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[2011] ZAGPJHC 20
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Renier Nel Inc and Another v Cash on Demand (KZN) (Pty) Ltd (2011 (5) SA 239 (GSJ)) [2011] ZAGPJHC 20; A5040/2011 (22 March 2011)
IN THE SOUTH GAUTENG
HIGH COURT
JOHANNESBURG
CASE No. A5040/2011
DATE: 22/03/2011
REPORTABLE
In the matter between:
RENIER
NEL INC
.
1
st
Appellant
RENIER
ERHARDT NEL
2
nd
Appellant
and
CASH
ON DEMAND (KZN) (PTY) LTD
.
Respondent
JUDGMENT
1.
WILLIS J:
1.
[1] This is a so-called “Full
Bench Appeal” from the judgment of Heaton-Nicholls J
delivered in the South
Gauteng High Court on 2nd February, 2010.
The appeal is heard with the leave of the court below. The appellants
were the respondents
in motion proceedings in the court below. The
applicant, who is the respondent in this appeal, relied on a
contractual undertaking
to seek specific performance in the payment
of certain sums of money. The learned judge granted the applicant the
relief which
it sought. It may facilitate the reading of this
judgment if one hereinafter refers to the parties as they were in the
court below.
2.
[2] The applicant carries on the
business of providing short–term bridging finance. The four
transactions in question each
relate to the provision of such finance
by the applicant to the sellers of certain immovable property owned
under a sectional title
scheme as provided for in the
Sectional
Titles Act, No.95 of 1986
. The sectional title scheme, in each
instance, was known as Will-O-Sue, Portion 3 Erf 658, Hibberdene in
Kwazulu-Natal. Two
of the transactions relate to
section 1
of the
scheme and the other two to
section 2
thereof. In respect of both
section 1
and
section 2
, the initial agreement was varied but nothing
turns of this. The challenged transactions took place between January
and February
2009 in Durban. In terms of the order of the court below
the respondents were made jointly and severally liable, the one
paying
the other to be absolved, to pay the applicant a total sum of
approximately R820 000 together with interest at the rate of 15,5
%
to date of payment and costs.
3.
[3] Typically, the applicant would provide
short-term providing finance in the following manner. It would
advance a cash payment
to a seller of immovable property and take as
security a cession of the seller’s rights, title and interest
in the property.
The respondent would immediately acquire ownership
of the seller’s claim but would only receive payment on respect
of the
claim, upon the registration of transfer of the fee.
4.
[4] The claim would be defined as
being the right to receive payment of a surplus after transfer. The
surplus, in turn, was defined
as the net amount that would otherwise
have been payable to the seller after all specified deductions (e.g.
payments in terms of
a mortgage bond registered over the property)
had been made. The applicant would charge a “discounting
fee”.
5.
[5] The applicant would nominate the
conveyancing attorneys attending to the registration of the transfer.
The conveyancing attorneys
would, after deduction of their fees and
disbursements, pay over to the applicant an amount which would
include the claim for the
surplus which would otherwise have been due
to the respondent and, in addition, the discounting fee.
6.
[6] In each instance in this particular
case, the seller in the Will-O-Sue scheme was the Watchword Two Trust
duly represented by
Zhaun Pete Swart and the conveyancer was the
first respondent, represented by the second respondent, the sole
director of the first
respondent.
7.
[7] Copies of the so-called
“Master Discounting Agreement” entered into between
entered into between the
applicant and the seller in each instance
appear to have been mislaid.
8.
[8] The applicant has relied on a
specimen copy of the agreement, the terms of which appear to be
common cause because the respondents
have claimed that this Master
Discounting Agreement was an unlawful agreement on the grounds that
it fell foul of the National
Credit Act, No. 34 of 2005 (“the
NCA”) by reason of the following:
9.
(i) the applicant was not a
registered credit provider in terms of the NCA;
10.
(ii) the agreement between the applicant
and the seller of the sections was a credit agreement in terms of
section 8 of the NCA;
and
11.
(iii) the applicant had failed to
give the respondents proper notice in terms of section 129 of the
NCA;
12.
(iv) the interest charged by the
applicant was such that the transactions should be considered
to amount to the reckless granted
of credit in terms of the NCA.
13.
[9] The respondents deny that
they are in any way bound by the provisions of the alleged Master
Discounting Agreement or
that they received any mandate from either
the applicant or the seller of the sections in question.
14.
[10] It is, however,
common cause that the respondents were appointed to act as
conveyancers in respect of the
challenged transactions, that the
transfers arising from the sales in question have indeed been
registered at the office of the
Registrar of Deeds in
Pietermaritzburg and that the respondents have not paid over any
money to the applicant arising from these
challenged transactions.
