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[2012] ZAGPJHC 112
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RMB Private Bank a Division of First Rand Bank Ltd v Kaydeez Therapies CC and Others (2012/00783) [2012] ZAGPJHC 112; 2013 (6) SA 308 (GSJ) (30 May 2012)
REPORTABLE
THE SOUTH GAUTENG HIGH
COURT (JOHANNESBURG)
Case no: 2012/00783
DATE:30/05/2012
In the matter between:
RMB PRIVATE BANK A
DIVISION OF
...............................................
Applicant
FIRST RAND BANK LIMITED
and
KAYDEEZ THERAPIES CC (IN
LIQUIDATION)
................................
First
Respondent
DOBSON, KAREN
DIANA
..................................................................
Second
Respondent
PARKINSON, HELEN
CATHERINE
..................................................
Third
Respondent
Neutral citation: RMB v
Kaydeez Therapies CC & 2 others 2012 SA (GSJ)
Coram: SATCHWELL J
Heard: 17 May 2012
Delivered: 30 May 2012
Summary: Only Parliament
can determine whether or not the
National Credit Act 34 of 2005
, in
its entirety or in part, is applicable to an agreement between
creditor and debtor – common mistake between contracting
parties cannot require third parties or the courts to hold a Statute
applicable to an agreement which does not fall within the
purview of
the Statute.
JUDGMENT
SATCHWELL J
INTRODUCTION
[1] This judgment raises
the interesting question whether specific legislation can be held
applicable to an agreement between private
parties when the Statute
is not factually applicable but the contracting parties erroneously
thought the agreement was subject
thereto. The creditor sues
sureties where it is common cause that the principal credit agreement
was not subject to the provisions
of the
National Credit Act 34 of
2005
(‘NCA’). The sureties insist that the creditor
follows the procedures provided for in the NCA because, at the time
of signing the suretyships, both parties erroneously thought that the
NCA was applicable thereto.
[2] The applicant (‘the
creditor’) seeks judgement in an amount of R 1 470 277,85
against the second and third respondents
(‘the sureties’)
(‘Dobson’ and ‘Parkinson’) as surety and
co-principal debtors for and on behalf
of the first respondent
(‘Kaydeez’) in liquidation. It is common cause that the
NCA is not applicable to the principal
agreement. Nevertheless, the
sureties claim the NCA is applicable to the suretyship agreements and
that the creditor failed to
comply with the relevant provisions
thereof. In addition, Parkinson disputes that she knew that she was
signing and committing
herself to a suretyship.
AGREEMENT
[3] The creditor and
Kaydeez concluded a written facility agreement on 24th October 2007
in terms of which the creditor lent and
advanced funds in an amount
in excess of one million rand (R1 000 000) to Kaydeez which has
failed to effect repayments and went
into liquidation in September
2009.
[4] On the same date as
the signing of the facility agreement, 24th October 2007, each
surety signed a suretyship agreement binding
herself as surety and
co-principal debtor together with Kaydeez for the repayment of any
sum owed by Kaydeez to the creditor and
for due fulfilment of all
obligations of Kaydeez to the creditor in respect of such
indebtedness. In addition, Dobson, caused
a covering mortgage bond
to be registered over certain immovable property in favour of the
creditor.
[5] The creditor now
seeks judgment against both sureties, jointly and severally, for an
order of payment of the capital plus interest,
for an order declaring
the immovable property specially executable and the costs of the
application.
APPLICABILITY OF THE
NATIONAL CREDIT ACT
The
NCA and the sureties
[6] The principal
agreement entered into between the creditor and Kaydeez was a ‘credit
facility’ and therefore a ‘credit
agreement’ as
defined by the NCA. The NCA applies to every such agreement unless
specifically exempted in terms of the Act.
[7] It is common cause
that this agreement between the creditor and Kaydeez is exempted from
the provisions of the Act by reason
of the provisions of
section
4(1)(b)
which exempts a ‘large agreement’ where the
‘consumer is a juristic person whose asset value or annual
turnover
is below the threshold value determined by the Minister.’
The credit facility was a ‘large agreement’ as defined
because the principal debt exceeded the sum of R250 000. Kaydeez is
incorporated as a close corporation and had, at the time of
entering
into the agreement, neither asset value nor turnover. Accordingly, on
all four grounds set out in
section 4(1)(b)
of the NCA, the NCA
cannot apply to the principal agreement between the creditor and
Kaydeez.
