Articles

Carbon Tax Bill – Now Carbon Tax Act 15 of 2019

The Act came into effect on 1 June 2019.

Global warming and climate change is drastically changing every aspect of the environment in general. The objective of the Act is to provide for the imposition of a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions; and to provide for matters connected therewith. The preamble of the Act details reasons such as climate change, global warming and environmental degradation as factors negatively impacting upon the future generation.

Important definitions from the Act:

“carbon dioxide (CO2) equivalent’’ which means the concentration of carbon dioxide that would cause the same amount of radiative forcing (the difference of sunlight absorbed by the Earth and energy radiated back to space) as a given mixture of carbon dioxide and other greenhouse gases.

“emissions’’ means which means the release of greenhouse gases or their precursors; or the release of greenhouse gases and their precursors, into the atmosphere, over a specified area and period of time;

“Tax period”– commencing on 1 June 2019 and ending on 31 December 2019; and subsequent to the period contemplated in paragraph (a), the period commencing on 1 January of each year and ending on 31 December of that year

The rate of the carbon tax on greenhouse gas emissions must  be imposed at an amount of R120 per ton carbon dioxide equivalent of the greenhouse gas emissions of a taxpayer.

The amount of tax payable by a taxpayer in respect of a tax period must be calculated in accordance with the formula:

X = <{[(E – S) x (1 – C)]-[D x (1-M)]} + {P x (1 – J)} + {F x (1 – K)}> x R

To find each of the variables above, there are formulas for each one of them.

The Act essentially brings into effect the “polluter-pays principle” which will inevitably put pressure on big industrial corporations to find more sustainable production processes as they will be “penalized” for emitting co2 emissions or its equivalent which is above the threshold. There are thresholds for each type of activity sector, e.g Energy, Fuel Combustion Activities, Energy Industries (including heat and electricity recovery from Waste), Main Activity Electricity and Heat Production (including Combined Heat and Power Plants) and Petroleum Refining. Each of these activity sectors will have a certain threshold for co2 emissions. This is contained in schedule 2 of the Act which also contains the threshold for each type of activity sector.

In order to lessen the blow, there will be various allowances, including a 60% basic tax allowance which means corporations will be paying R48 per ton instead of the rate of tax being R120 per ton of co2.

The Act is set to be implemented in phases with phase one applicable from 1 June 2019 to 31 December 2022. Phase two will start in 2023. This approach will see the carbon tax burden increasing over time, with the aim of shaping the behaviour of both producers and consumers and motivating them to adopt a methodical transition towards a low-carbon economy through the use of cleaner technologies. This approach will also mean that businesses will need to make use of auditors who can advise from a risk and control perspective, tax consultants with an in-depth understanding of the Carbon Tax Bill in order to calculate and correctly apply tax credits, and experienced sustainability consultants who can advise on strategies to reduce operational carbon emissions.

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Two new Acts which regulate the Property Industry

The State President passed two Bills into law which will impact significantly on the property industry.

The effect of the Electronic Deeds Registration Systems Act can be summarised as follows:

The object of the Act is to improve security in the registration system, simplify it and speed up the registration process.

The Bill is divided into the following clauses:

  • Clause 1 provides for definitions.

(b)       Clause 2 provides for the development, establishment and maintenance of the e-DRS by the Chief Registrar of Deeds. The Chief Registrar of Deeds is empowered to issue practice and procedure directives for, amongst others, the functional requirements of the e-DRS; technical specifications for the e-DRS and the operation of the e-DRS.

(c)       Clause 3 provides for the validity of deeds and documents. A deed or document generated, registered and executed electronically and any other registered or executed deed or document scanned or otherwise incorporated into the e-DRS by electronic means is for all purposes deemed to be the only original and valid record.

(d)       Clause 4 requires any user of the electronic deeds registration authorised by the regulations to be registered in the manner and under the conditions as may be directed by the Chief Registrar of Deeds.

