
The Misfit Kid of the Financial World: Navigating the Chaotic Intersection of Debt Counselling, Legalities, and Everything In-Between
December 10, 2024Case Summary: Sithole v. Sager (High Court of Pretoria)
Court Order Date: 21 January 2025
Background:
The consumer applied for debt review on 4 February 2021 and duly completed all necessary documents, including signing a power of attorney authorizing the debt counsellor to represent him in the Tribunal or Court. The debt counsellor successfully negotiated revised repayment terms, substantially reducing the consumer’s monthly repayment by more than half and extending the repayment period to 60 months.
On 26 August 2021, the debt counsellor obtained a consent order from the National Consumer Tribunal. However, on 23 August 2023, the consumer consulted an attorney to rescind the Tribunal order and subsequently lodged a rescission application at the Tribunal, raising the following points:
- The consumer was declared over-indebted under Section 86(7)(c) of the National Credit Act (NCA).
- The matter should have been lodged with the Magistrate’s Court, as the Tribunal lacks jurisdiction (locus standi).
- The order was granted in the consumer’s absence.
- The order was erroneously sought and granted.
The Tribunal refused the rescission application, prompting the consumer to approach the High Court for relief.
Main Arguments and Findings:
- Representation through Mandate:
The High Court held that the consumer, having granted a mandate to the debt counsellor to act on their behalf, was effectively present in court through representation. - Jurisdiction of the Tribunal:
The High Court concurred with the Tribunal’s reasoning, citing prior judgments that determined over-indebtedness is not a barrier to seeking a consent order from the Tribunal when all parties have agreed to a debt rearrangement plan. Sections 86(7)(b) and (c) of the NCA should be interpreted in line with the Act’s purpose—providing cost-effective solutions to alleviate over-indebtedness. The court emphasized that consumers should not be prevented from reaching voluntary debt-restructuring agreements with creditors and obtaining Tribunal orders. - Tribunal’s Discretion:
The Tribunal exercised its discretion under Section 165 of the NCA in refusing the rescission application. The High Court upheld this decision, emphasizing that the debt restructuring aligned with the Act’s purpose: alleviating the consumer’s financial burden while ensuring creditors are repaid. - Lack of Justification for Rescission:
The High Court noted that the consumer failed to provide a valid explanation for consulting an attorney two years after the consent order was granted. This lack of justification was relevant to the Tribunal’s exercise of discretion. - Impact of Rescission:
The High Court highlighted the consequences of rescission, including restoring all parties to their pre-debt review status. This raises questions about the treatment of payments already made under the debt restructuring agreement. - Additionally, granting rescission could create a precedent for dissatisfied consumers seeking to prematurely exit the debt review process, undermining its purpose.
Conclusion:
The High Court dismissed the application, affirming the Tribunal’s decision and reiterating that debt restructuring agreements under the NCA are designed to provide relief to over-indebted consumers while ensuring creditors are fairly compensated.
For the full case law: 34. rescind deb review tribunal MB Sithole v B Sager and Others – A369_2023 (1)