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[2016] ZAWCHC 100
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Absa Bank Ltd v Expectra 423 (Pty) Ltd (20495/2015) [2016] ZAWCHC 100; 2017 (1) SA 81 (WCC) (19 August 2016)
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REPORTABLE
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 20495/2015
Before
the Hon. Mr Justice Bozalek
Hearing:
20 April 2016
Judgment
Delivered: 19 August 2016
In the
matter between:
ABSA
BANK
LTD
Plaintiff
(Reg
No: 1986/004794/06)
and
EXPECTRA
423 (PTY) LTD
1
st
Defendant
PIETER
LOUIS LE ROUX N.O. AND
JOLENE
LOUCHE LE ROUX
N.O.
2
nd
Defendant
(in
their capacity as Trustees of DIE LE ROUX FAMILIETRUST)
PIETER
LOUIS LE
ROUX
3
rd
Defendant
(IDENTITY
NUMBER: [6.....])
JUDGMENT
BOZALEK
J
[1]
This is an opposed
application for summary judgment together with an application by the
defendants for leave to file a supplementary
opposing affidavit but
only after the plaintiff has complied with a notice in terms of Rule
35(12) of the Uniform Rules of Court
to produce certain documents
referred to in the affidavit supporting the application for summary
judgment. The applications raise,
again, the question of whether the
early discovery procedures provided for in Rule 35(12) (and 14) apply
to summary judgment applications.
BACKGROUND
[2]
The plaintiff bank
instituted action against the three defendants herein by way of a
combined summons. It sought judgment against
them jointly and
severally for payment of the nominal amount of R7.2mil but limited to
R6.5mil in respect of second and third defendants
plus interest
thereon and costs. The defendants were sued in their capacity as
sureties for and co-principal debtors with a certain
West Dunes
Properties 176 (Pty) Ltd (‘West Dunes’ or ‘the
principal debtor’). First defendant is a limited
liability
company whilst the second defendant is Mr Pieter le Roux (‘Le
Roux’) and Ms Jolene le Roux in their capacity
as trustees for
the time being of the Le Roux Family Trust. The third defendant is Le
Roux in his personal capacity.
[3]
The particulars aver
that the defendants signed deeds of suretyship on 1 March 2010 and
copies thereof are annexed thereto. Further
allegations in the
particulars of claim are that the suretyships were in turn based on a
written ‘
term
loan agreement’
under
which the plaintiff lent and advanced the capital amount of R6.5mil
to West Dunes repayable, together with interest, over
ten years in
monthly instalments commencing in July 2010. It is further alleged
that the principal debtor failed to pay regular
instalments and as at
May 2015 the outstanding balance on the loan was some R7.2mil. A
certificate issued by a manager of the plaintiff
in this amount was
likewise annexed to the particulars. Various other documents,
including the term loan agreement, were also annexed.
[4]
The plaintiff did not
seek summary judgment against the first defendant. The application
against the second and third defendants
(‘the defendants’)
was initially postponed for a month but three days before the hearing
the defendants filed a notice
in terms of Rule 35(12) followed
shortly thereafter by what they termed a ‘
provisional
affidavit resisting summary judgment’
.
The body of the affidavit is, nonetheless, ten pages long. In the
Rule 35(12) notice the defendants call upon the plaintiff to
produce
for their inspection various documents referred to in the affidavit
supporting the plaintiff’s application for summary
judgment,
more particularly, unspecified files and certain information ‘
as
captured on plaintiff’s computer system’
.
The notice is a response to an affidavit by a Mr B Montshiwa
(‘Montshiwa’) who is employed by the plaintiff as a
manager at its ‘
Business
Bank, Wholesale Credit Restructuring and Advisory Services’
.
Montshiwa testified that insofar as some of the facts relating to the
claim were not within his personal knowledge, he had ‘
acquainted
(himself) of those facts by perusing plaintiff’s files in (his)
possession and under (his) control, as well as
by referring to
information as captured on plaintiff’s computer system’
.
[5]
The defendants also
applied for leave to file a ‘
supplementary
answering affidavit’
as well as an extension of the time period set in Rule 32(3)(b) for
the filing of such affidavit to a date ‘
not
more than ten days’
after the plaintiff had produced the documents and information sought
by the defendants. In the same application they seek postponement
of
this summary judgment application sine die pending the fulfilment of
these various steps.
