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Standard Bank V Dlamini Plain Language Coup
Law (LLB)
University of the Western Cape
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IN THE HIGH COURT OF SOUTH AFRICA, DURBAN REPUBLIC OF SOUTH AFRICA Case no.: In the matter between STANDARD BANK OF SOUTH AFRICA LIMITED Applicant and MBUYISENI DLAMINI Defendant JUDGMENT Heard August 2012 Handed down:23 October 2012 D. PILLAY J Mbuyiseni Dlamini bought a 2004 Toyota Corolla 160i GLE on credit from Standard Bank for R85 745 on 3 June 2010. Starlight Auto Sales, a second hand car dealership in Pinetown, acted as the agents to facilitate the financing of the purchase of the vehicle. Four days later he had it towed back to the dealership. He informed the salesman, Sibusiso Mthetwa, that the vehicle malfunctioned and that he did not want it or any other vehicle from that dealership. He demanded a refund of his deposit. When he did not get his refund he approached Scorpion Legal Protection (Pty) Ltd for legal assistance. On 5 October 2010 Scorpion despatched a letter to the dealership demanding the refund of the deposit of R15 and cancellation of the agreement. On 21 October 2010 the attorneys sent a notice in terms of s 129 of the National Credit Act 34 of 2005 (the NCA) addressed to Mr Dlamini but to an incorrect address demanding payment in terms of the credit agreement. On 3 March 2011 the Bank had summons issued for judgment to be entered against Mr Dlamini confirming the termination of the agreement, ordering the return of the vehicle, costs of suit and the costs of locating, removing, storing and disposing of the vehicle. 2 In support of its claims, the Bank relied on clause 10 in its credit agreement which provided that if the agreement was not entered into at the registered business premises, Mr Dlamini could, within five business days after signing the agreement, terminate it on notice to the vehicle and asset finance division head office at fax number 011 6313168, and return or tender the return of the vehicle. If he terminated the agreement in this way he was obliged to pay the rental for the use of the vehicle for the time that he had it and any reasonable costs the Bank might incur to have the vehicle returned or restored to a saleable condition. What the agreement did not record was that he was also entitled to a refund in terms s 121(3)(a) of the NCA. In short, the Bank relied on s 121 the NCA read with reg 37 of the National Credit Regulations, GN R713, GG 28893, 31 May 2006 (the NCR). Because Mr Dlamini did not notify the Bank of the termination in the manner prescribed clause 10 of the agreement and reg 37, the Bank contended that the termination was a voluntary surrender contemplated in s 127(5) to (9) of the NCA. Clause 10 which provides for termination voluntary surrender, entitles the Bank to sell the vehicle, account to Mr Dlamini and claim any shortfall due him under the agreement. In the circumstances, finding the basis for the termination is important to determine the consequences and remedies each party has on termination. In his defence, Mr Dlamini denied that he surrendered the vehicle. He alleged that he returned it because it broke down. On driving it from the dealership he had noticed that it was jerking and smoking. He consulted his cousin, a mechanic who testified in corroboration. After they test drove it for about two kilometres they diagnosed that it would not last for more than 30 kilometres. They discovered that the vehicle was rebuilt following an accident. As predicted, it broke down and they had it towed back to the dealership. 4 it purported to be. The interpretation of the termination clause and its materiality were also not disputed. Ms evidence could easily have been curtailed, if not dispensed with altogether, if the parties had defined the issues in dispute precisely at their conference. At the end of Ms evidence the Bank signalled its intention to call Ms N. Marimutho whose signature appeared on the agreement on behalf of the Bank. Mr Dlamini vehemently denied having any dealings with Ms Marimutho at all. On resumption, the Bank abandoned Ms Marimutho as its witness and called Mr Mthetwa instead. The gist of Mr evidence was that he was the salesman who sold the vehicle to Mr Dlamini. He informed Mr Dlamini that the dealership could arrange finance from one of several institutions including Standard Bank. He took Mr Dlamini to Ms Marimutho and left him with her to complete the application for finance. The only conversation he heard between them was Ms Marimutho asking Mr Dlamini in English whether he was Mr Dlamini. They were together for 25 