ARTICLES

A comparison between formal debt administration and debt review - the pros and cons of these measures and suggestions for law reform (Part 2)

'n Vergelyking tussen formele skuldadministrasie en skuldhersiening -die voor- en nadele van hierdie maatreëls en voorstelle vir regshervorming

André Boraine^I; Corlia van Heerden^II; Melanie Roestoff^III

^IBlur LLB LLM LLD; Professor and Dean of the Faculty of Law, University of Pretoria
^IIBLC LLB LLM LLD; Associate, Professor Department of Mercantile Law, University of Pretoria
^IIIBLC LLB LLM LLD; Professor, Department of Mercantile Law, University of Pretoria

OPSOMMING

Ongeveer 'n dekade gelede het die Departement van Justisie en Konstitusionele Ontwikkeling, na aanleiding van klagtes deur verbruikers oor die misbruik van die administrasieprosedure, 'n projek ter hervorming van hierdie prosedure van stapel gestuur. Hierdie projek is egter opgeskort vanweë 'n onafhanklike inisiatief van die Departement van Handel en Nywerheid om verbruikerswetgewing, wat in 2007 in die Nasionale Kredietwet 34 van 2005 gekulmineer het, te hervorm. Ongelukkig het die wetgewer met die invoering van die skuldhersieningsprosedure ingevolge die Nasionale Kredietwet 'n gulde geleentheid laat verbygaan om die reg insake skuldverligtingsmaatreëls behoorlik en volledig te hersien. Daarbenewens het die wetgewer ook nie die verhouding tussen skuldhersiening en ander bestaande skuldverligtingsmaatreëls, in die besonder administrasiebevele, behoorlik oorweeg nie. In die eerste gedeelte van hierdie artikel wat in 2012 De Jure 80 verskyn het is administrasie ingevolge die Wet op Landdroshowe 32 van 1944 en skuldhersiening ingevolge die Nasionale Kredietwet geanaliseer om sodoende sekere positiewe en negatiewe aspekte rakende hierdie twee prosedures te identifiseer. In hierdie tweede gedeelte van die artikel word 'n vergelyking tussen administrasie en skuldhersiening gedoen en voorstelle ter regshervorming gemaak. Die skrywers doen aan die hand dat Suid-Afrika 'n volledige hersiening van sy huidige skuldherskedulerings-maatreëls benodig en dat die wetgewer vir een enkele maatreël wat op alle skuldherskeduleringsgevalle van toepassing is, voorsiening moet maak. Na aanleiding van die vergelyking tussen administrasie en skuldhersiening belig die skrywers die hoofkwessies wat die wetgewer na hul mening in ag moet neem wanneer so 'n nuwe prosedure ontwerp word.