[8] These particular
suretyship agreements would, on the face of it, be ‘credit
guarantees’ and subject to the NCA.
However, the definition of
a ‘credit guarantee’ in section (8)(1)(c) requires the
guarantor to ‘undertake or
promise to satisfy...any obligation
of another consumer in terms of a credit facility or credit
transaction’. Since the
sureties are furnishing undertakings
in respect of Kaydeez’ obligations which are not in terms of a
‘credit facility
or credit transaction’ as defined in the
NCA, these suretyships cannot be ‘credit guarantees’ as
provided for
in the NCA. Furthermore, as I pointed out in Firstrand
Bank Ltd v Carl Beck Estates (Pty) Ltd,
1
section 8(5)
of the NCA requires the credit guarantee to apply to the
obligations of another consumer in terms of ‘a credit agreement
to which this Act applies’. The NCA does not so apply.
[9] Accordingly, the NCA
cannot apply to these particular sureties since their surety
obligations were not incurred in terms of
a credit transaction to
which the NCA applies.
Wording of the
suretyships
[10] However, the
creditor and its legal representatives appear to have operated under
a misunderstanding as to the applicability
of the NCA. That mistake
caused the creditor to annex a document to each suretyship agreement
advising the sureties that: ‘[k]indly
note that the National
Credit Act, 34 of 2005 (‘the NCA’) provides you, in your
capacity as co-principal debtor (although
still a surety) with a
number of rights’ and also caused the applicant to claim
compliance with the NCA in its founding affidavit.
[11] This introduction to
the annexure has no heading and is of the nature of a notice or
announcement of an existing state of affairs.
There is no recordal
that these are terms to which the contracting parties are agreeing.
[12] The issue to be
determined is the import of this mistaken notification at the time of
concluding the suretyship agreement.
Each party signed an agreement
which is not subject to the provisions of the NCA. Yet, each party
also signed the annexure to the
suretyship agreement which noted that
the NCA provided the sureties with a number of rights in terms of the
NCA.
The Legislature
determines to which contracts the NCA applies
[13] The NCA is a
Statute passed by the Legislature which has determined to whom and in
respect of which agreements the Statute
shall apply and to what
extent and with what result.
[14] The Act is very
detailed. It is very careful to specify exactly what constitutes a
‘credit agreement’,
2
to spell out precisely when the Act does not apply by identifying the
exceptions and further amplifying thereon
3
and to indicate where the Act is of full or only limited
application.
4
Clearly, the Legislature was determined to ensure that there was no
uncertainty as to the purview of the Act and that parties
would
have certainty as to whether or not their agreement was subject to
the NCA.
[15] It is clear from the
Constitution of the Republic of South Africa, Act 108 of 1996 that it
is not available for any individual
or entity other than Parliament
to determine when and where legislation shall apply.
5
A Statute applies ex lege – by Parliamentary enactment and
decree of the President. Legislation obtains its force by reason
of
the will and decision of the Legislature, not because individuals or
entities elect to be subject thereto.
[16] Against that
background, the ‘notice’ given in the addendum to the
suretyship agreements is incorrect. The Legislature
did not provide
that the NCA would be applicable to the surety agreement into which
the parties had entered. The NCA did not ‘provide
you…with
a number of rights’.
[17] Nevertheless, the
sureties assert that they are entitled to the benefits of the NCA by
reason of this addendum.
The parties can
incorporate certain terms into their agreement
[18] The parties are, of
course, entitled to include in their agreement anything which is not
contra bonos mores.
6
The parties could have stated in their agreement ‘notwithstanding
that the NCA does not apply, the parties agree that each
shall enjoy
the following rights and observe the following obligations’ and
then set out all or some of those rights and
obligations which are
found in the NCA. These would be terms and conditions of the
suretyship and binding on all parties.
[19] However, the
contracting parties could not bind statutorily created third parties
– such as the National Credit Regulator
which is established in
terms of the NCA
7
with powers and functions set out in the NCA. Nor could the parties
ever utilise the services of such a third party because the
National
Credit Regulator has no jurisdiction over the agreement between the
parties or any dispute arising therefrom.