(e)       Clause 5 empowers the Minister to make regulations, on recommendation by the Regulation Boards established in terms of the Deeds Registries Act, relating to, amongst others, the procedures for the electronic lodgement of deeds or documents; procedures for electronic record storing by deeds registries; and the manner of identification of the person who prepares, executes, lodges, registers or stores any deed or document required or permitted to be prepared, executed, lodged, registered or stored in any deeds registry.

(f)        Clause 6 provides for transitional provisions relating to the continuation, by a Registrar of Deeds, of the registration, execution and filing of deeds and documents in a deeds registry until the e-DRS and related provisions or regulations are in place.

It is apparent, however, that implementation of this new procedure will take time as the Registrar of Deeds must still regulate how the process is to be implemented and until he has done so the current procedure will continue.

The Property Practitioners Act has now been signed into law. This Act replaces the Estate Agency Affairs Act 112/1976.

The Act not only regulates the conduct of Estate Agents, but a wider body of people termed  “Property Practitioners“. It applies to marketing, promotion, managing, sale, letting, financing and purchase of immovable property.

The Act introduces a regulating authority which replaces the Estate Agency Affairs Board.

The Act is also designed to transform the industry and open it up to Previously Disadvantage Individuals  and Chapter 4 of the Act deals with the Property Sector Transformation Code

The Act covers a substantial number of property related activities and the definition of a “Property Practitioner” illustrates this.

A Property Practitioner

  • means any natural or juristic person who or which for the acquisition of gain on his, her or its own account or in partnership, in any manner holds himself, herself or itself out as a person who or which, directly or indirectly, on the instructions of or on behalf of any other person—

(i)        by auction or otherwise sells, purchases, manages or publicly exhibits for sale property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvas a seller or purchaser in respect thereof;

(ii)       lets or hires or publicly exhibits for hire property or any business undertaking by electronic or any other means or negotiates in connection therewith or canvasses or undertakes or offers to canvass a lessee or lessor in respect thereof;

(iii)      collects or receives any monies payable on account of a lease of a property or a business undertaking;

(iv)      provides, procures, facilitates, secures or otherwise obtains or markets financing for or in connection with the management, sale or lease of a property or a business undertaking, including a provider of bridging finance and a bond broker, but excluding any person contemplated in the definition of ‘‘financial institution’’ in section 1 of the Financial Services Board Act, 1990 (Act No. 97 of 1990);

(v)       in any other way acts or provides services as intermediary or facilitator with the primary purpose to, or to attempt to effect the conclusion of an agreement to sell and purchase, or hire or let, as the case may be, a property or business undertaking, including, if performing the acts mentioned in this subparagraph, a home ownership association, but does not include—

(aa)    a person who does not do so in the ordinary course of business;

(bb)    where the person is a natural person and that person in the ordinary course of business offers a property for sale which belongs to him or her in his or her personal capacity; 2

(cc)     an attorney or candidate attorney as defined in section 1 of the Attorneys Act, 1979 (Act No. 53 of 1979); or

(dd)    a sheriff as defined in section 1 of the Sheriffs Act, 1986 (Act No. 90 of 1986), when he or she performs any functions contemplated in paragraph (a) of this definition, irrespective of whether or not he or she has been ordered by a court of law to do so; or

(vi)      renders any other service specified by the Minister on the recommendation of the Board from time to time by notice in the Gazette;

