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[2015] ZASCA 6
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First National Bank v Clear Creek Trading 12 (Pty) Ltd and Another (1054/2013) [2015] ZASCA 6; 2018 (5) SA 300 (SCA) (9 March 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
no: 1054/2013
In
the matter between:
FIRST
NATIONAL BANK ─ A DIVISION OF
FIRSTRAND
BANK
LIMITED
...................................................................................
APPELLANT
and
CLEAR
CREEK TRADING 12 (PTY)
LTD
................................................
FIRST
RESPONDENT
LUCKY
SOLOMON
SELEMELA
..........................................................
SECOND
RESPONDENT
Neutral
citation:
Firstrand Bank v Clear
Creek Trading
(1054/2013)
[
2015]
ZASCA 6
(9 March 2015)
Coram:
Lewis, Willis and Mbha JJA and Van der Merwe and
Gorven AJJA
Heard
:
16 February 2015
Delivered:
9 March 2015
Summary:
High Court dealing with separated issue
in terms of Rule 33(4) ─ no order made separating the issues ─
issue to be determined
not stated at all, let alone with clarity and
precision ─ no factual basis laid on issue sought to be
determined ─
factual matrix relevant to interpretation of
contract ─ not appropriate or possible to determine the issue.
ORDER
On
appeal from:
North Gauteng High Court,
Pretoria (Kollapen J sitting as court of first instance)
1.
The appeal is upheld.
2.
The order of the court below is set aside and substituted by the
following: ‘No order is made on the separated issue save
that
the costs arising from the separated issue shall be costs in the
cause.’
3.
Each party shall pay its own costs of the appeal.
JUDGMENT
Gorven
AJA (Lewis, Willis, Mbha JJA and Van der Merwe AJA concurring):
[1]
This matter concerns an issue dealt with in
the North Gauteng High Court before Kollapen J under rule 33(4)
of the Uniform
Rules. The issue related to whether the provisions of
the
National Credit Act
34 of 2005
applied
to an agreement. This arose as follows.
The
appellant, First National Bank
(FNB)
loaned
money to t
he first respondent, Clear Creek
Trading 12 (Pty) Ltd (Clear Creek) against the security of a mortgage
bond. The second respondent
stood surety for the due performance of
the agreement by Clear Creek.
FNB sued
Clear Creek for breach of the agreement and sought to foreclose on
the mortgage bond. It also sued the second respondent
under a deed of
suretyship. The only defence raised in the plea was that the
agreement was unlawful for two reasons. First, certain
provisions in
the agreement were said to have had the general purpose and effect of
deceiving Clear Creek and so contravened
s 90(2)(a)(ii)
of the
Act. Secondly, it was claimed that FNB had failed to comply with
s 81(2)
and (3) of the Act. The latter subsections required FNB
to properly assess Clear Creek’s general understanding and
appreciation
of the risks and costs of the proposed credit, and of
its rights and obligations under the agreement. The nett effect of
the plea
was that, because the agreement was unlawful for one or both
of the above reasons, Clear Creek was relieved of any obligation to
perform.
[2]
The Act would ordinarily not apply to the
agreement. This is made clear in s 4(1) of the Act. The relevant
parts of s 4(1)
read as follows:
‘
(1)
Subject to sections 5 and 6, this Act applies to every credit
agreement between parties dealing at arm's length and made within,
or
having an effect within, the Republic, except-
(a)
a
credit agreement in terms of which the consumer is-
(i)
a juristic person whose asset value or annual turnover . . . at the
time the agreement is made, equals or exceeds the threshold
value
determined by the Minister in terms of section 7 (1);
. . .
(b)
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)’.
Section
9(4) says that a mortgage agreement is a large agreement. It was
submitted before us that, because no evidence was led that
Clear
Creek had any income at all, the agreement was not hit by s 4(1)
of the Act. Clear Creek was a juristic person. If Clear
Creek had an
asset value or annual turnover greater than the threshold set by the
Minister under the Act, it was excluded in terms
of s 4(1)(a)(i).
