Amardien and Others v Registrar of Deeds and Others (Women’s Legal Trust Amicus Curiae) 2019 (2) BCLR 193 (CC)

In the case of Amardien and Others v Registrar of Deeds and Others (Women’s Legal Trust as Amicus Curiae) 2019 (2) BCLR 193 (CC), the Constitutional Court (CC) was called on to interpret s 129(1) of the National Credit Act 34 of 2005 (NCA) and ss 19, 20 and 26 of the Alienation of Land Act 68 of 1981 (ALA). The court was engaged because statutory interpretation of these provisions raises a constitutional issue directly pertaining to s 26 of the Bill of Rights and had a significant effect on the applicants’ right of access to housing. The court previously held that the interpretation of s 129(1) of the NCA raised a constitutional issue.

Facts

In 1998, the City of Cape Town established a housing initiative to deliver government subsidised housing to poor members of the Cape Town community. The Cape Town Community Housing Company (the fifth respondent), was the driving force for the delivery of the subsidised housing. It receives housing subsidies on behalf of the delivery of beneficiaries and applies those subsidies toward the construction of new houses. The subsidies are used to reduce the purchase prices of the houses. The applicants were all beneficiaries of government subsidised housing and concluded instalment sale agreements with the fifth respondent as the seller between December 2000 and February 2001.

The relevant terms of these agreements are set out in clauses 4, 8 and 17 of the instalment sale agreements. The applicants were, in terms of clause 4, required to make payment in instalments on the last day of each month for a period of four years, while clause 17 sets out the steps to be followed by the seller if the purchaser breaches the terms of the agreement or fails to comply with the seller’s notice to remedy the breach.

In terms of clause 8, the fifth respondent was obliged to record these agreements with the Registrar of Deeds in accordance with the ALA. This obligation arises from s 20 of the ALA, which is headed ‘Recording of contract’, read with s 26, which places restriction on the receipt of consideration by virtue of certain deeds of alienation. These sections provide:

‘20. Recording of contract –

(1)(a) A seller, whether he is the owner of the land concerned or not, shall cause the contract to be recorded by the registrar concerned in the prescribed manner provided a prior contract in force in respect of the land has not been recorded or is not required to be recorded in terms of this section.

…

26. Restriction on the receipt of consideration by virtue of deeds of alienation –

(1) No person shall by virtue of a deed of alienation relating to an erf or a unit receive any consideration until –

(a) such erf or unit is registrable; and

(b) in case the deed of alienation is a contract required to be recorded in terms of section 20, such recording has been effected’.

The applicants moved into their respective homes at various times between 2000 and 2003, only to discover that the buildings were of an inferior quality. According to the applicants, they spent substantial amounts of money repairing these homes, with little assistance from the fifth respondent. As a result, the applicants paid their instalments with varying levels of regularity. In addition, the applicants advanced the following reasons for this:

• the instalments were higher than what the applicants expected;
• the building standards were inferior quality;
• the fifth respondent had failed on numerous occasions to respond to the applicants’ complaints; and
• the fifth respondent had extremely poor accounting and record keeping practices making it onerous for the applicants to calculate the outstanding amounts.

The fifth respondent failed in its contractual and statutory duty to record the instalment sale agreements. Despite the ALA’s statutory bar, the fifth respondent continued to receive payment from those applicants who continued paying. It eventually recorded each of the instalment sale agreements with the Registrar of Deeds on 1 April 2014 – more than ten years after these agreements were originally concluded.

On 25 April 2014, the fifth respondent sent notices in terms of s 129(1) of the NCA (s 129 NCA notices) to the applicants, informing them (among other things) that firstly, they were in arrears in terms of their respective instalment sale agreements and provided them with various options to bring the payments up to date. Secondly, the applicants were threatened with cancellation of the instalment sale agreements in the event they failed to respond to the notice within ten days of receipt and failed to remedy the default of their payment obligations in terms of the instalment sale agreements within 20 days. Lastly, the applicants were informed that their instalment sale agreements had been recorded in terms of s 20 of the ALA.

On 23 June 2014, the fifth respondent sold the applicants’ home to S & N Trust (the Trust). At that stage, the fifth respondent had not cancelled the instalment sale agreements, nor had it submitted an application to the Registrar of Deeds for cancellation of the recording of the agreements. The fifth respondent only submitted an application for cancellation of the instalment sale agreements in April 2015. The Registrar of Deeds cancelled the recording of these agreements on 4 May 2015. On 5 May, the properties were transferred to the Trust.

In 2016, the applicants launched an application in the Western Cape Division of the High Court in Cape Town against the respondents. They sought a declarator that the actions of the fifth respondent in cancelling the instalment sale agreements had been unlawful. They also sought the review and setting aside of the cancellation of these agreements by the Registrar of Deeds; and a declarator that the subsequent sale of the properties by the fifth respondent to the Trust was unlawful and hence void.

The High Court considered three issues:

• whether the applicants had been in breach of their payment obligations under their respective instalment sale agreements;
• whether the applicants had been given notice in terms of s 129(1) of the NCA; and
• assuming notice had been given, whether the extent of arrears had been indicated.

