Brief Summary

Execution — Suretyship — Acquiescence in judgment — Appellants sought to appeal a judgment enforcing a suretyship after making a payment to satisfy the judgment debt and costs — Court held that the appellants' actions constituted acquiescence, thereby perempting their right to appeal — Payment made without protest indicated an intention to abide by the judgment, extinguishing any further dispute — Appeal dismissed as there was no practical effect to be gained.

Comprehensive Summary

Summary of Judgment

Introduction

This matter concerned an appeal to the South Gauteng High Court, Johannesburg, against a judgment of the same Division (per Bashall AJ) enforcing suretyships and related security granted in respect of a loan facility. The appeal was heard by a full court, with Wepener J delivering the judgment (Horn J and Victor J concurring).

The appellants were Bruce Eric Heafield (first appellant), Duncan Eric Heafield (second appellant), Wehmeyer & De Witt (Pty) Limited (third appellant), and Zevenfontein Farm (Pty) Limited (fourth appellant). The respondent was Rodel Financial Services (Pty) Limited, a registered credit provider. The second appellant had been sequestrated and took no part in the proceedings, and the appeal court recorded that no order was issued against him.

The litigation arose from a facility agreement concluded between the respondent and the first appellant (as borrower/principal debtor), secured by mortgage bonds over immovable property owned by the third and fourth appellants and by deeds of suretyship executed by the second, third and fourth appellants. The court a quo granted judgment in favour of the respondent and subsequently granted leave to appeal on limited issues, principally relating to the construction and waiver of security-related conditions in the agreement (in particular clause 5.1 of the respondent’s standard terms and conditions).

On appeal, a further preliminary question became central: whether the appeal had been perempted (lost) by reason of the third and fourth appellants having tendered and paid the judgment debt and costs after judgment, conduct alleged to amount to acquiescence in the judgment. The appeal court ultimately dismissed the appeal, primarily on peremption, and additionally on the basis that the contested security condition (the “cession”) was in any event fulfilled.

Material Facts

On 22 December 2006, the respondent and the first appellant concluded a written facility agreement under which the respondent would lend and advance R14 800 000,00, with an amount repayable (including interest and bond registration costs) stated as R18 796 000,00. The facility was expressed to be conditional upon security being furnished, including (among other items) the registration of mortgage bonds, the execution of suretyships, and a cession of ticket sales by Kusasa (Pty) Limited, collected by Ticketconnection, in relation to the national performance of Celine Dion, limited to R14 800 000,00 plus costs and interest. The respondent’s standard terms and conditions were incorporated, including clause 5.1, which described the security condition as being for the benefit of the respondent and contemplated that the respondent could waive fulfilment of security requirements (on written notice to the borrower).

Also on 22 December 2006, the second appellant and the third and fourth appellants executed written deeds of suretyship securing the first appellant’s obligations to the respondent. Two mortgage bonds were registered over immovable property of the third and fourth appellants, binding each mortgagor as co-principal debtor with the principal debtor for repayment on demand of sums owing, subject to maximum amounts (including additional amounts) stated in the bonds. The third and fourth appellants’ suretyship liability was limited to stated maxima (R6 600 000,00 and R12 200 000,00 respectively).

The respondent alleged, and it was treated as material to the merits, that all conditions precedent were fulfilled and that the loan was advanced on 27 December 2006. The respondent further alleged that the loan became due and payable by 26 December 2007, and that notice was given during November 2007 of the amount that would be due on expiry of the facility period, but the first appellant failed to pay. Demand letters were later sent to the third and fourth appellants by registered post on 5 May 2008.

A material dispute (as framed in the proceedings) arose concerning whether the condition requiring a cession of ticket sales had been fulfilled. After the appellants delivered a Rule 35(12) notice seeking production of documents referred to in the founding affidavit (including the cession referred to as a condition), a document headed “Cession of Funds (Limited)” was produced. Bashall AJ regarded this document as not constituting the contemplated cession, but as an undertaking to cede. On appeal, the appeal court differed and treated this document as constituting a valid cession for purposes of fulfilment of the relevant condition.

After the court a quo granted judgment (30 June 2009) and after the appellants filed an application for leave to appeal (6 August 2009), the third and fourth appellants’ attorneys addressed a letter to the respondent referring to the judgment and requesting cancellation figures to enable cancellation of the respondent’s mortgage bonds in the context of a proposed sale of the properties. The letter reflected an intention to settle the judgment debt and tendered R150 000,00 in respect of the respondent’s costs. Guarantees were furnished; as a result of an oversight the costs were initially not included, and a separate guarantee for R150 000,00 was agreed for costs. On 13 November 2009, cancellation of the mortgage bonds was effected and payment was made pursuant to the guarantees, resulting in the extinguishment of the judgment debt and costs.

The court a quo, when later dealing with leave to appeal, held that because the approach to pay came from the third and fourth appellants, it was not an unqualified acquiescence in the judgment debt. The appeal court rejected that characterisation on the facts and treated the tender and payment as unequivocal conduct inconsistent with persisting in an appeal.