[6]
There are accordingly,
apart from the summary judgment application itself, two separate but
interrelated applications before the
Court being the application for
leave to supplement coupled with an extension of time, as well as for
the postponement of the summary
judgment application.
THE
ISSUES
[7]
In their provisional
opposing affidavit the defendants raise three distinct issues,
namely, that Montshiwa has no personal knowledge
of the facts of the
matter; that they require a response to their notice in terms of Rule
35(12) before they are in a position
to deal with the summary
judgment application and, in regard to the merits, that the
plaintiff’s alleged delay in taking
action against the
principal debtor was such that they ought to be released from their
suretyship obligations to the plaintiff.
THE
ROLE OF A RULE 35(12) NOTICE
[8]
I shall deal firstly
with the question whether the defendants are entitled to invoke the
provisions of Rule 35(12) in these proceedings.
The sub-rule provides
as follows:
‘
Any
party to any proceedings may at any time before the hearing thereof
deliver a notice as near as may be in accordance with Form
15 in the
First Schedule to any other party in whose pleadings or affidavits
reference is made to any document or tape recording
to produce such
document or tape recording for his inspection and to permit him to
make a copy or the transcription thereof. Any
party failing to comply
with such notice shall not, save with the leave of the court, use
such document or tape recording in such
proceedings provided that any
other party may use such document or tape recording.’
[9]
On
behalf of the defendants Mr Newton emphasised the wide terms of the
sub-rule, particularly the phrase ‘
any
proceedings’.
He further highlighted the commentary in Erasmus’ Superior
Court Practice
[1]
which, without
qualification, states that ‘(
t)he
entitlement to see a document or tape recording arises as soon as
reference is made thereto a pleading or affidavit and a party
cannot
ordinarily be told to draft and file his or her own pleadings or
affidavits before he or she will be given an opportunity
to inspect
and copy, or transcribe, a document … referred to in his or
her adversary’s pleadings or affidavits’
.
Counsel also invoked the case of
Protea
Assurance Co Ltd and another v Waverley Agencies CC and Others
[2]
and
Unilever
PLC and another v Polagric
(Pty)
Ltd
[3]
as authority for his argument.
[10]
Those
cases, however, were not concerned with summary judgment proceedings
and neither is direct authority for the proposition that
Rule 35(12)
and/or (14) may be invoked by a defendant in summary judgment
proceedings. The only judgment dealing with that situation
to which I
was referred was
Business
Partners Ltd v Trustees, Riaan Botes Family Trust, and Another
[4]
.
Paradoxically, this judgment was relied on by both parties in the
present matter.
[11]
In
Business
Partners,
the
defendant in a summary judgment application delivered a Rule 35(12)
notice without filing an opposing affidavit. Schippers J
held that an
application for summary judgment could not be deferred by the
delivery of a notice in terms of Rule 35(12) and (14)
and that to
hold otherwise would ignore both the summary judgment procedure and
its purpose. Secondly, it would misconstrue the
provisions and
purpose of Rules 35(12) and (14). In reaching this conclusion the
learned judge set out at some length the procedure
involved in an
application for summary judgment and its rationale. He pointed out
that where any defence raised is based on facts
in the sense that
material facts alleged by the plaintiff in its summons are disputed
or new facts are alleged constituting a defence,
all that the court
enquires into is:
‘
a.
whether the defendant has disclosed the nature and grounds of his
defence and the material
facts upon which it is founded and,
b.
whether on the facts so disclosed the defendant appears to have a
defence which
is both bona fide and good in law to either the whole
or part of the claim
[5]
.’
[12]
He
noted, furthermore, that if the defendant furnishes security or
satisfies the Court that he has a bona fide defence which is
good in
law, the Court is bound to give leave to defend and the action
proceeds in the ordinary way. If the defendant fails to
furnish
security or satisfy the Court in this way, then it retains a
discretion whether or not to grant summary judgment. Schippers
J also
analysed the interplay between Rule 32, governing summary judgment
applications, and Rule 35 which provides for the discovery,
inspection and production of documents. He found the fact that Rule
35 does not feature at all in the summary judgment procedure
was
hardly surprising since the very purpose of that procedure is to
dispose of a clear case without putting the plaintiff to the
expense
of a trial. Furthermore Rule 32(3)(b), which requires the defendant
to establish a bona fide defence which is good in law,
by no means
sets a high threshold in this regard. Schippers J concluded that ‘
it
could never have been the intention of the drafters of the rules that
a defendant should first be allowed to invoke rule 35(12)
or (14) -
and to delay summary judgment proceedings even further where there
has been no compliance with those rules - to the prejudice
of the
plaintiff’
.