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162 S 86(6) & 87(1)(b). A declaration of reckless credit may in some instances have the effect of relieving a consumer from the debt altogether. For a detailed discussion see Boraine & Van Heerden "Some observations regarding reckless credit in terms of the National Credit Act 34 of 2005" 2010 THRHR 650 and Van Heerden & Boraine "The money or the box: Perspectives on reckless credit in terms of the National Credit Act 34 of 2005" 2011 De Jure 44.         [ Links ]
163 See the discussion in par 3 3 1 above.
164 Except a debt due under a mortgage bond or a debt referred to in s 74B(3) - s 74P(2) MCA.
165 See the discussion in par 2 7 above.
166 See, however, Changing Tides 17 (Pty) Ltd v Grobler (unreported case no 9226/2010) (GNP) par 12 where it was held that a consumer is not entitled to delay enforcement of a credit agreement by again applying for debt review ito s 86(1) NCA prior to enforcement but after an earlier debt review iro the said credit agreement was terminated in accordance with s 86(10) NCA.
167 See eg s 1328(f) American Bankruptcy Reform Act of 1978 (commonly known as the Bankruptcy Code or Code) and s 288 Dutch Wet Schiuldsanering Natuurlijke Personen.
168 S 1 NCA defines a juristic person so as to include a partnership, association or other body of persons, corporate or unincorporated, or a trust if there are three or more individual trustees, or where the trustee is itself a juristic person, but does not include a stokvel.
169 S 6 NCA.
170 Par 2 2 above.
171 Par 3 3 3 above. It appears that such referral will not readily be granted. See Van Heerden & Lötz "Over-indebtedness and discretion of court to refer to debt counsellor - Standard Bank Ltd v Hales 2009 3 SA 315 (D)" 2010 THRHR 502.
172 Par 3 3 4 above.
173 National Credit Regulator v Nedbank (GNP) supra 311.
174 Standard Bank v Panayiotts supra par 16-31. See further Roestoff et al 2009 PER 257.
175 S 74(1) MCA.
176 National Credit Regulator v Nedbank(GNP) supra.
177 Idem 314.
178 R 10 CR.
179 S 74E MCA.
180 See par 2 5 above.
181 S 74E(2) MCA. See also Stander v Erasmus supra 324.
182 S 74N MCA.
183 An administrator who fails to carry out this duty will be guilty of an offence - see s 74W MCA.
184 S 74L(2) MCA - see the discussion in par 2 6 above.
185 National Credit Regulator v Nedbank (GNP) supra.
186 R 1 CR. In National Credit Regulator v Nedbank (GNP) supra 313, Du Plessis J indicated that the role of the debt counsellor is that of a neutral functionary who does not seek to advance any particular party's case
187 National Credit Regulator v Nedbank (GNP) supra 312.
188 The NCA in s 86(3)(a) read with sch 2 CR, currently only provides for an application fee of R50. One of the initial concerns after commencement of the NCA was that the prescribed fee is so dismal that no one would be willing to practise as a debt counsellor. As a result, a recommended cost and fee structure was drafted by DCASA which was endorsed by the NCR. Currently debt counsellors are bound to this fee structure as a condition of their registration as debt counsellors.
189 S 74H MCA and par 2 5 above.
190 S 74S MCA and par 2 7 above.
191 Ss 88(4) & (5) NCA and par 3 3 6 2 above.
192 See eg the facts in Stander v Erasmus supra.
193 It is currently a condition of registration for debt counsellors that they only use PDAs accredited by the NCR.
194 One of the abuses noted by Boraine 2003 De Jure 231 regarding administration orders, is the evading by non-attorneys of the requirements of the Act pertaining to security by forming arrangements with attorneys to pose as the appointed administrators - cf the facts in African Bank Ltd v Weiner (C) supra.
195 Eg the facts in Stander v Erasmussupra.
196 S74J(1) MCA.
197 S 74F(3) MCA.
198 S 74F(4) MCA.
199 S 74B(e) MCA and Madari v Cassimsupra 38.
200 Ss 86(7)(c), 86(8)(b) & 87 NCA.
201 National Credit Regulator v Nedbank (GNP) supra 310, 320.
202 S 74F(3) MCA.
203 S 74A(5) MCA.
204 Ito s 74A(5) MCA the application may be delivered to creditors personally or by registered post.
205 National Credit Regulator v Nedbank (GNP) supra.
206 National Credit Regulator v Nedbank Ltd supra312, 320-321.
207 See also Van Heerden in Scholtz par 11 6.
208 S74A MCA discussed in par 2 2 above.
209 Draft r 3 Debt Counselling Regulations published for comment in GN 503 in GG 32229 of 2009-03-15 endeavoured to address this issue by providing that the debt counsellor must lodge his or her proposal in Form B which must be filed as soon as it has been delivered to the consumer and credit providers. Such proposal must be substantiated by a written statement which must contain the information set out in sub-r 2. The credit providers affected must be informed that they may oppose the proposal by filing a notice in the form of Form C with the clerk of the court and delivering a copy thereof to the debt counsellor. Ito draft r 3(4) this notice must be filed and delivered within 15 days after the proposal was served on the credit provider, that it must be substantiated by a written statement containing the credit provider's objections to the proposal and that it must be accompanied by a certified copy of the relevant agreement and relevant documentation intended to be used as evidence to substantiate the objections. See also Roestoff et al 2009 PER 274.
210 S 74(1)(a) & (b) MCA.
211 National Credit Regulator v Nedbank (GNP) supra 310.
212 R 55(1)(k)(ii) MCR.
