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[2016] ZAWCHC 159
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Collotype Labels RSA (Pty) Ltd v Prinspark CC and Others (6722/2016) [2016] ZAWCHC 159 (9 November 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case Number: 6722/2016
In the matter
between:
COLLOTYPE
LABELS RSA (PTY)
LTD
Plaintiff
and
PRINSPARK
CC
First
Defendant
CHERYL
NAIDOO
(now
PRINS)
Second
Defendant
JOHANNES
CHARL FRANCOIS PRINS
Third
Defendant
Delivered:
9 November 2016
JUDGMENT
BOQWANA,
J
Introduction
[1]
This is a
summary judgment application brought by the plaintiff against the
defendants jointly and severally, one paying the other
to be absolved
for:
1.1
Payment
of the sum of R616 652, 47;
1.2
Interest
at 15.5% per annum from 23 July 2015;
1.3
Costs of suit, including
the reserved costs of 20 June 2016, on the scale as between attorney
and client. (An amendment to the costs
was raised in argument which I
deal with later in the judgment)
[2]
The plaintiff and
the first defendant entered into an agreement in September 2009 in
terms of which the plaintiff undertook to sell
certain products and
deliver related services in future on an on-going basis to the first
defendant, subject to the terms of an
overarching agreement of trade
concluded on 3 September 2009.
[3]
The first
defendant made an application for credit facilities and for the
opening of the account on the same day. The first defendant
had
applied for a credit limit to the value of R900 000 with payment
terms requested to be within 60 days. The credit
limit was
granted to the value of R500 000 at payment terms of 30 days as
evidenced by the last page of the agreement of trade.
The
plaintiff confirmed approval of the application for credit in a
letter dated February 2010. The letter further recorded,
inter alia,
the following:
‘I would like to point out – if the account is overdue at
any time, no new orders are to be processed until the account
has
[been] [s]ettled in full. Our month end is on the last day of
every month. ‘
We must stress that payment terms are
strictly 30 days [f]rom date of statement and is due no later than
the last working day of
every month
.’
[4]
The first
defendant is referred to in the agreement of trade as the ‘Customer’
and the plaintiff as ‘Collotype’
or the ‘Supplier’.
The salient terms of the agreement of trade are,
inter
alia
, as follows:
‘2. This agreement and any offers, orders or contracts
pursuant thereto, become binding when accepted by Collotype
at its
business address. …
29. The customer hereby confirms that the goods or services
detailed on the Tax invoice issued duly represent the goods
or
services ordered by the Customer at the prices agreed to by the
Customer and, where delivery/performance has already taken place,
that the goods or services were inspected and that the Customer is
satisfied that these conform in all respects to the quality
and
quantity ordered and are free from any defects.
30. Any delivery note, invoice or waybill (copy of original) signed
by the Customer or a third party engaged to transport the products,
and held by the Supplier, shall be conclusive proof that delivery was
made to Customer.
…
36. All products supplied by the Supplier remain the property of the
Supplier until such products have been fully paid for whether
such
products are attached to other property or not.
37.
The Customer agrees to pay the full amount on the Tax Invoice
at the Business Address of the Supplier or at such other that the
Supplier may designate in writing.
…
39 The Customer agrees that the amount contained in the Tax
Invoice issued by the Supplier
shall be due and payable at the
agreed time as per this agreement.
40.
The Customer is not entitled to set off any amount
due
to the Customer by the Supplier
against it’s (sic)
indebtedness to the Supplier.
41. All discounts shall be forfeited if payment in full is not made
on due date.
42. The Customer agrees that the amount due and payable to the
Supplier may be determined and proven by a certificate issued and
signed by an independent auditor. Such certificate shall be binding
and shall be
prima facie
proof of the indebtedness of the
Customer.
45. The Customer agrees that
interest shall be payable to the
Supplier at the maximum legal interest rate prescribed in
terms of the Usury Act on
any amounts in arrears, and that interest
shall be calculated daily and compounded monthly from the date of
acceptance of the order
.
…’
(Underlined
for emphasis)
[5]
On 23 October 2009
the second and third defendants bound themselves as sureties and
co-principal debtors by way of a written deed
of suretyship. During
the period of 10 December 2014 to February 2015, the plaintiff sold
and delivered to the first defendant
printed labels for various
beverages, mainly wine. Goods and/or services ordered and sold are
detailed in tax invoices attached
to the particulars of claim; prices
thereof appear on the invoices. Such goods were delivered and/or
effected on or about the date
of the invoices to the first defendant
by the plaintiff.
[6]
The plaintiff’s
claim is for payment of the agreed printing costs of the labels only,
all of which printing had been done
and all of which the first
defendant took delivery of. This is not disputed. Notwithstanding
demand from the plaintiff the
first defendant failed to pay the
amount reflected on the invoices in the sum of R616 652, 47.
[7]
It is apparent
from the correspondence between the attorneys of the plaintiff and
that of the defendants that the first defendant
withheld payment of
the aforesaid debts on the alleged basis that the plaintiff was in
possession of certain ‘tooling’
which the defendants
alleged would give rise to a counterclaim. Various correspondences
were exchanged between the parties on the
issue of the delivery of
the alleged tooling to which I shall return.
[8]
The defendants
have opposed the summary judgment application on the basis that they
have a
bona fide
defence and a counterclaim. Before I deal with the merits of the
defences put forward by the defendants, it is convenient to first
deal with the legal principles underlying summary judgments.
Applicable
principles and case law relating to summary judgments
[9]
Mr MacWilliam SC
who appeared for the defendants prefaced his argument on this aspect
by submitting that this was not a clear case
where summary judgment
should be granted. While it is correct that a court should not
deprive a defendant of an opportunity to
defend a case when there are
triable issues, it is equally important to stress that summary
judgment is a procedure that is intended
“
to
prevent sham defences from defeating the rights of parties by delay,
and at the same time causing great loss to plaintiffs who
were
endeavouring to enforce their rights.