Legal Issues

The central issues determined by the appeal court were whether the appeal was barred by peremption due to the appellants’ conduct after judgment, and, relatedly, whether the appeal should be dismissed because it would have no practical effect in light of settlement/payment (with reference to section 21A of the Supreme Court Act 59 of 1959).

These issues were primarily questions of law (the doctrine of peremption; jurisdiction and procedural competence to raise peremption without a cross-appeal or separate leave) applied to largely common-cause facts (the tender, provision of guarantees, cancellation of bonds, and payment extinguishing the judgment debt). The court also addressed a further merits-related question involving the application of legal principles to fact, namely whether the produced “Cession of Funds (Limited)” document amounted to a cession satisfying the relevant security condition.

Although the appeal had originally been directed at questions of contractual construction and waiver (including whether clause 5.1 was inserted for the exclusive benefit of the respondent and whether it was validly waived), the appeal court expressly stated that it was not necessary to decide those issues in light of its conclusions on peremption and, in any event, on fulfilment of the contested condition.

Court’s Reasoning

The appeal court applied the established principle that a litigant who, by unequivocal conduct inconsistent with an intention to appeal, indicates acceptance of a judgment is taken to have acquiesced, and the right of appeal is thereby perempted. It emphasised that peremption does not depend on an express agreement not to appeal; rather, the inquiry is whether the conduct leads clearly to the conclusion that the litigant intended not to assail the judgment, with the onus resting on the party alleging acquiescence.

On the facts, the appeal court regarded the third and fourth appellants’ letter of 6 August 2009 and the subsequent conduct as decisive. The letter requested cancellation figures so that the mortgage bonds could be cancelled “upon” payment of the judgment debt, and it included a tender in relation to costs. The court considered that this conduct—followed by the actual furnishing of guarantees, cancellation of the bonds, and payment extinguishing the debt and costs—was inconsistent with a continued intention to pursue the appeal. The payment was made without protest and without reservation of rights, and it occurred in circumstances where the noting of an application for leave to appeal would ordinarily stay execution. Relying on the approach in Hlatshwayo v Mare and Deas, the court treated payment after a stay of execution as strongly indicative of acquiescence because it would ordinarily admit only one reasonable inference: acceptance of the judgment.

The court rejected the court a quo’s view that the payment by the third and fourth appellants was not “unqualified” acquiescence merely because it was not made by all appellants. It further held that the first appellant was bound by the corporate appellants’ acquiescence because, on the affidavits, he acted as their duly authorised representative and signatory in matters affecting the case, including the signing of the suretyships, and had associated himself with their actions. The respondent’s characterisation of the first appellant as the “guiding mind” of the companies was noted as having been conveyed and not challenged.

The court also reasoned that, once the judgment had been satisfied, the appeal by the first appellant would in any event lack practical effect, engaging the discretionary dismissal power under section 21A of the Supreme Court Act 59 of 1959. It considered authority emphasising that where there is no longer a live dispute between the parties, an appellate court may decline to entertain the appeal on the basis that the outcome would be academic.

A procedural objection was addressed to the effect that peremption could not be raised on appeal because the court a quo did not grant leave to appeal on that point. The appeal court rejected this objection. It reasoned that peremption arises by conduct after judgment, may occur before or after leave to appeal is considered, and did not constitute a “discrete procedure” requiring separate leave in the manner described in National Union of Metalworkers South Africa v Jumbo Products CC. It further held that the respondent did not require a cross-appeal to advance peremption as a basis to resist the appeal because it sought no variation of the substantive order, relying instead on authority indicating that a respondent may support the result on grounds not upheld below without cross-appealing.

In addition to peremption, the appeal court provided a further reason why the appeal could not succeed: it disagreed with Bashall AJ’s conclusion that the produced “Cession of Funds (Limited)” document was merely an undertaking to cede. Drawing on authority that no particular form is required for a cession and that the essential requirement is a clear intention by the holder of rights to cede them coupled with all steps necessary to give effect to that intention, the court interpreted the document as evidencing a cession. It attached weight to the document’s heading, its express statements referring to “cession” and “ceded funds”, its description of the funds and limitations, and the mechanism of payment into the respondent’s bank account. It treated the document as a valid commercial instrument and cautioned against an overly formalistic approach when construing such documents.

The court also addressed the appellants’ argument that the respondent could not make out a case regarding the cession in reply because a party must stand or fall by its founding affidavit. The court treated that proposition as not inflexible in motion proceedings, noting that the founding affidavit contained an unambiguous allegation that all conditions precedent had been fulfilled. The respondent’s reply, prompted by the appellants’ defence and supported by the Rule 35(12)-produced document, was treated as an acceptable amplification in the circumstances, consistent with authority recognising the permissibility of supplementary explanation.

Outcome and Relief

The appeal court held that the appellants’ conduct amounted to acquiescence in the judgment and that the right of appeal had therefore been perempted, with the consequence that the appeal fell to be dismissed.

