IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE No. 13341/2021

REPORTABLE: NO
OF INTEREST TO OTHER JUDGES: NO
REVISED:
Date: 16/05/2022
In the matter between
FIRSTRAND BANK LIMITED T/A FIRST NATIONAL BANK
(REGISTRATION NUMBER 1929/001225/06) Applicant

and

THE MAGISTRATE FOR THE DISTRICT First Respondent

OF EKURHULENI NORTH, HELD AT TEMBISA
MR MM RATLOU
NESTA NEL Second Respondent
ANNA PULENG MOTAU Third Respondent
DIRECT AXIS SA (PTY) LIMITED Fourth Respondent
FINCHOICE (PTY) LIMITED Fifth Respondent
NEDBANK LIMITED Sixth Respondent
TRUWORTHS LIMITED Seventh Respondent
MFC, A DIVISION OF NEDBANK LIMITED Eighth Respondent

JUDGMENT

MAHOMED AJ
INTRODUCTION

1. The applicant in this matter seeks a declarator and an order to review and set
aside a debt restructuring order issued by the first respondent sitting as the
Magistrate for the District of Ekurhuleni North at Tembisa.

2. The second respondent the debt counsellor opposed the application and
raised a point in limine, on grounds that on the facts, a review is the incorrect
procedure to have followed and that the applicant ought to have taken the order on
appeal. It was further submitted that the applicant is seeking to “change the
outcome” of the order, it did not dispute any procedural point, impropriety, bias, or
unfairness when a review would be appropriate. Furthermore, it was argued, that
when the applicant relies on section 22 of the Superior Courts Act on grounds of the
court’s jurisdiction, it is effectively, trying to disguise an appeal in this review
application. The second respondent submitted the order of the court a quo, is correct
and good in law, the first respondent did not err when it granted the order.

3. The first respondent agreed to abide by the decision of the review court, it
conceded based on the previous judgments, it did not have the jurisdiction to grant
the order.

BACKGROUND

4. The applicant, a credit provider, advanced two loans, under different account
numbers to the third respondent (the debtor). The debtor was unable to pay off
several debts and approached the second respondent (“the counsellor”) to apply for
debt review in terms of the National Credit Act.

5. The counsellor, who becomes the applicant, in terms of the National Credit
Act1, (“the Act”) presented the court a quo with a proposal, which set out the
repayment plan in respect of all the debts over an extended period. In October

1 34 of 2005
2020, the first respondent, the court a quo, in terms of s 87 of the Act and having
considered the information before it granted the debt review order.

6. The applicant submitted that the court a quo acted ultra vires, when it granted
the order, in that the first respondent, did not have the authority to grant an order
where the monthly repayment amount is lower than the interest payable each month.

7. Advocate Bruwer, who appeared for the applicant, submitted that the
decisions in NEDBANK LTD v NORRIS2 and in NEDBANK LTD v JONES AND
OTHERS3, were endorsed by the SCA in FIRSTRAND BANK LTD v McLACHLAN
AND OTHERS 4, wherein the SCA dealt with the powers of the court and stated:

“[17] … a debt review order which does not result in the satisfaction of all
responsible obligations assumed under the credit agreement during the
repayment period does not meet the purpose of the NCA.”

[18] The reduction of the monthly instalment was so substantial that it

does not remotely cover the monthly interest due in terms of the order.
Such an order does not serve to protect the interests of the consumer
who would, at the end of the period, be left with a substantial debt which
they would in all likelihood be unable to pay. The debt review order is
therefor ultra vires the provisions of the NCA and was accordingly void
ab origine.”

IN LIMINE

8. Advocate C Spanenberg, appeared for the second respondent and submitted

that the applicant attacks the order for a change in the order and that it should have
appealed the order.

2 2016 (3) SA 568 EPC

3 2017 (2) SA 473 (WCC)

4 2020 (6) SA 46 SCA

9. Counsel submitted that the applicant’s reliance on s 22 of the Superior Courts
Act 10 of 2015 is misplaced and that the applicant in fact attacks the decision taken
and not the procedure adopted, it is an appeal presented under the guise of a
review.

10. It was further argued that the applicant has failed to show any mala fides,
improper conduct, or unfairness in the outcome due to incorrect procedures, for it to
succeed in a review. Counsel submitted that the applicant only disputes the
rearrangement in respect of one debt, where the entire debt review process is in
respect of all debts. The applicant seeks to be favoured above other creditors which
is not what the Act envisages.