”’
(See
Majola v Nitro
Securitisation 1 (Pty) Ltd
2012 (1) SA 226 (SCA) at 232F-G)
[10]
The Supreme Court
of Appeal in the oft quoted decision of
Joob
Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture
2009
(5) SA 1
(SCA) at 11G-12D
observed that it was perhaps time that labels such as extra-ordinary
and drastic be done away with when referring to summary judgment
as a
remedy. It held as follows:
‘The rationale for summary judgment proceedings is impeccable.
The procedure is not intended to deprive a defendant with
a triable
issue or a sustainable defence of her/his day in court. After almost
a century of successful application in our courts,
summary judgment
proceedings can hardly continue to be described as extraordinary. Our
courts, both of first instance and at appellate
level, have during
that time been rightly trusted to ensure that a defendant with a
triable issue is not shut out. In the
Maharaj
case at 425G –
426E, Corbett JA was keen to ensure first, an examination of whether
there has been sufficient disclosure by
a defendant of the nature and
grounds of his defence and the facts upon which it is founded. The
second consideration is that the
defence so disclosed must be both
bona fide
and good in law. A court which is satisfied that the
threshold has been crossed is then bound to refuse summary judgment.
Corbett
JA also warned against requiring a defendant the precision
apposite to pleadings. However, the learned judge was equally astute
to ensure that recalcitrant debtors pay what is due to a creditor.
Having regard to its purpose and its proper application, summary
judgment proceedings only hold terrors and are ‘drastic’
for a defendant who has no defence. Perhaps the time has come to
discard these labels and to concentrate rather on the proper
application of the rule, as set out with customary clarity and
elegance by Corbett JA in the Maharaj case at 425G – 426E.’
[11]
Mr MacWilliam
further contended that this was a case where legal questions of
considerable difficulty were involved. By that I understood
him to
mean that the case was not unarguable and that the points raised by
the defendants should appropriately be dealt with at
the exception
stage. While the summary judgment rule is not intended to replace
exception proceedings, it seems to me where defences
raised are on
points of law, the court dealing with those issues at the summary
judgment stage may equally be in the same position
as a court
determining the exception.
[12]
Heher J said the
following in the case of
One
Nought Three Craighall Park (Pty) Ltd v Jayber (Pty) Ltd
1994 (4) SA 320
at 323 A-B:
‘…The Judge who hears this matter on exception or at the
trial will be in no better position than I am to determine
the issue.
The plaintiff is entitled to his judgment now if the law and the
facts are in his favour. I shall therefore consider
the validity of
the legal contention.’
See
also
Bafokeng
Rasimone Management Services (Pty) Ltd v Van Wyk
(87403/2014)
[2015] ZAGPPHC 87 (26 February 2015) and
Freeman
NO and Another v Eskom Holdings Limited
(43346/09) [2010] ZAGPJHC 137 (24 April 2010)
[13]
I align myself
with that reasoning. I am of the view that the Court at this stage
should be able to find whether the points of law
raised as defences
are good and if they are, summary judgment must be refused; but if
they are not, it must be granted and that
should be the end of the
matter.
The
legal defences of the defendants
[14]
The legal defences
raised by the defendants are firstly, that the agreement between the
plaintiff and the first defendant is a credit
agreement as defined in
the National Credit Act, 34 of 2005 (‘the Act’) and that
being the case, the plaintiff was
obliged in terms of section 40 of
the Act to be registered as a credit provider. This, according to the
defendants, is so because
if it was not registered as a credit
provider, the credit agreement is unlawful and void
ab
initio
in terms of
section 89 of the Act.
[15]
Secondly, and in
the alternative, should the court find that the agreement is not void
then the agreement is a credit agreement
and the plaintiff has failed
to comply with ss 129 and 130 of the Act prior to the issuing of
summons and as such summary judgment
cannot be granted.
[16]
The same arguments
apply in respect of the suretyship as it is an accessory to the
primary agreement. Therefore, if the court finds
that agreement to be
void then the suretyship necessarily falls away. The same would apply
in respect of compliance with ss 129
and 130 the Act.
[17]
Thirdly, the
defendants allege that the plaintiff has been aware since at least
January 2015 that they have a counterclaim and since
August 2015
about the defences. The defendants, accordingly, seek the court to
dismiss the summary judgment application with costs
on the scale as
between attorney and client.
Was
the plaintiff obliged to register as the credit provider?
[18]
Section 40 (1) of
the Act provides that:
‘A person must apply to be registered as a credit
provider if the total principal debt owed to that credit provider
under all outstanding credit agreements,
other than incidental
credit agreements
, exceeds the threshold prescribed in terms of
section 42 (1).’
(Own
emphasis)
The
threshold which has been R500 000 has been reduced to zero with
effect from 11 November 2016, as per GG No 39981 Notice
N 513, which
was published 11 May 2016.
[19]
Section 40 (4)
provides that a credit agreement entered into by the credit provider
who is required to be registered in terms of
s 40 (1) but is not so
registered is an unlawful agreement and void to the extent provided
for in s 89.
[20]
As
is evident from s 40, if agreements concluded by the credit provider
are incidental agreements, there is no obligation on the
credit
provider to register in terms of section 40 (1). The focus of
the debate would be whether the agreement in the present
matter
constitutes a credit agreement for the purposes of the Act. The
plaintiff argues that it does not. The defendants
on the other
hand are of the view that the agreement perfectly fits the definition
of a credit agreement as it is a credit facility.
It is therefore
important to look at the definitions of what constitutes a credit
agreement and what would be an incidental credit
agreement. If it
were to be found that the
agreement
is a credit facility as contended by the defendants, the plaintiff
would have been obliged to register as a credit
provider in
terms of the Act and therefore the agreement would be void.
