Ratlou v Man Financial Services SA (Pty) Ltd

During 2013, Mr Ratlou acquired PNT (a registered company) and became its director. PNT was leasing five heavy-duty trucks and trailers from MAN. On 24 October 2013, Mr Ratlou executed a deed of suretyship in favour of MAN to secure the lease agreements. In December 2014, PNT and MAN concluded seven new rental agreements for heavy-duty trucks and trailers. PNT defaulted on monthly rentals, and on 30 April 2015, MAN repossessed the seven trucks and trailers. The outstanding amount was R4,915,043.98. After selling the trucks and crediting the proceeds to PNT's accounts, a shortfall of R4,400,000 remained. On 28 September 2015, MAN, PNT and Mr Ratlou concluded a settlement agreement (acknowledgment of debt) in relation to the shortfall, providing for payment in 60 consecutive monthly instalments with interest. The parties defaulted on payment dates. On 28 July 2016, MAN instituted proceedings against PNT and Mr Ratlou for payment based on the settlement agreement and suretyship. The High Court found that the settlement agreement constituted a new credit agreement under the NCA, and that MAN had failed to comply with section 129 of the Act. PNT went into liquidation. Mr Ratlou was ordered to pay but MAN was ordered to first comply with the NCA provisions. Mr Ratlou appealed against the declaration that the settlement agreement was an order of court, and MAN cross-appealed against the finding that the NCA applied.

• Whether a settlement agreement constituted a credit transaction in terms of the National Credit Act 34 of 2005 (NCA) when the underlying lease agreements and suretyship were excluded from the NCA
• Whether section 8(4)(f) of the NCA should be interpreted literally or purposively
• Whether MAN was obliged to comply with section 129 of the NCA before enforcing the settlement agreement
• Whether the High Court could competently make the settlement agreement an order of court when this relief was not sought

1. The appeal was dismissed with costs, including costs of two counsel. 2. The cross-appeal succeeded with costs, including costs of two counsel.

Where the underlying causa or transaction that gives rise to a settlement agreement does not fall within the ambit of the National Credit Act 34 of 2005, the settlement agreement itself does not constitute a credit transaction as defined in section 8(4)(f) of the NCA, notwithstanding that the settlement agreement provides for deferred payment with interest. The NCA must be interpreted purposively in accordance with section 2, giving effect to the purposes set out in section 3, rather than literally. A literal interpretation of section 8(4)(f) that would bring all settlement agreements providing for deferred payment and interest within the NCA would produce absurd results that could not have been intended by the legislature and would be inimical to the purposes of the Act. The settlement agreement remains linked to and interdependent with the underlying causa. If the underlying lease agreements and suretyship are excluded from the NCA as large transactions concluded with a corporate entity, the compromise of those obligations through a settlement agreement cannot convert the relationship into one governed by the NCA.

The Court noted, without deciding definitively, that MAN's alternative argument that the settlement agreement was a credit guarantee to which the NCA did not apply (as stated in Shaw v McKintosh 2019 (1) SA 308) would also have merit. The Court observed that the unintended conversion of a non-consumer/non-credit provider relationship into one governed by the NCA would have a chilling effect on the settlement of disputes. The Court commented that parties who were never credit providers, such as a once-off lessor, would suddenly find themselves unable to enforce settlement agreement terms for want of registration or due to failure to assess a lessee for creditworthiness. The Court indicated that on a literal interpretation, a settlement agreement concluded in relation to a delictual claim would fall within the ambit of the NCA, which could never have been the legislature's intention. The Court noted that PNT pleaded that the rental agreements were subject to a resolutive condition based on an oral agreement relating to a supply agreement with ASA Metal/Dilakong Chrome Mine, but this defence was not determinative of the issues on appeal.

This case is significant in South African credit law as it establishes important principles regarding the application of the National Credit Act to settlement agreements. The judgment clarifies that the NCA should not be interpreted so broadly as to encompass settlement agreements where the underlying transaction or causa would not itself have been governed by the Act. The case confirms that courts must adopt a purposive interpretation of the NCA that gives effect to its stated purposes of promoting fair credit markets and protecting consumers, rather than a literal interpretation that would lead to absurd results. The decision protects the efficacy of settlement agreements and prevents the unintended consequence of converting non-credit provider/non-consumer relationships into ones governed by the NCA merely because parties agree to deferred payment terms in settling a dispute. The case provides important guidance on the interpretation of section 8(4)(f) of the NCA and reinforces the interdependence between settlement agreements and their underlying causa. It contributes to a line of authority (including Grainco, Hattingh, and Ribeiro) that takes a contextual and purposive approach to determining the scope of the NCA.