Wednesday, 11 July 2012

Amendments regulating the conduct of proceedings in the High Court of South Africa

On the 22nd June 2012 the South African Department of Justice (“DOJ”) introduced various amendments to the court rules relating specifically to the service of legal process on certain parties.

These amendments relate mainly to the manner of service elected by the parties and, in short, in application to services not utilising the Sheriff, now expressly includes service by way of facsimile or email.

Succinctly, the DOJ has taken cognisance of the enormous growth of electronic communications and has made further provisions therefor in the court rules.  The aforementioned is done through the inclusion of new Rule 4A which states:
"Delivery of documents and notices:

4A (1)     Service of all subsequent documents and notices. not falling under rule 4(1)(a), in any proceedings on any other party to the litigation may be effected by one or more of the following manners to the address or addresses provided by that party under rules6(5)(b), 6(5)(d){i), 17(3). 19(3) or 34(8), by: -

(a) hand at the physical address for service provided, or

(b) registered post to the postal address provide, or

(c) facsimile or electronic mail to the respective addresses provided.

(3) Chapter Ill, Part 2 of the Electronic Communications and Transactions Act. 2002 (Act No. 25 of 2002) is applicable to service by facsimile or electronic mail.

Focusing on Rule 4A(1) it is clear that the section seeks only to apply to services not falling within the ambit of application of Rule 4(1)(a) (which refers to service on parties by the Sheriff).  As such, in application proceedings, the applicant’s Notice of Motion and Founding Affidavit, being the documents initiating the application process, must be served via the Sheriff.  

This would only apply to proceedings instituted by way of a Notice of Motion and not when the relevant application amounts to an interlocutory application interrupting action proceedings, unless specifically agreed when action was instituted (this is discussed hereunder). This is further emphasized by the inclusion of Rule 4A(4) above which states that, “Service under this rule need not be effected through the Sheriff”.

Therefore, the provisions of Rule 4A apply to all documents and notices served and filed subsequent to the Notice of Motion being served on the Respondent. These would include Opposing/Answering Affidavits and Replying Affidavits.

A further important element of the new Rule 4A is the reference to the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”) in section 4A(3), and more specifically Chapter III, Part 2 thereof.  

Chapter III, Part 2 of the ECTA deals mainly with the “Communication of Data Messages”.  As such it is trite that the service of legal documents through email or facsimile must comply with the provisions of Chapter II, Part 2 of the ECTA or the chosen manner of service will be considered invalid. For the present purposes it is unnecessary to set out the relevant provisions of the ECTA aforementioned but knowledge of its application to Rule 4A is sufficient.

Notwithstanding the inclusion of Rule 4A to the High Court Rules, certain other Rules have also been amended to accommodate the inclusion of Rule 4A and the alternative forms of service nominated therein.

Rule 6 of the High Court Rules has been substantially amended. In so doing the Rules Board has substituted paragraph (b) of sub-rule (5) which, to sum up, holds the following:

·   When dealing with an application other than an ex parte application, it shall be brought by Notice of Motion and served on all parties to whom notice is given;

·    The Applicant shall nominate an address within 8 kilometres from the office of the Registrar;

·   Such documents served shall set forth a day, not less than 5 days after service of the document on the Respondent, by which the Respondent shall notify the Applicant in writing if he or she seeks to oppose the application;

·      If no such notification of received, the matter shall be enrolled for hearing on a stated day, not being less than 10 days after service of the document on the Respondent.

Similarly, paragraph (d) of sub-rule (5) has been substituted. In its previous form it held:

·      When a Respondent chooses to oppose the order sought in the Notice of Motion he or she must within the time stated in the Notice of Motion, convey in writing his or her written intention to oppose and that such a notice must nominate an address within 8 kilometres radius of the office of the Registrar, where documents and services will be received.

The substituted sub-rules have altered the above position as follows:

·         In future, the Applicant’s postal, facsimile or electronic mail addresses are to be included in the Notice of Motion;

·         The Applicant’s nominated physical address must now be within 15 kilometre radius of the office of the Registrar as opposed to 8 kilometres previously;

·         The Respondent will also be expected to provide postal, facsimile or electronic mail addresses where available;

·         The aforementioned must be provided as part of the written notice to the applicant setting out his or her intention to oppose the relief sought.