minutes. He alleged that it was neither his function to explain the agreement to Mr Dlamini nor to complete the forms for applying for credit and concluding the credit agreement. Besides, Mr Dlamini had not brought a copy of the contract with him when he returned the motor vehicle. Mr Mthetwa studiously avoided accepting any responsibility for interpreting and explaining the terms of the agreement to Mr Dlamini. Even if Mr Dlamini did not bring the agreement, it was a standard credit agreement. Mr Mthethwa had earlier testified that Starlight was an agent for several banks including Standard Bank. The probabilities of Starlight not having a standard term credit agreement for Standard Bank are remote. It should at least have had its own copy as a record of the transaction for which it received R15 as deposit but reflected only R13 in the agreement. There is no evidence that Ms Marimutho spoke IsiZulu. Considering that Mr Mthetwa was the salesman and the person who spoke IsiZulu at Starlight the 5 probabilities favour Mr version that only Mr Mthetwa communicated with him. Mr Mthetwa confirmed that Mr Dlamini had towed the vehicle back to the dealership. Mr Dlamini was angry and informed him that he did not want that or any other vehicle that Starlight offered him. Mr Mthetwa surmised that Mr Dlamini might change his mind in due course. However, he conceded that nothing from what Mr Dlamini said or did suggested that Mr Dlamini might change his mind and return to the dealership. The vehicle was repaired the mechanic employed the dealership. This was usually done for all defective vehicles in the dealership. Authority from the Bank as the owner was not specifically sought to repair the vehicle. Unsurprisingly, Mr Mthetwa denied that Mr Dlamini demanded the return of his deposit of R15 To admit the demand Mr Mthetwa would have had to explain why Starlight or the Bank had not refunded the deposit. As the salesman, Mr Mthetwa earned commission income only. The termination of the agreement meant that he and Starlight would lose their commission. In response to questions from the court, Mr Mthetwa testified for the first time that when Mr Dlamini returned the vehicle he took Mr Dlamini aside and informed him that he should notify the Bank of the termination of the agreement and that if he could not see what was in the agreement then he should get his child to read it for him. This was vital evidence that he should have given in chief. The Bank knew that Mr defence was that he was not aware that he had to notify it in any prescribed manner. If Mr Mthetwa was being truthful about advising Mr Dlamini as he alleged, he would have given this evidence in chief. Coming as it did in response to questions from the court, it is an afterthought and contrived. 7 defence. I warned him that it did not assist him to deny facts that he knew to be true and that I could find him to be evasive. Thereafter, he made a conscious effort to give a considered response to questions put to him. His illiteracy, lack of sophistication and general discomfort at being in a courtroom rather than deliberate mendacity caused him to lapse into the easy option of simply denying everything. On these facts I find firstly that Mr Dlamini terminated the agreement returning the vehicle because it was so defective that it could not be driven. A voluntary surrender is usually triggered a inability to comply with the credit agreement. Not a whiff of evidence suggested that Mr Dlamini was unable to pay for the vehicle or that he returned it for any reason other than it being incapable of being driven The Bank failed to establish a factual basis for any finding that the termination was a voluntary surrender. Mr mere with the procedural formality of faxing notice of termination does not lead to the inference that he terminated the agreement voluntarily surrendering the vehicle. Secondly, the Bank and its agents caused Mr Dlamini to enter into a credit agreement without reading, interpreting and explaining the material terms to him which he did not know and understand. Could he nevertheless in law be held to have assented to the agreement virtue of his signature? Turning to the law, the Bank relied on the common law principles of mutual consent and caveat subscriptor and the cases in which these principles were invoked. 1 However, when the NCA applies, the constitutional right to equality comes to my mind immediately. The Preamble to the Constitution and to the NCA connect them. What then is the interface between the Constitution, NCA and the common law principles of caveat subscriptor and quasi mutual consent? 