[20] If the parties had
reached such an agreement that certain terms, which also happen to be
provisions of the NCA, would be applicable
to the suretyships then
one would have regard to those provisions which had been included in
their agreement.
[21] In the present
instance, the addendum ‘notice’ refers to ‘[s]ome
of the most important rights’ and
seven paragraphs follow
dealing with credit profiles, termination by the principal debtor,
settlement of the outstanding amount,
suspension of the agreement,
prepayment, resolution of complaints by alternative dispute
resolution and the use of debt counsellors.
Each paragraph either
refers to a section of the NCA, an entity established in terms of the
NCA or refers to a ‘credit agreement’.
Certainly, this
addendum envisages an agreement to which the NCA is applicable and
which is subject to the provisions of the NCA.
[22] The question is what
the parties intended and understood by this ‘notice’.
[23] Firstly, in
explicitly announcing that the NCA was of application, the creditor
was incorrect and could not so determine.
[24] Secondly, it would
have been possible for those ‘rights’ set out in the
addendum to be implicitly incorporated
into the agreement. But in the
present case none of the ‘rights’ referred to in the
addendum are those upon which the
sureties seek to rely. Phrased
differently, none of the rights which the sureties seek to invoke are
referred to in the addendum
‘notice’.
[25] The sureties argue
that the creditor was required to conduct an assessment as provided
for in section 81 and 82 the NCA prior
to the conclusion of the
agreement and, failing such assessment, the granting of credit was
‘reckless’. The sureties
also argue that they were each
entitled to be sent a notice in terms of section 129(1) giving the
surety written notice of the
default and proposing referral to an
entity which may resolve any dispute or result in agreement on a plan
for payment. Yet, this
addendum contains no reference to either an
‘assessment’ or ‘section 129 notice’ as
provided for in the
NCA. Such ‘rights’ were therefore not
implicitly incorporated into the agreement.
[26] The sureties
therefore cannot succeed in their argument that they are entitled to
the benefit of certain ‘rights’
contained in the NCA
because they were erroneously and explicitly referred to the benefits
of rights in the NCA which are different
from those upon which they
now seek to rely.
Mistake as to the
legislative environment
[27] In the present case
there is no recordal that the parties agreed between them that the
NCA or certain terms thereof were of
application to their agreement.
The document made an announcement – it called upon the sureties
to ‘note’ that
the NCA provided the sureties ‘with
a number of rights’ – which was incorrect. This was a
statement of the
legislative environment within which the suretyships
agreements would operate – which was incorrect.
[28] The NCA did not
provide the sureties with any rights. They had only those rights set
out in their agreement. In effect, the
creditor was asking the
sureties to take cognisance of a legislative state of affairs which
did not exist. The sureties may or
may not have taken such
cognisance.
8
[29] Clearly, the
creditor (and perhaps the sureties) were operating under the mistaken
belief that the Statute was applicable to
their agreement. Both
parties made the same erroneous supposition about the legislative
environment. There is no lack of consensus
about the content or
import of the agreement but a mistaken common assumption about the
applicability of the NCA.
[30] The Supreme Court of
Appeal recently discussed the impact of common mistaken assumptions
in Van Reenen Steel (Pty) Ltd v
Smith NO and another
9
and confirmed that which was said in Wilson Bayly Holmes (Pty) Ltd
v Maeyane and others
10
that:
‘
a common mistake
relating to the existence of a particular state of affairs will not
render the contract void unless it can be said
that the parties
expressly or tacitly agreed that the validity of the contract was
conditional upon the existence of that state
of affairs.’
11
[31] There is nothing in
the affidavits or in the suretyship agreements themselves to suggest
that the agreement was made dependent
upon the assumption that the
NCA would apply to any of the agreements.
[32] Importantly, there
is no reference whatsoever in either the suretyship agreement or the
addendum to either the assessment referred
to in sections 81 and 82
of the NCA or the issuing of a notice in terms of section 129 of the
NCA. This suggests that the parties
had not agreed that the validity
of the contract would depend upon the applicability of the NCA. The
absence of any reference to
those provisions indicates that these
provisions of the NCA were not vital or fundamental to the
transaction between the parties.
[33] In addition to the
lack of materiality of this misunderstanding or misrepresentation,
there is nothing in the papers to suggest
that the sureties were
induced to enter into the suretyship agreements by reason of this
notification that the NCA gave them certain
rights.
