LESOTHO
IN THE COURT OF APPEAL OF LESOTHO
HELD AT MASERU
C OF A (CIV) 47 OF 2024
In the matter between –
TSELISO JAMES THAMAE 1STAPPELLANT
BASOTHO WATER HOLDINGS (PTY) LTD 2NDAPPELLANT
And
NED BANK LESOTHO LTD RESPONDENT
CORAM: MOSITO, P
SAKOANE, CJ
J VAN DER WESTHUIZEN, AJA
HEARD: 16 OCTOBER 2024
DELIVERED: 1 NOVEMBER 2024
SUMMARY
In an application for summary judgment the protection afforded to consumers by the Financial Consumers Protection Act 7 of 2022 is applicable and may not be ignored. This appeal is upheld on that basis.
JUDGMENT
J VAN DER WESTHUIZEN:
Introduction
[1] This appeal deals with a summary judgment granted by the Mokhesi J in the High Court. It was for a claim based on a loan (or overdraft facility) by Nedbank Lesotho Ltd (the respondent, further referred to in this judgment as Nedbank)) to Mr TJ Thamae (the first appellant), having bound himself, jointly and severally, for the indebtedness of Basotho Water Holdings (Pty) Ltd (the second appellant, further referred to in this judgment as Basotho Water Holdings.
Factual background
[2] To run Basotho Water Holdings’ daily business operations, Nedbank, extended loan facilities to it. Nedbank furthermore granted overdraft facilities in the sum of M3 275 837.00, together with an additional temporary overdraft facility of M800 000.00, over the existing limit of M2 475 837.00, for construction of residential properties.
[3] The agreement provided that the overdraft would “expire on 20 May 2023 or upon receipt of payment, whichever is earlier”. On 1 August 2022 the parties also concluded a loan agreement in the amount of M310 950.00, for the construction of residential properties for Nedbank’s clients.
[4] In January 2024 Nedbank sued the first appellant and Basotho Water Holdings, as first and second defendants, for payment of M1 933 467.96, plus interest and costs. It claimed that the overdraft limit expired on 20 May 2023; and the “defendants failed to pay the monthly instalments as agreed, or the full amount on demand, with the result that as at 16 January 2024 they were in arrears in the sum of M1 933 467.96 …. Despite demand the defendants failed, refused and/or neglected to pay the aforesaid sum of money”.
High Court
[5] Nedbank approached the High Court for summary judgment. The Court referred to case law, such as Mahaj v Barclays National Bank Ltd (1976 (1) SA (A) 418 at 426) in South Africa and Leen v First National Bank (Pty) Ltd (LAC (2025 – 2016) 578 at 589) in Lesotho. It restated the test for summary judgment, namely whether a defendant’s entering of appearance to defend discloses a bona fide defence or was merely done to delay the plaintiff’s claim.
[6] The High Court thus considered whether the appellants had a bona fide defence. It summarised the defence as that the appellants had a counterclaim for loss of business and reputational damages; and that there had never been a demand for payment. For the purposes of these proceedings, the emphasis is on the demand.
[7] The High Court referred to Nedbank’s averment that a demand had been made. No proof of a demand had been shown, the Court found. However, relying on authority like Trust Bank of Africa Ltd v Senekal (1977 (2) SA 587 (WLD) AT 160) and Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 at 546 – 547), it concluded: “such prior notice is not necessary, nor should it form part of the plaintiff’s cause of action where overdrafts facilities did not specify that such a prior notice was a condition precedent for repayment to be made”.
[8] The High Court added: “One other important aspect of the present matter is that all the overdraft facilities have expiry dates and had expired and had expired by the time the summons were issued. The loans were therefore due to be repaid without any prior notice of demand for payment as the defendants seem to belief (sic).” The High Court concluded: “This, therefore, goes to show that in this regard, the defendant’s defence is not bona fide and therefore is bad in law.” The Court granted summary judgment, with costs.
This Court
[9] On appeal the need for a notice or a demand for payment was debated. Counsel for the appellants stressed the importance thereof. On behalf of Nedbank the reasoning in the High Court judgment was supported and it was argued that the Summons itself served as a demand.
[10] However, in his written heads of argument, as well as his oral submissions, counsel for the appellants submitted that the High Court had ignored the Consumer Protection Act (the Act) 7 of 2022. Under the heading “Pre-enforcement notice” section 21(1) states:
“(1) Enforcement proceedings over a credit liability shall commence after a consumer has been –
- notified of a default
- informed of his rights”
Subsections (2) and (3) state:
“(2) A financial service provider shall be required to issue a written notice explaining an amount overdue and how a default can be remedied by a consumer.
(3) A financial service provider shall be required to observe a minimum notice period between a pre-enforcement notice and a commencement of action, commensurate with a type, length and amount of credit as outlined by the Regulator.”