1 Brink v Humphries Jewell (Pty) Ltd 2005(2) SA 419 George v Fairmead (Pty) Ltd 1958(2) SA 465 (A) at National and Overseas Distributors Corp (Pty) Ltd v Potato Board 1958(2) SA 473 (A) at Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992(3) SA 234 (A) at 239I Hartley v Pyramid Freight (Pty) Ltd Sun Couriers 2007(2) SA 599 (SCA). 8 In its Preamble the Constitution recognises the injustices of our past. It commits to healing the divisions of the past, establishing a society based on democratic values, social justice and fundamental human rights, and to improve the quality of life of all citizens. The founding values of the Constitution include human dignity, achieving equality, advancing human rights and 2 The right to equality declares everyone equal before the law and has the right to equal protection and benefit of the law. 3 Discrimination whether direct or indirect on a listed or proven ground is prohibited. Academics Fredman et al observe: many countries, equality legislation initially sought to free individuals from the negative effects of these group characteristics, believing that in a and world individuals could thrive and develop their potential free from stereotypical assumptions. But this view of equality was narrowly circumscribed. It was a relative principle dependent upon identifying an appropriate comparator. It also operated symmetrically so that the benefits provided to a disadvantaged group could be challenged as a violation of the principle of equality. Moreover, it assumed that the only legitimate role of state action was negative, to stop discrimination, rather than requiring positive steps and measures to be taken to remedy disadvantage. The failure of this formal view of equality to address deeply entrenched and complex patterns of group disadvantage led to sustained criticism feminist and other writers, and to calls for formal equality to be replaced with substantive equality. Substantive equality, unlike formal equality, requires attention to context, the intersection of different grounds of disadvantage, difference, and positive obligations upon the state. 4 2 Section 1 of the Constitution of the Republic of South Africa, 1996.. Section 9(1) of the Constitution. 4 Catherine Albertyn, Sandra Fredman, Judy Fudge Substantive equality, social rights and women: A comparative (2007) 23 SAJHR 209 p 209. 3 10 marketing regulate credit to establish national norms and standards relating to consumer Section 3 elaborates that the purposes of the NCA are to promote and advance the social and economic welfare of South Africans, to promote a fair transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers , amongst other things, promoting equity in the credit market balancing the res pective rights and responsibilities of credit providers and consumers. 8 Importantly, its purpose is also to address and correct: . . imbalances in the negotiating power between consumers and credit providers (i) providing consumers with education about credit and consumer (ii) providing consumers with adequate disclosure of standardised information to enable them to make informed and providing consumers with protection from deception and from unfair or fraudulent conduct credit providers and credit Section 2 of the NCA requires the Act to be interpreted in a manner that gives effect to the purposes of s 3. Section 2(6) acknowledges that a person is historically disadvantaged if that person is one of a category of natural persons who, before the Interim Constitution of the Republic of South Africa, 1993 came into operation, were disadvantaged unfair discrimination on the basis of race. Section 121 applies to an instalment agreement entered into at any place other than the registered business premises of the credit provider. Furthermore, the section gives a consumer the right to terminate the credit agreement within five business days after the date on which it was signed the consumer, firstly, delivering a notice in the prescribed manner to the credit and secondly, tendering to return any money or goods, or paying in full for any services received the consumer. 