The amendments to Rule 6 therefore have the effect of including the alternative options for service of documents (via facsimile or electronic mail) as well as extending the scope of the nomination of the Applicant and Respondent’s service addresses.

It is clear, however, from amendments to additional Rules of the Uniform Rules of Court that the inclusion of alternative forms of service and extension of the restricted nominated service area does not only apply to the application process and documents relating thereto but also to summonses being documents initiating action proceedings. Rule 17 has also been amended, by the substitution of sub-rule (3).  The effect of the amendment, in my view, is as follows:

·         The Plaintiff’s attorney must now provide his or her physical address, postal address as well as electronic mail and facsimile addresses in the summons;

·         When a Plaintiff is not represented, the Plaintiff must sign the summons and provide the relevant addresses;

·         The amendments of the rules allow the Plaintiff or his attorney to nominate his or her preferred form of service including facsimile and electronic mail service;

·         The Defendant will also be allowed to deliver a consent to the future exchange of pleadings and other documents by way of electronic mail or facsimile; and

·         In the absence of such a consent, the Court may grant consent following application being made by the Plaintiff.

 Finally, it is necessary to consider the amendments made to Rule 19 of the Uniform Rules of Court. Rule 19 deals mainly with the delivery of the Defendant’s Notice of Intention to Defend and it has been amended in the following ways:

·         The Defendant must also, in his or her Notice of Intention to Defend, state his or her physical and postal addresses and where available their electronic mail and facsimile addresses;

·         Further the Defendant shall also nominate an address within 15 kilometres of the office of the Registrar, where the service of pleadings and documents are to be accepted;

·         The Defendant may elect in the Notice which manner of service would be preferred;

·         The Plaintiff, in response to the Defendant’s aforesaid written request, may deliver a written consent to the exchange or service by both parties of subsequent documents and notices in the suit by way of facsimile or electronic mail; and

·         Again, if such a request is refused by the Plaintiff, the Defendant may make application to the court for a finding ordering such form of service and on such terms as to costs and otherwise as may be just and appropriate.

In my view, the above amendments to the Uniform Rules of Court and the inclusion to these Rules of the new Rule 4A will hugely improve and streamline civil process in the Local and Provincial Divisions of the High Court of South Africa.  Moreover, it is indicative of the technological environment within which we live and work and will continue to steer our current judicial system towards technological and electronic advancement. Such progression is integral to the survival and continued successful operation of our legal system.

I do, though, have certain comments on the said amendments. Although the amendments will have an immensely positive effect on process and the ease of litigating in the High Court I do feel that such amendments have been effected too late. Service of pleadings and other relevant documents via fax especially has been a contentious issue between attorneys and the courts alike for many years. One would think that such a section and the accompanying amendments would have been enacted at the time that such issues arose and not a few years after the fact when the exchange of pleadings via facsimile has already become commonplace. This is not a particularly strong criticism but rather a comment made obiter. Though, one must admit, it is better late than never.
Further, the aforesaid amendments will obviously not have the effect of remedying the issue of alternative service methods in the Magistrates’ Courts, where I feel it would be most necessary. The issue of service in the Magistrates’ Courts has become particularly problematic especially when employing the services of correspondent attorneys or when litigating in the smaller Magistrates’ Courts located in the more remote areas of the country where service on any parties to litigation can prove to be near-impossible to effect. As such one would hope that the latest trend in judicial regulatory amendment would lead to the Magistrates’ Court Rules being brought in line with the latest provisions and amendments to the Rules of the Higher Courts.

Peter Turner

Thursday, 5 July 2012

Cancellation of fixed term contracts

The promulgation of the Consumer Protection Act 68 of 2008 (“CPA”) on the 31st March 2011 has been a revolutionary legislative stride towards comprehensively protecting the rights and consumer interests of the South African consumer and  provides more structured and substantially enhanced access to consumer protection mechanisms to the legally uninformed. It has been argued though, that certain of these landmark features might have serious and unforeseen consequences and impede as much on the rights of the supplier and the sanctity of contract as it provides protection to consumers.