[21]
The Act defines a
credit agreement as an agreement that meets all the criteria set out
in s 8. Section 8 (1) identifies three types
of credit agreements,
being: a credit facility; a credit transaction; and a credit
guarantee. It provides as follows:
‘Credit agreements – (1) Subject to subsection (2), an
agreement constitutes a credit agreement for the purposes of
this Act
if it is –
(a)
a credit facility, as described in subsection (3);
(b)
a credit transaction, as described in subsection (4);
(c)
a credit guarantee, as described in subsection (5);
(d)
any combination of the above.
[22]
In turn a credit
facility is defined in s 8 (3) of the Act in the following terms:
‘(3) An agreement, irrespective of its form but not including
an agreement contemplated in subsection (2) or section 4 (6)
(b),
constitutes a credit facility
if, in terms
of that
agreement
–
(a)
a credit provider undertakes –
(i)
to supply goods or services
or to pay an amount or
amounts, as determined by the consumer from time to time, to the
consumer or on behalf of, or at the direction
of, the consumer;
and
(ii) either to –
(aa)
defer
the consumer’s obligation to pay
any part
of the cost of goods or services, or to repay to the credit provider
any part
of an amount contemplated in subparagraph (i); or
(bb)
bill
the consumer
periodically
for
any part
of
the cost of goods or services, or any part of an amount, contemplated
in subparagraph (i);
and
(b)
any charge, fee or interest payable to the credit provider in respect
of –
(i) any amount deferred as contemplated in paragraph (a) (ii) (aa);
or
(ii)
any amount billed as contemplated in paragraph (a) (ii)
(bb) and not paid within the time provided in the agreement.’
(Underlined
for emphasis)
Defendants’
contention on this issue
[23]
According to the
defendants, the agreement that the first defendant had with the
plaintiff has the hallmarks of the definition of
a credit facility.
To support this contention Mr MacWilliam argued that when one
considered the entire agreement (which the defendants
attached on
their opposing affidavit) including two pages that they allege were
omitted by the plaintiff, it is plain from the
first page being one
of the pages so omitted, that an application for credit was completed
by the first defendant as indicated
by the words: ‘
Application
for Credit’
on
that page.
[24]
Secondly, in terms
of the ‘application for credit’ document which according
to the defendants formed part of the agreement,
the first defendant
specifically applied for the following:
(a)
credit facilities;
(b)
opening of an account
pursuant to the application for credit facilities
(c)
credit in the amount of R
900 000 per month with a credit limit of R900 000;
(d)
the credit requested was
for 60 days.
(e)
The plaintiff agreed to
provide credit for only 30 days with a credit limit of R500 000
and approved an application for credit
in its letter of February
2010. Furthermore, its own invoices specifically expressed that
‘terms strictly 30 days from date
of statement’.
[25]
Therefore, in this
present matter the obligation to pay for the goods is deferred to a
date after the delivery of the goods, which
date is 30 days from date
of statement. The terms of the agreement of trade provide that
interest shall be payable ‘
on
any amounts in arrears
’
which interest is to run ‘
from
the date of acceptance of the order
’.
This provision on its own constitutes a ‘charge, or interest’
referred to in s 8 (3) (b) (ii) of the Act.
[26]
Accordingly, so
contend the defendants, the agreement constitutes a credit facility
since in terms of s 8 (3) of the Act, the plaintiff
undertakes to
supply goods and to defer the consumer’s obligation to pay the
cost thereof.
Plaintiff’s
contentions on this issue
[27]
It is submitted on
behalf of plaintiff that the agreement between the plaintiff and the
first defendant is not a credit agreement
under the Act, but an
overarching agreement for the future sale of products to the first
defendant. Mr Stelzner SC who appeared
for the plaintiff argued that
s 40 only applies to the registration of credit provider under the
Act. The fundamental point, according
to the plaintiff, is that the
agreement of trade and all subsequent individual sale agreements
which underlie the present claim
are not agreements in terms of which
credit was advanced. They are all agreements for the sale of products
in respect of which
payment became due 30 days upon invoice and if
this was not paid, the purchaser was in breach of the agreement and
needed to pay
interest as part of the damages for such breach.
[28]
Mr Stelzner
further submitted that this case was on all fours with the judgment
of
JMV Textiles (Pty)
Ltd v De Chalain Spareinv
est
14 CC & Others
2010 (6) SA 173
(KZD). In that case parties concluded an agreement in
terms of which the plaintiff,
JMV
Textiles
would sell
fabric to the first defendant,
Cuts
.
The credit limit, presumably monthly, was R50 000/R100 000.
Payment was to be made within 60 days. As in this case,
the second
and third defendants bound themselves as co-principal debtors and
sureties. The defendants raised numerous defences
in their plea,
inter alia
,
that the agreement was unlawful and void by reason of the plaintiff
not having registered as a credit provider in terms of s 40
of the
Act and that the s129 notice was defective. The key issue in that
case was whether the agreements, which were similar in
their form and
content, were incidental credit agreements, because if they were
found to be so, then there would have been no obligation
by the
plaintiff to register in terms of s 40 (1) of the Act.
Discussion
on this issue
[29]
An incidental
credit agreement is defined in s 1 of the Act as an:
‘agreement, irrespective of form, in terms of which an account
was tendered for goods or services that have been provided
to the
consumer, or goods or services that are to be provided to a consumer
over a period of time and either or both of the following
conditions
apply:
(a)
a fee, charge or interest
became payable when payment of an amount
charged in terms of that account was not made on or before a
determined period or date
; or
(b)
two prices were quoted for settlement of the account, the
lower price being applicable if the account is paid on or before a
determined
date, and the higher price being applicable to the account
not having been paid by that date.’