8 9 Section 3(d) of the NCA. Section 3(e) of the NCA. 11 When a credit agreement is terminated in terms of s 121, the rights of the credit provider and consumer are balanced subsecs (3)(a) and (b) as follows: . . the credit provider must refund any money the consumer has paid under the agreement within seven business days after the delivery of the notice to and (b) may require payment from the consumer (i) the reasonable cost of having any goods returned to the credit provider and restored to saleable and (ii) a reasonable rent for the use of those goods for the time that the goods were in the Clause 10 of the agreement paraphrases s 121(1), (2) and (3)(b) of the NCA but studiously excludes any reference to subsec (3)(a) which gives the consumer the right to a refund from the credit provider. Subsection (3)(b) clearly favours the the consumer has to pay the Bank. Subsection (3)(a) which favours the consumer because the Bank must to pay the consumer is omitted. Rescission of an agreement referred to in the heading of s 121 of the NCA and termination of an agreement at the instance of the consumer under s 122 of the NCA have distinctly different causes and consequences. Rescission aims to restore the contracting parties to the status ante quo. In other words the agreement is revoked or withdrawn. Termination retains and enforces the agreement. The remedy to which Mr Dlamini was entitled when he discovered that the agent sold him a vehicle that could not be driven at all was a refund in terms of subsec (3)(a). Despite the agreement being silent about rescission and a refund the Bank does not deny that Mr Dlamini has a right arising from the NCA to rescind the agreement. Clause 8 of form 20 which reg 30 of the NCR prescribes for small agreements, is headed right to rescind the agreement (if Bank does not deny that it is applicable. However, the Bank 13 Given the importance of the notice to the Bank of the basis of the termination, the Bank should have mandated its agent to assist consumers like Mr Dlamini to fax the notices. Even if the Bank and its agents provided this service at a fee it would have been far cheaper than litigating to determine the basis of the termination. Imposing such a duty on the agents would also acknowledge the potential conflict of interest between an agent that sells defective vehicles and the consumer. Although the legal obligation to notify the Bank rested on Mr Dlamini, the Bank cannot absolve Starlight of its duty to act in good faith to notify the Bank in the ordinary course of commercial practice. The Bank should hold its agent accountable for not reporting immediately that the vehicle was towed back and that it could not be driven. Another two consumer rights are important in the context of this case. The first is the right to information in an official language in terms of s 63 of the NCA. Section 63(1) gives consumers a right to receive any document that is required in terms of the NCA in an official language that the consumer reads or understands, to the extent that is reasonable having regard to usage, practicality, expense, regional circumstances and the needs and preferences of the population ordinarily served the person required to deliver that document. The second is the right to information in plain and understandable language in terms of s 64 of the NCA. Subsection (1)(b) requires the producer of a document that is required to be delivered to a consumer in terms of the NCA to provide that document in the prescribed form, if any, for that document, or in plain language. For the purposes of the NCA, a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance and import of the document without undue effort, having regard to, the organisation, form and style of the document, and the vocabulary, usage and sentence structure of the text 10 Section 64 (2) (b) (c) of the NCA. 14 Strictly interpreted neither s 63 nor s 64 of the NCA assists an illiterate consumer. Purposively interpreted they embody the right of the consumer to be informed reasonable means of the material terms of the documents he signs. What is reasonable and material varies depending on the circumstances of each case. Amongst other things, the industry, regional circumstances or geographical location, price, nature of the goods and services and class of consumers likely to contract for them are relevant to determining what are reasonable means and material terms. Purposively interpreted, the credit provider bears the onus to prove that it took reasonable measures to inform the consumer of the material terms of the agreement. This transaction arose at a second hand car dealership in Pinetown, KwaZulu Natal. IsiZulu is the predominant African language. In the nature of such a business the Bank must anticipate that it will be dealing with historically disadvantaged persons. It enters into contracts in terms of which vehicles are returned for repairs and for defects or as voluntary surrender because of the inability to pay the instalments. Establishing at the earliest opportunity what the basis is for the termination of an agreement is therefore important in the second hand car dealership industry. From the perspective the circumstances in which he is entitled