SA Taxi Impact Fund (RF) (Pty) Ltd v Jacobs

The applicant, SA Taxi Impact Fund (RF) (Pty) Ltd, a registered credit provider under the National Credit Act 34 of 2005 (NCA), and the respondent, Sidney Clifford Jacobs, concluded a credit agreement on 25 April 2022 for the financing of a 2013 Toyota Quantum taxi vehicle. The total amount payable was R1,032,139.90 over 77 months, with monthly instalments of R13,404.40 linked to prime rate (initially 19.25%). Ownership remained with the applicant until full payment. Within eight months, in December 2022, the respondent applied for debt review and was found over-indebted by a debt counsellor. At that stage, he was already in arrears. The applicant provided a certificate of balance on 21 December 2022. The debt counsellor proposed a restructuring plan on 4 January 2023, which the applicant rejected on 10 March 2023, making a counter-proposal. The respondent claimed this counter-proposal was unaffordable given his monthly net income of R12,848.75. The applicant terminated the debt review on 5 April 2023 under section 86(10) of the NCA, by which time the respondent had been in default for at least twenty business days and more than sixty business days had elapsed since the debt review application. After termination, further negotiations occurred, with the applicant making additional counter-proposals in May and June 2023, all of which were rejected by the respondent. The applicant then instituted action for cancellation of the agreement and return of the vehicle.

• Whether the applicant credit provider failed to participate in good faith in the debt review negotiations under section 86(5) of the NCA, entitling the respondent to reinstatement of debt review under section 86(11).
• Whether the credit agreement constituted reckless credit under section 80 of the NCA, on the grounds that the applicant did not conduct a thorough affordability assessment as required by section 81(2).
• Whether, following cancellation of the credit agreement, a court may order reinstatement of the agreement or suspension of its force and effect under section 83 of the NCA.
• Whether summary judgment should be granted for the return of the financed vehicle.

Summary judgment was granted. The termination of the credit agreement concluded on 25 April 2022 was confirmed, and the respondent was ordered to return the 2013 Toyota Quantum to the applicant forthwith. The respondent was ordered to pay the applicant's costs on the attorney and client scale.

A credit provider's obligation under section 86(5) of the NCA to participate in good faith in debt review negotiations is discharged where the provider makes counter-proposals within a reasonable time and continues to negotiate. Once a credit agreement has been validly cancelled under section 86(10) read with section 123(2) of the NCA, a court has no power to reinstate the cancelled agreement or to order resumption of debt review that would negate the right of cancellation. A consumer relying on reckless credit as a defence to summary judgment must base the assessment on the position at the time the agreement was made (as per section 80(2)), and must provide sufficient verificatory detail to sustain a bona fide defence, bearing the onus of proof. Where a consumer provided the information on which the credit provider's assessment was based, the credit provider is entitled to rely on those declarations without further investigation.

The court observed that even if suspension of the credit agreement were a competent remedy following a reckless credit declaration, all elements of the agreement would be suspended, meaning the respondent would not be entitled to retain possession of the vehicle during suspension and would not be obliged to make payments during that period. The court further noted that debt restructuring should aim at fulfilling financial obligations, not facilitating a purchaser to keep and use the vehicle on more favourable payment terms, and that the NCA does not contemplate a consumer retaining 'the money and the box' where credit should not have been extended.

This judgment reinforces principles from the Supreme Court of Appeal in Collett v FirstRand Bank Ltd 2011 (4) SA 508 (SCA) and the precedent in ABSA Bank v Walker regarding the limited remedies available to consumers after valid termination of debt review under section 86(10). It clarifies that a cancelled credit agreement cannot be reinstated by a court and that reckless credit remedies under section 83 of the NCA are largely unavailable or self-defeating once the agreement has been cancelled. The case also affirms the principle that credit providers financing taxi operators are entitled to rely on the consumers' own route profitability declarations when conducting affordability assessments under section 81(2) of the NCA.