BACKGROUND AND SUMMARY
In this case, Shaun Harris (the “Plaintiff”) sought action proceedings to recover the sum of R531 361 plus interest thereon a tempore morae. The debt arose upon the Plaintiff and Rachel Rossouw (the “Defendant”) concluding a loan agreement in terms of which repayment was due, owing and payable (the “Agreement”). The claim was not defended, as such the Plaintiff applied for default judgment.
Upon the hearing the application the Judge had reservations insofar as the applicability of the National Credit Act 34 of 2005 (the “Act”) and, if it was applicable, whether an entitlement to the relief sought had been made out.
The Plaintiff alleged in its particulars of claim that the Agreement, which had not been reduced to writing, provided that the loan would be repayable on demand and would accrue interest thereon at the prescribed rate of interest. The Defendant subsequently concluded an acknowledgement of debt in favour of the Plaintiff in terms of which inter alia the Defendant acknowledged her indebtedness in terms of the Agreement (the “AOD”).
A material clause of the AOD provided that:
“The loan amount was contributed towards my [the Defendant] personal expenses as well as towards the establishment of the new business… of which [the Plaintiff] was part of at the time. [The Plaintiff] decided to exit the new business…by choice early August 2017.
I wont be able to commit to pay back arrangements as yet as the new business is still in the development phase and I [the Defendant] haven’t started earning any income.”
Subject to the exceptions expressly provided for in terms of the Act, loan agreements qualify as ‘a credit agreement’ for the purposes of the Act. The Plaintiff, however, posited that the Act does not apply on the basis that the Agreement was not between parties dealing at arm’s length (in terms of section 4(1) of the Act read with section 4(2)(b)). The facts pleaded by the Plaintiff in its particulars of claim were scant with insight into the parties’ relationship and did not elucidate the significance of the alleged failure of one or the other parties to ‘necessarily strive to obtain the utmost possible advantage out of the transaction’ (in terms of section 4(2)(b)(iv)(aa) of the Act- the subsection dealing with instances at which parties are not dealing at arm’s length).
The Agreement, as alleged in the Plaintiff’s particulars of claim, was deemed to not be a credit agreement to which the Act does not apply, such as those expressly excluded from the application of the statute as specified in paragraphs (a) to (d) of s4(1) of the Act.
Insofar as the Plaintiff’s uncomprehensive particulars of claim, the Court adopted the stance that the pleadings fell short in identifying the material facts upon which the pleaded conclusion that the Act is not applicable supposedly stood, citing Uniform Rule 18(4) which provides that pleadings should ‘contain a clear and concise statement of the material facts upon which the pleader relies for his claim…with sufficient particularity to enable the opposite party to reply thereto.’
The Court was of the view that it was not apparent on what basis it was alleged that the Agreement was not an agreement entered into between parties at arms’ length. The clause quoted from the AOD suggests the parties may have been involved in some form of business venture together (and therefor the loan was not advanced at arms’ length), however this was not pleaded by the Plaintiff and was merely surmised by the Court. Moreover, the pleadings do not contain any allegation at all that the Plaintiff is a registered credit provider. The Act finding application to the Agreement would be relevant in this case as the amount loaned to the Defendant exceeds the threshold determined in terms of s42(1) of the Act and the Plaintiff would therefore have to be registered as a credit provider.
Moreover, section 40(4) of the Act provides that a ‘credit agreement entered into by a credit provider who is required to be registered in terms of subsection (1) but who is not so registered is an unlawful agreement and void…’. Therefore, if the Act applied and the Plaintiff was not registered as a credit provider, the Plaintiff would be unable to enforce the Agreement on the basis pleaded and would only be entitled to enforce a claim for unjust enrichment.
The Court stated that Plaintiff’s pleadings ultimately fell short insofar as making a case regarding the applicability of the Act to the Agreement and therefore, dismissed the said application.
The case outlines the necessity of concise, clear and comprehensive statements of material facts upon which a pleader may rely for its claim to have reasonable prospects of success.
Written by Saul Mayers and supervised by Omphile Boikanyo