The Cape Town High Court delivered a judgment during April 2012 (Opperman vs Boonzaaier and Others Case No. 24887/2010) in terms whereof section 89(5)(c) of the National Credit Act 34 of 2005 (“NCA”) was declared unconstitutional. The majority of the Constitutional Court has now confirmed the order of invalidity.
Background factual information:
Opperman lent Boonzaaier roughly R 7 million in terms of three written loan agreements. Boonzaaier was unable to repay the debt and during the subsequent application for his sequestration, the question was raised whether section 89(5)(c) was unconstitutional. In terms of
this section a credit provider loses his right to claim back money which has been lent to a consumer if he was not a registered as a credit provider when making the loan. Section 40 of the NCA requires a person who is a credit provider under at least 100 credit arrangements or to whom the total principal debt owed in terms of all outstanding credit agreements exceeds R 500 000.00, to be registered as a credit provider in terms of the Act. If such a credit provider fails to register, the credit agreement would be void. In this case, Opperman was not registered as a credit provider as he was not aware of the requirement of registration.
Constitutional Court Judgment
The majority of the Constitutional Court found that section 89(5)(c) resulted in “arbitrary deprivation of property in breach of section 25(1) of the Constitution”. It was further confirmed that the deprivation was not a reasonable and justifiable limitation of the right to property, because the said section compelled a court to declare an agreement such as the one in this matter to be void and compelled the court to order that the unregistered credit provider’s right to restitution be cancelled or forfeited to the state. No discretion is allowed under section 89(5)(c) and by removing a credit provider’s right to claim restitution, he is being deprived of property. In light of the above, the section was found to be unconstitutional. This judgment will no doubt be viewed as a welcome relief to credit providers who, in good faith, lend large amounts of money without being aware of the requirement that they register as a credit provider under the NCA.