to supplement his case in the replying affidavit, however, it is always up to the court’s discretion as to whether to allow a new matter to be considered in reply. In this instance, despite the remedy only being raised in reply, the SCA exercised its discretion and elected to consider Mr Mostert’s defence in terms of s129(3).
The most important aspect of the SCA’s decision, however, was determining whether a default in a credit agreement may be remedied by payment that was not made by or on behalf of the consumer in respect of that credit agreement.
The SCA held that the core objective of the NCA is the protection of consumers by securing a credit market that is fair and equitable. Payment in terms of s129(3) may of course be made on behalf of the consumer. But when payment is not made by the consumer, it falls outside the scope of s129(3).
In this instance, despite Mr Mostert’s shares in CSHELL having been ceded to RMB, Mr Mostert transferred the shares to New Port when the loan owing to RMB was still in arrears. Only when CSHELL was trying to repurchase the shares from New Port, did RMB become aware that Mr Mostert had unlawfully disposed of the shares. At RMB’s insistence and enforcement of its security, New Port paid the proceeds of the sale of the shares to RMB. These payments were those received by RMB in 2015. It naturally follows that the 2015 payments which settled the arrears of the loan did not remedy Mr Mostert’s default.
Accordingly, in making its finding the SCA held that when payment of arrears does not emanate from the consumer’s bona fide effort to resolve the default, but from the credit provider having had to enforce rights against a third party, the consumer is not deserving of the protection of s129(3).