I agree with these conclusions wholeheartedly
[6]
.
[13]
Puzzlingly, however,
the learned judge stated, in para [11] that: ‘
(i)t
is of course open to the defendants to invoke Rule 35(12) and (14)’
and it is on the strength of that
remark that the defendants base their application to supplement their
opposing affidavit only
after the documents they seek from the
plaintiff have been received. The remark made by Schippers J must,
however, be seen in context
since he immediately goes on to say
‘
[11]
…. However, if they had difficulty in dealing with the
pleadings because they require documents
in order to determine what
the plaintiff’s case was, this should have been stated in
affidavits opposing summary judgment
as justification for their
inability to deliver an affidavit disclosing the nature and grounds
of the defence and the material
facts upon which it was based. But
what the defendants cannot do is circumvent the provisions of rule
32(3)(b) by delivery of the
notice, in order to obtain documents
which might support a bona fide defence or to defer summary judgment
proceedings, as was submitted
by Mr Newton on their behalf.
[12]
For the above reasons I have come to the conclusion that an
application for summary judgment
cannot be deferred by delivery of a
notice in terms of rules 35(12) and (14) of the Rules of Court,
without more.’
[14]
In my view, seen in its
context, the learned judge’s dictum to the effect that a
defendant may invoke Rule 35(12) and (14)
means at most that a
defendant may, for what it is worth, issue a notice in terms of Rule
35(12) and (14) but these cannot defer
an application for summary
judgment on the basis that no reply has been forthcoming. Should the
plaintiff not produce any document
or tape so sought, a defendant
can, at best, aver in its opposing affidavit that in its evaluation
of the nature and grounds of
its defence and the material facts upon
which it is based, the Court must take into account that the
defendant has not been able
to gain access to such documentation.
[15]
In
the event that I am incorrect in my interpretation of the relevant
part of the judgment in
Business
Partners
and the learned judge was indeed stating or implying that the
provisions of Rule 35(12) and (14) can somehow be utilised to defer
an application for summary judgment until such time as appropriate
response is received from a plaintiff, then I am in respectful
disagreement therewith. In my view, for all the reasons which
Schippers J sets out, invoking the provisions of Rule 35(12) and
(14)
is incompatible with the purpose and nature of summary judgment
proceedings. If it were the intention of the rule maker that
early
discovery could, in this sense, be obtained, it would go a long way
to stultify the procedure created by Rule 32 which has
effectively
been used by the courts over a long a period of time
[7]
.
Defendants’ intent upon delaying summary judgment could make
use of the provisions of Rule 35(12) and (14) to obtain extended
delays in summary judgment applications by tying up the plaintiff in
contested interlocutory applications.
[16]
For these reasons I
consider that the applications for the postponement of the summary
judgment application, for an order that the
plaintiff be directed to
furnish a reply to the defendants’ notice in terms of Rule
35(12) and for leave for the defendants
to thereafter file a
supplementary opposing affidavit are without merit and must be
dismissed.
PERSONAL
KNOWLEDGE
[17]
I turn now to the
defendants’ averment that the deponent to the plaintiff’s
affidavit in support of the application
for summary judgment has no
personal knowledge of the facts of the matter. Mr Newton’s
submission was that, in the absence
of a response from the plaintiff
to the defendants’ notice in terms of Rule 35(12), following
the wording of the sub-rule
and without leave of the Court having
been sought, the plaintiff was disqualified from using the relevant
documents. He argued
further that if the plaintiff was so
disqualified from using the documents and records referred to in
Montshiwa’s affidavit,
then the latter was precluded from
relying thereon to acquaint himself with the facts which were not in
his personal knowledge
in order to place himself in a position to
swear positively to the facts verifying the plaintiff’s cause
of action in the
summons.
[18]
Of course this argument
rests squarely on the assumption that Rule 35(12) is applicable in
summary judgment proceedings which, as
has been explained above, is
not the case. This argument therefore has no merit.
