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[2016] ZASCA 141
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Afgri Corporation Limited v Eloff and Another (20474/2014) [2016] ZASCA 141 (29 September 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 20474/2014
In
the matter between:
AFGRI
CORPORATION LIMITED
APPELLANT
and
MATHYS
IZAK
ELOFF
FIRST RESPONDENT
ELSABE
ELOFF
SECOND RESPONDENT
Neutral
citation:
Afgri
Corporation Ltd v Eloff
(20474/2014)
[2016] ZASCA 141
(29 September 2016)
Coram:
Maya DP, Bosielo,
Theron and Van der Merwe JJA and Makgoka AJA
Heard:
25 August 2016
Delivered:
29 September 2016
Summary:
Contract ─
acknowledgement of debt and undertaking to pay ─ evidence
contradicting the terms of the agreement rendered
inadmissible by the
parol evidence rule ─ judgment granted in terms of the
agreement.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Hughes J
sitting as court of first
instance):
(a)
The appeal is upheld with costs.
(b)
The order of the court a quo is set aside and replaced with the
following:
‘
Judgment
is granted against the defendants jointly for payment of:
1
The amount of US$920 844.59;
2
Interest on the amount of US$920 844.59, compounded monthly and
calculated at:
2.1
14 per cent per annum from 1 September 2007 to 18 February 2008;
2.2
13 per cent per annum from 19 February 2008 to 10 November 2008;
2.3
15 per cent per annum from 11 November 2008 to date of payment.
3
Costs of suit.’
JUDGMENT
Van
der Merwe JA (Maya DP, Bosielo and Theron JJA and Makgoka AJA
concurring):
[1]
On 26 December 2007 Dumela Farms Limited (Dumela) and the
respondents, Mr Mathys Isak Eloff and Ms Elsabe Eloff, signed an
agreement entitled ‘ACKNOWLEDGEMENT OF DEBT, SURETYSHIP,
UNDERTAKING & CESSION’ (the agreement). In terms thereof,
Dumela acknowledged indebtedness to the appellant, Afgri Corporation
Limited, in the amount of US$920 844.59. In terms of
the
agreement, the respondents bound themselves jointly and severally as
sureties and co-principal debtors for the due payment
of the amount
of US$920 844.59 by Dumela to the appellant. The court a quo
(Hughes J in the Gauteng Division, Pretoria) dismissed
the
appellant’s claim against the respondents based on the
agreement, but granted leave to appeal to this court. The central
question in this appeal is whether the court a quo should have held
the respondents liable in terms of the agreement, for payment
of the
said amount to the appellant.
[2]
The respondents are married to each other in community of property
and are domiciled in the Republic of South Africa. They have,
since
1992, conducted farming operations in the Republic of Zambia through
Dumela, a company incorporated and registered in terms
of the laws of
Zambia. The respondents were shareholders of Dumela. Mr Eloff was a
director of and the driving force behind Dumela.
He signed the
agreement on behalf of Dumela.
[3]
Dumela mainly produced maize. Maize is planted during spring and
harvested during autumn and winter of the following year. The
appellant, which is also a Zambian company, had for some years
provided producers’ goods such as seeds, fertilizers, chemicals
and fuel, to Dumela on credit. This was regulated by standard written
agreements entitled ‘PRODUCTION AGREEMENT AND AGRICULTURAL
CHARGE’ (production agreement), entered into between the
appellant and Dumela in respect of each seasonal planting.
[4]
In terms of such a production agreement the appellant made a credit
facility in a specified amount available to Dumela for the
purchase
of producers’ goods. The outstanding balance of the credit
facility had to be settled by an agreed date after the
harvest of the
relevant crop, either by payment thereof or by delivery of a
specified quantity of maize at a fixed price. As security
for the
repayment of the credit facility, Dumela granted an agricultural
charge to the appellant in terms of the then Zambian Agricultural
Credits Act 23 of 1995. For purposes of this judgment it is not
necessary to say more than that an agricultural charge provides
a
creditor with security over moveable property and rights of its
debtor similar to the security provided by a notarial bond in
terms
of South African law. (See 17(2)
Lawsa
2ed (2008) para 399-405.)