[30]
In his analysis,
in
JMV Textiles
supra, Wallis J (as he then was) observed that at first blush both
arguments that the agreements constituted a credit facility
and
incidental credit agreement were plausible but such arguments could
not both be correct. In other words, the incidental credit
agreement
cannot also be a credit facility (at para 13).
[31]
According to the
judge, s 8 (3) (a) contemplates two types of transactions that
qualify as credit facility. The first transaction
involves the supply
of goods or services at the consumer’s request and either the
deferment of the obligation to pay the
price or a periodic billing of
part of the amount. The second is the payment by the credit provider
of amounts to either the consumer,
or third parties at the consumer’s
request, where the obligation to pay is deferred, or is in the form
of periodic billing
in respect of the amount. He gives an example of
the first type as the store-charge card or account and the example of
the second
as a credit card. In the first instance, the customer is
allowed to buy goods up to a certain determined limit, payment is
deferred
to the end of the month and the customer is billed monthly.
A fee is charged for using the card and interest is liable to be
charged
on the deficit and the customer decides how much he or she
wants to pay, subject to a specified minimum amount. With the credit
card the position is similar (at para 14).
[32]
According to
Wallis J, the kind of agreement which the parties in the
JMV
Textiles
case had
concluded, was different to the scenario described above. In that
case, the plaintiff would sell goods on credit to the
first
defendant.
He illustrated
the situation as follows:
‘The expectation is that the
price of the goods will be paid each month as it falls due. There is
no fee paid for this and
there is no entitlement to pay less than the
full amount due each month. The obligation to pay interest flows from
default in making
timeous payment, not from a legitimate decision not
to pay the full amount that is due each month.
There is no
contemplation that JMV Textiles will ever send a bill for only part
of what is due or at periodic intervals. This type
of transaction is
so wholly distinct from those that are manifestly intended to fall
within s 8 (3), that the language should not
be stretched to
encompass it.
Even if it does I am mindful of the warning given
by De Villiers ACJ in
Town Council of Springs v Moosa and another
1929 AD 401
at 417, that:
‘
An interpretation clause
has its uses, but it also has its dangers, as is obvious from the
present case. To adhere to the
definition regardless of
subject-matter context might work the gravest injustice by including
cases which were not intended to
be included.’
In my view s 8 (3)
is directed at the provision by credit providers of charge cards and
credit cards and similar arrangements, and
not at conventional sales
on credit. It accordingly does not cover the transactions before me.’
(
See
JMV Textiles
supra at para 15)
[33]
I am in agreement
with the views espoused by the court in
JMV
Textiles
. The
purpose of the Act broadly speaking is directed at those entities
whose activities and business are to provide credit
to consumers and
who aim to profit from that kind of business by way of fees, charges
or interest. In the case of incidental credit
agreements interest
only arises when the consumer is in default or payment is not made
timeously. As was observed by the court
in
Filippus
Albertus Opperman and Jacobus Boonzaaier and three others
(WCC
Case No 24887/10) at para 26
‘
there
are a number of indications in s 40 that the legislature conceived of
the credit provider who requires to be registered as
such in terms of
the Act to be a person, who either alone or in association with
others, is engaged in the business of
providing credit to
consumers.’
[34]
It is sensible to
hold that the Act was not aimed at your day-to-day credit
transactions between suppliers of goods and services,
who are not in
the business of providing credit to their customers. It could not
have been the legislature’s intention to
require every trader
out there to register as a credit provider. The Act recognises
situations where an account would be tendered
for goods and services
to be provided by a supplier at a fixed time or on an on-going basis
to a customer. Payment date in those
cases is determined. If payment
is not made on or before the date determined, interest would be
payable. The fee, charge or interest
in this instance is made payable
because payment for the goods or services was not made on or before
the determined date or period.
In respect of a credit facility, any
charge, fee or interest is payable on any amount deferred or billed
periodically.
[35]
Mr MacWilliam
argued that clause 45 of the agreement of trade dealing with payment
of interest, places the agreement within the
definition of a credit
facility. He places emphasis on the words ‘
on
any amounts in arrears
’
which interest is to run ‘
from
the date of acceptance of the order
’.
It would be recalled that the relevant clause stipulates the
following:
‘The Customer agrees that interest shall be payable to the
Supplier at the maximum legal interest rate prescribed in terms
of
the Usury Act
on any amounts in arrears
, and that
interest
shall be calculated daily and compounded monthly from the date of
acceptance of the order
.’
[36]
In
Voltex
(Pty) Ltd v SWP Projects CC and Another
2012 (6) SA 60
(GSJ)
(‘
Voltex 2
’)
at para 23 the court held that: ‘
If the payment is not
received within a 30-day period, the purchaser would be in breach of
the agreement and is liable for the consequences
upon such breach,
and damages are then payable, over and above the amount originally
payable.’
According to
Bhikha AJ, the first defendant was not liable to pay interest in
terms of the agreement of sale, but as damages as
a consequence of
its breach of such agreement of sale. In an earlier
Voltex
decision, involving
the same plaintiff, namely,
Voltex
(Pty) Ltd v Chenzela CC and Others
2010 (5) SA 267
(KZP)
(‘
Voltex
1’
) at para 39,
Madondo J found that the
mora
interest claimed by
Voltex
was in the nature of damages suffered; it was determined not by
agreement but by operation of law. The courts in both those cases
found that the transactions/agreements were not credit agreements and
accordingly there was no obligation on the plaintiff to register
as
the credit provider. They also found that the agreements were
not incidental credit agreements.