  • includes any person who sells, by auction or otherwise, or markets, promotes or advertises any part, unit or section of, or rights or shares, including time share and fractional ownership, in a property or property development;
  • includes any person who for remuneration manages a property on behalf of another;
  • includes a trust in respect of which the trustee, for the acquisition of gain on the account of the trust, directly or indirectly in any manner holds out that it is a business which, on the instruction of or on behalf of any other person, performs any act referred to in paragraph (a);
  • for the purposes of sections 34, 46, 48, 59, 60, 61 and 65 includes—
  • any director of a company or a member of a close corporation who is a property practitioner as defined in paragraph (a);
  • any person who is employed by a property practitioner as envisaged in paragraph (a) and performs on his, her or its behalf any act referred to in subparagraph (i), (ii), (iv), (v) or (vi) of that paragraph;
  • any trustee of a trust which is a property practitioner as envisaged in paragraph (d);
  • any person who is employed by a property practitioner as envisaged in paragraph (b) and performs on its behalf any act referred to in subparagraph (i), (ii), (iv), (v) or (vi) of paragraph (a); and
  • any person who is employed by a property practitioner contemplated in paragraph (a) or (b) to manage, supervise or control the day-to-day operations of the business of that property practitioner;
  • includes any person who is employed by or renders services to an attorney or a professional company as defined in section 1 of the Attorneys Act, 1979, other than an attorney or candidate attorney, and whose duties consist wholly or primarily of the performance of any act referred to in subparagraph (I), (ii), (iii), (iv), (v) or (vi) of paragraph (a), on behalf of such attorney or professional company whose actions will be specifically covered by the Attorneys’ Fidelity Fund and not the Property Practitioners Fidelity Fund;
  • for the purposes of section 61 and any regulation made under section 70, includes any person who was a property practitioner at the time when he or she was guilty of any act or omission which allegedly constitutes sanctionable conduct referred to in section 62,

but does not include an attorney who, on his own account or as a partner in a firm of attorneys or as a member of a professional company, as defined in section 1 of the Attorneys Act, 1979, or a candidate attorney as defined in that section, who performs any act referred to in paragraph (a), in the course of and in the name of and from the premises of such attorney’s or professional company’s practice, provided that such an act may not be performed—

  • in partnership with any person other than a partner in the practice of that attorney as defined in section 1 of the Attorneys Act, 1979; or
  • (ii) through the medium of or as a director of a company other than such professional company, and ‘‘advertise’’ for the purposes of this definition does not include advertising in compliance with the provisions of any other law;

Article by Peter Bowes , Conveyancer at BLC Attorneys

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Proposed Amendments to rules regulating “Divorce Debt” created by Government Employees Pension Fund, Light at the end of the Tunnel.

Presently, aggrieved divorce spouses who are members of the Government Employees Pension Fund (GEPF) are receiving the short end of the stick. The divorced spouse is subjected to rules enabling the GEPF to create an onerous ‘divorce loan’ benefiting the Fund at the expense of the divorced spouse. The proposed changes will serve to ease the burden on divorcees belonging to the GEPF.

Current Position;

Clean-Break Principle

This principle was primarily introduced in private pension funds in 2007, and the public sector pension fund (GEPF) later followed suit in 2011. Basically, the principle provides that the non-member spouse no longer has to wait for an exit event to occur. This means that a pension benefit awarded to a non-member spouse in terms of the Divorce Act is deemed to have accrued on the date of the divorce. The aim was to separate the knots between the former spouses as soon as possible after the divorce in all aspects.

The GEPF rules were amended to incorporate this clean break principle by establishing the following procedure. The former spouse has to submit a commissioned decree of divorce to the Fund and the latter is thereafter required within 45 days to request such spouse to make an election between direct payment of the accrual or transfer to his or her retirement fund. The former spouse will then have 120 days to make a decision and if she/he does elect an option within the 120 days period, the Fund will have 60 days to make payment or transfer. If, however, the non-member spouse does not decide, the Fund will make a direct payment to that spouse within 30 days after the expiry of the 120 days period.

‘Divorce Debt’

The Fund’s model is to create a debt by paying the amount due to the claimant spouse from its own reserves and not taking it from the member’s actual benefit. The Fund is actually granting ‘divorce loans’ to its divorcing members and thus, creating an obligation for the member spouse to repay this debt with interest charged at the Fund’s discretion. The drastic effect of these ‘loans’ is that upon the retirement of the member spouse, he or she still owed the Fund a substantial amount resulting in the member not receiving a gratuity lump sum and their annuity substantially reduced.

The Proposed changes

Following the gazetting of the Government Employees Pension Law Amendment Bill on 23rd May 2019, the Government Employees Pension Fund (GEPF) will, once the amended rules are implemented, no longer subject a member to a debt model in executing a divorce settlement. This amendment now ensures that rather than creating a debt, there will be an adjustment to the member’s pensionable service following the payment of a divorce settlement by the GEPF. This means that the benefit that will be paid to the member upon retirement will now be decreased by reducing the members’ years of pensionable service to take into account the pension interest of the member that was given to the spouse upon divorce. 
Therefore, members will receive their full benefit after the reduced pensionable service has been affected. Members who have more than ten years of pensionable service will still be entitled to a lump sum and a monthly pension upon exiting the fund, however at a reduced value.

