In the High Court of South Africa s4

IN THE HIGH COURT OF SOUTH AFRICA (EASTERN CAPE - GRAHAMSTOWN)

Case No.: 50/2010

In the matter of the Appeal of:

RAYNARD EDWARD McLAREN Appellant and

PAUL CHRISTIAN BADENHORST First Respondent BAYPORT FINANCIAL SERVICES Second Respondent CAPITEC BANK Third Respondent WESBANK Fourth Respondent CREDIT WORX Fifth Respondent ELANDRE POTGIETER & ASSOCIATES Sixth Respondent EAST CAPE DEBT ADMIN Seventh Respondent LIFE LINE FINANCE Eighth Respondent MFC Ninth Respondent

HEADS OF ARGUMENT BY AMICUS CURIAE

1 INTRODUCTION

1. The Appellant in this appeal is a registered debt counsellor in terms of

section of the National Credit Act 34 of 2005 (hereinafter referred to as

“the NCA”).

2. The Appellant referred this matter to the Magistrates’ Court for the

District of Port Elizabeth, seeking an order:

2.1 declaring the First Respondent to be over-indebted in terms of

section 79 of the NCA; and

2.2 that the financial obligations of the First Respondent be re-

arranged as contemplated in section 86(7)(c)(ii) of the NCA.

3. The orders sought were refused by the court a quo on the basis that the

court a quo lacked the jurisdiction required to entertain the matter. It is

against this judgment that the Appellant appeals.

4. The First Respondent is the consumer seeking to have his financial

obligations re-arranged. The remaining respondents are all credit

providers who have extended credit to the First Respondent.

2 THE DEBT COUNSELLOR AS APPLICANT IN PROCEEDINGS

CONTEMPLATED IN TERMS OF SECTION 86(8)(b) OF THE NCA

5. If, upon receipt of an application by a consumer to have him- or herself

declared over-indebted, a debt counsellor concludes that the consumer

is, in fact, over-indebted, then the debt counsellor, in terms of section

86(7)(c) “…may issue a proposal recommending that the Magistrate’s

Court…” make an order declaring that one or more of the consumer’s

credit agreements are reckless or re-arranging the consumer’s financial

obligations in the manner specified in the section.

6. Section 86(8)(b) thus requires a debt counsellor, having reasonably

concluded that the consumer is over-indebted, to refer the matter to the

Magistrates Court. No provision is made in the NCA for the manner in

which this recommendation is to be placed before the magistrates’ court

or the procedure to be adopted by the magistrates’ court upon receipt of

such a recommendation.

See: National Credit Regulator v Nedbank Ltd 2009 (6) SA 295 (GNP)

at 320D

7. In this regard is has been held that, upon a proper interpretation of the

relevant sections, section 86(8)(b) applies in the circumstances

contemplated in section 86(7)(c). Further, when section 86(7)(c) applies,

3 the proper procedure to be followed by the magistrates’ court is that set

out in section 87 of the NCA.

at 304I – 305B and 320D – F

8. A determination that the consumer is over-indebted (section 86(7)(c)) is

made by a debt counsellor pursuant to the consumer applying, in terms

of section 86(1) of the NCA, to the debt counsellor and not to the

magistrates’ court. It has been held that the referral of a matter to the

magistrates’ court in terms of section 86(8) (and in particular a referral in

terms of section 86(8)(b)) constitutes an extraordinary procedure created

by the NCA. That it is extraordinary is evidenced by the fact that the

matter is referred to the magistrates’ court by a third party, namely the

debt counsellor, and as a result, the consumer cannot be said to be

dominus litis.

at 309B – F

9. As the debt counsellor acts as a pro forma applicant, it is submitted that

it flows logically therefrom that the debt counsellor is also the proper

Appellant in this matter.

4 THE CORRECT MAGISTRATE’S COURT

10.The rationale underlying jurisdiction is to be found in the doctrine of

effectiveness which provides that a court has jurisdiction to entertain a

matter if that court has power to give effect to the order sought. This has

led to the establishment of the maxim actor sequitur forum rei as the

general rule with regard to the bringing of actions. This rule postulates

that the plaintiff ascertains where the defendant resides, goes to his

forum and serves him with summons there.