15.
[11] In the event that the respondents’
defence that the underlying, challenged transactions fall foul of the
NCA should fail,
they have the further defence that they received
insufficient funds from the purchasers of the sections in question to
pay any
money over to the applicant.
16.
[12] It is common cause
that there has been no credit agreement (as defined in the NCA)
between the applicant
and the respondents. The defence of the
respondents (apart from the fact that the monies which they received
from the purchaser
was insufficient to permit any payment over to the
applicant) is that to enforce payment by them to the applicant will
amount to
enforcement of an illegal agreement as between the
applicant and the seller of the sections in question.
17.
[13] There has been no direct or overt
illegality in the agreements between the applicant and the
respondents. As these agreements
are subsidiary or accessory to the
agreements concluded between the applicant and the seller of sections
in question, I shall assume,
without deciding the matter, that if the
latter agreements are illegal, then the former may not be enforced
because to do so would
serve to sanction an illegality.
18.
[14]
In the case of
Shooters’
Fisheries v Incorporated General Insurances Ltd
[1]
it
seems to have been recognised that there may, in certain
circumstances, be a “piggy-backing” effect with the
illegality
in one transaction impacting upon the enforceability of
another, related, transaction.
19.
[15] It has become a notorious
fact that cases requiring the interpretation of the NCA result in a
scarcely muffled
cry of exasperation resounding from the leathered
benches of the judiciary.
20.
[16] In my opinion,
the learned judge in the court below correctly considered that one
should have regard to the
definitions of “credit”,
“credit agreement”, “credit provider” and
“incidental credit
agreement” in the definitions section
of the NCA and the provisions of section 8 thereof to try
to determine
whether, as between the applicant and the seller, the
applicant has been a credit provider.
21.
[16]
One can go round and round in loops, through subsection after
subsection of the NCA, trying to determine whether or not the
agreement between the applicant and the seller of the sections in
question constitutes an agreement to which the NCA applies. As
Professor JM Otto said in
Verkoop
van Regte teen ’n Diskonto en die Toepaslikheid van die
National Credit Act,
“Mens
hoef nie wyle Siener Van Rensburg se gene in jou te hê om te
voorspel dat dié wet nog tot baie litigasie gaan lei
nie”.
(One need not have the genes of the Soothsayer Van Rensburg of the
past to predict that this statute will result in
much more
litigation.)
[2]
22.
[17] In each instance in
the present case this much, however, is clear:
23.
(i) The applicant discounted
commercial paper in the property market;
24.
(ii) The applicant did not supply goods or
services to the seller;
25.
(iii) There is no agreement of mortgage
or lease as between the applicant and the seller;
26.
(iv) The applicant takes a well-calculated
risk in parting with its money to the seller but looks to the
conveyancer (and no one
else) for the recovery of the money with
which it has parted as well as the “discounting fee”.
27.
[18]
As Kotze J said in
De
Villiers v Roux
[3]
“
discounting”
amounts in effect to or resembles more closely an agreement of
purchase and sale than one of lending. Our brother
Mathopo referred
to this judgment with approval in
Bridgeway
Ltd v Markam
.
[4]
The
learned judge in the court below, in turn, referred to the
Bridgeway
judgment with approval. The
Bridgeway
case was also approved by Madondo J in
Voltex
v Chenzela
.
[5]
In
general terms, the judgment in
Bridgeway
has
been supported by Professor Otto in
Verkoop
van Regte teen ’n Diskonto en die Toepaslikheid van die
National Credit Act
>
.
[6]
28.
29.
30.
[19]
I fully accept, as did Mathopo J and the learned judge in the court
below that, in determining whether the agreements upon
which the
applicant relies fall foul of the Act, one must, as Trollip J (as he
then was) said in
Tucker
v Ginsberg
,
[7]
look
at the nature of the transactions and have regard mainly to their
substance rather than their form, as well as the whole course
of the
parties dealings.
31.
[20]
Under (a) in the definition of a “credit
provider” in the NCA, it is provided that this means
a “party
who supplies goods or services under a discount transaction”. A
“discount transaction” is also
defined in the NCA. Mr
Sieberhagen
,
who appeared for the respondent, accepted that the transactions in
question could not be regarded as the supply of either goods
or
services by the applicant. Under (b) a “credit provider”
is also defined as meaning a “party who advances
money or
credit under a pawn transaction”. Even if it can be said that,
in the present case, the applicant advanced money,
it did not do so
under a pawn transaction. It is useful also to refer to Professor JM
Otto’s
The
National Credit Act Explained
,
[8]
Guide
to the
National Credit Act
,
[9]
P.