On the first question, the High Court held that although the instalments had not been due and payable until the instalment sale agreements were recorded, that did not prevent them from becoming due. The court held that the effect of s 26 of the ALA was only to prevent the creditor from receiving consideration until it had attended to promptly recording the instalment sale agreements. It did not affect the terms of agreements and accordingly did not prevent the amounts from becoming due under the instalment sale agreements. The High Court held that at the moment of recordal, all the outstanding amounts became immediately payable and since the applicants were in arrears under the instalment sale agreements and accordingly in default thereof, these agreements were amenable to cancellation by the fifth respondent.

Regarding the alleged conflict between the NCA and the ALA, the High Court held that s 129(1) of the NCA substantively overrides s 19 of the ALA. It noted that it is plainly equivalent to s 129 read with s 130 of the NCA, they inconsistently provided for notice to be given as the section required a different number of days’ notice before cancellation for breach of agreement can be effected. The court thus held that s 172(1) of the NCA read with sch 1 provides that where there is a conflict, the NCA prevails over those of ch 11 of the ALA. In the result, the High Court held that the fifth respondent was permitted to cancel the agreement subject to compliance with only s 129(1) of the NCA and not s 19 of the ALA.

On the question of whether the extent of the arrears had been indicated, the High Court held that it was not essential for s 129 NCA notices to set out the amounts in which the applicants were in arrears. The High Court held that the applicants’ counsel did not refer to any authority in support of the argument that particulars of the arrears were an essential ingredient of a s 129 NCA notice, neither were there any provisions in the NCA nor the regulations thereto that required this. The court further held that the legislative purpose set out in s 3 of the NCA would not be frustrated if the particulars of the arrears were not included.

The High Court relied on Phone-A-Copy Worldwide (Pty) Ltd v Orkin and Another 1986 (1) SA 729 (A) and held that ‘the applicants were, notionally at least, in as good a position to determine for themselves how much they owed under the contracts.’ Furthermore, if the applicants were uncertain about the amounts, the notice afforded them the opportunity (directly or through intermediary) to make the necessary inquiries or engage with the substantive issue. If the amount was lacking information that the applicants required, the fifth respondent would have bound to provided it on request.

The High Court dismissed the application with costs. An application for leave to appeal was also subsequently dismissed. The applicants petitioned the Supreme Court of Appeal for leave to appeal. On 28 July 2017, that application was dismissed.

Judgment

The CC, among other things, had to consider some of the following issues:

• Should leave to appeal be granted?
• What is the effect on the purchaser’s obligation of the seller’s failure to record an instalment sale agreement as required by s 20 of the ALA?
• Does s 129(1) of the NCA require a credit provider to state the amount alleged to be owing in the notice it sends to a consumer.
• Should the new evidence that the fifth respondent seeks to have admitted in this court be admitted?
• What is appropriate remedy in this case?

The CC said in order to determine the effect on the purchaser’s obligations, the following legal questions must be answered:

• At what point are purchaser’s obligations, in relation to late recordal of agreements in terms of s 20 of the ALA, activated?
• Secondly, can notice of recordal and cancellation of agreement be provided at the same instance?
• Thirdly, which provisions of the NCA and ALA govern cancellation as a remedy?

The CC said s 19 of the ALA limits the right of the seller to take legal action and outlines those limitations. On the other hand, s 129(1) of the NCA specifies certain obligations the creditor must fulfil before it can proceed to the stage of legal enforcement or unilateral cancellation. The purchaser has to be afforded an opportunity to consider certain steps. Therefore, the requirements of the ALA and the NCA do not conflict, and there is no need to have recourse to sch 1 of the NCA. In fact, in instances where they both apply, they can and should be read together: A seller must comply with the NCA in informing the purchaser of the default, and they must inform a purchaser in terms of s 19 if they are going to rely on the remedies in terms thereof if entitled to do so. The two pieces of legislation, specifically s 19 of the ALA and s 129 of the NCA, serve different purposes.

The CC said even if the s 129 NCA notice can additionally serve the purpose of s 19 of the ALA it does not, on the facts here, suffice. The actual notice falls short of requirements set out in s 19 of the ALA. Having regard to both the plain meaning of s 20 read with s 26 of the ALA and the case law referred to, the effect of the late recordal is clear. The payments under the instalment were not arrears as contended by the fifth respondent.

The CC held that the cancellation of the instalment sale agreements was premature. The effect of this is that the subsequent cancellation of the instalment sale agreements and the cancellation of the recording of these agreements are invalid.

The CC granted leave to appeal. The order of the Western Cape Division of the High Court in Cape Town is set aside and replaced with:

‘(a) The application is upheld with costs.

(b) The cancellation of the instalment sale agreements by the Cape Town Community Housing Company (Pty) Limited is unlawful and is set aside.

(c) The cancellation of the recordal of the instalment sale agreements by the Registrar of Deeds is set aside.’

The application of the Cape Town Community Housing Company (Pty) Limited to adduce new evidence was dismissed with costs and the Cape Town Community Housing Company (Pty) Limited was ordered to pay costs.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.

This article was first published in De Rebus in 2019 (July) DR 23.