[19]
For the sake of
completeness also I deal with what the defendants put up in their
opposing affidavit on this issue, notwithstanding
that it was not
pressed in argument. In short the defendants disputed that Montshiwa
had any personal knowledge of the facts in
this matter and contended
that his personal knowledge was based solely upon the plaintiff’s
files and the contents of its
computer system.
[20]
Montshiwa testified
that the account(s) referred to in the particulars of claim were
directly under his control. To the extent that
some of the facts were
not within his personal knowledge he stated that he had acquainted
himself with them by perusing the plaintiff’s
files in his
possession and under his control as well as by referring to
information as captured on the plaintiff’s computer
system.
[21]
The
cause of action relied upon by the plaintiff in this matter is
similar in all material respects to that in
Rees
and Another v Investec Bank
[8]
,
namely, a bank suing a surety for the repayment of loans made to a
principal debtor. The defendants in
Rees
disputed that the deponent to the affidavit in support of the summary
judgment application, a recoveries officer who had had regard
to the
applicant’s records, accounts and other relevant documents in
her possession and under her control, had the necessary
personal
knowledge of the defendants’ financial standing and could
verify the cause of action; furthermore, that the defendants
were
indebted to the applicant in the amounts claimed. In short, it was
contended, she was not able to ‘
swear
positively to the facts’
as
envisaged in Rule 32(2). The court conducted a full review of the law
in this regard, in the process approving the judgment in
Maharaj
[9]
.
[22]
In
Maharaj
Corbett JA, on behalf of the court, stated:
‘
That
the mere assertion by a deponent that he
c
an
swear positively to the facts’ is not regarded as being
sufficient, unless there are good grounds for believing that the
deponent fully appreciated the meaning of these words. In my view,
this was a salutary practice... While undue formalism in procedural
matters is always to be eschewed, it is important in summary judgment
applications under Rule 32, that, in substance the plaintiff
should
do what is required of him by the Rule... Where the affidavit fails
to measure up to these requirements, the defect, may,
nevertheless,
be cured by reference to other documents relating to the proceedings
which are properly before the Court…
The principle is that, in
deciding whether or not to grant summary judgment, the Court looks at
the matter ‘at the end of
the day’ on all the documents
that are properly before it…
[10]
’
[23]
In
Barclays
National Bank Ltd v Love
[11]
,
which was quoted with approval in
Maharaj
,
the following is said:
‘
We
are concerned here with an affidavit made by the manager of the very
branch of the bank at which overdraft facilities were enjoyed
by the
defendant. The nature of the deponent’s office in itself
suggests very strongly that he would in the ordinary course
of his
duties acquire personal knowledge of the defendant’s financial
standing with the bank. This is not to suggest that
he would have
personal knowledge of every withdrawal of money made by the defendant
or that he personally would have made every
entry into the bank’s
ledgers or statements of account; indeed if that were the degree of
personal knowledge required it
is difficult to conceive the
circumstances in which a bank would ever obtain summary judgment’.
[24]
This
latter statement was reinforced in
Shackleton
[12]
in para [13] by the following dictum:
‘…
[F]irst-hand
knowledge of every fact which goes to make up the applicant’s
cause of action is not required, and that where
the applicant is a
corporate entity, the deponent may well legitimately rely on records
in a company’s possession for their
personal knowledge of at
least certain of the relevant facts and the ability to swear
positively to such facts’.
[25]
In the present matter,
as in
Rees,
comprehensive particulars of claim were annexed to the combined
summons setting out the cause of action, supported by the written
loan agreement concluded with the principal debtor, the suretyship
agreements and other relevant documentation. The suretyships
provide
for a certificate of balance to be issued by an official of the
applicant, which certificate was furnished.
[26]
It is against this
background that Montshiwa’s affidavit must be viewed. It was
not disputed by the defendants that in the
discharge of his duties
Montshiwa would have had access to the documents in question and that
upon a perusal of those documents
he would have acquired the
necessary knowledge of the facts to which he deposed in his affidavit
on behalf of the plaintiff. An
email from Le Roux to Montshiwa on 21
August 2015 in which he raises his concern that Absa was not taking
action against the principal
debtor with sufficient expeditiousness
bears out that Montshiwa was dealing with the matter. As was stated
in
Rees:
‘
At
the end of the day, whether or not to grant summary judgment is a
fact based enquiry. Many summary judgment applications are
brought by
financial institutions and large corporations. First-hand knowledge
of every fact cannot and should not be required
of the official who
deposes to the affidavit on behalf of a financial institution or
large corporation. To insist on first-hand
knowledge is not
consistent with the principles espoused in Maharaj.’