Xolisa Colani

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Carbon Tax Bill – Now Carbon Tax Act 15 of 2019

The Act came into effect on 1 June 2019.

Global warming and climate change is drastically changing every aspect of the environment in general. The objective of the Act is to provide for the imposition of a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions; and to provide for matters connected therewith. The preamble of the Act details reasons such as climate change, global warming and environmental degradation as factors negatively impacting upon the future generation.

Important definitions from the Act:

“carbon dioxide (CO2) equivalent’’ which means the concentration of carbon dioxide that would cause the same amount of radiative forcing (the difference of sunlight absorbed by the Earth and energy radiated back to space) as a given mixture of carbon dioxide and other greenhouse gases.

“emissions’’ means which means the release of greenhouse gases or their precursors; or the release of greenhouse gases and their precursors, into the atmosphere, over a specified area and period of time;

“Tax period”– commencing on 1 June 2019 and ending on 31 December 2019; and subsequent to the period contemplated in paragraph (a), the period commencing on 1 January of each year and ending on 31 December of that year

The rate of the carbon tax on greenhouse gas emissions must  be imposed at an amount of R120 per ton carbon dioxide equivalent of the greenhouse gas emissions of a taxpayer.

The amount of tax payable by a taxpayer in respect of a tax period must be calculated in accordance with the formula:

X = <{[(E – S) x (1 – C)]-[D x (1-M)]} + {P x (1 – J)} + {F x (1 – K)}> x R

To find each of the variables above, there are formulas for each one of them.

The Act essentially brings into effect the “polluter-pays principle” which will inevitably put pressure on big industrial corporations to find more sustainable production processes as they will be “penalized” for emitting co2 emissions or its equivalent which is above the threshold. There are thresholds for each type of activity sector, e.g Energy, Fuel Combustion Activities, Energy Industries (including heat and electricity recovery from Waste), Main Activity Electricity and Heat Production (including Combined Heat and Power Plants) and Petroleum Refining. Each of these activity sectors will have a certain threshold for co2 emissions. This is contained in schedule 2 of the Act which also contains the threshold for each type of activity sector.

In order to lessen the blow, there will be various allowances, including a 60% basic tax allowance which means corporations will be paying R48 per ton instead of the rate of tax being R120 per ton of co2. The Act is set to be implemented in phases with phase one applicable from 1 June 2019 to 31 December 2022. Phase two will start in 2023. This approach will see the carbon tax burden increasing over time, with the aim of shaping the behaviour of both producers and consumers and motivating them to adopt a methodical transition towards a low-carbon economy through the use of cleaner technologies. This approach will also mean that businesses will need to make use of auditors who can advise from a risk and control perspective, tax consultants with an in-depth understanding of the Carbon Tax Bill in order to calculate and correctly apply tax credits, and experienced sustainability consultants who can advise on strategies to reduce operational carbon emissions

The Act came into effect on 1 June 2019.

Global warming and climate change is drastically changing every aspect of the environment in general. The objective of the Act is to provide for the imposition of a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions; and to provide for matters connected therewith. The preamble of the Act details reasons such as climate change, global warming and environmental degradation as factors negatively impacting upon the future generation.

Important definitions from the Act:

“carbon dioxide (CO2) equivalent’’ which means the concentration of carbon dioxide that would cause the same amount of radiative forcing (the difference of sunlight absorbed by the Earth and energy radiated back to space) as a given mixture of carbon dioxide and other greenhouse gases.

“emissions’’ means which means the release of greenhouse gases or their precursors; or the release of greenhouse gases and their precursors, into the atmosphere, over a specified area and period of time;

“Tax period”– commencing on 1 June 2019 and ending on 31 December 2019; and subsequent to the period contemplated in paragraph (a), the period commencing on 1 January of each year and ending on 31 December of that year

The rate of the carbon tax on greenhouse gas emissions must  be imposed at an amount of R120 per ton carbon dioxide equivalent of the greenhouse gas emissions of a taxpayer.