[5]
The last production agreement entered into between the appellant and
Dumela pertained to the production of maize during the
2006/2007
season. This agreement provided for a credit facility for Dumela in
the amount of US$647 520. The credit facility
had to be settled
by 30 September 2007, by payment or the delivery of 3 660 metric
tons of maize. The value of the maize to
be delivered was
predetermined at US$160 per ton. Although this agreement was only
signed on 19 July 2007, it is common cause that
it was implemented
since commencement of the planting season during 2006. The
agricultural charge in the amount of US$647 520,
envisaged in
the production agreement, was registered on 20 July 2007, inter alia
over ‘all crops growing and otherwise to
be grown in the 2006/7
season’. The respondents admitted that Dumela utilized the
facility to the full and thus became indebted
to the appellant in
terms of this production agreement in the amount of US$647 520.
[6]
The appellant subleased a portion of the land farmed by Dumela at
Mukonchi, Zambia for purposes of a depot. It is common cause
that
Dumela delivered approximately 2 900 metric tons of white maize
(the maize) to the appellant at this depot. In terms
of the
production agreement, the appellant therefore became entitled to
utilize the maize to settle or reduce the outstanding balance
on the
credit facility.
[7]
However, Dumela, represented by Mr Eloff, entered into negotiations
with the appellant to prevent this outcome. Mr Eloff maintained
that
the low price of maize at the time would in future probably rise
materially. He accordingly requested extension of time for
settlement
of the 2006/2007 production credit facility as well as other amounts
owed by Dumela to the appellant at the time. The
total amount owed
was US$920 844.59. Mr Eloff also offered additional security for
this debt. The appellant acceded to this
request and these
negotiations led to the signing of the agreement. During these
negotiations and the entering into the agreement,
Dumela and the
respondents were assisted by an attorney.
[8]
Clauses 3 and 4 of the agreement setting out the debt provided:
‘
3.
DUMELA
FARMS
acknowledges that, excluding any amounts owing in respect of
Instalment Sale Agreements, as at 31 October 2007 it is indebted to
AFGRI
CORPORATION LIMITED
[ie
the appellant], a company duly registered as such under Registration
Number 44914 in the Republic of Zambia, (hereinafter referred
to as
“
AFGRI
CORPORATION
”)
[in] the following amounts:
3.1
An amount of US Dollar (“$”)920 844.59 (NINE HUNDRED
AND TWENTY THOUSAND
EIGHT HUNDRED AND FORTY FOUR DOLLARS AND FIFTY
NINE CENTES) in respect of goods sold and delivered, services
rendered and credit
facilities granted by AFGRI CORPORATION to DUMELA
FARMS at the latter’s special instance and request;
3.2
Interest on the amount of US$920 844.59 from the 1
st
day of November 2007 to date of payment, at a interest rate equal to
the Base Rate charged from time to time by STANBIC in Zambia
plus 3
percentage points and which interest will be compounded monthly. It
is recorded that the aforementioned Base Rate is presently
11.5% per
annum and the interest rate charged on the aforesaid amount is
presently 14.5% per annum.
4.1
The amount mentioned in paragraph 3.1 above was payable by
DUMELA
FARMS
to
AFGRI CORPORATION
before or on 31 August 2007,
but was not paid;
4.2
DUMELA
FARMS
has requested an extention of time until 31 July 2008 for payment of
the due amounts mentioned in 3.1 and 3.2 above.’
[9]
Clauses 7 and 8 of the agreement dealt with the additional security
provided. It essentially consisted of a cession by the respondents
of
their right, title and interest, up to the amount of US$1 million, in
a first mortgage bond to be registered over certain land
that had
been sold by the respondents to a close corporation for purposes of
development of a residential township. The respondents
also undertook
to pay an amount of R100 000 to the appellant upon transfer of
each erf in the development to the purchaser
thereof.
[10]
Clause 9 provided:
‘
9.1
DUMELA
FARMS
consented to
AFGRI
CORPORATION
registering certain Agricultural Charges against
DUMELA
FARMS
in terms of the provisions of the Agricultural Credits Act (Act 23 of
1995) of the Republic of Zambia, which charges have been
duly
registered.
9.2
DUMELA FARMS
,
MATHYS
and
ELSABE
acknowledged
that the provisions of this document will in no way prejudice or vary
the rights of
AFGRI CORPORATION
in terms of the Agricultural
Charges registered in the Republic of Zambia by
AFGRI CORPORATION
,
nor affect any other rights of
AFGRI CORPORATION
to enforce
any rights which it might have against
DUMELA FARMS
in terms
of the laws of force in the Republic of Zambia or any agreements
entered into between
DUMELA FARMS
and
AFGRI CORPORATION
.
9.3
DUMELA FARMS
confirms that approximately 2 900 metric
tons of white maize is presently being stored in bags on
DUMELA
FARMS’
farm Mukonchi, Zambia. It is recorded that the total
quantity of maize being stored on the farm is
inter alia
subject to the Agricultural Charge mentioned above.