See: Sciacero & Co v Central SAR 1910 TPD 119 at 121

Bisonboard Ltd v Braun Woodworking Machinery (Pty) Ltd 1991

(1) SA 482 (A) at 499E – F

11.From the judgment of the court a quo it was “common cause” that, at the

time of the institution of the Application, none of the Respondents were

resident within the jurisdiction of the court a quo and that the cause of

action did not arise within the jurisdiction of the court a quo.

See: Record 19 – 21 at page 23

12.Presumably this reference to residence in respect of the Second to Ninth

Respondents means that their principle places of business or registered

offices are not located within the jurisdiction of the court a quo.

5 13.In this regard it is submitted that the Magistrates’ Court having

jurisdiction over the person of the consumer (in this matter the First

Respondent) in terms of section 28(1)(a) of the Magistrates’ Court Act 32

of 1944 would be the court with jurisdiction.

See: National Credit Regulator v Nedbank Limited 2009 (6) SA 295

(GNP) at 314B – C

14.This is also in keeping with the common law principles relevant to

jurisdiction and outlined in paragraph 10 above.

THE FIRST RESPONDENT’S CONSENT TO JURISDICTION IN TERMS OF

SECTION 45 OF THE MAGISTRATES’ COURT ACT

15.The First Respondent was not resident within the jurisdiction of the court

a quo and it is clear that the court a quo accepted that it did not possess

jurisdiction in terms of section 28 of the Magistrates’ Court Act.

See: Record 23 : 19 - 21

6 16.Despite not being resident within the jurisdiction of the court a quo, the

First Respondent, in terms of section 45(1) of the Magistrates’ Court Act,

purported to consent to the jurisdiction of the Magistrates’ Court in which

the application for a declaration of over-indebtedness and debt

rearrangement was made.

See: Record at page 12

17.It is submitted that this consent to jurisdiction does not meet the

requirements of section 45 of the Magistrates’ Court Act. Section 45

requires that consent to the jurisdiction of a Magistrates’ Court which

would not normally have jurisdiction in terms of section 28(1) must refer

specifically to particular proceedings already instituted or about to be

instituted in the court contemplated.

See: Van Heerden v Muir 1955 (2) SA 376 (A) at 379G - H

18.The Appellant, in his Founding Affidavit, fails to make the allegation that

the First Respondent’s consent was given specifically with reference to

the Application brought in the court a quo. Moreover, the consent is

undated and no reference to the date upon which it was signed is made

by the Appellant in the Founding Affidavit. Accordingly, this court is

unable to determine that the consent to jurisdiction is given specifically in

7 reference to the proceedings “about to be instituted” as such consent

may have been given at the time the First Respondent first applied to the

Appellant for debt review in terms of section 86(1) of the NCA. If this was

the case, it would be analogous to instances in which consent to the

jurisdiction of a court is given in a contract, for any proceedings that may

be instituted in terms of that contract, and such a clause does not

amount to the furnishing of consent in terms of section 45(1) of the

Magistrates’ Court Act.

See: Appellant’s Founding Affidavit paragraph 2 at page 3

Record at page 12

Van Heerden v Muir 1955 (2) SA 376 (A) at 379G - H

19.The above argument is strengthened by the fact that the heading to the

consent to jurisdiction in terms of section 45 omits reference to the First

and Fifth Respondents.

20.Additionally, the procedure by which the debt counsellor’s

recommendation is referred to the magistrates’ court is an extraordinary

procedure created by the NCA.

at 308D – F and 309B – F

8 21.As a result of this, the First Respondent is not a “defendant” as

envisaged by section 45 of the Magistrates’ Courts Act. The procedure

following the referral of a recommendation by the debt counsellor to the

magistrates’ court in terms of section 86(8)(b) in fact concerns a lis

between the consumer and his credit providers that has been referred to

the court by a third party. In fact there is no real lis between the debt

counsellor and the consumer.

at 309D – F

22.As a result, the First Respondent cannot be said to be a “defendant” as

envisaged by section 45 of the Magistrates’ Courts Act and thus cannot

consent to the jurisdiction of a particular magistrates’ court in terms of

that section.

