Allied Steelrode (Pty) Ltd vs. Dreyer and Another

South Africa

21.12.2023

Civil

A person must apply for registration as a credit provider, if the total principal debt exceeds the threshold prescribed

Present is an appeal against the decision of the High Court, where it is declared that a loan and an acknowledgment of debt (the AOD) was subject to the National Credit Act, 2005 (the NCA).The Appellant was a company operating the business of processing and distributing hot steel plates. The first respondent, Mr Paul Dreyer, was a businessman and a co-owner of a company called Lasercraft, which was a customer of the appellant. The second respondent was cited in her capacity as the wife of the first respondent and as a signatory to the AOD. The Appellant claimed repayment of R15 million from the Respondents. The foundation of the Appellant’s claim, as pleaded, arose from the AOD signed by the parties on 1 October 2014.

Section 40(1) of National Credit Act, 2005, stipulates that, a person must apply for registration as a credit provider, if the total principal debt exceeds the threshold prescribed. Section 40(4) renders a credit agreement entered into by an unregistered credit provider an unlawful agreement and void to the extent provided for in Section 89.

It was evident that the trial court conflated the loan and the AOD. It was drawn into the error because of the manner in which the separated issue was formulated and addressed. Therefore, the trial court misdirected itself. The loan agreement giving rise to the AOD was clearly not at arm’s length. Consequently, the trial court’s conclusion that the parties transacted at arm’s length was flawed and a misdirection unsupported by the evidence. The AOD, despite not falling under the ambit of the NCA, remained a credit agreement. The finding by the trial court that the agreement was unlawful and void as provided for in Section 89 constituted a misdirection.

Based on the evidence, the loan originated from an oral agreement, with no interest charged between parties with a familial relationship, conducted outside the scope of arm’s length dealings. Accordingly, on the facts of this case, it was evident that neither the loan nor the AOD were subject to the NCA. The trial court was therefore in error and its order had to be set aside.The loan giving rise to the acknowledgment of debt (the AOD) upon which the Plaintiff’s cause of action is based is not subject to the National Credit Act, 2005.

Tags : Loan Agreement Repayment

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