Stoop’s
Disclosure
as an Indirect Measure Aimed at Preventing Overindebtedness
[10]
and
the title
Consumer
Credit
in
part 1
of volume 5 of
LAWSA
by
M. Kelly-Louw.
[11]
In
general terms the case of
JMV
Textiles (Pty) Ltd v De Chalan Spareinvest 14 CC and Others
[12]
by
Wallis J is also helpful to assisting one understand why a reluctance
to rush to find persons guilty of infractions of the NCA
on a
technical basis is the correct approach for a court to adopt.
32.
[21] No matter how rigorous an
interpretation one may seek to apply to the definitions relating to
“credit” in the NCA,
it cannot be said that the
challenged transactions fall foul of it. A plain reading of the
relevant provisions of the NCA
makes this clear enough. It is
unnecessary and indeed would be unhelpful in this judgment to attempt
to enter into the labyrinth
of complex, interlinking definitions in
the NCA in an attempt to justify this conclusion.
33.
[22]
As the learned judge in the court below recognised, it has long been
a well recognised principle of our law that it is legitimate
deliberately to arrange one’s transactions so as to
remain outside of the provisions of a statute even though that
statute may seem, in general terms, to have been far-fetching
in its purview.
[13]
As
Boshoff J (as he then was) said in
Western
Bank Ltd v Registrar of Financial Institutions
:
[14]
34.
When it comes to the
interpretation of the transaction in question it is necessary to bear
in mind that the parties may generally
arrange their transactions so
as to remain outside the provisions of the Act. Such a procedure is
in the nature of things perfectly
legitimate. There is nothing in the
authorities to forbid it. Nor can it be rendered illegitimate by the
mere fact that the parties
intend to avoid the operation of the law
and that the selected course is as convenient in its result as
another which would have
brought them with it.
35.
[23]
Even if one is wrong in concluding that the challenged transactions
do not fall foul of the NCA, there remain other considerations
why
the respondents should not be able to evade payment of the debt. It
is clear from a long line of cases that, ultimately, policy
considerations lie behind the courts’ unwillingness to condone
illegal agreements.
[15]
36.
[24]
Nevertheless, as Kotze J said in
Burger
v SA Mutual Life Insurance Society
[16]
the
doctrine of public policy “ought not to be stretched beyond
what is necessary for the protection of the public”.
There
would be no apparent advantage to the public if the applicant were to
be denied a right of recourse against the respondents
in this case.
37.
[25]
In the aforesaid case of
Shooters’
Fisheries v Incorporated General Insurances Ltd
[17]
Friedman
J (as he then was) referred approvingly to this principle in
Burger’s
case to hold that an insured should not be deprived of a claim merely
because the insured’s vessel had been confiscated on
account of
the fact that it had been fishing illegally in Mozambique. The
contravention of Mozambican law was obscure.
38.
[26]
In the case of
S
v De Blom
[18]
five
judges of the Appellate Division unanimously cautioned against facile
findings of “wederegtelikheidsbewussyn”
[19]
when
it comes statutory contraventions in a modern state. Although the
De
Blom
case
dealt with a criminal matter, the principle is relevant because the
unenforceability of a contract due to illegality has punitive
consequences. In the case of
First
National Bank v Seyffert and Another and Similar Cases
[20]
I
referred to the widespread lack of clarity and certainty which
various judicial colleagues around the country had experienced
when
trying to interpret the NCA. If judges have such difficulty, how much
more so must this be the case among the men and women
of business? If
the provisions of the NCA are obscure, they should not interpreted to
allow what would, in effect, be an unjust
enrichment of one party at
the expense of another.
39.
[27] To enforce the
challenged transactions would not offend against the plain wording of
a statute, the prevailing
moral norms in our society as a whole or
any principle of our constitutional law. In view of the general
lack of clarity
concerning the manifold definitions of a credit
agreement in the NCA, the discounting of commercial paper without
being a registered
credit provider in terms of that Act cannot be
regarded as something heinous. For policy reasons, even if the
challenged transactions
contravene the NCA, the applicant should not,
in all the circumstances, be deprived of the right to recover from
the respondents
its claims which derive from these transactions. The
same reasoning must apply to the respondents’ protest that they
did
not receive proper notice of the claim in terms on section 129 of
the NCA. Besides, it is clear on their own version of events,
that
the respondents have been well aware since at least 30 July 2009 of
the applicant’s claim and have had no intention
whatsoever of
meeting it.