[37]
In
Independent
Plumbing Suppliers (Pty) Ltd v Thomas Classen t/a TPC Plumbing
(5191/2010 ) [2014]
ZAGPPHC 523 (13 June 2014) at para 39 Muller AJ, making reference to
s 101 (1) (d) of the Act which prescribes
that interest must be
expressed in percentage terms as an annual rate and regulation,
disagreed with Wallis J’s view expressed
in
JMV
Textiles
at para 16,
that the
Prescribed Rate of Interest Act of 1975
is applicable to an
incidental credit agreement if it is silent on the entitlement of the
of the supplier to charge a fee, charge
or interest. In his view,
‘
unless a
provision is made for entitlement to claim a fee, charge or interest,
as required by the definition of an incidental agreement,
the
agreement is not an incidental credit agreement. If an agreement is
silent on the issue of an entitlement to interest if payment
is not
forthcoming on a determine date, no demand is necessary, because in
that event mora interest automatically attaches to the
debt by
operation of law
.’
[38]
Muller AJ also
disagreed with Bhikha AJ’s findings in
Voltex
2,
that interest is
payable as damages in consequence of the breach of agreement, holding
a view that the inclusion of the clause
entitling the supplier to
claim interest if the debt is not paid brings the agreement within
the incidental credit agreement.
[39]
In the present
matter, a provision has been made in the agreement of trade that
interest shall be payable to the plaintiff at the
maximum legal
interest rate prescribed in terms of the Usury Act on any amounts in
arrears. The inclusion of the said clause,
in my view, brings
the agreement into the definition of an incidental credit agreement.
As Muller AJ observed at para 40 of
Independent
Plumbing
supra, it
matters not that the provision states that interest will be claimed
in terms of the Usury Act. That statute has been
repealed by the Act
and interest must therefore be claimed in terms of the Act.
[40]
The first
defendant in this case has no option of paying at a later date. It
must make payment for the goods within 30 days of the
invoice. There
is no deferment of the consumer’s obligations to pay any part
of the cost nor is there billing for any part
of the cost
periodically. The charging of the interest is on default of payment
after 30 days from delivery.
[41]
The plaintiff
appeared to be non-committal on the issue of whether the agreement
was an incidental credit agreement, particularly
as regards the
question of whether interest is payable by operation of law if one
has regard to the
Voltex
approach, (which
would mean that the agreement is not an incidental credit agreement)
or is payable in terms of the agreement, by
virtue of the clause
providing for payment of interest being included in the agreement
(which makes it an incidental credit agreement
if one follows the
reasoning in the decisions of
Independent
Plumbing
supra and
Nedan (Pty) Ltd v
Selbourne Food Manufacturies CC and Another
(53658/2010)
[2014] ZAGPPHC 979 (18 November 2014 at paras 31 and 32.
[42]
However, during
oral argument with reference to the
JMV
Textile
supra,
Seaworld Frozen Foods
(Pty) Ltd v Butcher’s Block & Another
CA 122/2011 [2011] ZAECGHC (24 November 2011 at para 24 and
Nedan
supra, Mr Stelzner
seemed to accept that the agreement in the present matter is an
incidental credit agreement.
[43]
Whichever
construction is accepted between that of Muller AJ and Bhikha AJ on
the issue of interest, the agreement between the plaintiff
and first
defendant is not a credit facility. Accordingly, the plaintiff had no
obligation to register as the credit provider in
terms of the Act.
Compliance
with ss 129 and 130 of the Act
[44]
As an alternative
argument, the defendants submit that the plaintiff was obliged to
comply with ss 129 and 130 of the Act as the
agreement is a credit
agreement for the purposes of these sections.
[45]
The plaintiff’s
contention on the other hand is that, assuming the agreement of trade
and other subsequent agreements are
credit agreements under the Act,
such agreements constitute a large agreement as the credit limit was
up to the value of R500 000.
In terms of s 4 (1) (b), the Act does
not apply to a large agreement ‘
as
described in section 9(4), in terms of which the consumer is a
juristic person whose asset value or annual turnover is, at the
time
the agreement is made, below the threshold value determined by the
Minister in terms of section 7 (1)
’.
[46]
Section 9 defines
categories of credit agreements as follows:
‘
9 Categories of credit agreements
(1)
For all purposes of this Act, every credit agreement is characterised
as a small agreement, an intermediate agreement, or a
large
agreement, as described in subsections (2), (3) and (4) respectively.
(2)
A credit agreement
is a small agreement
if it is –
(a) a pawn transaction;
(b)
a credit facility
, if the credit limit and that facility
falls at or below the lower of the thresholds established in terms of
section 7 (1) (b);
or
(c)
any other credit transaction
except a mortgage agreement
or a credit guarantee, and the principal debt under that a
transaction or guarantee falls at or below
of the thresholds
established in terms of section 7 (1) (b).
(3)
A credit agreement is an
intermediate agreement
if it is –
(a)
a credit facility
, if the credit limit under that facility
falls above the lower of the thresholds established in terms of
section 7 (1) (b); or
(b)
any credit transaction
except a pawn transaction; a
mortgage agreement or a credit guarantee, and the principal debt
under that transaction or guarantee
falls at or above the higher of
the thresholds established in terms of section 7 (1) (b.)
(4)
A credit agreement is a
large agreement
if it is –
(a) a mortgage agreement; or
(b)
any other credit transaction
except a pawn transaction or
a credit guarantee,
and the principal debt under that transaction
or guarantee falls at or above the higher of the thresholds
established in terms of
section 7 (1) (b)
.’
(Underlined
for emphasis)
[47]
Section 9(4)
classifies an agreement as a large agreement if the principal debt
under the agreement or guarantee falls at, or above
the higher of the
thresholds established in terms of s 7 (1) (b). The higher threshold
required to be determined in terms of s
7 (1) (b) of the Act is
R250 000.00 (See
National
Credit Act 34 of 2005
, Government Notice 513 in Government Gazette
39981 dated 11 May 2006. Commencement date: 11 May 2016)
.
[48]
The defendants
contend that a credit facility, which they argue the agreement
between the parties is, can only be categorised as
a small agreement
or an intermediate agreement as mention of a credit facility is made
in
ss 9
(2) (b) and
9
(3) (a) only and not in subsection 4.