In light of the above, a very noticeable inclusion in the ambit of the CPA is the prescription of the cancellation of fixed-term contracts. This is done through the provisions of section 14 of the CPA under Part C: consumer’s right to choose, which states:

Expiry and renewal of fixed-term agreements


(2) If a consumer agreement is for a fixed term—

(a) that term must not exceed the maximum period, if any, prescribed in terms of subsection (4) with respect to that category of consumer agreement;

(b) despite any provision of the consumer agreement to the contrary—

(i) the consumer may cancel that agreement—

(aa) upon the expiry of its fixed term, without penalty or charge, but subject to subsection (3)(a); or

(bb) at any other time, by giving the supplier 20 business days’ notice in writing or other recorded manner and form, subject to subsection (3)(a) and (b); or

It is important to note that the aforementioned section is not applicable to agreements existing between juristic persons regardless of their annual turnover.

In my view, section 14 of the CPA will be applied as follows:

  • The consumer and the credit provider would have entered into a fixed term agreement for a maximum duration of 24 months (unless the consumer expressly agrees to a longer period and the credit provider can prove a demonstrable financial benefit) as per section 14(2)(a) and Regulation 6(1) the regulations to the CPA. As such, the duration of a fixed term agreement which falls under the ambit of s14 is limited;

  • A consumer may cancel the agreement upon expiry of the fixed term, without penalty or charge, provided that the consumer has paid all that is owing to the credit provider at such a date of cancellation – this is particularly relevant for certain agreements, as it eradicates the instance of indefinite automatic renewal of fixed term agreements of long duration but introduces a situation where an agreement is renewed on a month-to-month basis pending cancellation by the consumer and, subject to material changes as notified by the supplier;

  • A consumer may cancel a fixed term agreement at any time by giving the credit supplier 20 business days’ notice in writing. Take note that no reason need be provided by the consumer for the cancellation;

  • If the consumer opts to cancel the fixed term agreement as aforementioned the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation and the supplier may charge the consumer a reasonable cancellation penalty;

  • What is considered ’reasonable’ in light of a reasonable cancellation penalty is dependent on a variety of factors included in the Regulations to the CPA. These are of limited application as they refer mainly to particular contract clauses regarded as contra bonos mores and do not specifically include indicators as to what is ’reasonable’ relating to the calculation of a cancellation penalty. It seems that we will have to wait for this section to be litigated on before this will become clear but it is submitted that what is reasonable will depend on a variety of factors including the duration of the contract, the period of the agreement that has lapsed, the period still due to run on the agreement, the balance owing in terms of the agreement, the amount already paid in terms thereof etc. The aforementioned will make it particularly difficult for a supplier to inform a prospective consumer of his or her obligations upon cancellation;

  • A supplier is also entitled to cancel the fixed term agreement before expiry of the duration of the contract on similar terms to the process prescribed for cancellation by the consumer in that the supplier may provide 20 days’ written notice to the supplier BUT only upon the consumer’s material failure to comply with the agreement, unless the consumer has rectified his or her failure within such time. Exactly what type of breach a court will consider materially sufficient for the invocation of this section remains to be seen. Again, it seems, we will have to wait for litigation on the issue before its application is crystallised. Another sensational piece of Parliamentary drafting on the seemingly baffling area of credit and consumer law (sarcasm added);

  • Further, not more than 80 days and not less than 40 days prior to the expiration of the fixed term agreement, the supplier must notify the consumer in writing of the impending expiry date, including a notice of material change to the agreement if it were to be renewed or continued past the expiry date and advise the consumer of any options available to him or her.

In conclusion it follows that the above section and its impact on credit law as we know it may be huge and probably largely unintended. In fighting the good fight for a more equal footing between the consumer and the supplier the drafters may have opened the floodgates for numerous blink-and-you’ll-miss-it cancellations by consumers.

As the CPA is still a very new piece of legislation it might still be too early to point out its failures, as mentioned above it seems that we will have to wait for a court to do this for us.

Peter Turner