40.
[28] As for the respondents’
submissions regarding the “recklessness” and the
“usurious rates of interest”
of the challenged
transactions, these are irrelevant for the simple reason that the
applicant did not lend so much money (or provide
credit) as it bought
debt.
41.
[29]
The respondents’ defence that no money whatsoever is due to the
applicant because the purchasers of the sections
did not pay enough
for this to occur or is so palpably implausible, so far-fetched and
so clearly untenable in the circumstances
that the court below was
justified in rejecting that version on the papers. In this regard the
principles are clear and well-known.
See,
Stellenbosch
Farmers’ Winery Ltd v Stellenvale Winery (Pty) Ltd
,
[21]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[22]
and
National
Director of Public Prosecutions v Zuma
.
[23]
42.
[30]
It is inconceivable that the “hard men of business”
representing each of the
dramatis
personae
in
this case would have transacted on the basis that the applicant would
be left entirely empty handed if registration of the respective
transfer of the immovable properties did, as in this case, take place
as envisaged. That was the very risk on which the applicant
gambled. If transfer took place as envisaged, the applicant stood to
gain handsomely. If transfer did not, the applicant lost.
43.
[31] Besides, the
defence is so baldly set out as to be incredible. If true, it could
easily have been supported by the rendering
of an account with
independent verification. There would have been a paper trail in this
case. Crumpled pieces of paper would have
lain in a basket at the
feet of the respondents. It would have been simple enough for the
respondents to have picked up these pieces
of paper, opened them and
made them available for all to see. When the respondents have not
done so the inference to be drawn is
obvious.
44.
[8] Accordingly,
I propose that the appeal be dismissed with costs.
45.
46.
DATED AT JOHANNESBURG ON THIS 22nd DAY
OF MARCH 2011.
47.
49.
N.P. WILLIS
50.
JUDGE OF THE HIGH COURT
51.
52.
I agree. The appeal is dismissed with
costs.
53.
55.
K. M. SATCHWELL
56.
57.
I agree.
59.
R. MONAMA
60.
JUDGE OF THE HIGH COURT
61.
Counsel for the
Plaintiff: Adv.
P.Sieberhagen
Counsel for the
Defendant: Adv.
G.M.E. Lotz
SC
Attorneys for the
Appellants: Klinkenberg Inc.
Attorneys for the
Defendant: Lynn and Main Inc.
Date of hearing: 14th
March, 2011
Date of judgment:
22nd March, 2011
[1]
1984
(4) SA 269
(D&DCLD)
[2]
2009
TSAR 198
[3]
1916
CPD 295
at 298
[4]
[2008] ZAGPHC 251
;
2008
(6) SA 123
(W) at paragraph
[17]
.
[5]
2010
(5) SA 267
(KZP) at paragraph [26]
[6]
(2009)
TSAR
198
[7]
1962
(2) SA 58
(W) at 62G
[8]
2006.
Durban: LexisNexis, p17
[9]
By
JW
Scholtz, JM Otto, E Van Zyl, CM Van Heerden and N. Campbell.
2008.
Durban: LexisNexis, paragraphs 8.2.3.3 and 8.2.4.3 in particular.
[10]
(2008)
41
De
Jure
352
at 357-8.
[11]
2010.
Durban: LexisNexis at pargraph 14, in particular.
[12]
2010
(6) SA 173
[13]
See,
for example,
Dadoo
Ltd and Others v Krugersdorp Municipal Council
1920
AD 530
at 548;
Commissioner
of Customs and Excise v Randles Bros & Hudson Ltd
1941
AD 369
at 395-6;
Western
Bank Ltd v Registrar of Financial Institutions
1975 (4) SA 37
(T) at 44H-45A.
[14]
1975
(4) SA 37
(T) at 44H
[15]
See,
for example,
Kennedy
v Steenkamp
1936
CPD 113
at 116;
Mahomed
Abdullah v Levy
1916 CPD 302
at 308;
Lion
Match Co Ltd v Wessels
1946 CPD 376.
[16]
20
SC 538
at 545
[17]
1984
(4) SA 269
(D&DCLD). See paragraph [7] above.
[18]
1977
(3) 513 (A) at 529A-533F
[19]
This
may, somewhat crudely, be translated as “as awareness that
what you were doing was wrong in terms of the law”
.
[20]
2010
(6) SA 429 (GSJ)
[21]
1957 (4) SA 234 (C).
[22]
1984 (3) SA 623 (A).
[23]
[2009] ZASCA 1
;
2009
(2) SA 277
(SCA)
.