[34] In any event, the
sureties are not seeking and have not argued that the agreements are
void. They continue to rely upon the
contracts. They persist in
claiming that they are entitled to certain benefits of the NCA –
more specifically a statutory
section 81 and 82 assessment prior to
conclusion of and implementation of the agreement, failing which it
should be found that
the creditor was ‘reckless’ in
granting credit, and receipt of the statutory section 129 notice.
[35] This is not the
first time that a party has expressed an erroneous understanding as
to the legal effect of a term in an agreement.
Where the party, which
has expressed that erroneous opinion, attempts to enforce the
contract then that party must abide by the
assurance given and cannot
deny the correctness of the erroneous construction. However, in the
present case, it is not open to
either party to abide the assertion
that the NCA applies to the suretyship agreements. The sureties
cannot insist that the NCA
does or must apply by reason of any common
mistake or representation. There are simply not the jurisdictional
facts to render the
Statute of application.
[36] Two examples come to
mind which exemplify the difficulty in trying to bring this agreement
within the purview of the NCA. Firstly,
if parties had entered into
an agreement for the sale of immovable property during the years of
apartheid and the white seller
agreed with the black purchaser that
the provisions of the Group Areas Act would not apply to their sale
and purchase, thereby
purporting to give the black purchaser the
right to live in a white group area – it would immediately be
seen that the parties
could not inter se contract in or out of the
applicability of legislation thereby granting to one of them that
which they would
not normally acquire ex lege. Secondly, if a
landlord and lessee agreed that their lease agreement was subject to
the provisions
of the Prevention of Illegal Eviction Act (PIE) when
it was not subject to such legislation and the landlord went to court
seeking
orders for service of notices and orders for eviction –
the court would refuse to grant such orders since the necessary
jurisdictional facts did not exist to found such orders,
notwithstanding that the parties had agreed PIE to be applicable to
their
agreement.
CONCLUSION
[37] I can only but
conclude that the NCA is not applicable to either the principal
agreement or the suretyship agreements. The
NCA cannot be rendered
applicable by agreement. The parties have not expressly agreed to
include in their agreement certain terms
which reflect or parallel
certain provisions of the NCA. The parties have not tacitly agreed to
include in their agreement any
term that the creditor must conduct an
assessment prior to entering into the agreement failing which the
granting of any credit
would be reckless. The parties have not
tacitly agreed to include in their agreement any term that the
creditor must give the sureties
notice of default which also refers
them to an entity to resolve any dispute or result in agreement on a
payment plan.
SECOND SURETY DID NOT
KNOW SHE WAS SIGNING A SURETYSHIP AGREEMENT
[38] Dobson avers in her
answering affidavit that Parkinson has ‘no recollection of
having signed’ the suretyship agreement
and, if she did, ‘she
did not appreciate the significance of her actions in doing so’.
All Parkinson intended to do
was ‘to provide a limited amount
of assistance to me as her daughter’ and she intended to signed
documentation to ‘make
herself a joint or second signatory’
on the credit facility. Parkinson signed the documents ‘without
reading them
or appreciating their significance’.
[39] This is a curious
set of averments.
[40] Neither Dobson nor
Parkinson claim that any employee of the creditor made any wrongful
or untruthful representations to Parkinson
which induced her to sign
the suretyship. It is merely claimed that she signed without reading
the document. She relies upon
her own mistake.
[41] Parkinson was
neither an ingénue with no experience of the world nor a
disabled and very senior citizen. At the time
of signing the
suretyship agreements she was (according to her identity number)
fifty nine years old. Dobson is her daughter. She
must have known
that her daughter was borrowing money from the bank and that her
daughter was required to both furnish a suretyship
and mortgage her
immovable property. Dobson certainly envisaged, when she first
applied for a credit facility from the creditor,
that she would have
to furnish security. In what she calls her ‘business plan’
she concludes ‘I have in my own
rights a house worth R1,100,000
fully paid. I have off shore accounts that exceed R1,200,000. I am
requesting a business loan of
R800,000’.
[42] Dobson must have
approached her mother to provide the additional suretyship. Dobson
does not state in her answering affidavit
that she deceived her
mother, concealed the need for the suretyship or misled her mother as
to the nature of the document which
she was signing. She does state
that she was present when her mother signed the documents.
