Can Registrars grant default judgments in terms of the National Credit Act?

Financial institutions will be breathing a sigh of relief after a High Court decision on whether a Registrar is entitled to grant a default judgment in NCA-related matters.

Some divisions of the High Court have issued practice directives relating to the granting of default judgments by Registrars. In some divisions, default judgments involving credit agreements are not being considered by Registrars, but are referred to open court. There are other divisions in which default judgment applications relating to credit agreements are being determined by Judges of the High Court in Chambers (after the Registrar has considered the application and is satisfied that default judgment should be granted), while in other divisions, default judgments relating to credit agreements are being granted by the Registrar.

Despite section 23 of the Superior Courts Act, 2013 vesting a Registrar with powers to grant and enter default judgment as long as such judgments are granted in line with rule 31(5)(a) of the Uniform Rules of Court, some courts have interpreted these provisions differently:

The Pretoria High Court, in Ruylyn Du Plessis v First Rand Bank Limited t/a Wesbank, held that there is no bar to the Registrar granting a default judgment for a National Credit Act, 2005 (“NCA”) related matter;
On the other hand, the Pretoria High Court in Theu v First Rand Auto Receivables (RF) Limited and Another found that Registrars do not have the power to grant a default judgment in NCA-related matters because section 23 of the Superior Courts Act, 2013 cannot be interpreted to mean that the Registrar is empowered to do so;
In Donald Modiegi Seleka v Fast Issuer SPV (RF) Limited and Another, the Pretoria High Court held that the Registrar is not empowered to grant a default judgment where the Registrar has been prohibited to do so in terms of legislation, such as section 130 of the NCA;
In Xulu v Standard Bank Of South Africa Limited And Others, the Pietermaritzburg High Court rescinded a default judgment on the basis the Registrar did not have the powers to grant them under section 130(3) of the NCA. In Xulu, the court held that a default judgment granted by the Registrar regarding a NCA matter is null and void; and
The Limpopo High Court, in Ramakuela v FirstRand Auto Receivable (RF) Limited, held that the Registrar had usurped their powers by granting default judgments and said it was bound by the Constitutional Court’s judgment in FirstRand v Nkata.

In light of these conflicting judgments, the Mpumalanga High Court constituted a full bench of three judges to consider whether a Registrar is entitled to grant a default judgment in NCA-related matters.

The full court held that a default judgment granted and entered by the Registrar is deemed to be a judgment of a court of the division concerned. A Registrar of a court fulfills a quasi-judicial function. Rule 31(5)(b) sets out the process that needs to be followed in respect of default judgments and safeguards are provided to ensure that all relevant information is gathered before a decision is made. Further, the powers of a Registrar to grant default judgment is not a final determination that cannot be appealed against. The Uniform Rules of Court provide for reconsideration, thereby allowing oversight by the court.

In arriving at its finding, the full bench remarked that if the Registrar was not empowered to do so, the costs of bringing a substantive application for default judgment in NCA-related matters would burden financially distressed consumers and it would defeat the purposes of the NCA, which includes the promotion of a responsible credit market.

The court also considered the impact of section 130(3) of the NCA. The court held that the granting of default judgment for NCA-related matters can only be done once there has been procedural compliance with the NCA. Section 130(3) expressly provides that the court would only proceed to consider an application for default judgment after being satisfied that:

There has been compliance with sections 127, 129 or 131 (to the extent that any of those sections are applicable);
There is no matter arising under the credit agreement that is pending before the Tribunal that would result in an order affecting issues to be determined by the court; and
The credit provider has not approached the court (as set out in the NCA).

Bearing in mind the safeguards provided for in the NCA, the full bench held that a Registrar is empowered to consider requests for default judgment, and if satisfied, that the procedure set out in section 130(3) of the NCA has been complied with, the Registrar may grant a default judgment. Any default judgment granted and entered by the Registrar is deemed to be a judgment of a court of that division of the High Court.

In the concluding remarks, the court quoted, with approval, the following from the Banking Association South Africa’s counsel:

“To cause every default judgment application which deals with procedural issues to be considered in an open court, would amount to turning judges into credit policemen and women and this is a complete waste of a judge’s time.”

According to the court, a Registrar is empowered to grant default judgment in respect of NCA-related matters. It is yet to be seen whether other divisions agree with the approach adopted by the full bench. We certainly hope so as it will decrease the burdens on our very busy judges and default judgment applications will be more cost-effectively dealt with.

Aslam Moosajee

Dispute Resolution | Executive

amoosajee@ENSafrica.com

Shenaaz Munga

Dispute Resolution | Senior Associate

smunga@ENSafrica.com