11. Counsel proffered that the applicant does not raise any issue in respect of the
other debt. It appears to aprobate and reprobate. The applicant continues to accept
payments as set out in the proposal submitted to the court a quo and in terms of the
order made.

12. There is no evidence of a procedural irregularity or impropriety or a dispute in

audi alterem partem.

13. In KRUMM v THE MASTER5 and KHADER v CHAIRMAN, TOWN

PLANNING APPEALS BOARD 6, the courts have held:

“Judicial review is in essence concerned, not with the decision, but with the
decision-making process. Review is not directed at correcting a decision on
the merits. It is aimed at the maintenance of legality.”

14. I agree with Ms Spanenberg, the applicant appears to approbate and

reprobate, when it applies for a review, based on the first respondent’s authority/
jurisdiction, in respect of only one of the amounts it has loaned.

5 1989 (3) SA 944 (D) at 9511-J

6 [1998] 4 ALL SA 201 (N) at 207

15. I agree that the applicant seeks a different outcome in respect of the large
amount it loaned, it does not attack the procedures or method adopted or any point
of illegality in the outcome of the application before the court a quo. Based on the
authorities set out earlier, the applicant’s approach is incorrect.

16. The point must succeed, and I address this point later, below.

THE APPLICANT’S CASE

17. Mr Bruwer submitted that his client advanced a personal loan in the amount of
R88 920,96 with an interest rate at 23.5%. The monthly interest payable on that
amount would have been R2 013,17.

18. He proffered that the first respondent granted an order on 26 October 2020
that the third respondent’s debt be restructured and that the applicant, be repaid in
an amount of R1 092.85 per month. He submitted that by November 2020, the
amount of the loan increased to an amount of R110 058.43, by January 2021 the
amount had escalated to R124 646.76. In November 2020, the interest payable was
R2 633. 74 and by January 2021 the interest payable was R2 715.24.

19. Mr Bruwer submitted that the first respondent conceded that:

“The Court is in agreement that it did not have authority to issue an order in
light of the findings in the referred cases and while the monthly repayment
amount did not cover the monthly interest payable”7

20. Counsel advised the court that the applicant, has no problem with the
restructuring of the smaller loan of R4 751.00 but prays that the order by the first
respondent be reviewed and set aside, only in respect of the personal loan and the
order be corrected to read:

“the recommendation in respect of the FNB personal loan account number 4-

7 007 -7
 000077-308-657 is rejected with costs.”

21. Counsel submitted further, that there is no dispute that the amount ordered to
be repaid on the applicant’s loan did not and does not cover the monthly interest
payable on that loan.

22. Mr Bruwer furthermore, informed the court the monthly repayment must
exceed the monthly interest payable, as at the date the order is granted.

23. Counsel submitted that the test is “how much was payable per month at the
time the order was made”, the “cascading effect” that the second respondent refers
to is of no worth given that one is dealing with an unknown, when the interest
continues to accumulate and the debtor never knows if he/she will ever pay off the
debt, and is still left with a lot of money to pay at the end of the repayment period.
(The cascading effect, is when smaller debts are paid up, more money becomes
available for distribution to larger creditors, which then increases the repayments to
the large creditor.)

24. As to the procedure to review the order, Mr Bruwer referred the court to the
provisions of s 22 Superior Courts Act 10 of 2013,

“(1) The grounds upon which the proceedings of any Magistrates’ Court
may be brought under review before a court of a Division are-

(a) Absence of jurisdiction on the part of the court”

25. Mr Brewer submitted the review is appropriate as it is settled law that the
Magistrates Court which is empowered to make an order for rearrangement of a
debtors obligations to its creditors, acts ultra vires it the arrangement is such that the
amount for repayment is less than the amount of interest payable per month on the
debt. The court does not have jurisdiction to make such an order. The order does not
fulfil the objectives of the debt rearrangement process, it does not assist the debtor,
who finds at the end of the repayment period, he/she still has a large amount still
owing.
THE SECOND RESPONDENT’S CASE

26. Ms Spanenberg argued that the court a quo did not err, and that the proposal
put to the first respondent, in casu, sets out all debts, all repayments, and their
respective period of repayment. The debtor does know how much is paid monthly.