[43] Certainly someone,
either Dobson or Parkinson, furnished the bank with the full names
and identity number of Parkinson. If
indeed, Parkinson believed that
she was going to be a second signatory on the banking account of her
daughter’s business,
why does Dobson say that this ‘was a
close corporation in which she [Parkinson] held no interest
whatsoever’? I can
appreciate that Parkinson had no interest
in her daughter’s business but she certainly had an interest in
her daughter.
[44] The document signed
by Parkinson indicates its status on the first page in bold and in a
larger font than the rest of the document:
in the centre of the page
is the word ‘SURETYSHIP’. Immediately above that word in
bold is a box with: ‘NOTICE:
We encourage you to obtain
independent legal advice to ensure that you understand your
commitment in terms of this suretyship and
the potential consequences
of your decision to stand surety’. This too, is in a larger
font than the rest of the document.
Immediately above Parkinson’s
signature is the word ‘surety’ which could not have been
missed because she placed
her signature in the space provided.
Immediately below Parkinson’s identity number is the word (‘the
surety’).
The total document signed by Parkinson is (including
the addendum) five pages. On none of these is she required to place
exemplars
of her signature for purposes of signing on a bank account.
[45] The documentation
signed is neither misleading nor deceptive. It clearly proclaims that
which it is and it clearly identifies
to the signatory who she will
become. Parkinson does not claim to have been incapacitated in any
way requiring special assistance
– over and above the notice
given to her that independent legal advice may be advisable.
[46] I can find no basis
on which she can avoid the consequence of her actions.
ORDER
[47] In the result an
order is made as follows on behalf of the applicant against the
second and third respondents jointly and severally,
the one paying
the other to be absolved:
Payment of the sum of R1
470 277.85 (one million four hundred and seventy thousand two
hundred and seventy seven rand and eighty
five cents);
Payment of interest on
the above amount at the rate of 10.25% (ten point two five per
centum) per annum from 6 September 2011
to date of final payment
calculated daily and compounded monthly;
An order declaring the
following property specially executable, being certain:
A unit consisting as
shown and more fully described as Section Plan no: SS218 in the
Scheme known as La Motte in respect of
the land and building or
buildings situate at Rynfield Extension 42 Local Authority:
Ekuruleni Metropolitan Municipality of
which section the floor
area, according to the said sectional plan is 168 (one hundred and
sixty eight) square metres in extent;
and
An undivided share in
the common property in the scheme apportioned to the said section
in accordance with the participation
quota as endorsed on the said
sectional plan.
Held by Deed of Transfer
no: ST 2279/2007; and
Costs on the attorney
and client scale.
DATED AT JOHANNESBURG ON
THIS 30TH DAY OF MAY 2012
______________
SATCHWELL J
APPEARANCES
APPLICANTS: L Van Tonder
Instructed by Lowndes
Dlamini Attorneys, Johannesburg
RESPONDENT: J C Viljoen
Instructed by Dewey de
Souza, Johannesburg
1
2009 (3) SA 384
TPD.
2
Sections 9, 10 and 11.
3
Subsections (a) – (d) of Section 4 (1) and further in
subsections (2), (5) and (6) of section 4.
4
Sections 5 and 6.
5
Section
44 of the Constitution confers the legislative power on Parliament
and reads in subsection (a) ‘The national legislative
authority as vested in Parliament confers on the National Assembly
the power (ii) to pass legislation with regard to any matter…’
6
The
then Appellate Division in
Sasfin
(Pty) Ltd v Beukes
1989
1 SA 1
at 9E-F held ‘…it must be borne in mind that
public policy generally favours the utmost freedom of contract, and
requires that commercial transactions should not be unduly trammeled
by restrictions on that freedom. “Public policy demands
in
general full freedom of contract; the right of men freely to bind
themselves in respect of all legitimate subject-matters.”
(per
Innes CJ in
Law
Union and Rock Insurance Co Ltd v Carmichael’s Executor
1917 AD 593
at 598)’
7
Section 12.
8
Parkinson claims that she did not know that she was signing a
suretyship agreement – she thought she was applying to have
access to the bank account of Kaydeez Therapies.
9
[2002] JOL 9515
(A).
10
1995 (4) SA 340
(W).
11
344I.