By Duncan Wild on 2 November 2014

This matter concerns the constitutionality of section 89(5)(b) of the National Credit Act 34 of 2005 (“NCA“).  This section of the NCA deals with how unlawful credit agreements must be treated. In particular, providing that the credit agreement be declared void and that the consumer must be refunded any money paid under the agreement. 

The background to the matter is the Chevron SA (Pty) Ltd (“Chevron“) conducts business throughout Southern Africa as a supplier of petroleum products. Dennis Wilson, the first respondent carried on business as a sole proprietor – Wilson’s Transport. From 1997, Chevron extended credit to Wilson’s Transport for the purchase of petroleum products.

In 2008, Wilson’s Transport alleged that Chevron’s billing was inaccurate. A period of negotiation followed but the parties were unable to resolve their differences. In the magistrate’s court pre-trial proceedings, the magistrate enquired whether Chevron was a credit provider under the NCA. Chevron acknowledged that it was required to be registered as a credit provider but that it had failed to do so.

Section 89(5)(a) provides that the agreement was void because of Chevron’s failure to have registered as a credit provider as prescribed by the NCA. Therefore, in terms of section 89(5)(b) the court had to order a refund to Wilson’s Transport of all money he had paid to the Chevron in terms of the agreement.

Chevron then brought an application in the High Court seeking to have section 89(5) declared unconstitutional as it amounted to an arbitrary deprivation of property inconsistent with the right to property protected in section 25 of the Constitution.  The High Court agreed that as the provision of the NCA was unconstitutional as the order of a refund was obligatory, and did not allow the court a discretion to make a just and equitable order in the specific circumstances of each case.

During the course of the proceedings, an amendment to NCA was passed by Parliament, Amendment Bill [B47- B3013], but had not yet been signed by the President. That Bill amends the wording of section 89(5) to read:

(5) If a credit agreement is unlawful in terms of this section, despite any other legislation or any provision of an agreement to the contrary, a court must make a just and equitable order including but not limited to an order that:

(a) The credit agreement is void as from the date the agreement was entered into.

The High Court, therefore granted an order, which was not opposed by the Minister of Trade and Industry, that section 89(5) is inconsistent with the Constitution, and that the wording of the amended section should be read into the current NCA. The declaration does not apply to cases that have already been completed.

This order is before the Constitutional Court for confirmation. Both the National Credit Regulator and the Minister of Trade and Industry support the application to have the High Court’s order confirmed.