Can A Court Amend Interest By Consent?
After the somewhat disastrous Nedbank V Jones ruling, in which a Western Cape court ruled that interest rates in a debt review matter can’t unilaterally be changed but then seemed to go further and say no rates may be changed at all, no matter what, getting debt review matters heard in the Western Cape has become increasingly difficult.
‘Recently, more and more Cape courts have refused to rule on debt review matters where all parties have agreed to reduced interest rates to speed up consumer repayments’
One such matter was presented to the court by well-known Debt Counsellors, Debt Therapy. The case did not go well due to the issue of changed interest rates (which all the credit providers had agreed to). As a result, the matter was taken on appeal. This court case has become the focus of a lot of attention as it may help courts across the country figure out how to handle these matters and Debt Counsellors whether to include information on interest rate agreements in court papers or not.
The appeal was heard on the 2nd of June 2017 in Court 8, in the Western Cape High Court. Being such a serious case two Judges presided over the matter which will probably be reported on (meaning that other courts can refer to it and it can be used as a precedent in other cases).
Kim Armfield and Quintin Zimmermann were the appointed attorneys for the applicant (Debt Therapy). Surprisingly for such a big case, no Counsel was used during arguments. It turns out that unfortunately, counsel withdrew very last minute, the evening before the case. This, however, would not stop the matter from being heard.
Kim Armfield dealt with the Introduction and Summary with Case Law whilst Mr. Quintin Zimmermann attended to the Legislation, some other Case Law as well various NCR Circulars. Both of their arguments aimed to present motivation for courts to be able to rule on debt review matters where all parties agreed to rate changes.
‘their arguments aimed to present motivation for courts to be able to rule on debt review matters where all parties agreed to rate changes’
The main argument presented was that a Magistrate may amend the interest rates where credit providers have consented to the variation and within the scope of the debt review process. The legal team tried to steer away from contract law as they were not implying a ‘novation‘ or amendment of the original credit agreement (and the Judge confirmed that arguing such a point would not succeed in this case anyway).
The legal team also made it clear that the High Courts were correct in their judgments of Norris, Jones and Adams, but the facts that were put before the court in this appeal were significantly different, in that, in this particular case (unlike those) consents and acceptances were given by the credit providers asking that rates be reduced. In those other cases, there had been issues with the courts perhaps just changing interest rates without the credit providers having suggested or agreed to this.
‘The legal team relied on the Rijkheer and Van der Hoven declarators to assist in their arguments’
The legal team relied on the Rijkheer and Van der Hoven declarators to assist in their arguments. These rulings are in favour or rate reductions by consent. They further reasoned on the very purpose of the NCA and the interpretation thereof together with all the debt review sections. Without interest rate reductions simply reducing payment amounts monthly would cause most accounts under debt review to escalate to the point of NCA Section 103(5) induplum. This could mean that consumers would, in many cases, pay longer than where interest rates are reduced by credit providers – who say they would like to see consumers rehabilitated within 60 months if possible.
Also used were the NCR issued industry circulars which helped clarify to the court that Credit Providers (including banks like Nedbank) and Debt Counsellors want to work together and create a solution to the over indebtedness of consumers which includes reducing the interest rates by consent.
Now We Wait
After a case like this, the judges will take their time to make a ruling. The outcome will affect what other courts do when faced with changes to interest rates showing in the prayers in a court application for debt review. Debtfree will be sure to report on the outcome once the ruling is made.