27. The second respondent in consultation with the applicant, incorporated an

escalation of 5% annually, which is factored into the cascaded payment plan that
services both the interest and capital.

28. In addition, when small debts are paid off, money will become available to
increase the repayments on larger debts. The cascading effect, Ms Spanenberg
argued, must be considered.

29. Counsel furthermore argued that the proposal sets out the complete
repayment plan in respect of all debt and sets out the final instalments, including
interest payments to satisfaction of the entire debt obligations to all creditors.

30. The debtor knows how each debt is liquidated and when each debt together
with interest over the period is paid up.

31. Counsel distinguishes the facts in casu from those in McLACHLAN AND
OTHERS, supra, when she submitted that there is no change in interest rate in casu,
there is no alteration to the obligations of the debtor to creditors. In the McLACHLAN
case the court changed the interest rates and did not adopt the proposal put to it by
the debt counsellor.

32. Ms Spanenberg submitted that there are increases in 2023 as a result of the
escalation which will result in higher repayments above interest amounts.

33. Furthermore, counsel argued that the SCA was concerned with the interest
accumulating, that the arrangement would not serve the purpose of the Act and that
the debtor would find he/she is still left with a high amount outstanding at the end of
the repayment period.
33.1. It was argued there is no such risk in casu, in that the proposal has set
out all debt and interest payable over the period up to the final instalment.
For as long as the debtor continues to service the debt as per the proposal,
there will be no remaining amount after the period of payment.

33.2. Ms Spanenberg submitted therefor, that it is not common cause that

the proposal on repayments does not cover the interest payable monthly
rather it is common cause that, “initially” it will not cover interest but the order
of the court a quo includes an escalation, that increases the repayment
amounts per creditor which will then cover the monthly interest payments
and monthly repayments to capital, together with the cascading effect.

33.3. Counsel submitted that the proposal complies with the intention and
purpose of the Act, it may be that it does not suit the applicant’s repayment
expectations, but that is the fate that all creditors suffer.

33.4. Counsel submitted that the distribution of funds and allocation to

each creditor over the identified periods is arrived at by reference to industry
accepted debt restructuring guidelines, referred to as Debt Counsellors
Rules Systems which is approved by all major credit providers, including the
applicant.

33.4.1. this system seeks to fairly distribute the amount available

for distribution equally among all creditors.

33.4.2. the third respondent cannot meet any of the counter

offers put by the applicant, nor can the one debt be rejected as prayed
for, without prejudicing the other creditors and the debtor herself. The
debtor cannot meet the repayments as per the credit agreement, it is
beyond her means.
JUDGMENT

34. In BONGANI BETHWELL KHIBA v MAGISTRATE NEL,

KINGWILLIAMSTOWN8, Lowe J, in addressing a similar issue of a review in terms
of s 22 of the Superior Courts Act, stated a High Court on review will not interfere if
no “substantial wrong was done to the Applicant”, and stated further at [3]

“in general, if a complaint is perceived relevant to the result of the

proceedings of the Magistrates’ Courts, the appropriate remedy would be by
way of appeal, but if the method of the proceedings is attacked, the remedy
is to bring the matter on review. There are various grounds to bring a review,
and include, “a gross irregularity in the proceedings.” Those irregularities are
sufficient to establish an unfair outcome.

35. The court continued 9,

“the onus of proof of such review proceedings is that the applicant must first
prove the existence of the irregularity, and that it was so gross that it was
calculated to prejudice him/her, and, only if he/she discharges the at onus,
then his/her adversary or opponent must satisfy the court that he/she in fact
suffered no prejudice.”

36. The applicant did not make any submissions in relation to a procedural
irregularity resulting in an unfair outcome before this court. It failed to discharge its
onus, and I agree with Ms Spanenberg that the applicant attacks the outcome of the
order of the court a quo.

37. If the procedure were a problem, a review is appropriate and it must then
pertain to all the debts owed, including the smaller loan it advanced. However, the

8 Case No. 2765/2016 [11 April 2017]

9 Paragraph 15
applicant approaches this court for relief pertaining only to one of the loans it
advanced.

38. Ms Spanenberg correctly argues that the applicant is unwilling to wait its
longer term of repayment and that if this court were to agree with the applicant and
reject the order pertaining to the larger loan, the debtor is severely prejudiced in that
she is liable for the repayment amounts as per the credit agreement which she
cannot afford. It defeats the entire purpose of the debt review process.