9.4
DUMELA FARMS
undertakes, at its cost, to take all necessary
steps including, but not limited to, effective covering and regular
fumigation as
prescribed by
AFGRI CORPORATION
, so as to
protect the bagged maize against any damage of whatever nature,
including, but not limited to damage as a result of theft,
destruction, fire, damage by water, inclement weather, storm, wind,
pests and contamination.
9.5
It is recorded that approximately 1 500 metric tons of the
aforementioned 2900 metric
tons bagged maize had to date not been
contracted for sale and
DUMELA
FARMS
undertakes, subject to
AFGRI
CORPORATION’s
prior written consent and its rights in terms of the Agricultural
Charge and other agreements entered into with
DUMELA
FARMS
,
to enter into the necessary contracts for the sale of the total
quantity of 2 900 metric tons of maize before or on 25 July
2008.
DUMELA
FARMS
confirms and acknowledges that in the event of
DUMELA
FARMS
still being indebted in any amount to
AFGRI
CORPORATION
at 25 July 2008 and it failing to enter into the necessary contracts
of sale in respect of the total quantity of the stored bagged
maize,
or
DUMELA
FARMS
failing to make payment of the total purchase price of such maize to
AFGRI
CORPORATION
before or on 31 July 2008,
AFGRI
CORPORATION
will be entitled, without any notice to
DUMELA
FARMS
,
to exercise all its rights in terms of the Agricultural Charge which
has been registered in favour of
AFGRI
CORPORATION
and which rights will include, but not be limited to seizure and the
appointment of a receiver.’
[11]
On 6 February 2008, however, Dumela was placed under receivership in
terms of the laws of Zambia. As a result, the assets of
Dumela were
placed under the control of the appointed receivers. The duty of the
receivers was to distribute the assets of Dumela
amongst its
creditors, in accordance with the ranking of their rights. Litigation
in respect of the maize ensued in Zambia. It
is not necessary to
provide the particulars thereof. It suffices to say that the prior
rights of another creditor of Dumela prevailed
in respect of the
maize. The appellant consequently received no payment as envisaged in
the agreement nor from any other source.
[12]
The appellant accordingly issued a provisional sentence summons
against the respondents for payment in terms of the agreement.
By
agreement between the parties, the matter went to trial. The court a
quo
mero motu
held that the provisions of s 21(1) of the English Sale of Goods
Act of 1893, applicable in Zambia, rendered the agreement
invalid.
The respondents rightly conceded that this finding was wrong and
nothing more need be said about it.
[13]
It is necessary to analyse the provisions of clause 9 of the
agreement in context. Their meaning is plain. Dumela confirmed
that
the maize was stored in bags on its farm at Mukonchi. It undertook,
at its cost, to take all steps necessary to protect the
maize against
any damage of whatsoever nature. Dumela acknowledged the provisions
of the agricultural charge registered in favour
of the appellant and
that the maize was subject thereto. At its request, Dumela was
granted the opportunity until 25 July 2008
to sell the maize to third
parties in order to obtain a better price. The purchase price of the
maize had to be paid to the appellant
by 31 July 2008. In the event
that no such sale took place, or if Dumela failed to make payment of
the full purchase price of the
maize to the appellant on or before 31
July 2008, the appellant would be entitled, without notice to Dumela,
to exercise its rights
in terms of the agricultural charge. It is
clear that the parties to the agreement were ad idem that Dumela was
the owner and in
control of the maize, which was subject to the
appellant’s security consisting of the agricultural charge.
[14]
The only defence proffered in the evidence of Mr Eloff, was raised in
a second amended plea filed after Mr Eloff had completed
his evidence
in chief. Although his evidence in this regard was not clear and
consistent, he attempted to convey that the maize
became the property
of the appellant when it was delivered to the appellant in the period
up to 31 August 2007. The implication
hereof was that Dumela’s
account with the appellant ought to have been credited with the value
of the maize by 31 August
2007, that is before the agreement was
entered into. (In terms of the production agreement Dumela would in
such event have been
credited with only US$464 000 (2 900
tons x US$160 per ton)).
[15]
Before us, counsel for the respondents recognised that in terms of
the production agreement of 19 July 2007, the appellant
had only
obtained the security of the agricultural charge over the maize. He
argued that it should be found that the appellant
and Dumela had
entered into a written purchase and repurchase agreement in respect
of the maize. The appellant did from time to
time in the past enter
into such standard written agreements with Dumela. The essential
effect of such agreement was that the appellant
purchased the maize
that was subject to a prior production agreement and the debtor
obtained the right to repurchase the maize
from the appellant by a
specified date. On this basis, so it was argued, the appellant became
the owner of the maize upon the delivery
thereof, which was completed
by 31 August 2007.