23.Were the position otherwise, the consumer and debt counsellor would be

placed in a position to manipulate the provisions of both the NCA and

the Magistrates’ Courts Act to gain an advantage that is clearly to the

detriment of the true Respondents, namely the credit providers.

24.The Appellant argues that the court a quo possessed jurisdiction to

entertain the Application on the basis of section 28(1)(f) of the

9 Magistrates’ Court, as the First Respondent signed the consent to

jurisdiction in terms of section 45 of the Magistrates’ Court Act and as

such “appeared”.

See: Appellants Heads of Argument paragraphs 19 and 20

25.It is submitted that this is incorrect. Section 28(1)(f) of the Magistrates’

Court Act confers jurisdiction upon a court in which any Defendant “…

appears and takes no objection to the jurisdiction of the court”.

26.“ Appears” means “entering appearance” and does not refer to an

appearance in court.

See: William Spilhaus & Co (MB) (Pty) Ltd v Marx 1963 (4) SA 994 (C)

at 997D – E

Muller v Möller and Another 1965 (1) SA 872 (C) at 879B – C

and 881B – C

27.It is clear from the above that consent to jurisdiction in terms of section

45 of the Magistrates’ Act cannot constitute an appearance on the part of

the First Respondent and as a result, the court a quo did not acquire

jurisdiction in respect of the Application by virtue of section 28(1)(f).

10 IS A COURT PERMITTED TO RAISE THE QUESTION OF JURISDICTION

MERO MOTU?

28.The onus of establishing jurisdiction always rests upon the plaintiff or

applicant.

See: Malherbe v Bristown Municipality 1949 (1) SA 281 (C) at 287

Hydromar Ltd v Pearl Oyster Shell Industries Ltd 1976 (2) SA

384 (C) at 389H

29.A magistrate is entitled to raise the point of jurisdiction where it appears

ex facie the summons that the matter is beyond his jurisdiction.

See: Schmidt v The African Farms Ltd 1914 TPD 528 at 529

30.Where there has been no valid consent to jurisdiction in terms of section

45 of the Magistrates’ Court Act, and the court does not possess

jurisdiction over the First Respondent’s person in terms of section 28(1),

it is submitted that the court is entitled to raise the question of jurisdiction

mero motu.

31.This is particularly the case where the provisions relevant to jurisdiction

are manipulated in order for the debt counsellor and First Respondent to

11 obtain an advantage over the remainder of the true Respondents who

may be precluded from participating in the matter by reason of an

artificially created jurisdiction.

32.In this matter, it appears, for the reasons stated above, that the consent

to jurisidiction is, ex facie that document, invalid for the purposes of

section 45 of the Magistrates’ Court Act. Further.It was common cause in

the proceedings that the Magistrate’s Court for the District of Port

Elizabeth did not possess jurisdiction in terms of section 28(1).

33.Accordingly, it is submitted that the court a quo was entitled to raise the

question of jurisdiction mero motu.

CONCLUSION

34.Accordingly, it is submitted that the court a quo did not possess

jurisdiction either by virtue of the consent thereto in terms of section 45

or section 28(1)(f) of the Magistrates’ Act. It is further submitted that it

follows as a matter of logic and fairness that applications such as that

launched in the court a quo should be instituted in the magistrates’ court

having jurisdiction over the person of the consumer.

12 As amicus curiae:

______

EAS FORD SC

______

M L BEARD

13 LIST OF AUTHORITIES

1. Bisonboard Ltd v Braun Woodworking Machinery (Pty) Ltd 1991 (1) SA

482 (A)

2. Hydromar Ltd v Pearl Oyster Shell Industries Ltd 1976 (2) SA 384 (C)

3. Malherbe v Bristown Municipality 1949 (1) SA 281 (C)

4. Muller v Möller and Another 1965 (1) SA 872 (C)

5. National Credit Regulator v Nedbank Ltd 2009 (6) SA 295 (GNP)

6. Schmidt v The African Farms Ltd 1914 TPD 528

7. Sciacero & Co v Central SAR 1910 TPD 119

8. Van Heerden v Muir 1955 (2) SA 376 (A)

9. William Spilhaus & Co (MB) (Pty) Ltd v Marx 1963 (4) SA 994 (C)