39. The rejection of the one debt, must impact on the other debts which formed
part of the debt review process. The repayment amounts are determined according
to the total debt owed and the distribution is surely based on the entire amount
available for distribution.

40. Therefore, I do not agree with Mr Bruwer that this court can reject the order
regarding one debt without prejudice to other creditors.

41. I turn now to the merits of the application.

42. Section 86 of the Act provides that a consumer may apply to a debt counsellor
in the prescribed manner and form to have the consumer declared over-indebted.

43. The second respondent applied for such an order, having consulted with all
creditors, and considered the various objections from the applicant. The evidence is
that the second respondent and the applicant agreed to an escalation in the
repayment terms to service capital and interest. The further evidence is that the
applicant has and continues to accept payments in terms of the order granted.

44. The order granted was based on the proposal presented, which I have had
sight of. The proposal sets out the debt owed and payment periods for all creditors
including the applicant’s loan under account number 4 000077-308 657 in the
amount of R88 920.96, in terms of the cascading effect10, which amount is finally
paid off on 15 February 2028, in the amount of R1049.40.11

45. I noted that initially the repayment amount, after debt review, was less than
the monthly interest payable, however it is increased in July 2023 to R2 307.85 and
from thereon progressively, as the smaller debts are paid off.

46. The first respondent’s in its reasons for judgment12, stated:

“the court bona fide concluded and had no reason to think otherwise, that it was
the intention of the Third Respondent (consumer) to settle all her obligations in
relation to all credit providers as soon as possible and that once smaller debts
were settled, increased repayments on the remaining bigger debts with other
credit providers would be made. The order makes provision for such a case.”
Then at paragraph 813

“… it is therefore not correct to contend that the court made an outright order in
conflict with the findings in the reported decisions referred to. … paragraphs 3.4
of the Court Order made it clear that once smaller debts were paid off, any
additional amount available could be paid to credit providers with larger debts
and in that way in due course exceed the monthly amount payable in respect of
the interest pertaining to the applicant’s debt.”

47. I am of the view that the facts in casu are distinguishable from those in the
McLACHLAN judgment supra, no changes were made either to the interest rate or
any other contractual obligations of the debtor, in satisfaction of debts over an
extended period.

10 Caselines 004-121-125

11 Caselines 004-124 line 1

12 Caselines 011-57 para 4

13 Caselines 011-58 at par 8

48. The SCA expressed the view that the repayment plan did not “remotely cover
the monthly interest due in terms of the order, that it cannot be in the interest of the
consumer who would at the end of the period be left with a substantial debt which
she would most likely be unable to pay.” In casu the repayment plan does cover
interest, albeit not initially. It does satisfy all debt including interest and must
therefore be in the debtor’s interest.

49. The first respondent did not act ultra vires, as the order made achieves the
objectives of the Act. The repayments cover interest eventually and the debtor is not
left with any debt at the end of the repayment period, all the debts are satisfied.

50. I agree with Ms Spanenberg that the proposal set out an economically sound
repayment plan of both capital and interest over the allowed extended period.

51. The order made, achieves the eventual satisfaction of all obligations of the
debtor, without any changes to the contractual obligations of the debtor to the
creditors, based on a sound economic plan and is payable within the repayment
period.

52. Accordingly, the application must fail, and it is dismissed.

COSTS

53. It is trite that costs must follow the outcome, however it is worth noting Ms
Spanenberg’s submissions that a debt counsellor executes a statutory function and
cannot attract a costs order if she acted within her duties.

54. In casu, the counsellor acted fully in terms of her duties and obligations as set
out in the Act and performs a statutory duty.

55. Costs must follow the cause.

I make the following order

 1. The application for review of the decision of the court a quo is
dismissed.

2. The order of the court a quo stands and is of full force and effect.

3. The applicant is to pay the respondents party party costs.

MAHOMED AJ

This judgment was prepared and authored by Acting Judge Mahomed. It is handed
down electronically by circulation to the parties or their legal representatives by email
and by uploading it to the 16 May 2022.

Heard on: 15 February 2022

Delivered: 16 May 2022

Appearances

For Applicant:
Advocate Bruwer
Instructed by CF van Coller Inc
Tel: 011 827 8422

For Second Respondent

Advocate C Spanenberg
Instructed by:
McKenzie van der Merwe & Willemse Inc
Email: [email protected]