If it had an asset value or annual turnover below that threshold,
s 4(1)(b) made s 9(4) applicable
and mortgage bonds were
excluded. So, regardless of the asset value or annual turnover of
Clear Creek, the Act did not, by law,
apply to the agreement.
[3]
In clause 1 of the agreement, which is
headed ‘Introduction’, the following phrase is found:
‘
This
agreement is governed by the National Credit Act 34 of 2005 (“the
Act”).’
There
are also various references to provisions of the Act in other
clauses. For example, there is a provision for administration
charges
to be imposed if letters are written in terms of Part C of Chapter 6
of the Act.
[1]
Also, collection
charges are limited to those allowed in Part C of Chapter 6. It also
provides that if the agreement is being reviewed
in terms of s 86
of the Act, FNB can give notice to terminate the review in the
prescribed manner. Any increases in fees or
charges prescribed by the
Act are binding and FNB is authorised to transmit to or obtain from
the credit bureau all data relating
to Clear Creek’s credit
profile as permitted in terms of the Act. If Clear Creek furnished
FNB with incorrect information,
Clear Creek may be denied the
protection afforded by the Act. The agreement is clearly generated by
FNB in a standard form.
[4]
At the commencement of the trial, the
parties agreed to deal with whether the Act was applicable to the
agreement as a separate
issue in terms of rule 33(4). This
appears to have been an informal agreement because the only
indication in the record to
this effect appears in the judgment of
the court below. After the issue was dealt with, the following order
was granted:
‘
The
provisions of the
National Credit Act 34 of 2005
are applicable in
respect of the home loan agreement entered into between the plaintiff
and the first defendant on 13 February
2008.’
[2]
It
is this order which is appealed against, with leave of the court
below.
[5]
The
law has long been settled that parties may incorporate legislation
into their agreement in certain circumstances. This court
held as
much in
Tuckers
Land and Development Corporation (Pty) Ltd v Kruger
,
[3]
where it said –
‘
There
is no doubt that parties to a contract may by reference incorporate
appropriate statutory provisions therein so as to make
them binding
upon them as terms of the contract.’
The
important qualification in this dictum is introduced by the word
‘appropriate’. This necessarily implies that some
statutory provisions cannot be incorporated by way of agreement
between the parties. Although there is no list of those provisions,
it seems that those that attempt to bind non-consenting third parties
would not be competent. In addition, those provisions that
seek to
bind third parties whose powers are derived from the legislation
itself cannot be made applicable.
[4]
The reason for this is obvious; obligations may not be imposed on
others without their consent and the machinery of the State cannot
be
burdened by matters to which it is not intended to apply.
[6]
As regards the Act, two examples suffice.
Section 129 envisages that a matter can be referred, inter alia,
to a consumer court.
This is defined in the Act to include a tribunal
which is, in turn, a body established by s 26 of the Act. Section
86(10) provides
for the involvement of the National Credit Regulator
which is established by s 12 of the Act. It would seem clear
that entities
established by the Act and empowered to give effect to
it, are not capable of dealing with an agreement to which the Act
would
otherwise not apply. If they were to do so, they would be
acting
ultra vires
the powers conferred on them by the Act. This would, in turn, mean
that those parts of the Act which involve such bodies cannot
be made
applicable by agreement.
[7]
The law is not settled as to the effect of
attempting to make legislation as a whole applicable to an agreement
if certain parts
of the legislation cannot be invoked. If the whole
of an Act cannot be made to apply to an agreement, it may be
necessary for parties
to specify which provisions are to apply.
Because of the view that I take of the matter, however, it is not
necessary to decide
this point and I specifically decline to do so.
[8]
I turn now to consider the rule under which
the matter was dealt with. Rule 33(4) reads as follows:
‘
If,
in any pending action, it appears to the court
mero
motu
that there is a question of
law or fact which may conveniently be decided either before any
evidence is led or separately from any
other question, the court may
make an order directing the disposal of such question in such manner
as it may deem fit and may order
that all further proceedings be
stayed until such question has been disposed of, and the court shall
on the application of any
party make such order unless it appears
that the questions cannot conveniently be decided separately.’