The appeal was dismissed with costs, and the costs order included the costs of two counsel. The second appellant, being sequestrated and not participating, was noted as having had no order issued against him.

Cases Cited

Hlatshwayo v Mare and Deas 1912 AD 242.

Samancor Group Pension Fund v Samancor Chrome and Others 2010 (4) SA 540 (Supreme Court of Appeal).

Dabner v South African Railways and Harbours 1920 AD 583.

Port Elizabeth Municipality v Smit 2002 (4) SA 241 (Supreme Court of Appeal).

Sun Life Assurance Company of Canada v Jervis [1944] AC 111 (House of Lords).

Ainsbury v Millington [1987] WLR 379 (House of Lords).

R v Secretary of State for the Home Department, Ex parte Salem [1999] UKHL 8; [1999] 2 WLR 483 (House of Lords); [1999] 2 All ER 42.

National Union of Metalworkers South Africa v Jumbo Products CC [1996] ZASCA 87; 1996 (4) SA 735 (Supreme Court of Appeal).

Publication Control Board v Central News Agency Ltd 1977 (1) SA 718 (Appellate Division).

Dickinson and Another v Fisher's Executors 1914 AD 424.

Heyman v Yorkshire Insurance Co. Ltd. 1964 (1) SA 487 (Appellate Division).

Ngubane v South African Transport Services [1990] ZASCA 148; 1991 (1) SA 756 (Appellate Division).

Mufamadi and Others v Dorbyl Finance (Pty) Ltd 1996 (1) SA 799 (Appellate Division).

Administrator, Cape, and Another v Ntshwaqeta and Another 1990 (1) SA 705 (Appellate Division).

Minister of Community Development v South African Mutual Fire & General Insurance Co Ltd 1978 (1) SA 1020 (W).

Luttig v Jacobs 1951 (4) SA 539 (O).

Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd 1964 (1) SA 669 (W).

Nedbank Ltd v Hoare 1988 (4) SA 541.

The judgment also referred (without reproducing full citations in the text) to Gentiruco AG v Firestone SA (Pty) Ltd, Natal Rugby Union v Gould, and Standard Bank v Estate Van Rhyn, in the context of quotations on peremption.

Legislation Cited

Supreme Court Act 59 of 1959, section 21A, section 20(1)(b), and section 20(4)(b).

National Credit Act 34 of 2005, section 40.

Rules of Court Cited

Uniform Rules of Court, Rule 35(12).

Rule 5(3) of the Rules of the Supreme Court of Appeal (referred to in the judgment as “Rule 5 (3) of the Rules of this Court”).

Uniform Rules of Court, Rule 28(1) (referred to in the cited passage).

Held

The appeal court held that the third and fourth appellants’ tender and payment of the full judgment debt and costs, effected through attorneys, without protest or reservation, and culminating in cancellation of the mortgage bonds, constituted unequivocal acquiescence in the judgment and therefore peremption of the right to appeal.

It held further that the first appellant was bound by that acquiescence in light of his role as authorised representative of the corporate appellants, and that the appeal also lacked practical effect under section 21A of the Supreme Court Act 59 of 1959 once the judgment had been satisfied.

Independently of peremption, the appeal court held that the document produced under Rule 35(12), titled “Cession of Funds (Limited)”, constituted a valid cession evidencing fulfilment of the relevant security condition relating to cession of ticket sales, and that the respondent’s reliance on it in reply was not impermissible in the circumstances. The appeal was dismissed with costs, including the costs of two counsel.

LEGAL PRINCIPLES

The doctrine of peremption applies where an unsuccessful litigant, by unequivocal conduct inconsistent with an intention to appeal, demonstrates acquiescence in the judgment; in such circumstances the right of appeal is lost. Payment of a judgment debt after execution has been stayed is, depending on the circumstances, conduct from which acquiescence may clearly be inferred, particularly where payment is made without protest or reservation.

A respondent may, without a cross-appeal, advance an argument on appeal that supports dismissal of the appeal without seeking variation of the substantive order, and the absence of leave specifically directed at a respondent’s preliminary argument does not necessarily preclude its consideration where it does not constitute a separate “discrete procedure” seeking substantive relief.

For purposes of a cession, no particular form is required; what matters is an intention to cede rights and the taking of steps necessary to give effect to that intention. In construing commercial documents alleged to embody such transactions, a court may adopt a practical approach and not insist upon undue linguistic precision, provided the essential terms and intention can be established with reasonable certainty.

In motion proceedings, while a case should ordinarily be made in the founding affidavit, a party may in appropriate circumstances amplify or explain matters in replying material, particularly where a broad allegation in the founding affidavit is met by a specific defence and supporting documentation emerges through procedural mechanisms such as Rule 35(12) discovery.

Heafield and Others v Rodel Financial Services (Pty) Ltd (A5038/2010) [2011] ZAGPJHC 82 (3 March 2011)