[49]
It was found in
the decision of
Nedbank
v Wizard Holdings
2010 (5) SA 523, at paras 6 that:
‘[6] For purposes of determining whether the credit facility,
which constitutes the principal debt (in the context of the
suretyship agreement) in the current matter, is a large agreement,
the ‘principal debt’ (as defined in s1 of the Act)
of the
credit facility (as defined in s 1 of the Act) of the credit facility
(as defined in s 8(3) is the credit facility under
that facility.
(See s 7 (2) of the Act.)…’
[50]
This finding is
supported by s7 (1) (2) of the Act which provides thus:
‘…
(2)
For the purpose of
applying a monetary threshold determined in terms of subsection (1)
(b) to a credit facility,
the principal debt of the credit
facility is the credit limit under that facility
.’
(Underlined for emphasis)
[51]
Mr MacWilliam
argued that that the finding in
Nedbank
case is not applicable in this case because the court there did not
deal with s 5 of the Act and also because the facts were common
cause. I disagree with him. The court did make a finding that the
credit agreement giving rise to the principal debt was exempted
from
the application of the Act in terms of s 4 (1) (b) because the
principal debt arose from a large agreement (See
Nedbank
supra at para 8).
Therefore the plaintiff was not obliged to give notice in terms of
s129 of the Act.
[52]
In the judgment of
Standard Bank of South
Africa Ltd v Essa and Others (18994/2009)
[2012] ZAWCHC 265
(23 May
2012)
a company in
liquidation, known as Xaler, concluded an overdraft agreement with
the plaintiff which qualified as a ‘credit
facility’ in
terms of s8 (3) of the Act or failing that a credit transaction in
terms of s 8(4). Xaler was indebted to the
plaintiff on overdraft in
the sum of R 793 836.53 together with interest thereon.
Binns-Ward J found at para 2 that the provisions
of the Act were not
applicable to the overdraft agreement between the plaintiff and Xaler
because the agreement concluded between
the parties was a large
agreement as contemplated in s 9(4) in that it was ‘
a
credit agreement in respect of which the principal debt falls at or
above the higher of the thresholds established in terms of
s 7 (1)
(b) of the Act and because Xaler, as the consumer, was a juristic
person. See s 4(1) (a) (i) and (b) d of the NCA
.’
[53]
The argument that
the credit facility cannot be a large agreement must be rejected. The
term ‘any other transaction’
in s 9 (4) is wide enough to
include a credit facility. Therefore based on the defendant’s
own version that the agreement
in this case is a credit facility,
such agreement, in my view, is a large agreement as described in s 9
(4) in terms of which the
consumer is a juristic person as set out in
s 4 (1) (b). See also
Nedbank
Ltd v Tru Essence Products (Pty) Ltd & Another
(86612/2104) [2015] ZAGPPHC 1062 (14 July 2015 at para 10 –
where the Court held '[
i
]
t
is in any event quite obvious from the credit facility and the amount
claimed that the agreement, which is not denied by the respondents,
does constitute a large agreement which would ipso facto preclude the
applicability of the
National Credit Act
>.'
[54]
I have, in any
event, already found that the agreement may be categorised as an
incidental credit agreement. The Act has limited
application to
incidental credit agreements. In terms of s 5 (1) (g) Part C of
Chapter 6 applies to incidental credit agreements,
which means ss 129
and 130 should be complied with unless an agreement is found to be
exempted on the basis that it is a large
agreement in terms of s
9(4) of the Act.
[55]
The defendants
claim that the amount which, they allege was, ‘
deferred
in terms of the agreement’ ‘was at no time more than
R250 000’
.
That may be so, what is clear, however, from the agreement is that
the credit limit approved was R500 000 and the plaintiff’s
claim exceeded the limit to R600 000. Although separate orders
were made and invoiced, which if considered individually may
possibly
not exceed R250 000, the overarching agreement in terms of which
the credit was granted was up to R500 000.
[56]
Therefore, even if
Mr MacWilliam were to be correct that a credit facility can never be
a large agreement, which has been found
not to be the case;
incidental credit agreements may also be large agreements if the
description of what constitutes a large agreement
is met. I
agree with Mr Stelzner that reference to ‘any other
transaction’ in s 9 (4) (b) is so wide that it
must include an
incidental credit agreement that meets the requirements of a large
agreement.
[57]
Mr McWilliam
seemed to dispute that the term ‘any other credit transaction’
in s 9 (4) included incidental credit agreements
or at least the
agreement in this case, even if it were to be categorised as an
incidental credit agreement. In view of that a
debate ensued as to
what a ‘credit transaction’ was. ‘Credit
transaction’ in section 1 of the Act is defined
as an agreement
that meets the criteria set out in s 8 (4). Section 8 (4) (b)
provides that an agreement, irrespective of
its form but not
including an agreement contemplated in subsection (2), constitutes a
credit transaction
if
it is an incidental credit agreement, subject to s 5(2)
.
Section 5(2) is a deeming provision that parties are deemed to have
made that agreement on the date that is 20 business days after,
inter
alia, the supplier of the goods or services that are the subject of
that account, first charges a late payment fee, or interest
in
respect of that account.
[58]
Mr MacWilliam
submitted that there is no reliance on s 5(2) by the plaintiff, and
therefore the agreement in question cannot be
a credit transaction.
He relied on paras 29, 30 and 36 of
Independent
Plumbing
supra. The
decision of
Independent
Plumbing
read in
context does not support the proposition advanced by Mr MacWilliam,
in my view. Muller AJ at paras 26 and 27 in fact stated
that the
wording of s 5 (2) implies that the section applies
to
an incidental credit agreement that was concluded prior to the date
on which the supplier first charges interest or late payment
fee
.