What
is clear from a straightforward reading of the rule is at least the
following. The court may of its own volition consider whether
an
issue may conveniently be decided separately from other issues in the
action. If this is the case, the court may make an order.
The order
must direct the disposal of that issue in a manner deemed appropriate
by the court. The court should also make a corresponding
order
staying further proceedings until the issue in question has been
resolved. If the issue can conveniently be decided separately
and one
or both parties make an application, the court must make the orders
referred to in the last two sentences.
[9]
The
process of dealing with a matter under rule 33(4) was clarified
in
Denel
(Edms) Bpk v Vorster
:
[5]
‘
Rule
33(4) of the Uniform Rules - which entitles a Court to try
issues separately in appropriate circumstances - is aimed at
facilitating the convenient and expeditious disposal of litigation.
It should not be assumed that that result is always achieved
by
separating the issues. In many cases, once properly considered, the
issues will be found to be inextricably linked, even though,
at first
sight, they might appear to be discrete. And even where the issues
are discrete, the expeditious disposal of the litigation
is often
best served by ventilating all the issues at one hearing,
particularly where there is more than one issue that might
be
readily dispositive of the matter. It is only after careful thought
has been given to the anticipated course of the litigation
as a whole
that it will be possible properly to determine whether it is
convenient to try an issue separately. But, where the trial
Court is
satisfied that it is proper to make such an order - and, in all
cases, it must be so satisfied before it does so
- it is the duty of
that Court to ensure that the issues to be tried are clearly
circumscribed in its order so as to avoid confusion.’
Another
helpful guideline is found in
ABSA
Bank Ltd v Bernert
:
[6]
‘
It
is imperative at the start of a trial that there should be clarity on
the questions that the court is being called upon to answer.
Where
issues are to be separated rule 33(4) requires the court to make
an order to that effect. If for no reason but to clarify
matters for
itself a court that is asked to separate issues must necessarily
apply its mind to whether it is indeed convenient
that they be
separated, and if so, the questions to be determined must be
expressed in its order with clarity and precision.’
[10]
These principles did not inform the
approach adopted in the court below. Rule 33(4) refers to a ‘question
of fact or a question
of law’ in a pending action. This must
surely mean an issue which arises on the pleadings. If an issue not
dealt with in
the pleadings is specified for decision under rule
33(4), it amounts to a request that a court give an opinion on a
matter not
in issue on the pleadings and which cannot dispose of an
aspect in issue between the parties. This cannot be what is intended
by
the rule. In the present matter, the issue placed before the court
for decision was not raised on the pleadings by either party.
FNB
pleaded what it averred were the material terms of the agreement. It
did not plead that the Act was applicable. The only tangential
reference was in the term concerning interest which, it was pleaded,
‘may be varied in the discretion of the plaintiff, subject
to
the provisions of the applicable Act’. The plea simply ‘noted’
the contents of the paragraph which pleaded
the terms. This amounts
to an admission that those are the material terms. No additional
terms were pleaded as being material to
the dispute between the
parties. In particular, it was not averred that it was a term of the
agreement that the Act applied to
it. It must have been considered
that, because Clear Creek relied on provisions in the Act to found
defences to the claim, there
was an implicit averment to that effect.
Whilst this problem is not, in and of itself, fatal to the procedure
adopted, it is indicative
of a failure to properly apply the rule.
[11]
A further departure from the rule is that
no order was made at all. The court below simply allowed the matter
to proceed on the
basis that the issues had been separated. On my
reading of the rule, unless an order is made, the court is required
to deal with
the action as a whole. Apart from being a requirement in
the rule, the fashioning of an order would sharpen the focus of the
enquiry
as to whether the issue specified can conveniently be decided
separately. It also assists in defining the precise ambit of the
enquiry to be undertaken.