on termination to a refund, or obliged to pay the Bank, are also important. Accordingly, the Bank should have had better measures in place to ensure that its historically disadvantaged customers are aware of their rights and responsibilities. Pitched as consumer rights, ss 63 and 64 impose the onus on credit providers to inform their consumers of their rights and responsibilities. Relying on agents whose interests as second hand car dealers conflicted with interests needed better control of the agent to avoid any finding that the Bank was complicit. Where possible, the Bank should also take reasonable steps to facilitate compliance consumers with their responsibilities. In this case, the Bank simply had to have Mr Mthetwa interpret the material terms of the agreement when he sold the vehicle to Mr Dlamini or at the latest when Mr Dlamini returned the vehicle. 16 For lawyers and lay persons alike, the form of the standard agreement is an unappetising formidable read. For a labourer like Mr Dlamini who did not read, write or understand English there might just as well have been no written agreement at all. Mr Dlamini was in a worse position than the purchaser who signed one page of an agreement but who was sued in terms of a clause appearing on the reverse of that page which had not been sent to him. 11 A credit agreement is also unlawful if it purports to waive any common law rights that apply to the credit agreement. 12 The above rights and protections for consumers under the NCA develop and ameliorate the potentially harsh impact on consumers of the common law principles of caveat subscriptor and consent relied on the Bank. These principles mean that a person who signs a document is taken to have assented to what appears above his signature. 13 The cases show that mutual consent is absent when a party is unaware of the terms of the agreement. A party may be unaware because the agreement contains terms that were not expected or were not disclosed. Or a party may be misled, 14 misinformed 15 or not or the form and getup of the agreement is inaccessible. 16 In the three appellate decisions to which Mr Broster helpfully referred me, the court found that there was no consent the signatories because their errors were justifiable. However, the uncertainty of how the common law principles are applied is evident in Brink v Humphries and Jewell (Pty) Ltd 2005(2) SA 419 (SCA) and Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A) In Brink v Humphries the minority disagreed with the majority on findings of fact and consequently the inferences to be drawn from them. The minority found that the signatory failed to discharge the onus of showing that his error was justifiable. In Sonap Petroleum v Pappadogianis the appellate court 11 Home Fires Transvaal CC v Van Wyk and Another 2002 (2) SA 375 (W) at 381. S 90 (2) (c) (i) of the NCA. 13 Brink v Humphries Jewell (Pty) Ltd 2005(2) SA 419 (SCA) para George v Fairmead (Pty) Ltd 1958(2) SA 465 (A) at 14 Brink v Humphries Jewell (Pty) Ltd 2005(2) SA 419 (SCA) para 11. 15 Sonap Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A) 16 George v Fairmead (Pty) Ltd 1958(2) SA 456 (A) at 12 17 disagreed with the findings of fact of the trial court. The trial court was under the impression that the signatory had not read the document presented to him. In contrast, the appeal court unanimously believed that the signatory was misled, that the other party was alive to the real possibility of a mistake and that he had a duty to speak but chose instead to snatch a bargain. 17 The NCA minimises the casuistry, unpredictability and uncertainty of judicial opinion setting the norms and standards for the communication and form of valid credit agreements. Nevertheless the common law remains relevant. Case law developed the test for consent to be: the party whose actual intention did not conform to the common intention expressed, lead the other party, as a reasonable man, to believe that his declared intention represented his actual 18 The NCA does not dispense with this test. The norms and standards it prescribes for a valid agreement readjusts and clarifies the rights and responsibilities of the parties, the onus of proof and consequently, the statutory context in which the common law test applies. Mr defence is not that he did not intend to conclude the agreement but that he did not know that he had to notify the Bank in a prescribed manner of his intention to rescind it. Knowing about this formality would not have stopped him from signing the agreement. Therefore, his failure to comply with a purely procedural obligation was not due to an unwillingness to comply but