[13]
[27]
A reading of the
defendants’ opposing affidavit reveals that little if anything
contained in the lengthy particulars of claim
was disputed by them.
Instead their defence is based on new facts or omissions upon which
they rely, namely, that the plaintiff
failed to take action against
the principal debtor thereby prejudicing them as sureties.
[28]
In these circumstances
and looking at the matter as a whole, I consider that the defendants’
contention that Montshiwa’s
affidavit in support of summary
judgment was insufficient to support the application, is without
merit and cannot be sustained.
I turn now to the merits of the
defence raised by defendants in their opposing affidavit.
THE
MERITS OF THE DEFENCE RAISED
[29]
First some explanation
of the relationship between the defendants and other interested
parties is necessary. All defendants bound
themselves to the
plaintiff as sureties and co-principal debtor with West Dunes for the
repayment of any sums of money which fell
due inter alia arising from
the loan to West Dunes. At material times the third defendant, Le
Roux in his personal capacity, was
a director and ‘
corporate
controller’
of West Dunes which was the owner of certain immovable property,
being a farm in the Paarl region, presumably acquired by virtue
of
the capital sum which it received from the plaintiff pursuant to the
loan agreement.
[30]
That loan was secured
by a mortgage bond in favour of the plaintiff over the property which
was also encumbered by another mortgage
bond in favour of one Kaye.
[31]
It would appear that
the second defendant, one of whose two trustees was the third
defendant, sold its shares in and claims against
West Dunes to the
Kleinevallei Kinder Trust, (‘the Kinder Trust’) and that
a wedding business and a restaurant business
were conducted from the
farm. In terms of the sale of shares agreement, the Kinder Trust
ultimately undertook to pay the indebtedness
of West Dunes’ to
the plaintiff but failed to do so. These facts are drawn either from
the defendants’ opposing affidavit
or from a founding affidavit
filed by them in proceedings in which the defendants’ attorney
previously sued West Dunes, citing
also the plaintiff and Kaye, for
monies allegedly owing to him for services rendered to West Dunes. In
that application the applicant’s
attorney sought to wind up
West Dunes but ultimately withdrew the application on payment of the
outstanding fees.
[32]
Pursuant to various
agreements the farm and the businesses thereon were run by a Mr W
Basson and his son both of whom were apparently
sequestrated during
the course of 2015. The third defendant remained enmeshed in the
affairs of West Dunes not simply by reason
of him being cited in the
liquidation application against West Dunes, but also because of
further litigation embarked upon by himself
and the second defendant
against inter alia West Dunes in March 2015. In that application an
order was successfully sought by the
second defendant interdicting
the Kinder Trust, the new owners of the farm from selling it pending
the determination of a dispute
arising from the original sale of
shares agreement.
[33]
That sale of shares
agreement is incorporated in the voluminous papers filed by the
defendants as annexures to their (preliminary)
affidavit opposing
summary judgment. It reveals that the purchase consideration for the
sale of the shares was the difference between
R11mil and the amount
owing to the plaintiff under the loan agreement and was itself to be
paid by way of shares in a company to
be listed on the JSE. The
agreement further provided that the purchaser was to procure
cancellation instructions in respect of
that mortgage bond.
[34]
The defendants leave it
unexplained how, notwithstanding the sophisticated agreement which
they drew up to protect their rights
arising out of the sale of the
shares in West Dunes, the new owners of the property retained
possession and use of the farm without
discharging their obligations
to the defendants, most notably their obligation to procure the
cancellation of mortgage bond held
by the plaintiff.