[12]
The simple issue placed before the court
below was whether the provisions of the Act applied to the agreement.
This formulation
gave rise to a number of difficulties, only one of
which needs mention. A corollary of invoking s 81(2) and (3) of
the Act
in defence to the claim is that sections 6(a) and 78(1)
cannot apply to the agreement. Section 6(a) provides that part D of
Chapter
4 of the Act, under which s 81 falls, does not apply
where the consumer under a credit agreement is a juristic person.
Section 78(1)
echoes this exclusion. A simple order that the Act
applies to the agreement then leads to an anomaly where one has to
pass over
those sections and, therefore, apply the Act selectively.
This gives no clarity to the question of whether the respondents are
entitled to rely on a defence based on s 81 of the Act.
[13]
In my view, the procedure adopted in the
court below was not competent under rule 33(4). The failure to make
any order and the failure
to specify an issue with clarity combined
to render the approach incompetent. I do not say that in every case
procedural shortcomings
will have this result. At a certain point,
however, procedural shortcomings cross the line and result in a
procedure not being
competent under the rule. It is not possible to
specify in general terms where that line will be crossed. Each case
must be judged
on its own merits.
[14]
This may be considered to be an unduly
formalistic approach to adopt. In this case, however, the failure to
address the matter properly
under rule 33(4) led to an even more
substantial difficulty. This impacted on the ability of the court to
arrive at a proper conclusion
on the issue.
[15]
I refer in this regard to the manner in
which the issue was ventilated in the court below. In doing so, the
parties failed to place
agreed facts before the court by way of
rule 33(1) or to lead any evidence. This was clearly felt keenly
by the court below
which, in its judgment, set out supposed common
cause facts. Some of these were challenged by FNB in its heads of
argument on appeal.
There is no indication in the record that any
facts were accepted as being common cause. The facts set out by the
court below appear
to have been gleaned from parts of the pleadings
and, principally, from the plea. The failure to present the court
with agreed
facts or with evidence means that no facts were placed
before the court which bore on the issue. FNB submitted before us
that this
was not necessary because the issue involved the
interpretation of an agreement and that accordingly no evidence was
necessary.
[16]
This
court recently dealt with the approach to take in interpreting
documents in
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
,
[7]
in these words:
‘
Whilst
the starting point remains the words of the document, which are the
only relevant medium through which the parties have
expressed their
contractual intentions, the process of interpretation does not stop
at a perceived literal meaning of those words,
but considers them in
the light of all relevant and admissible context, including the
circumstances in which the document came
into being. The former
distinction between permissible background and surrounding
circumstances, never very clear, has fallen away.
Interpretation is
no longer a process that occurs in stages but is “essentially
one unitary exercise”.’
Harms
DP had paved the way for this approach in
KPMG Chartered
Accountants (SA) v Securefin Ltd & another
2009 (4) SA 399
(SCA) para 39:
‘
First,
the integration (or parol evidence) rule remains part of our law.
However, it is frequently ignored by practitioners and
seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence may
not
contradict, add to or modify its meaning (
Johnson
v Leal
1980
(3) SA 927 (A)
at
943B). Second, interpretation is a matter of law and not of fact and,
accordingly, interpretation is a matter for the court and
not for
witnesses (or, as said in common-law jurisprudence, it is not a jury
question: Hodge M Malek (ed)
Phipson
on Evidence
(16
ed 2005) paras 33 - 64). Third, the rules about admissibility of
evidence in this regard do not depend on the nature
of the document,
whether statute, contract or patent (
Johnson
& Johnson (Pty) Ltd v Kimberly-Clark Corporation and
Kimberly-Clark of South Africa (Pty) Ltd
1985
BP 126 (A) ([1985] ZASCA 132 (at www.saflii.org.za)). Fourth, to the
extent that evidence may be admissible to contextualise
the
document (since “context is everything”) to establish its
factual matrix or purpose or for purposes of identification,
“one
must use it as conservatively as possible” (
Delmas
Milling Co Ltd v Du Plessis
1955
(3) SA 447
(A)
at
455B - C). The time has arrived for us to accept that there is no
merit in trying to distinguish between “background
circumstances”
and “surrounding circumstances”. The
distinction is artificial and, in addition, both terms are vague and
confusing.
