Kaknis v Absa Bank Limited & another

The appellant, Mr Pantelis Kaknis, concluded ten instalment sale agreements with Absa Bank Limited (Absa) between March 2006 and March 2008 for various movable assets (motor vehicles and trailers), and one instalment sale agreement with MAN Financial Services SA (Pty) Ltd (MFS) for a 2007 Man truck. The appellant initially paid regularly but later experienced financial difficulties. On 12 June 2010, he obtained a debt review order from the Magistrate's Court under section 86 of the National Credit Act 34 of 2005. His last payment was made on 8 July 2011, after which the debts became prescribed on 8 July 2014 under section 11(d) of the Prescription Act 68 of 1969 (three years having lapsed). On 3 October 2014, after prescription, the appellant concluded an acknowledgement of debt in favour of the respondents, acknowledging indebtedness of over R2.7 million to Absa and R702,496 to MFS. He failed to pay under this agreement. On 30 April 2015, the respondents issued summons claiming cancellation of the sale agreements, return of the assets, and leave to prove damages. The appellant opposed summary judgment applications, arguing that the debts had prescribed and that section 126B(1)(b) of the National Credit Act (inserted by National Credit Amendment Act 19 of 2014, effective 13 March 2015) precluded collection or re-activation of prescribed debt where the consumer would reasonably have raised the defence of prescription had they been aware of it.

• Whether section 126B(1)(b) of the National Credit Act 34 of 2005 (as inserted by the National Credit Amendment Act 19 of 2014) applies retrospectively
• Whether section 126B(1)(b) invalidated the acknowledgement of debt agreement entered into on 3 October 2014 before the section came into effect on 13 March 2015
• Whether the presumption against retrospective operation of legislation was rebutted by the intention of the legislature or by Schedule 3 of the National Credit Act
• Whether the respondents' claims had prescribed and whether the acknowledgement of debt revived prescribed debts

The appeal was dismissed with costs. The Supreme Court of Appeal upheld the decision of the Eastern Cape Local Division of the High Court (Msizi AJ) granting summary judgment in favour of the respondents, Absa Bank Limited and MAN Financial Services SA (Pty) Ltd.

Section 126B(1)(b) of the National Credit Act 34 of 2005 (as inserted by the National Credit Amendment Act 19 of 2014 and effective from 13 March 2015) has no retrospective operation and does not invalidate agreements entered into before its commencement. The strong presumption against retrospective operation of legislation applies: legislation is presumed not to take away or impair vested rights unless the legislature clearly intended it to have that effect. Retrospective legislation is that which invalidates what was previously valid or affects transactions completed before the new statute came into operation. Where there is no clear indication in the legislation of an intention to operate retrospectively, the presumption is not rebutted. The transitional provisions in Schedule 3 of the National Credit Act merely make specified provisions of the Act applicable to pre-existing credit agreements and do not provide for retrospective operation of amendments to those provisions. An agreement that validly revived a prescribed debt before the commencement of section 126B(1)(b) remains valid and enforceable notwithstanding the subsequent commencement of that section.

Shongwe JA in his dissenting judgment observed that while there is a strong presumption against retrospective application of legislation, this presumption is not inflexible and must yield to the intention of the legislature as it emerges from the statute. He noted that the purposes of the National Credit Act include protecting consumers, particularly naive and vulnerable ones, and that section 126B was introduced to cure situations where credit providers benefited from prescribed debts because consumers were unaware of the defence of prescription. He suggested that interpreting section 126B as not applying retrospectively would create differentiation between classes of consumers and would be at odds with the Constitutional Court's emphasis on consumer protection in cases such as Sebola, Kubyana, and Nkata. Willis JA in his concurring dissenting judgment observed that the principle against retrospective operation of law is not absolute, and that under the constitutional dispensation, the question is whether it is better to set consumers free from prescribed debt or to allow credit providers freedom to revive such debts through acknowledgement. He was persuaded that reading the National Credit Act comprehensively (ex visceribus actus) required coming down in favour of the consumer rather than the credit provider. Van der Merwe JA in the majority judgment noted (obiter) that it was not clear that prescription of the debts and invalidity of the acknowledgement of debt would constitute a defence to claims for delivery of the assets, since it does not follow from prescription of debts that the appellant was entitled to retain possession of the assets.

This case is significant in South African consumer credit law as it authoritatively determined that section 126B(1)(b) of the National Credit Act 34 of 2005, which prohibits collection or re-activation of prescribed debts where consumers would reasonably have raised prescription as a defence had they been aware of it, does not apply retrospectively. The judgment reaffirms the strong presumption against retrospective operation of legislation, particularly where such retrospective application would nullify valid agreements and take away vested rights. The case clarifies the limits of consumer protection under the National Credit Act and demonstrates that while the Act aims to protect consumers, this protection must be balanced against the rights of credit providers and the principle of legal certainty. The case provides important guidance on statutory interpretation, particularly regarding the operation of transitional provisions (Schedule 3) and the requirement for clear legislative intention before giving retrospective effect to new provisions. The split decision (3-2) reflects the tension between consumer protection objectives and established principles of statutory interpretation and the protection of vested rights.