[35]
The defence sought to
be raised by the defendants is that the plaintiff was inactive and
inordinately delayed in taking action against
the principal debtor
when it defaulted on its repayments thereby prejudicing the
defendants to the extent that they should be released
from their
obligations as sureties. In support of this defence the third
defendant states that on an unspecified date subsequent
to the sale
of shares agreement in June 2014, he became aware that the proceeds
of the sale of the shares in West Dunes, (the shares
in another
entity) were insufficient to effect payment of the outstanding
amounts due by West Dunes to the plaintiff. An addendum
was concluded
in terms of which the purchaser of the shares, the Kinder Trust,
would ensure that the liabilities of West Dunes
to the plaintiff were
settled. Notwithstanding this obligation the Kinder Trust failed to
settle the indebtedness. The plaintiff
was given notice of these
financial difficulties through being cited in the liquidation
application against West Dunes, and was
thus aware that neither the
second nor the third defendant had any further involvement in
the affairs of West Dunes and that
‘
the
business was dissipating funds’
.
[36]
It would appear to be
the defendants’ case that upon receipt of this information, the
plaintiff was under a duty to immediately
take steps against West
Dunes, foreclosing on the mortgage bond and thereby limiting the
defendants’ exposure as sureties.
They express this in the
following terms:
‘
In
fact, the plaintiff knew… that I and the second defendant had
no prospect of any right of recourse against West Dunes.
Nevertheless, to our complete and utter prejudice plaintiff simply
took no steps at all to enforce its rights against West Dunes’.
[37]
The defendants also
rely in this regard on emails addressed to the plaintiff in April and
August 2015. Two of those emails, however,
say nothing more than that
the defendants were sureties, that the Kinder Trust was supposed to
settle West Dunes’ liability,
that this was not being done and
that the defendants wish to be released as sureties. Only in the case
of the final email (to Montshiwa)
in late August 2015 was it
suggested that action be taken by the plaintiff against West Dunes
since its liability was increasing.
None of the emails even mentioned
that the defendants were allegedly being prejudiced as sureties by
any delay on the part of the
plaintiff in enforcing its rights
against West Dunes.
[38]
The high-water mark of
the defendants’ case is the following statement:
‘
The
plaintiff has delayed proceeding against West Dunes despite being
aware of the facts and circumstances all along and that the
plaintiff
was aware or ought to have been aware of the prejudice that the
plaintiff was placing on me and the second defendant
as sureties and
the prejudice is of such a nature, I respectively submit, and am
advised that the second respondent and I should
be released as
sureties’.
[39]
In the alternative it
was averred that the plaintiff had by its conduct ‘
altered
the terms of its loans with West Dunes without my or the second
defendant’s consent as sureties’
and
thus that they should be released as sureties. No detail is given as
to the conduct or how the terms of the loan were allegedly
altered.
It is common course that in November 2015 the plaintiff commenced
liquidation proceedings against West Dunes although
the fate thereof
does not appear from the summary judgment application.
[40]
In
resisting summary judgment the defendants rely on the case of
Absa
Bank Ltd v Davidson
[14]
,
specifically paras [14] and [19]. In that case it was held, however,
that although a surety can be released if the prejudice is
the result
of a beach of some or other legal duty or obligation, there is no
general so-called ‘
prejudice
principle’
in our law that if a creditor should do anything in his dealings of
principal debtor which has the effect of prejudicing a surety
the
latter is released. The general principle regarding delay on the part
of the creditor is as stated in
Caney
[15]
:
‘
The
central rule is that where the creditor gives the debtor more time in
which to pay before the debt falls due, and time is of
the essence,
that amounts to a material alteration and releases the surety.’
[16]
However
this rule only applies where an extension is given, before the debt
falls due. If this extension is made after the principal
debtor is in
mora, the suretyship is not released.
[17]
[41]
The rationale for this
approach was set out in
Estate
Liebenberg
by
Wessels JA when he stated:
‘
It
must at once be conceded that by our law every extension of time is
not considered to effect a novation. It seems quite clear
that if the
extension of time is given after the debt becomes payable and when
the debtor is in mora, then a failure to sue the
debtor, or even the
actual granting to him of an extension of time, cannot be regarded as
a novation, and therefore the surety
is not discharged. The surety
then has the remedy in his own hands: all he needs to do is to pay
the principal creditor and then
proceed against the principal
debtor.’
