Du Bruyn NO and Others v Karsten

Mr and Mrs Du Bruyn concluded three separate written sale agreements with Mr Karsten on 26 April 2013 to purchase his interests in three business entities for a total purchase price of R2 million. Payment was structured as a credit transaction: a deposit of R500 000, followed by monthly instalments of R30 000 over five years, with interest on the deferred amount. The Du Bruyns bound themselves as sureties and co-principal debtors and undertook to register a covering mortgage bond over their immovable property. At the time of conclusion of the agreements, Mr Karsten was not registered as a credit provider under s 40 of the National Credit Act 34 of 2005 (NCA), although the total deferred amount exceeded the prescribed threshold of R500 000. After the Du Bruyns defaulted, Mr Karsten sued for the outstanding balance. The Du Bruyns defended the action on the basis that the agreements were unlawful and void due to Mr Karsten’s failure to be registered as a credit provider at the time of contracting.

The appeal was upheld. The order of the Gauteng Division of the High Court, Pretoria, was set aside, and judgment was given in favour of the Du Bruyns.

The case authoritatively clarified that the National Credit Act applies to once-off credit transactions where the statutory threshold is exceeded. It rejected earlier High Court authority suggesting that the Act only regulates regular participants in the credit market, thereby strengthening consumer protection and promoting certainty in the interpretation of s 40 of the NCA.