[16]
The argument is devoid of any factual basis. Such agreement could
only have been entered into after the production agreement
of 19 July
2007. No such agreement was produced at any time. In his testimony Mr
Eloff only tentatively referred to the possibility
of such agreement
and in any event explicitly said that his case was that the appellant
had become the owner of the maize as a
result of the production
agreement. This evidence directly contradicted the contents of the
agreement.
[17]
In
Union Government v Vianini Ferro-Concrete Pipes (Pty) Ltd
1941 AD 43
at 47 Watermeyer JA said:
‘
Now
this Court has accepted the rule that when a contract has been
reduced to writing, the writing is, in general, regarded as the
exclusive memorial of the transaction and in a suit between the
parties no evidence to prove its terms may be given save the document
or secondary evidence of its contents, nor may the contents of such
document be contradicted, altered, added to or varied by parol
evidence’.
This
is referred to as the parol evidence or integration rule. The rule
renders statements and negotiations leading up to the conclusion
of a
written contract irrelevant and therefore inadmissible. Where a
document that had not been signed by all the parties to the
agreement, was accepted by them as their contract, the rule is of
equal application. (See
Rielly
v Seligson and Clare Ltd
1977 (1) SA 626
(A) at 637C-H.) However, where the parties to an
agreement reduced only part of the agreement into writing, the rule
does not prevent
the admission of extrinsic evidence in respect of
the portion of the agreement that was not integrated in the document.
(See
Affirmative
Portfolios CC v Transnet Ltd t/a Metrorail
[2008] ZASCA 127
;
2009 (1) SA 196
(SCA) para 14.)
[18]
This led counsel for the respondents to argue, albeit faintly, that
that was the case here. He was, however, unable to identify
any
portion of the agreement between the parties in respect of the debt
in question that had not been integrated. In my judgment,
the
agreement embodied the whole of the arrangement of the parties in
respect of the debt in question. This is clear from the negotiations
that led to the agreement, the nature of the transaction and the
contents of the agreement. This conclusion is particularly
underscored
by the provisions of clause 5 of the agreement. This
clause was headed ‘Possible claims not covered by
Acknowledgement’.
It provided that an alleged claim by the
appellant against Dumela for damages in respect of delivery of wheat
during the production
season 2006/2007 and an alleged claim by Dumela
against the appellant in respect of the sale of soya beans,
were excluded
from the operation of the agreement. The same applied
to amounts owing in respect of instalment sale agreements, in terms
of clause
3 of the agreement.
[19]
Therefore, the evidence of Mr Eloff was inadmissible. This of course
renders it unnecessary to consider whether the evidence
was in any
event acceptable on the general probabilities arising from the
matter, which appears to be doubtful, to say the least.
To the extent
that Mr Eloff’s evidence reflected an interpretation of the
production agreement, the evidence was inadmissible
on that ground
too. (See
KPMG
Chartered Accountants (SA) v Securefin Ltd & another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) para 39 at 409G-H).
[20]
It follows that the court a quo should have granted judgment in
favour of the appellant against the respondents as claimed.
Clauses
10.3 and 10.4 of the agreement provided that all payments in terms
thereof had to be made in US dollars. Judgment should
be given in
that currency. Our courts have the power to do so (see
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994 (4) SA 747
(A) at 774F-I).
[21]
The following order is accordingly issued:
(a)
The appeal is upheld with costs.
(b)
The order of the court a quo is set aside and replaced with the
following:
‘
Judgment
is granted against the defendants jointly for payment of:
1
The amount of US$920 844.59;
2
Interest on the amount of US$920 844.59, compounded monthly and
calculated at:
2.1
14 per cent per annum from 1 September 2007 to 18 February 2008;
2.2
13 per cent per annum from 19 February 2008 to 10 November 2008;
2.3
15 per cent per annum from 11 November 2008 to date of payment.
3
Costs of suit.’
__________________
C
H G van der Merwe
Judge
of Appeal
APPEARANCES:
For
Appellant:
J G Bergenthuin SC
Instructed by:
Ernst J V Penzhorn
Attorneys, Pretoria
Hill McHardy & Herbst
Incorporated, Bloemfontein
For
Respondents:
A Liversage
Instructed by:
Grosskopf Attorneys,
Pretoria
Spangenberg Zietsman &
Bloem Attorneys, Bloemfontein