Standard Bank v Dlamini: A plain language coup in the Durban High Court

The Durban High Court recently used plain language to provide an out to a consumer who concluded an agreement with Standard Bank. Whether one agrees with the judgment or not, this case is one of the most important decisions post-NCA and CPA for several reasons, not least of which is that it gives some very practical guidance on the effect of the plain language provision on the way in which consumer contracts are drafted and concluded.
It is very important to note that the NCA and the CPA have identical plain language provisions and that many of their principles can therefore be applied to other consumer agreements.
Mr Dlamini purchased a defective vehicle from a dealership. With the help of the dealership, Mr Dlamini had concluded a credit agreement to finance the vehicle. It was not in dispute that the vehicle was defective and that Mr Dlamini was in fact entitled to return it. When he returned the vehicle, Mr Dlamini thought that he would be entitled to a refund and that he had cancelled the agreement. In the interim Standard Bank demanded payment in terms of the credit agreement and eventually issued summons after having sent a notice in terms of s 129 of the NCA to the incorrect address. The bank contended that Mr Dlamini did not cancel the agreement and that his return of the vehicle was a ‘voluntary surrender’, a distinction which had significant financial implications for Mr Dlamini. The bank relied on a clause in the agreement which stated that the agreement must be terminated by sending a notice to the bank’s vehicle and asset finance division via fax. It was not good enough that Mr Dlamini had informed the dealership where he bought the vehicle.
Here is what we are told about Mr Dlamini (para 23):
Mr Dlamini is functionally illiterate and does not understand English. This is as obvious to me as it was to Mr Mtetwa
[the dealer]. Mr Dlamini completed schooling at standard one. At 52 years, he is an unsophisticated African male. He had difficulty in the witness stand engaging with the documents. He had become so excited about the purchase of a vehicle that he paid little attention to the repayment plan. He relied on the bank to deduct reasonable installments. He did not expect the bank to deduct a high amount that left him without the means to support himself, his wife and his two little children. He expected to discover what the amount of those instalments would be when the bank deducted its first instalment from his account. He trusted his bank. On discovering that he bought a defective vehicle he returned it intuitively to the person who sold it to him.
What follows here is a very limited discussion of but one of the arguments made in the judgment as to why Mr Dlamini should prevail (See Carmel Rickard’s blog, ‘A free state of mind’ (http://carmelrickard.posterous.com/166437770#comment). Also see my blog (http://www.esselaar.co.za/plain-language-finally-makes-it-high-court) for a discussion of a different aspect to what will be discussed below.). The aspect we deal with here is whether suppliers are obliged to include consumers’ CPA rights in the contract. Many suppliers are hesitant to include references to the CPA in their contracts, as they fear that it will encourage consumers to claim.
Essentially the complaint against the bank was that it recorded certain obligations of the consumer in terms of the NCA in the agreement, but that it failed to include the consumer’s right to a refund. It was held that [para 41]:
Non-disclosure of s 121(3)(a) [the consumer’s right to receive a refund] violates the right of consumers to education and information in terms of s 3. The bank’s selection of what parts of s 121 of the NCA it should record in the agreement and what it should exclude is deliberate and deceptive. The heading of s 121 highlights its purpose as the ‘Consumer’s right to rescind credit agreement’. Instead of informing the consumer of this right, the bank pitches it as an onerous bundle of obligations on the consumer to pay the bank the costs of renting and recovering the vehicle. Projecting the consumer’s obligations whilst understating his rights discourages rescission which is the consumer’s statutory right.
The question is whether this line of reasoning can be applied in respect of other consumer contracts. It is clear that contracts cannot detract from the consumer’s rights as any clause that limits the consumer’s CPA rights is void (s 51). We also know that suppliers must not mislead consumers (s 41) and that consumers have a right to contracts which are fair, reasonable and just (s 48) which means that they must not be ‘excessively one-sided’. Despite all of that the CPA (contrary to, for instance, an instrument like the EC Directive on Consumer Sales and Associated Guarantees) does not expressly require a supplier to inform a consumer of their consumer rights or to include them in a contract. A notable exception to this is s 32 which provides that a consumer must be informed of the right to a 5-day cooling-off period in respect of sales which are the result of direct marketing. It is notable because it opens the door to an argument that the legislature would have included this disclosure obligation in respect of other sections if it wanted to.
What is interesting about the Dlamini judgment is that it recognises the notion that an omission from a contract or agreement which emphasises consumers’ obligations while obscuring their rights is ‘deceptive and misleading’. This argument could easily be made by relying on s 41 of the CPA. The judgment also emphasised the fact that the more abstract right to education and information was emphasised. Suppliers would be well advised to remember that the consumer has a ‘right to disclosure and information’.
(This article appeared in the November/December 2012 edition of Consumer Law Review which is available at www.jutalaw.co.za)

About the Author:

Elizabeth de Stadler
Elizabeth is the quirky one in the company. She specialises in all things Consumer Law, plain language drafting and designing and delivering training. She prides herself on being slightly out there and bringing a fresh perspective to compliance issues. She has a Masters (cum laude – the nerd) in Consumer Law. Elizabeth met Paul in 2011 and joined Esselaar Attorneys (she is still a senior associate at the firm). In 2013 they founded Novation Consulting together. Elizabeth is a bit of a nerd. She is the editor of the Consumer Law Review (you can get it here for free!) and wrote A Guide to the Protection of Personal Information Act with Paul. She is also the author of Consumer Law Unlocked, a co-author of the hefty Commentary to the Consumer Protection Act and wrote chapters on the Consumer Protection Act in The Law of Contract in South Africa and The Law of Commerce in South Africa. She is currently working with Liezl van Zyl from the Stellenbosch University Language Centre on Plain language legal drafting, which will be published in 2017. Elizabeth loves Lego, sneakers, zombies and white wine. She hates comic sans font, sweet potato and most other attorneys. She is allergic to suits and ‘office shoes’ because of the years she worked at Webber Wentzel. She is very scared of moths. It is a thing – read about it. Want to find out more about Elizabeth? Check her out on LinkedIn. Better yet, contact her on elizabeth@novcon.co.za or (021) 481 8004.