The amount of tax payable by a taxpayer in respect of a tax period must be calculated in accordance with the formula:

X = <{[(E – S) x (1 – C)]-[D x (1-M)]} + {P x (1 – J)} + {F x (1 – K)}> x R

To find each of the variables above, there are formulas for each one of them.

The Act essentially brings into effect the “polluter-pays principle” which will inevitably put pressure on big industrial corporations to find more sustainable production processes as they will be “penalized” for emitting co2 emissions or its equivalent which is above the threshold. There are thresholds for each type of activity sector, e.g Energy, Fuel Combustion Activities, Energy Industries (including heat and electricity recovery from Waste), Main Activity Electricity and Heat Production (including Combined Heat and Power Plants) and Petroleum Refining. Each of these activity sectors will have a certain threshold for co2 emissions. This is contained in schedule 2 of the Act which also contains the threshold for each type of activity sector.

In order to lessen the blow, there will be various allowances, including a 60% basic tax allowance which means corporations will be paying R48 per ton instead of the rate of tax being R120 per ton of co2. The Act is set to be implemented in phases with phase one applicable from 1 June 2019 to 31 December 2022. Phase two will start in 2023. This approach will see the carbon tax burden increasing over time, with the aim of shaping the behaviour of both producers and consumers and motivating them to adopt a methodical transition towards a low-carbon economy through the use of cleaner technologies. This approach will also mean that businesses will need to make use of auditors who can advise from a risk and control perspective, tax consultants with an in-depth understanding of the Carbon Tax Bill in order to calculate and correctly apply tax credits, and experienced sustainability consultants who can advise on strategies to reduce operational carbon emissions

The Regulator submitted that what Section 124 does is to depart significantly from the Common Law by permitting set-off, but subject to stringent safeguards that are designed to protect the consumer. None of the above-mentioned safeguards exist under Common Law principles, instead it is left to the consumer to identify any set-off that may be unlawful and to pursue a remedy, such as prescription, at the consumer’s own cost.

Further, the Regulator submitted that if the Banks interpretation is accepted it would completely undermine the importance of the NCA’s purpose. They further provided that this would effectively render Section 124 nothing but a meaningless dead letter. The Regulator provided that the reason for this is because the Banks’s interpretation provided a credit does not contain an express provision permitting set-off, falls outside the regulatory ambit of Section 90(2)(n) and Section 124, rendering the Common Law application of set-off acceptable. They are of the view that it would be absurd if credit providers could simply avoid the consumer safeguard provided in Section 124 by not saying anything in their credit agreements about set-off.

The South African Human Rights Commission (hereinafter referred to as the SAHRC), similarly submitted that the Banks interpretation of the NCA undermined the debt review scheme established under the NCA. Further, the SAHRC submitted that the Banks interpretation was inconsistent with several constitutional rights, in particular the socio-economic rights of consumers as well as their fundamental right to dignity. The SAHRC was of the view that the Regulators interpretation is to be preferred.

In its approach to the interpretation of the NCA, the Respondent (the Bank) focused on the language of the provisions, in particular that of Section 90(2)(n). The Bank accepted that that interpretation is holistic in nature and involves taking into account the context and purpose of the legislation in question. The Bank, however placed emphasis on the fact that courts cannot lose sight of the actual words used by the lawmakers. In particular, the courts cannot, under the guise of interpreting words, impose a view of what the policy or object of a statute is or should be.

The Bank argued that with their interpretation, the Regulator and SAHRC ignored the actual and plain wording of the provisions, leapfrogging over the words themselves to get a meaning that in their view represented a better policy outcome for consumers. According to the Bank. Section 90(2)(n) cannot be interpreted to apply to a Common Law set-off because common-law set-off is not dependent on any contractual nexus between the parties, as it applies ex lege. They accordingly provided that, is only if the Bank wishes to depart from the Common Law and apply a different form of set-off, that it must make provision for this agreement itself.