On behalf of the appellants, it was also mentioned that sections 46 and 47 legally required Nedbank to establish an internal complaint handling mechanism.
[11] It is common cause that the above did not happen in this case. The High Court judgment does not deal with the Act.
[12] Counsel for Nedbank argued that the Act had neither been pleaded, nor brought to the attention of the High Court. This potentially raises the interesting issue of the relationship between pleadings and law, especially when it is clearly stated in a statute.
[13] Pleadings are not only important, but indeed essential for fair litigation. Their main purpose is to state the core and perimeters of a litigant’s case, so that an opponent is not taken by surprise. Furthermore, a court is not expected to take into account something that was not put before it for consideration. On the other hand, pleadings cannot oust or override a valid statute. The function of a court is to apply the law. Bearing the above in mind, the facts of the present case are noteworthy,
[14] On 2 March 2023 a letter on the letterhead of Nedbank was sent to the director of Basotho Water Holdings, Mr Tseliso James Thamae (the first appellant in this appeal). On the same date a document, also on Nedbank’s letterhead, was signed by Thamae, on behalf of the borrower, to accept “the Offer and the terms and conditions in this Facility Letter”. What appears to be the Credit Manager and the Relationship Manager-Simme of Nedbank, signed the document, below the following sentence: “We thank you for the opportunity to submit the offer and trust that it will meet your requirements.”
[15] Importantly, this document is headed: “DECLARATION OF THE FINANCIAL CONSUMER PROTECTION ACT 7 OF 2022 APPLIES”. The application of the Act to the agreement between the appellants and Nedbank is thus expressly and explicitly stated by Nedbank, in a document on Nedbank’s letterhead, signed by two managers of the bank.
[16] Whereas the contents and implications of the Act may not have been argued in the High Court, the document was before the Court, as Annexure “A2” … to Nedbank’s Particulars of Claim! In these Particulars of Claim Nedbank refers to the annexure as a “copy of the loan agreement duly signed by the parties …”.
[17] As far as pleadings are concerned, the applicability of the Act was stated in Nedbank’s own Particulars of Claim, in capital letters. It can hardly be argued that Nedbank was taken by surprise by the reference to the Act. A simple perusal of their own papers would have alerted Nebank, not only in preparation for a summary judgment application, but indeed before it embarked on its litigation against the appellants.
Conclusion
[18] The High Court erred in ignoring (or being unaware of) the Act and concluding that the appellants had no bona fide defence. The appellants were entitled to the protection the Act affords to consumers. This protection was denied to them.
[19] During oral argument before this Court, counsel for Nedbank eventually conceded that the appeal should succeed. He undertook to make available to the Court, the next day (Thursday October 17, 2024), a written draft order which he attempted to formulate orally in court.
Order
[20] On Tuesday 22 October 2024 the Registrar provided me with hard copies of Nedbank’s promised draft order. It is not clear exactly when it was made available to this Court’s administration.
[21) The draft order reads as follows:
“IT IS ORDERED THAT:
- The appeal is allowed and the order of the court a quo is replaced with the following:
- the application for summary judgment is refused;
- costs shall be costs in the cause;
- the main proceedings are stayed until the respondent would have complied with the requirements of section 21 of the Financial Consumer Protection Act of 2022 by issuing the pre-enforcement notice and once the appellants would not have complied with such notice, the respondent would be entitled to proceed with further action under CCT/0039/2024.
- Each party shall bear the costs of appeal.”
[22] In response to the proposed draft, counsel for the appellant proposed that the appeal be upheld with costs and – therefore – the application for summary judgment be dismissed with costs.
[23] While Nedbank’s counsel accepts that the appeal must be upheld, he attempts to avoid the normal cost consequences of such an outcome; and wants this Court to keep the possibility of summary judgment, or Nedbank’s claim, alive. The proposed draft order is not persuasive. It is, for example, not clear what “costs in the cause” in this case refers to. No reason is provided as to why the costs of the successful appeal should not be carried by the respondent, who opposed the appeal. The upholding of the appeal puts an end to this matter. Nedbank may obviously consider any further steps as far as the alleged debt is concerned.
[24] In view of the above, as well as the general rule that costs must follow the result, the following is ordered:
(a) The appeal is upheld, with costs.
(b) The order of the High Court is set aside and replaced with the following:
“The application for summary judgment is dismissed, with costs”.
____________________________ J VAN DER WESTHUIZEN
ACTING JUSTICE OF APPEAL
I agree:
______________________ K E MOSITO
PRESIDENT OF THE COURT OF APPEAL
I agree:
______________________ SP SAKOANE
CHIEF JUSTICE
For the appellant: Adv S.S Tsabeha
For the respondent: Mr Q. Letsika