|During 2013 Mr Ratlou (“Ratlou”) acquired Phapo Nkone Transport (Pty) Ltd (“PNT”) together with its business. Subsequently, on 24 October 2013, he executed a deed of suretyship in favour of MAN Financial Services SA (Pty) Ltd (“MAN”) to secure a lease agreement between MAN and PNT relating to the lease of trucks and trailers. Following repeated defaults by PNT, and subsequent repossession of the trucks and trailers, MAN, PNT and Ratlou concluded a settlement agreement (also referred to as an acknowledgement of debt or “AOD”) for the outstanding amount due to MAN in 2015. This notwithstanding, PNT defaulted on their payments under the AOD.
On 28 July 2016 MAN launched an application in the Johannesburg High Court against PNT and Ratlou, claiming payment of the outstanding amount together with interest. The High Court however ordered that the AOD be made an order of court and that the application be postponed sine die. The court furthermore ordered that the AOD was a ‘credit transaction’ within the meaning of the National Credit Act 34 of 2005 (“NCA”) and that MAN was accordingly obligated to comply with S129 of the NCA, before setting the matter down.
Ratlou obtained leave to appeal the declaration that the AOD was an order of court and MAN was granted leave to cross-appeal against the High Court order in terms of which it was ordered to comply with the provisions of the NCA and pay the costs of the application. At the hearing of the appeal MAN informed the Supreme Court of Appeal (“SCA”) that it had complied with the relevant portions of the high court order and obtained judgment in the amount claimed. It, however, persisted that the AOD was not governed by the NCA. The SCA in turn held that although a ruling will no longer have any practical effect on the parties, the matter raises a legal point of public importance and would accordingly be considered.
The High Court found that the original rental agreements did not fall within the ambit of the NCA as they were large agreements, concluded with juristic persons, in terms of which the instalments exceeded the R250 000 threshold provided for in the NCA. The SCA agreed. However, the High Court also held that the AOD constituted a new credit agreement within the ambit of the NCA. This latter conclusion by the High Court had the outcome that Ratlou was no longer bound as surety but that he was liable jointly and severally together with PNT for the amount outstanding. Effectively ruling that the AOD was a transactio which created a new relationship with consequent rights and obligations removed from the previous underlying rental agreement.
At the hearing of the appeal, Ratlou submitted that the High Court was not competent to make the AOD an order of court because none of the parties sought an order in those terms. He also persisted (in line with the High Court order) that the AOD was a new contract to which the NCA applied and that his status was altered to that of a co-principal debtor.
In the cross-appeal, MAN conceded that, on a literal interpretation of S8(4)(f) of the NCA, the AOD met the definition of a credit transaction. The section provides that:
‘(4) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2) constitutes a credit transaction if it is … (a) …
(f) Any other agreement, other than a credit facility or a credit guarantee, in terms of which payment of an amount owed by one person to another is deferred, and any charge, fee or interest is payable to the credit provider in respect of –
(i) the agreement; or
(ii) that amount has been deferred.’
However, MAN argued that the underlying causa to the AOD did not constitute a credit agreement as envisaged by the NCA and therefore the AOD also did not fall within the ambit of the NCA. Counsel for MAN submitted that the AOD was a credit guarantee to which the NCA did not apply, as stated in paragraph 308 of Shaw & another v McKintosh & another (267/17)  ZASCA.
The SCA held that it was common cause that the AOD related to the rental agreements and the compromise remained linked to the underlying causa and, in this regard, Ratlou’s argument that the underlying causa (the rental agreements) was extinguished by the compromise and AOD, was found to be artificial.
Accordingly, the SCA held that a purposive interpretation and not a literal interpretation of S8(4)(f) of the NCA was required as the NCA was not aimed at settlement agreements such as the AOD. The SCA held that any other interpretation will have a devastating effect on the efficacy of parties to conclude such agreements and thereby restrict litigation.
The SCA added that, on a literal interpretation, the AOD meets the definition of a credit transaction. This is so even though the underlying lease and suretyship agreements did not constitute credit agreements and are not governed by the NCA. However, on a literal interpretation a settlement agreement concluded in relation to a delictual claim would immediately fall within the ambit of the NCA – this position, the SCA held, could not have been the intention of the legislature.
In support of a purposive interpretation to rather be applied, MAN relied on three cases. The first being Grainco (Pty) Ltd v Broodryk NO & others  ZAFSHC 143 which held that although an AOD referred to deferral of payment and interest, same did not constitute a credit transaction because the underlying transaction was a damages claim. It was held that the transaction did not fall within the business of moneylending and the furnishing of credit, in the ordinary sense of the word. Concluding that the NCA was not intended to encompass an underlying causa of the postponement of payment of damages. The second case, Hattingh v Hattingh  ZAFSHC 173, held that an AOD in which two brothers terminated a business relationship and provided for the payment of instalments together with interest, did not fall within the ambit of the NCA as there was no credit provider-consumer relationship. Finally, MAN also referred to the case of Ribeiro & another v Slip Knot Investments 777 (Pty) Ltd  ZASCA 174 which it was held that the underlying cause remained extant despite settlement and that the agreements were interdependent. All three these cases, the SCA held, was proof that the NCA was not designed to regulate settlement agreements, where the underlying agreement of cause would not be within the ambit of the NCA.
|The SCA held that the AOD did not fall within the ambit of the NCA. MAN had no obligation to comply with the provisions thereof prior to enforcing its rights. The parties agreed that a determination of the cross appeal in MAN’s favour (that the AOD did not constitute a credit transaction), would dispose of both the appeal in MAN’s favour. Accordingly, the following order was granted:
1.The appeal is dismissed with costs, such costs to include the costs of two counsel.
2.The cross-appeal succeeds with costs, such costs to include the costs of two counsel
The court applied a purposive approach to the interpretation of the term “credit transaction”, contained in the NCA, in order to avoid triggering its application in the context of settlement agreements. The courts also confirmed that the NCA was not designed to regulate agreements, where the underlying agreement of cause would not be regulated by the NCA.
Written by Danmari Bouwer and Jasvir Sewnarain