Allied Steelrode (Proprietary) Limited v Dreyer and Another

The appellant, Allied Steelrode (Pty) Ltd, advanced an informal loan of R15 million to the first respondent, Paul Dreyer, to enable him to buy out a business partner. The loan arose from a close personal relationship between the parties and was initially interest-free, agreed orally and sealed by a handshake. At the respondent’s request, the terms were later reduced to writing in an acknowledgment of debt (AOD) signed on 1 October 2014, which provided that interest would accrue only in the event of default (mora). When repayment was not made, the appellant sued on the AOD. The respondents admitted the AOD but raised a defence that the loan and AOD were subject to the National Credit Act 34 of 2005 (NCA), rendering the agreement unlawful and void due to the appellant’s lack of registration as a credit provider. The High Court separated issues under rule 33(4) and held that the transaction was subject to the NCA. The appellant appealed to the Supreme Court of Appeal.

The appeal succeeded with costs. The High Court’s order was set aside and replaced with an order declaring that the loan and the acknowledgment of debt were not subject to the National Credit Act 34 of 2005, and that the costs of determining the separated issue were to be paid by the defendant.

This case clarifies the application of the National Credit Act to informal loans arising from personal or non-commercial relationships. It confirms that transactions not concluded at arm’s length fall outside the NCA, particularly where no interest is charged other than mora interest. The judgment also provides important guidance on the proper use of rule 33(4) separations of issues and cautions against piecemeal litigation that delays the final resolution of disputes.