The bank further argued that had it been the intention of the lawmaker to oust the application of Common Law set-off to credit agreements under the NCA, this would have been made clear. They also argued that their interpretation of the NCA is compatible with the objects and purposes of the NCA.

Decision of the Court

The court was not prepared to accept the interpretation of Sections 90(2)(n) and 124 as contended for by the Bank. The court was of the view that the interpretation is not plainly indicated by the wording of the Sections, nor is it consistent with the underlying purposes of the NCA, or the context within which the NCA was adopted. It is also provided that this interpretation does not promote the basic constitutional rights of consumers – the right to socio economic welfare, dignity and possibly property are concerned. It was further provided that to accept the Banks interpretation would amount to ignoring the fact that the NCA was specifically adopted to break with the past regulation of consumer credit that rendered a few safeguards to consumers.

Keightley is of the view that the purpose of Section 124 was precisely to effect that break from Common Law passed that was necessary in order to achieve the underlying objects of the NCA. Further Keightley provided that even though it does not expressly oust the continued application of Common Law set-off in parallel with Section 124, its meaning and effect is to do so.

Having regard to the above, Keightley therefore concluded that, in light of Sections 90(2)(n) of the NCA, the Common Law right to set-off is not applicable in respect of credit agreements that are subject to the NCA.

This judgment has and will continue to provide much needed clarity on the position in law and marks the end of a practice where set-off is applied without any notice to or authorization by the consumer.

Mihlali Mzileni – 10/07/19

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Common Law right to set-off not applicable to credit agreements subject to the National Credit Act

On the 27th of June 2019 the High Court sitting in Johannesburg handed down an interesting judgement on the correct interpretation of the National Credit Act 34 of 2005 (Hereon referred to as the NCA).

The core question to be decided by the Court was whether Sections 90(n) and 124 of the NCA render the Common Law right of set-off non applicable to credit agreements subject to the NCA.

The case was brought by the National Credit Regulator (hereon referred to as the Regulator) as the credit industry regulator which acts on behalf of all credit consumers in terms of the NCA. The matter was brought against Standard Bank and the South African Human Rights Commission intervened in the matter as amicus curiae – National Credit Regulator v Standard Bank (South African Human Rights Commission intervening as amicus curiae).

The Landlord can set the terms of the lease agreement without any measurement in law of their reasonableness and fairness to the Tenant.

The respondent in this matter, Standard Bank, argued that where the set-off is not addressed in the credit agreement, the common law principles of set-off continue to apply to many of the credit agreements concluded between the bank and its client.

Objects and Purpose of the NCA.

Before proceeding further, it is important to establish the purpose and objects of the NCA.  Section 3 of the NCA states that the purpose of this Act is to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers. The NCA was designed to achieve several objectives most of which are to benefit and protect the consumer.

What do Sections 90(2)(n) & 124 say?

Section 90(2)(n) of the NCA prohibits an automatic set-off without compliance with s124 of the NCA. That section sets out the conditions for set-off in terms of a credit agreement incorporating a clause authorizing the appropriation of funds from a debtor’s account in set-off of a consumer’s obligation in terms of a credit agreement. Section 124 says that a creditor must secure the customer’s authorization, specifying:

Prior to the Amendment Act, it was not a formality for a lease agreement to be reduced to writing however the Amendment Act requires a lease agreement to be reduced to writing, failing which no valid lease agreement exists (Section 8(1)(a)). This is mainly to overcome the number of disputes based on oral agreements which are difficult to prove.

Another major introduction to the Amendment Act is section 4B which requires the landlord to invest the deposit amount into an interest-bearing account. The deposit plus accrued interest will be refunded to the tenant upon termination of the lease, after having considered any damages caused by the tenant to the property. The tenant is entitled to request for information on the deposit and interest accruing during the course of the lease.

-the account from which the funds can be withdrawn;

-the debt which is to be paid;

-the amount which may be transferred; and

-the date of the transfer.