That provision, in my view, neither excludes the incidental credit
agreements from the meaning of large agreements nor does it
classify
incidental credit agreements. It simply means the supplier has sold
and supplied goods and services on credit on a date
determined;
charged a late payment fee or interest in respect of that account;
and the date upon which the agreement was concluded
being deemed to
be in future. As Muller AJ remarked ‘
the
absurdity of what the provision accomplishes is apparent
’.
It is ‘
obscured
and unnecessary
’
(See
Independent
Plumbing
supra at
para 27 and footnote 32). That is however not the issue before me.
[59]
It has been
established that the agreement before me is an incidental credit
agreement. To try and argue that it is not a large
agreement on the
basis that it is not a credit transaction, by virtue of the
plaintiff not having relied on s 5 (2) takes
the matter no further.
The plaintiff is not obliged to allege the non-applicability of the
Act, in a manner suggested. It is for
the defendants in establishing
a
bona fide
defence to establish that the Act applies to the agreement concerned.
In any event, s 5 (2) does not categorise credit agreements.
[60]
It is worth noting
clause 26.1 of the suretyship which records the following:
‘
26
. CONFIRMATION AND CONSENT –
NATIONAL CREDIT
ACT
26.1
The
Surety confirms and states that this suretyship secures the
indebtedness of:
* 26.1.1 a juristic person (as defined in the Credit Act)
whose asset value or annual turnover is, at the time this
suretyship
is signed, respectively below the threshold of R1, 0 million
but
the indebtedness falls at or above the threshold of R250 000, 00 i.e.
a large agreement as referred to in section 4 (1) (b)
of the Credit
Act
.’
(Underlined for
emphasis)
[61]
Whilst it is
accepted that the categorisation of the agreement is a matter of law,
it is evident that parties to the suretyship
viewed the agreement as
a large agreement. I agree with Mr Stelzner that the argument that is
now presented by the defendants that
the agreement is not a large
agreement, curiously contradicts clause 26 of the suretyship.
Alleged
counter-claim
[62]
The defendants
claim that the first defendant has a counterclaim against the
plaintiff in the amount of R 1 078 340.10,
which exceeds
the plaintiff’s claim. This alleged counterclaim is in respect
of a ‘tooling’ that the plaintiff
made for the first
defendant. The tooling was allegedly kept by the plaintiff to be used
when it did printing for the first defendant.
After the plaintiff
decided to terminate its business relationship with the first
defendant in December 2014, the first defendant
requested the return
of the tooling. The tooling consists of plates and hot foil
cylinders. The defendants allege that the plaintiff
only returned a
small portion of the tooling. The plaintiff tendered to return some
tooling in July 2015. The plaintiff on the
other hand alleges that it
has on many occasions tendered to return the tooling. I frankly do
not understand the to-ing and fro-ing
that has been taking place
between the plaintiff and the first defendant regarding the delivery
of the tooling. The delivery and/or
the fetching of the tooling
between the plaintiff and the first defendant seems to be a simple
matter to me. The real cause of
the impasse is not very clear. It
appears to be artificial, in my view.
[63]
Nevertheless, it
may not be necessary, to determine the genuineness of the defendants’
alleged counterclaim, as the defendants
first have to overcome the
‘no set-off’ provision in clause 40 of the agreement of
trade. In as much as set-off operates
ipso
iure
, its operation
may be excluded by agreement (See
Blakes
Maphanga
Inc
v Outsurance Insurance Company Ltd
2010
(4) SA 232
(SCA) at para 15 and
Herrigel
No v Bon Roads Construction Co (Pty) Ltd and Another
1980 (4) SA 669
(SWA) at 676G-677A).
[64]
In the decision of
Altech Data (Pty) Ltd
v M B Technologies (Pty) Ltd
1998 (3) SA 748
at 761 B – G, the court stated the following:
‘
(
f
)
The right to set off the damages to be claimed
in the counterclaim
It
seems to me that, on a proper construction of the structure and
nature of this agreement, the remarks of Lichtenberg J in the
case of
Herrigel NO
v Bon Roads Construction Co (Pty) Ltd and
Another
1980 (4)
SA 669
(SWA) at 676 are apposite. The
learned Judge there stated at 676G-677A:
‘…
(I)f a party to an action wants
to obtain the benefit of set-off, he must claim to be entitled to
set-off; see
Hardy NO
and Mostert v Harsant
1913
TPD
433
;
Bain v Barclays
Bank (DC & O) Ltd 1937
SR 191.
In
the present case, however, Quickbeton and Bon Roads did exactly the
opposite in that they
expressly, or at least by necessary
implication, in their dealing with each other, agreed not to set off
their reciprocal debts
but to pay them to each other in full, albeit
by the simultaneous exchange of cheques for the amounts of their
respective indebtedness.
As already set out above, these two
companies had agreed that they would not pass credits in favour of
each other but would instead
pay each other for their respective
indebtedness on a monthly basis.
This being the express
agreement between them I do not think it lies in the mouth of Bon
Roads to contend that set-off operates
automatically in respect of
their mutual indebtedness, nor can Bon Roads, now insist upon or
claim set-off when it specifically
chose not to do so at the time
that set-off would have operated, had it at that time chose to rely
thereon. In my view the
inference is irresistible that Bon
Roads and Quickbeton expressly, or at least tacitly, agreed that
set-off would operate between
them or, put differently, they
expressly, or by necessary implication contracted out of the
applicability of set-off to their mutual
debts
.’
It seems to me therefore, having regard to the express wording of
clause 4.2 and the various provisions for adjustment mechanisms,
that
the respondent cannot now rely on set-off to avoid payment of the
portion of the purchase price which fell due on 5 December
1997.’
(Underlined for emphasis)
[65]
Set-off can only
take place if both claims are liquidated in the sense that they are
capable of speedy and easy proof. This was
held in
Blakes
Maphanga
supra at
para [15].