Consequently, everything tends to be admitted. The terms
“context” or “factual matrix” ought to
suffice.
(See
Van
der Westhuizen v Arnold
2002
(6) SA 453
(SCA)
([2002]
4 All SA 331)
paras 22 and 23, and
Masstores
(Pty) Ltd v Murray & Roberts Construction (Pty) Ltd and
Another
[2008] ZASCA 94
;
2008
(6) SA 654
(SCA)
para
7.)’
[17]
In the present matter, evidence of
‘relevant and admissible context, including the circumstances
in which the document came
into being’ seems to me to be
crucial. This is particularly so because of the anomaly I have
pointed out above. The anomaly
places a question mark over whether
any consideration at all was given by either party to those parts of
the document which refer
to the Act. The circumstances as to how the
document came to take the form it did seem to me to be highly
relevant, particularly
since what was signed by Clear Creek appears
to be a standard form document.
[18]
In addition to the serious procedural
shortcomings, therefore, it is my opinion that the issue could not
have been properly decided
on the basis on which it was dealt with in
the court below. In the circumstances, the court below should have
declined to grant
any order on the issue placed before it and made
the costs relating to the ventilation of that issue costs in the
cause. All of
this means that the appeal should succeed.
[19]
As regards the costs of the appeal, both
parties argued the matter as if the court below could deal with the
issue despite the lack
of factual material placed before it. Neither
FNB nor the respondents raised the procedural lacunae mentioned
above. No party sought
to lead evidence or agree a stated set of
facts under rule 33(1). Only counsel appointed as
amicus
curiae
by the court expressed any
reservations as to whether a finding could properly have been arrived
at in the circumstances. We are
grateful to him for the contribution
made to the hearing in this and the substantive areas argued before
us.
[20]
In the result, the following order issues:
1.
The appeal is upheld.
2.
The order of the court below is set aside and substituted by the
following: ‘No order is made on the separated issue save
that
the costs arising from the separated issue shall be costs in the
cause.’
3.
Each party shall pay its own costs of the appeal.
______________
T
R Gorven
Acting
Judge of Appeal
Appearances
For Appellant: A
Gautschi SC (with him M Reineke)
Instructed
by:
Strauss
Daly Incorporated, Sandton and Bloemfontein
For
Respondent: B Lesomo of Seokane Lesomo Incorporated, Sandton
c/o
Ramothello Raynard & Tsotetsi Incorporated,
Bloemfontein
Amicus
Curiae: N Snellenburg
[1]
This
refers to s 129 of the Act where the consumer is in breach.
[2]
FNB
was also ordered to pay the costs relating to the issue.
[3]
Tuckers
Land and Development Corporation (Pty) Ltd v Kruger
1973 (4) SA 741
(A) at 745F-G.
[4]
H
C J Flemming
Krediettransaksies
(1982) at 31, says that parties cannot change the jurisdiction of
the courts, create offences, bind third parties or suspend
or amend
the provisions of other legislation by agreeing to incorporate
legislation in their agreement. My summary of the following
passage:
‘
Die
partye kan nie die jurisdiksie van die howe wysig nie en kan nie
misdade skep nie. Artikel 23 van die Kreditooreenkomstewet
geld dus
nie as die wet by ooreenkoms van toepassing gemaak is nie. Die
partye kan nie derde partye bind of die bepalings van
ander
wetgewing opskort of wysig nie.’
[5]
Denel
(Edms) Bpk v Vorster
2004
(4) SA 481
(SCA) para 3.
[6]
ABSA
Bank Ltd v Bernert
2011
(3) SA 74
(SCA) para 21.
[7]
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA) para 12.