Common Law Set-Off

Common Law set-off allows a creditor, like Standard Bank in this matter, who is owed money by its customer, to immediately debit that customer’s account when funds are credited to it. The Bank can do so without notice to the customer, without the customer’s authorization, and in any amount that the bank considers to be validly due to it. In short and simple terms, under the Common Law, set-off gives a creditor full control of the set-off process without any input or authorization from the customer.

Submissions of the Parties

The Regulator sought an order declaring that, in light of Sections 90(2)(n) and 124 of the NCA, the Common Law right to set-off is not applicable in respect of credit agreements which are subject to the NCA. For the Regulator, the context of the provisions and the underlying of the NCA are important. The Regulator does not dispute the importance, for interpretational purposes, of the of the ordinary meaning of the words used in a legislative provision. The Regulator is however, of the view that the general principles of interpretation require more than a consideration of the ordinary grammatical meaning of words.

The Regulator submitted that what Section 124 does is to depart significantly from the Common Law by permitting set-off, but subject to stringent safeguards that are designed to protect the consumer. None of the above-mentioned safeguards exist under Common Law principles, instead it is left to the consumer to identify any set-off that may be unlawful and to pursue a remedy, such as prescription, at the consumer’s own cost.

Further, the Regulator submitted that if the Banks interpretation is accepted it would completely undermine the importance of the NCA’s purpose. They further provided that this would effectively render Section 124 nothing but a meaningless dead letter. The Regulator provided that the reason for this is because the Banks’s interpretation provided a credit does not contain an express provision permitting set-off, falls outside the regulatory ambit of Section 90(2)(n) and Section 124, rendering the Common Law application of set-off acceptable. They are of the view that it would be absurd if credit providers could simply avoid the consumer safeguard provided in Section 124 by not saying anything in their credit agreements about set-off.

The South African Human Rights Commission (hereinafter referred to as the SAHRC), similarly submitted that the Banks interpretation of the NCA undermined the debt review scheme established under the NCA. Further, the SAHRC submitted that the Banks interpretation was inconsistent with several constitutional rights, in particular the socio-economic rights of consumers as well as their fundamental right to dignity. The SAHRC was of the view that the Regulators interpretation is to be preferred.

In its approach to the interpretation of the NCA, the Respondent (the Bank) focused on the language of the provisions, in particular that of Section 90(2)(n). The Bank accepted that that interpretation is holistic in nature and involves taking into account the context and purpose of the legislation in question. The Bank, however placed emphasis on the fact that courts cannot lose sight of the actual words used by the lawmakers. In particular, the courts cannot, under the guise of interpreting words, impose a view of what the policy or object of a statute is or should be.

The Bank argued that with their interpretation, the Regulator and SAHRC ignored the actual and plain wording of the provisions, leapfrogging over the words themselves to get a meaning that in their view represented a better policy outcome for consumers. According to the Bank. Section 90(2)(n) cannot be interpreted to apply to a Common Law set-off because common-law set-off is not dependent on any contractual nexus between the parties, as it applies ex lege. They accordingly provided that, is only if the Bank wishes to depart from the Common Law and apply a different form of set-off, that it must make provision for this agreement itself.

The bank further argued that had it been the intention of the lawmaker to oust the application of Common Law set-off to credit agreements under the NCA, this would have been made clear. They also argued that their interpretation of the NCA is compatible with the objects and purposes of the NCA.

Decision of the Court

The court was not prepared to accept the interpretation of Sections 90(2)(n) and 124 as contended for by the Bank. The court was of the view that the interpretation is not plainly indicated by the wording of the Sections, nor is it consistent with the underlying purposes of the NCA, or the context within which the NCA was adopted. It is also provided that this interpretation does not promote the basic constitutional rights of consumers – the right to socio economic welfare, dignity and possibly property are concerned. It was further provided that to accept the Banks interpretation would amount to ignoring the fact that the NCA was specifically adopted to break with the past regulation of consumer credit that rendered a few safeguards to consumers.

Keightley is of the view that the purpose of Section 124 was precisely to effect that break from Common Law passed that was necessary in order to achieve the underlying objects of the NCA. Further Keightley provided that even though it does not expressly oust the continued application of Common Law set-off in parallel with Section 124, its meaning and effect is to do so.

