Williams v Shackleton Credit Management (Pty) Ltd (10771/2020) [2023] ZAWCHC 279; 2024 (3) SA 234 (WCC) (10 November 2023)

The case involves an application for the rescission of a default judgment under rule 42(1)(a) and the common law. The applicant, Ryan Williams, entered into a loan agreement with Direct Axis in October 2016. He chose an address in Philadelphia, Western Cape as the place where he would receive legal notices under the agreement. However, he moved to the Eastern Cape in 2018 without updating his address. In 2019, Direct Axis ceded its rights under the agreement to the respondent, Shackleton Credit Management, based in Pietermaritzburg.

Shackleton sent a notice under section 129(1)(a) of the National Credit Act to Williams in July 2020, informing him of his default and providing an opportunity to remedy it. However, the notice did not reach Williams and was last recorded as "in transit" at a post office in KwaZulu-Natal. Shackleton then issued a summons against Williams in August 2020, which was served at his chosen address. The return was provided to a Mrs. West, who informed the Sheriff that Williams no longer resided there. Williams claims he was unaware of the summons.

In January 2021, Shackleton applied for a default judgment, which was granted by the Registrar in February 2021. Williams only became aware of the action and default judgment in April 2022 when his bank contacted him about an attachment order on his account. He then instructed attorneys to investigate the matter and obtained the court file. Correspondence between the parties' attorneys followed, with Williams disputing the amount owing and proposing a settlement, which was not accepted.

Williams argues that the judgment was erroneously granted due to improper service and the failure to deliver the section 129 notice. He also raises defenses related to prescription, jurisdiction, and the authority of Direct Axis to cede the credit agreement. Shackleton accepts the delay in filing the application but opposes rescission, arguing that Williams' defenses are not raised in good faith.

The court first sets out the principles of rescission under rule 31(2)(b), rule 42(1)(a), and the common law, highlighting the differences in requirements and the extent of discretion. It then addresses Williams' arguments, dismissing the prescription, jurisdiction, and cession defenses. The key issue is the failure to deliver the section 129 notice.

The court analyses the requirements for delivering a section 129 notice under the National Credit Act and relevant case law. It concludes that Shackleton failed to comply with the delivery requirements, and this constitutes a valid ground for rescission under rule 42(1)(a). The court discusses conflicting judgments on whether rescission is mandatory or discretionary in such cases and expresses sympathy for a pragmatic approach. However, it ultimately grants rescission, holding that the judgment was erroneously sought and granted due to the failure to establish proper delivery of the notice. The court also notes that it would have exercised its discretion to grant rescission if it had such discretion. Each party is ordered to bear their own costs.

In this case, the court found that the judgment was erroneously granted because the respondent (the credit provider) failed to comply with the requirements of Section 129 of the National Credit Act (NCA) by not properly delivering the notice to the applicant (the consumer). The court held that proper delivery of the notice is a mandatory requirement before legal proceedings can be commenced, and non-compliance with this requirement invalidates the judgment.

Additionally, the court addressed the question of whether rescission under Rule 42(1)(a) is mandatory or discretionary when a judgment is found to be erroneously granted. The court expressed sympathy for a pragmatic approach, which considers the practical value of rescission and the potential for delay without a substantive defense. However, the court ultimately held that it had no choice but to rescind the judgment, as the failure to deliver the notice was an error that precluded the grant of default judgment.

Therefore, the ratio decidendi of this case is that non-compliance with the mandatory requirements of the NCA, specifically the proper delivery of a notice under Section 129, renders a default judgment erroneously granted and provides grounds for rescission under Rule 42(1)(a).

Here is a summary of the case law referenced in the provided judgment:
1. Sebola and Another v Standard Bank of South Africa Ltd and Another [2012] ZACC 11; 2012 (5) SA 142 (CC); 2012 (8) BCLR 785 (CC): In this case, the Constitutional Court held that a credit provider must demonstrate that the Section 129 notice actually reached the correct post office. The court upheld the appeal for rescission of the judgment as the credit provider had not complied with the delivery requirements.
2. Kubyana v Standard Bank of South Africa Ltd [2014] ZACC 1; 2014 (3) SA 56 (CC); 2014 (4) BCLR 400 (CC): The Constitutional Court clarified that a credit provider must establish that the Section 129 notice was delivered by registered post to the post office that would send a delivery notice to the consumer.
3. Kgomo and Another v Standard Bank of South Africa and Others 2016 (2) SA 184 (GP): Dodson AJ held that non-compliance with Section 129 was not merely a dilatory defense but a required procedure. The failure to deliver the notice meant that the judgment was erroneously sought, and rescission was granted.
4. More v BMW Financial Services [2018] ZAGPPHC 583: Mabuse J followed the approach in 'Kgomo' and granted rescission due to the credit provider's failure to deliver the Section 129 notice.
5. African Bank Ltd v Myambo NO and Others 2010 (6) SA 298 (GNP): This case aligns with the approach that compliance with Section 129 is compulsory, and no judgment can stand without proper delivery of the notice.
6. Firstrand Bank Ltd t/a First National Bank v Moonsammy t/a Synka Liquors 2021 (1) SA 225 (GJ): This case supports the view that compliance with Section 129 is essential, and non-compliance invalidates the judgment.
7. Wesbank v Ralushe 2022 (2) SA 626 (ECG): The court in this case followed the approach that compliance with Section 129 is compulsory, and non-compliance leads to the conclusion that the judgment was erroneously sought and granted.
8. Benson and Another v Standard Bank of South Africa (Pty) Ltd And Others 2019 (5) SA 152 (GJ): Unterhalter J held that consumers were not entitled to rescission if they received the Section 129 notice before the hearing, even if they had not received it prior to the service of summons.
9. Absa Bank Ltd v Petersen 2013 (1) SA 481 (WCC): Binns-Ward J refused rescission, holding that the mere fact that the judgment might not have been lawfully granted does not provide good cause for rescission. The consumer had not established that the infringement of their rights was material.
10. Buys v Changing Tides 17 (Pty) Ltd NO and Others [2013] ZAWCHC 150: Ndita J granted rescission under Rule 42(1)(a) due to the failure to produce a track and trace report indicating delivery of the Section 129 notice to the relevant post office. The judgment distinguished 'Petersen' on the basis of the rule relied on and the absence of good cause in 'Petersen'.