[18]
[42]
Thus even if one
assumes that the defendants did suffer prejudice as a result of the
plaintiff’s inactivity in proceeding
against the principal
debtor, that prejudice can only be relied upon by them if it is the
result of a breach of some or other legal
duty or obligation owed by
the creditor to them. However, the defendants do not rely upon the
breach of any terms of the various
underlying agreements. They state
only that the plaintiff’s conduct in allegedly delaying the
enforcement of its rights against
West Dunes, taken together with the
‘
surrounding
circumstances’,
justified
their release from the suretyships
.
These circumstances include the fact that to the plaintiff’s
knowledge the principal debtor was under the control of insolvents,
who were ‘
mismanaging’
the principal debtor (West Dunes) (or more accurately, the business
which was conducted on the property); that West Dunes was in
breach
of its obligation to the defendants to pay the monthly instalments
due on its mortgage bond account with the plaintiff,
the fact that
the defendants had requested the plaintiff to take action to enforce
its rights against West Dunes and that at that
time the plaintiff was
aware that the defendants had no prospects of exercising their right
of recourse against West Dunes.
[43]
The high-water mark of
the defendants’ case is that if these circumstances were proved
on trial it would establish that the
plaintiff’s conduct was so
unreasonable that it could not be considered as falling within the
terms of the loan agreement
or the deeds of suretyship.
[44]
In my view this
conclusion is not sustainable in law and, even if the alleged delay
and the ‘
circumstances’
are
proved, they do
not constitute a defence for at least two reasons. In the first place
they seek to create an exception to the general
rule that our law
does not recognise an unbounded ‘
prejudice
principle’
to
the effect that, if a creditor should do anything in its dealings
with the principal debtor which has the effect of prejudicing
the
surety, the surety is released. Secondly, not only do the defendants
not found their putative defence on the breach of any
specific
provisions in the underlying agreements but various provisions
therein expressly grant the plaintiff the right to conduct
itself in
the alleged dilatory manner which is criticised by the defendants.
All three suretyship agreements provide as follows
in clause 7:
‘
Diskresie
van die Bank
Ek/ons
erken en stem hiermee toe dat die bank geregtig is om in eie
diskresie sonder verwysing na my/ons en sonder benadeling van
sy
regte kragtens hierdie:
7.1
Die aard, omvang en duur van enige fasiliteite voorskot aan die
Skuldenaar te bepaal;
7.2
…
7.3
Enige reëling, kompromie, vergelyk of skikking te tref met of
uitstel te verleen aan
die Skuldenaar of enige borgewers;
7.4
…’
[45]
For good measure in the
term loan agreement concluded with the principal debtor the following
clauses appear:
‘
Afstanddoening
en wysiging
14.1
Indien die BANK enige bepaling van die OOREENKOMS nie stiptelik
afdwing of sy regte stiptelik uitoefen
nie, beteken dit nie dat die
BANK van enigeen van soedanige bepalings of regte afstand gedoen het
nie;
14.2
Hierdie dokument bevat die volledige OORENKOMS tussen die partye in
verband met die TERMYNLENING en
hierdie dokument, insluitend hierdie
klousele, mag nie gewysig, verander of gekanselleer word nie tensy
dit op skrifgestel is en
deur verteenwoordigers van die LENER en die
BANK onderteken is’.
[46]
As I have mentioned
there is no indication from the defendants how the plaintiff altered
the terms of its loan with West Dunes.
On the defendants’ own
version when West Dunes defaulted on its obligations in terms of the
loan agreement the plaintiff
took action against it within a year in
the form of an application for liquidation. The facts of this case,
moreover, underline
the specious nature of the defence raised by the
defendants. The defendants were closely involved in the affairs of
West Dunes
for a considerable period of time. They appear to have
been shareholders in West Dunes when it concluded the term loan
agreement
with the plaintiff which, presumably, used the proceeds of
the loan to purchase the property in question. The term loan
agreement
was concluded in June 2010 and the suretyship agreements in
March of that year. Indeed, a certificate from a firm of chartered
accountants reveals that as at 18 March 2010 the second defendant was
a 100% shareholder in West Dunes. On 1 March 2010 a resolution
was
taken by a meeting of directors of West Dunes empowering PL Le Roux
and JL Le Roux, in their capacity as directors to arrange
and
negotiate a bank facility for the company with the plaintiff.