Having regard to the above, Keightley therefore concluded that, in light of Sections 90(2)(n) of the NCA, the Common Law right to set-off is not applicable in respect of credit agreements that are subject to the NCA.

This judgment has and will continue to provide much needed clarity on the position in law and marks the end of a practice where set-off is applied without any notice to or authorization by the consumer.

Mihlali Mzileni – 10/07/19

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INTRODUCTION TO THE RENTAL HOUSING AMENDMENT ACT 35 OF 2014

The Rental Housing Amendment Act 35 of 2014 (herein after referred to as the “Amendment Act) is the recent amendment to the Rental Housing Act 50 of 1999.

It would come to question as to what brought to the amendment of the Rental Housing Act 50 of 1999 and what are the material changes that have been introduced by the Amendment Act.

In a Landlord (this term has been substituted to Landowner in the Amendment Act) and Tenant relationship, the Tenant is often in a vulnerable position. The Tenant in need of housing is often compelled to accept the terms and conditions set by the Landlord in the lease agreement.

The Landlord can set the terms of the lease agreement without any measurement in law of their reasonableness and fairness to the Tenant.

Despite the availability of The Rental Housing Act 50 of 1999, Common law and Consumer Protection Act in regulating the Landlord and tenant relationship, there were still a number of shortfalls in regulating the relationship and a number of disputes which could not be resolved in fairness and in the interest of justice. The introduction of the Amendment Act seeks to cater for these shortfalls in all fairness to the Landlord and Tenant.

The importance of introducing the Amendment Act was made in mindful of Section 25 (1) and Section 26 (1)-(3) of the Constitution of the Republic of South Africa (The Constitution).

Section 26 of the Constitution provides;

  • Everyone has the right to have access to adequate housing’”;
  • “The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right”;
  • “No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions”

The Amendment Act has introduced provisions that sought to promote social justice. This has been achieved by requiring the MEC’s to establish Rental Housing Tribunals and such tribunals be given the necessary powers to resolve disputes and pass orders (Section 13(12A) and have appeal procedures for an aggrieved party (Section 17A). Before the amendment, the Rental Housing Act has been criticized for being ‘toothless’, this was based on its incapability to enforce its rulings.

The MEC will further be required to ensure that all Municipalities have Rental Housing Information Offices. This ensures accessibility of the law to the public.

Prior to the Amendment Act, it was not a formality for a lease agreement to be reduced to writing however the Amendment Act requires a lease agreement to be reduced to writing, failing which no valid lease agreement exists (Section 8(1)(a)). This is mainly to overcome the number of disputes based on oral agreements which are difficult to prove.

Another major introduction to the Amendment Act is section 4B which requires the landlord to invest the deposit amount into an interest-bearing account. The deposit plus accrued interest will be refunded to the tenant upon termination of the lease, after having considered any damages caused by the tenant to the property. The tenant is entitled to request for information on the deposit and interest accruing during the course of the lease.

The Amendment Act has created new offences which are punishable by law. Landlords may face either imprisonment or a fine for failing to comply with the following but not limited to;

  • Providing a written lease agreement to the tenant’;
  • Providing a habitable dwelling and maintaining the premises;
  • Refunding the security deposit with interest;
  • Cutting the utilities of the premises; e.g electricity or water
  • Denying the tenant access to the premises e.g lockouts

To date, the Amendment Act has not yet come into force. It was assented by the President of the Republic of South Africa in November 2014 but has not been promulgated. This means it is not law which one can rely on and this was demonstrated in the case of Kondile v Canary (29896/2013) [2018] ZAGPHC 412 where the Applicant made an application to have a Rental Housing Tribunal ruling rescinded by the High Court. Judge Nel made confirmation that the Amendment Act is not yet in operation.

It is important that everyone takes interest in the Act because once the Amendment Act has been promulgated, the Landlord will be given an opportunity of six month from date of promulgation to ensure that their lease agreement with their tenant do conform with the Amendment Act.

Zilungile Stimela

23 July 2019

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