[66]
Mr MacWilliam
argued that clause 40 is not applicable in this matter as there is no
amount due as postulated in the clause. According
to him, the
defendants rely on an unqualified and admitted obligation by the
plaintiff to deliver the first defendant’s tooling
to it. There
is therefore ‘no set-off’ of debts that arises.
[67]
The suggestion
that the defendants would not be seeking to set-off the debt owed by
the plaintiff against its claim does not make
sense to me. The
defendants are asking for a counter-claim to be determined so that
they can set-off their debt, as determined
at a later stage against
the plaintiff’s claim. The fact is, the contract does not allow
them to do that. Arguments attempting
to get around clause 40 are, in
my view, unconvincing. For reasons set out above the defendants are
precluded from invoking the
operation of set-off, which is
effectively what the counterclaim would seek to do at the end of the
day. It further appears from
the correspondence between the parties,
that the extent of the claim itself is yet to be quantified. The
outstanding tooling is
still to be checked and verified for quality.
Some may need to be remade. Under those circumstances, it cannot be
said that the
actual counterclaim is liquidated and I have not
understood the defendants to suggest that it is.
[68]
Furthermore, in
Spilhaus & Co. Ltd
v Coreejees
1966 (1)
SA 525
(C) at 529 G – H, the court held that, the fact that the
defendant has a counterclaim for damages is not a ‘defence’
to plaintiff’s action on its claim within the meaning of Rule
32 (3) (b). The summary judgment was therefore granted in favour
of
the plaintiff with costs.
[69]
In any event,
nothing prevents the first defendant from instituting action against
the plaintiff should it wish to do so. The door
is not ‘shut’
to the defendants so to speak. Furthermore, both parties through
their correspondences and in court have
conveyed that the matter at
hand is capable of settlement.
[70]
Mr MacWilliam
sought to distinguish the
Altech
case on the basis
that it dealt with arbitrations. That distinction is in my view
unsustainable. The arbitration issue bears no
relevance to the
principle at hand. The arbitration point in that case was whether the
court should exercise its discretion by
referring the claim to
arbitration as per a clause in the agreement between the parties
which provided that any dispute should
be resolved in that forum.
[71]
Of relevance to
this matter, is the interpretation by the court of the structure and
the nature of a clause 4.2 of the agreement,
in that case, which
stated that ‘
the
purchaser shall pay the seller the purchase price…without
deduction or set-off…
’
The court found that the express wording of the relevant clause
precluded the respondent from relying on set-off to avoid
payment of
the portion of the purchase price which fell due on 5 December 1997
(
Altech
supra at 761G). The issue contented in that case on behalf of the
applicant was that the effect of clause 4.2, ‘
having
regard to the circumstances of this case and more particularly the
structure of the agreement, set-off cannot operate in
respect of any
indebtedness of the applicant to the respondent as envisaged in the
respondent’s counterclaim.
’
In any event, the court decided that, the applicant’s claim for
payment of the purchase price was undisputed and the
counterclaim for
damages (which was in dispute) could not be set-off against the
applicant’s claim. The court at 757 quoted
with approval the
remarks by Didcott J in
Parekh
v Shah Jehan Cinemas (Pty) Ltd and Others
1980 (1) SA 301
(D
where
he stated:
‘That the plaintiff’s claim was undisputed seems beyond
doubt. The defendants plainly admitted it. They had an answer,
to be
sure, in the
counterclaim.
But that was not truly a defence to
the claim. It was an excuse for not meeting a claim to which there
was no defence. Whether the
excuse was a good may well turn out to be
disputed. Any such dispute will, however, concern the counterclaim.
It will not be the
dispute about the claim.’
[72]
I am therefore
persuaded by the plaintiff’s case that in view of the
indebtedness to the plaintiff in terms of the agreement
of trade
having been admitted and the applicable principles of the summary
judgment, the defendants cannot avoid judgment being
taken against
them simply on the basis of their counterclaim which cannot be used
to set-off the debt against plaintiff.
[73]
The suretyship is
accessory to the principal agreement. Therefore, the findings in
respect of the principal agreement are equally
applicable to it. For
those reasons, the summary judgment must succeed.
[74]
Mr MacWilliam
argued that the plaintiff is not entitled to interest at the rate of
15.5% due to the amendments to the prescribed
rate of interest.
According to him, at best the plaintiff should get 10.25% interest.
It is established in my view that,
interest runs at the prescribed
interest rate which was applicable when the debt arose. The
prescribed interest rate does not operate
retrospectively. (See
Katzenellebogen v
Mullin
1977 (4) SA
855
(A);
Davehill
(Pty) Ltd v Community Development Board
1988 (1) SA 290
(A).
[75]
As to costs, the
plaintiff asked for costs to be awarded on the scale as between
attorney and client in its heads of argument on
the basis that this
is provided for in the agreement between the parties. The defendants
did not place any objection to the request
for such a relief and I
see no reason why it should not be allowed.
[76]
I therefore make
an order as follows:
1.
Summary judgment is
granted against the First, Second and Third Defendants jointly and
severally, the one paying the other to be
absolved, in the following
terms:
1.1
Payment
of the sum of
R616
652, 47;
1.2
Interest at 15.5% per
annum from 23 July
2015
to date of payment;
1.3
Costs of suit, including
the reserved costs of 20 June 2016, on the scale as between attorney
and client.
___________________
N
P BOQWANA
Judge
of the High Court
APPEARANCES
For
the Plaintiff: Adv R G L Stelzner SC
Instructed
by: J L U Van der Hoven, Paarl, c/o Van der Spuy & Partners, Cape
Town
For
the Defendants: Adv R MacWilliam SC
Instructed
by: Spamer & Triebel, Bellville, c/o Norman Wink & Stephens,
Cape Town