rather an unawareness of such an obligation. In Davids en Andere v ABSA Bank Bpk 2005 (3) SA 361 (C) (headnote) in which the appellants alleged that they had signed deeds of suretyship in the bona fide but mistaken belief that it encapsulated a prior oral agreement limiting the liability of the appellants, the full bench held that a reasonable person in the position of the bank official would have explained the nature and content of the 17 18 Sonap Petroleumv Pappadogianis 241E F Supra at 239 I 240 B 19 small print of the conditions, the judges did what they could to put a curb on Similarly, in Diners Club SA (Pty) Ltd v Livingstone and Another 1995 (4) SA 493 (W) at the Witwatersrand Local Division observed that the whole of an enrolment form was misleading. A series of conditions were printed in small print, not designed to be read without the aid of magnifying 20 The court opined that there was a duty on Diners Club to have drawn to the attention the provisions of the enrolment form which imposed personal liability on him. Its failure to do so reasonably led to the defendant signing the enrolment form ignorant of incurring personal liability. In Mercurius Motors v Lopez 2008 (3) SA 572 (SCA) the conditions on which the appellant relied had not been brought to the attention of the respondent. Furthermore, the style and format of the lease agreement on which the cause of action was founded was misleading and framed in small print which was not easily accessible. Having regard to the item lost (a Jeep) and the amount of the claim (R245 it seems that the claimant Mr Lopez was educated, literate and economically well off. 21 Nevertheless the Supreme Court of Appeal found that he had been misled the form of an agreement. In contrast, Van Zyl v Kotze 2007 JOL 19893 (T) differs from the facts of this case. There a full court found that the appellant failed to discharge the onus of proving her defence of common mistake which arose from her own negligence in that she failed to read the contract. Mr situation is distinguishable from that appellant. To begin with, the appellant was a relatively successful business woman who ran guest houses. Furthermore, she had been involved in a number of property transactions over a decade. The respondent in that case was a dentist and former neighbour of the appellant before emigrating. As the agreement related to the payment of occupational interest in a property 20 At 495I. See also CJ Pretorius clauses and mistake Mercurius Motors v Lopez v 2008 (3) SA 572 2010 (73) THRHR 21 20 transaction the appellant was either at an advantage or on par with her opponent as far as literacy and social and economic standing went. Applying the common law principles of caveat subscriptor and mutual consent, the Bank cannot hold Mr Dlamini bound to the agreement. The unpalatable form and of the agreement would have been immaterial to Mr Dlamini because of his illiteracy. That was all the more reason why the Bank should have ensured that its agents explained the material terms to Mr Dlamini. As Mr Dlamini was ignorant of the prescribed notice requirements of the agreement, there was no mutual consent as regards this term. Accordingly, Mr defence succeeds under the NCA and the common law. The validity of the entire agreement is an issue that neither party addressed. A credit agreement must not contain an unlawful provision. 22 A provision is unlawful if its effect is to defeat the purposes or policies of the NCA or deceive the consumer 23 or if it directly or indirectly purports to waive or deprive a consumer of a right set out in the NCA or set aside or override the effect of any provision of the NCA. 24 As stated above the selective disclosure of Mr s 121 rights in terms of the NCA as a consumer to rescind the agreement was deceptive. Furthermore, the breach of his ss 63 and 64 rights in terms of the NCA to be informed of the contents of the agreement and his rights to an agreement that complies in form with reg 30 skewed the agreement in favour of the Bank. Distorting the balance created in the NCA in this way in the agreement is unlawful. It defeats the purpose and policy of the NCA and renders the entire agreement unlawful. An unlawful provision in any credit agreement is void. 25 The court must sever the unlawful provision from the agreement, or alter it to render it lawful, if it 22 Section 90 (1) of the NCA. Section 90 (2) (a) (i) (ii) of the NCA. 24 Section 90 (2) (b) (i) of the NCA. 25 Section 90 (3) of the NCA. 23
Standard Bank V Dlamini Plain Language Coup
Course: Law (LLB)
University: University of the Western Cape
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