213 S 74B(e) MCA.
214 It is unlikely that the high court would be approached for debt restructuring but in such event it is submitted that r 6 Uniform Rules of the High Court will have to be used.
215 See Wesbank v Schroder, Stolz v Wesbank and Schroder (unreported case numbers EL1450/2011, ECD2485/2011).
216 Supra par 16.
217 Par 4 1 1.
218 S 74(1) MCA.
219 S 74(1)(b) MCA and see also s 74C(1)(b)(v) MCA.
220 It is submitted that the high court will be able to make such an order in terms of its inherent jurisdiction. Magistrates' Courts are creatures of statute and will not be able to do anything not specifically permitted by either the MCA or NCA.
221 S 87(1)(a) NCA.
222 Cf Standard Bank v Panayiotts supra par 77 and the discussion in par 3 2 above.
223 S 74U MCA.
224 Cf the position in the USA where the debtor, subject to certain exceptions, receives a discharge of all unsecured debt after completion of a Chapter 13 repayment plan - see s 1328(a) Bankruptcy Code.
225 S 86(7)(c)(ii) NCA.
226 See the discussion in par 4 5 above.
227 See in general iro Chapter 13, Ferriel & Janger Understanding Bankruptcy (2007) 641 et seq.
228 S 1325(a)(5) Bankruptcy Code.
229 S 1322(b)(2) Bankruptcy Code.
230 Ibid.
231 S 1322(c)(1) Bankruptcy Code.
232 See s 74C(2) MCA and the discussion in par 2 4 above.
233 See s 74Q MCA and the discussion in par 2 8 above.
234 An administration order may also not be granted if it is proved that any administration order was rescinded because of the debtor's non-compliance therewith, unless the debtor proves that his non-compliance was not wilful - s 74B(5) MCA.
235 In Firstrand Bank v Olivier 2009 3 SA 353 (SE) it was held that the purpose of the Act is, inter alia, to provide for the debt reorganisation of a person who is over-indebted, thereby affording that person the opportunity to survive the immediate consequences of his financial distress and achieve a manageable financial position.
236 See also iro administration African Bank v Weiner (C) supra 575 and the discussion in par 2 2 above.
237 See s 74R MCA with regard to administration. Debt review also does not, according to case law, create a bar to sequestration. In Investec Bank Ltd v Mutemeri 2010 1 SA 265 (GSJ) 274-277, Trengove AJ held that an application for compulsory sequestration did not amount to debt enforcement ito the NCA (see s 130(1) NCA) and therefore did not preclude the applicant creditor from proceeding with an application for sequestration. See also Firstrand Bank Ltd v Evans 2011 4 SA 597 (KZD) and Naidoo v Absa Bank supra confirming the decision in Mutemeri and the discussion of Naidoo by Maghembe "The appellate division has spoken - sequestration proceedings do not qualify as proceedings to enforce a credit agreement under the National Credit Act 34 of 2005: Naidoo v Absa Bank 2010 4 SA 597" 2011 PER 171. See also Boraine & Van Heerden "To sequestrate or not to sequestrate in view of the National Credit Act 34 of 2005: A tale of two judgments" 2010 PER 84 for a detailed discussion of the Mutemeri case. When applying for voluntary surrender ito the Insolvency Act and where a large portion of a debtor's debt consists of credit agreements in terms of the NCA, it has also been held that such debtor should explain that he or she has considered debt review as a possible solution for his or her debt problems - see Ex parte Ford2009 3 SA 376 (WCC). For a detailed discussion of Ford see Van Heerden & Boraine "The interaction between the debt relief measures in the National Credit Act 34 of 2005 and aspects of insolvency law" 2009 PER 161.
238 12 of 1976.
239 See Volkskas Bank v Pietersen supra 316; Fortuin v Various Creditors supra 573; Ex Parte August supra 271.
240 Firstrand Bank Ltd v Evans supra but cf FirstRand Bank Ltd v Heinrich Janse van Rensburg; FirstRand Bank Ltd v Azelle Janse van Rensburg (unreported case numbers 3846/2011; 3847/2011) (ECPP) where the court ruled that the initiation of debt review by the debtor (per se) does not amount to such an act of insolvency. See also Van Heerden in Scholtz par 11 7.
241 S 88(3) NCA.
242 S 88(3)(b)(ii) NCA.
243 Ss74G(7)-(9) MCA read with s 74H(4) MCA and the discussion in par 2 5 above.
244 Ito s 86(4)(b)(ii) NCA read with r 24(2) CR, a debt counsellor is obliged to notify all registered credit bureaux of an application for debt review. Credit bureaux are regulated by the NCA - see ss 70-73.
245 Par 4 10 above.
246 Par 1 above and Boraine 2003 De Jure217 230 et seq.
247 Par 3 3 2 2 above.
248 Par 4 10.
249 Par 4 4 above.
250 Par 4 above.
251 See s 86(2) NCA and the discussion in par 4 1 1 above.
252 Par 4 1 1 above.
253 Par 4 1 2 above.
254 Par 2 2 & 2 3 above.
255 Par 4 7 1 & 4 7 2.
256 See Wesbank v Schroder referred to in par 4 7 2 above.
257 See the discussion in par 4 7 1 above.
258 Supra.
259 These issues include the uncertainties pertaining to the person who has locus standito approach the court for debt restructuring, jurisdiction and the manner of service of the application - see par 4 1 2, 4 1 3 & 4 6 2 above.
260 Par 2 2, 2 3 & 4 7 2 above.
261 See s 88(5) NCA and the discussion in par 4 3 above.
262 Par 4 7 3 above.
263 See with regard to administration s 74C(1)(b)(i), 74K(1) & (2) MCA and the discussion in par 2 4 & 4 7 3 above.
264 Par 4 7 3 above.
265 See s 74Q MCA and the discussion in par 2 8 & 4 8 above. See also Fortuin v Various Creditors supra 576.
266 See s 74P(1) MCA and the discussion in par 4 11 above.