This blog is co-authored by Neshalia Nayagar, trainee associate.

On 21 February 2025, the Supreme Court of Appeal (SCA) held that the sale and lease transactions did not constitute credit agreements under the National Credit Act (NCA) and were not disguised or simulated agreements which were concluded on terms to avoid the provisions of the NCA.

The complainants lodged a complaint with the National Credit Regulator (NCR) in May 2018 concerning alleged contraventions of the NCA by a registered credit provider (the company). The NCR initiated an investigation into the company and found it to be acting as an agent for a Trust, of which the appellants were trustees (the Trust). The complainants who needed funds sold and transferred their immovable property to the Trust under a sale agreement and simultaneously concluded a lease agreement in terms of which the Trust leased the immovable property to the complainants. The lease agreement provided the seller with the option to repurchase the immoveable property from the Trust within 12 months of the sale and lease, subject to the rental under the lease agreement being paid timeously by the complainants to the Trust.

The complainants alleged that they had understood they were entering into loan agreements with the Trust and that their immovable properties would serve as security for the loans obtained. They contended that the sale and lease were simulated agreements and were in fact credit agreements, and the Trust was not a registered credit provider. The NCR approached the National Consumer Tribunal (NCT) which declared that all agreements with the Trust were void. Dissatisfied with the NCT’s decision, the Trust appealed unsuccessfully to the High Court.

The trustees then appealed to the SCA. The SCA held that a disguised transaction is a dishonest one which is intended to deceive by concealing what the real agreement or transaction between the parties is. The parties must have intended when entering into the agreements of sale and lease to do so on terms other than those set out in the scheme and must have intended that their transaction be a loan in reality.

The SCA came to the conclusion that for the transactions to be brought within the ambit of section 8 of the NCA, the transaction must provide for the deferral of the amount owed by one party to another and the payment of a charge, fee or interest in respect of the agreement or the amount that is deferred. The transactions in question, did not reflect or suggest any legal obligation for the complainants to repay the purchase price of the properties to the Trust, but rather they granted an option to purchase the property which could only be exercised if certain conditions were met.

There was no basis to conclude that the agreements were simulated and qualified as credit agreements as defined in the NCA. The NCR did not provide any evidence of simulation, and the complaints also did not support the conclusion of simulated agreements. At best, the complainants were misled as to the legal nature and import of the transactions. In the absence of evidence that the transactions were simulated or tainted, the NCR failed to show that the agreements were disguised credit agreements which were therefore not void.

The case is: Uys N O and Others v National Credit Regulator and Another (869/2023) [2025] ZASCA 34 (1 April 2025)