[47]
On the defendants’
own version the second defendant sold its shares in West Dunes to the
Kinder Trust. It did so apparently
without first procuring that West
Dunes’ obligations to the plaintiff were extinguished and in
any event clearly without
ensuring that the defendants were released
as sureties for West Dunes’ obligations and as co-principal
debtors. There is
no suggestion that this sale of shares took place
with the plaintiff’s knowledge or approval. In the
circumstances, for the
defendants to criticise the plaintiff for not
taking action against West Dunes expeditiously enough and to seek to
rely on this
as grounds for releasing them from their suretyship is
without any justification or merit.
[48]
The notion that the
defendants were prejudiced by the plaintiff allegedly dragging its
feet in enforcing its rights against West
Dunes also does not bear
scrutiny. Once they became aware that West Dunes was not meeting its
obligations to the plaintiff there
was nothing to stop the defendants
from settling their obligations to the plaintiff as co-principal
debtors and sureties and then
immediately exercising their right of
recourse against West Dunes. It is not without significance,
moreover, that the defendants’
attorney brought an application
for the liquidation of West Dunes in February 2015 which was rapidly
resolved when West Dunes made
payment of the monies in the sum of
R155 000 to the plaintiff.
[49]
For these reasons I
consider that the defendants have failed to establish a bona fide
defence which is good in law.
[50]
In the result the
following order is made:
1.
The application for the
postponement of the summary judgment application and for leave to
file a supplementary opposing affidavit
is dismissed with costs.
2.
The summary judgment
application is upheld as follows: There will be summary
judgment against second and third defendant
in the following terms:
2.1
As against Second Defendant:
2.1.1
Judgment in the amount of R6, 500 000.00 in respect of its
liability as surety and limited co-principal debtor
in respect of the
principal debt of R7, 212 285.41 owed by West Dunes Properties
176 (Pty) Ltd;
2.1.2
Interest (as claimed) on the amount of R7, 212 285.41 from 16
May 2015 to date of payment at the rate of
10.25% per annum,
calculated on a daily balance and capitalised monthly;
2.1.3
Costs of suit on the scale as between attorney and own client.
2.2
As against Third Defendant
2.2.1
Judgment in the amount of R6, 500 000.00 in respect of his
liability as surety and limited co-principal debtor
in respect of the
principal debt of R7, 212 285.41 owed by West Dunes Properties
176 (Pty) Ltd;
2.2.2
Interest (as claimed) on the amount of R7, 212 285.41 from 16
May 2015 to date of payment at the rate of
10.25% per annum,
calculated on a daily balance and capitalised monthly;
2.2.3
Costs of suit on the scale as between attorney and own client.
____________________
BOZALEK
J
APPEARANCES
For the
Plaintiff:
Mr FSG Sievers
Ms
C Brown
Instructed
by:
Marais Muller Yekiso Inc
For the
2
nd
and 3
rd
Defendant:
Mr A Newton
Instructed
by:
Assheton
Smith Inc
[1]
DE Van
Loggerenberg Erasmus Superior Court Practice 2 ed vol 2 (2015)
D1-478
[2]
1994 (3) SA
247 (C)
[3]
2001 (2) SA
329 (C)
[4]
2013 (5) SA
514 (WCC)
[5]
Business
Partners n 4 para 8
[6]
Ibid para 9
[7]
Joob
Joob Investments (Pty) Ltd v Stocks Mavundla Joint Venture
2009 (5) SA
1
(SCA) Para [32]
[8]
2014 (4)
SA 220 (SCA)
[9]
Maharaj
v Barclays National Bank Ltd
1976 (1) SA
418
(A) ; Rees n 7 para 10
[10]
Maharaj
n 8 at
423D-H
[11]
1975 (2)
SA 514
(D) at 516H. See also Maharaj n 8 at 424B-D and Rees n 7 para
11
[12]
Shackleton
Credit Management (Pty) Ltd v Microzone Trading 88 (CC) and Another
2010 (5) SA
112 (KZP)
[13]
Rees n 7
para 15
[14]
2000 (1)
SA 111 (SCA)
[15]
CF Forsythe
and JP Pretorius
Caney,
The law of Suretyship in South Africa, 6
th
ed p 208
[16]
Relying
inter alia on
Estate
Liebenberg v Standard Bank of South Africa Ltd
1927 AD 502
at 507 – 8
[17]
See Caney n
15 at 208
[18]
Estate
Liebenberg
n
16 at 507