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Court to here NCA validity dispute

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The Constitutional Court will on Tuesday hear an application for confirmation of a decision of the Western Cape High Court which declared a section of the National Credit Act (NCA) constitutionally invalid.

The high court heard a matter in which a man had bought petroleum products on credit from Chevron SA (Pty) Ltd since 1997.

In 2008, Chevron initiated court proceedings against the man, claiming he had underpaid about R3 million. The court heard that Chevron was not a registered credit provider under the NCA.

The parties then agreed to have the credit agreement declared void and the proceedings were adjourned to allow Chevron to challenge the constitutional validity of the section of the NCA enjoining a full refund.

Had the proceedings not been postponed, the magistrate would have had to order Chevron to refund the man R33m, which he had paid for previous purchases.

In the high court, Chevron challenged the constitutionality of the provision of the NCA, as it claimed this deprived it of its property.

The respondents, including Trade and Industry Minister Rob Davies and the National Credit Regulator, did not oppose the challenge and agreed with Chevron’s contention.

The high court declared the section constitutionally invalid because the obligatory nature of the refund was both substantively and procedurally unfair.

During the proceedings, the National Credit Amendment Act was passed. This amended the NCA by requiring that a court should make a just and equitable order when faced with an unlawful credit agreement, including a declaration that the agreement was void.

The amendment act had not yet come into force during the Chevron case, but the high court chose to replicate its wording to remedy the defect for the time being.

Before the Constitutional Court, the parties are again in agreement on the constitutional invalidity of the impugned section of the NCA. Chevron maintains the section arbitrarily deprives it of property.

It submits the effects of the section are harsh and its obligatory nature deprives the court of the opportunity to take into account the unique circumstances of each case and the creditor’s blameworthiness.

The minister and regulator submit that the upcoming amendment will remedy the defect.

In response, Chevron submits that such a claim is excluded from the legislative framework.

The minister and the regulator believe the discretion vested in a court to grant such a claim does not sufficiently counterbalance the lack of discretion to order a refund under the NCA and that, accordingly, the impugned section remains constitutionally invalid. SAPA

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