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[2016] ZAGPJHC 266
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Nedbank Limited v McGlashan and Others (14714/2016) [2016] ZAGPJHC 266 (4 August 2016)
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Certain
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 14714/2016
Reportable:
Yes
Of
interest to other judges: No
Revised.
In
the matter between –
NEDBANK
LIMITED
Applicant
and
GRANT
STUART McGLASHAN
First
Respondent
(ID
NO. […])
ALISTAIR
IAN McGLASHAN
Second
Respondent
(ID
NO. [...])
SUGAR
PROPERTY DEVELOPMENTS (PTY) LTD
Third
Respondent
(Reg.
No. 2007/020697/07)
THE
AFRICAN BLACKFOOT SHARE TRUST
Fourth
Respondent
THE
CIELO INVESTMENT TRUST
Fifth
Respondent
ILIMA
SHARE TRUST
Sixth
Respondent
THE
SILVERCLOUD SHARE TRUST
Seventh
Respondent
THE
MERCURIO INVESTMENT TRUST
Eighth
Respondent
THE
JAGUAR BUSINESS TRUST
Ninth
Respondent
THE
MILELE INVESTMENT TRUST
Tenth
Respondent
THE
SUGAR FAMILY TRUST
Eleventh
Respondent
JUDGMENT
Headnote
A
bank sued on a standard suretyship containing a clause providing for
a certificate of balance which stated:‘ …upon
the mere
production thereof is binding on us and be proof of the contents of
such certificate on the face of it….’.
Defendant argued
that the clause was unenforceable because it did not allow the
prospect of rebuttal, and relied on the decision
in
Nedbank v
Binder
which struck down the identical clause. The Bank argued
that
Nedbank v Binder
was wrongly decided because
the phrase ‘ on the face of it’ meant ‘prima facie’
and thus a rebuttal was
possible.
Held:
Nedbank v Binder 1483/2011 [7 April 2016, per van der Linde J
]
was not wrongly decided – the phrase ‘..on the face of
it..’ means ‘ex facie’ not ‘prima facie’-
accordingly, bank cannot rely on the clause because the meaning
of ‘ex facie’ is conclusive and not admitting
of a
rebuttal
In
the alternative the bank argued that the certificate clause in the
underlying contract in respect of which the suretyship was
accessory
was valid and if the ‘principal’ debt could be
established on the strength of such a certificate that certificate
could be applied to the accessory obligation too.
Held:
the argument had to fail in summary judgment proceedings in respect
of proceedings based on a suretyship because a defendant was
not
called upon to meet a case premised on the underlying contractual
obligation of another person towards the creditor
SUTHERLAND
J:
Introduction
[1]
The applicant (Nedbank) has sued the eleven respondents for payment
of the indebtedness of Immobile Transport systems (Pty)
Ltd
(Immobilise). A sum of R2,250,000 was lent to Immobilise in terms of
a loan agreement which should have been repaid by
1 August 2016
together with interest. However, on 18 April 2016 Immobilise
was liquidated. Nedbank claims that the
respondents are all
sureties for the debt.
[2]
The respondents all entered an appearance to defend which
precipitated the application for summary judgment. A common
defence is put up for all. The deponent is the first respondent Grant
McGlashan.
[3]
There are two parts to the defence proffered.
[4]
The first part of the defence is a challenge to the scope or
applicability of the suretyships. There are no disputes about the
validity of suretyships
per
se.
The
contention is that the debt in respect of which the suretyships were
given does not include or cover the loan agreement relied
upon by
Nedbank.
[5]
The second part of the defence is that, even assuming the suretyships
cover the loan agreement, Nedbank, cannot produce a legally
binding
certificate of balance. The certificate proffered is alleged to be
contra bonis mores
because it purports to be conclusive proof
of the debt, and as such unenforceable as decided in
Ex Parte:
Minister of Justice: In Re Nedbank v Abstein Distributors
(Pty) Ltd
&
Donnely v Barclays National Bank Ltd
1995
(3) SA 1
(A). Thus, runs the contention, in the absence of
a binding certificate to establish the quantum, the claim is not
liquid.
Thus, for that reason summary judgment cannot not be granted.
The
Scope of the suretyships
[6]
The Suretyships were all executed by 4 April 2015. McGlashan, says
that the understanding of all the sureties was that the security
thus
given was linked exclusively to a revolving credit agreement with
Immobilise which was cancelled. The loan agreement upon
which Nedbank
relies, was concluded later and the suretyships, so it is said, were
not intended to cover it. If that is true
then reliance on the
suretyships for the outstanding amount of loan owing must fail.
It is, however, common cause that after
the cancellation of the
revolving credit agreement Nedbank and the Immobilise concluded the
subsequent loan agreement for the same
sum as the sum provided for in
the revolving credit agreement.
[7]
The question whether or not the scope suretyships extended beyond the
revolving credit agreement then becomes the focus of the
controversy.
[8]
In my view, the defence put up by the respondents fails.
[9]
The first reason is that the terms of the suretyship are wide enough
to encompass the indebtedness of Immobilise on grounds
other on the
revolving credit agreement. Secondly, the papers disclose that
when the revolving credit agreement was cancelled,
it was cancelled
in order to supplant it with a loan agreement for the same sum.
[10]
The suretyships are not exclusively related to performance in terms
of any specific agreement. Clauses 1, 2, 3, 4 and 16 of
the
suretyship substantiate this intention. I cite the relevant
passages: Clause 1 provides that ‘We ……bind
ourselves jointly and severely as sureties and co-principal debtors
…..for the repayment on demand of all the amounts which
the
principal debtor may now or at any time hereafter owe Nedbank. Clause
2 provides that the obligation ‘may arise from
moneys lend and
advanced or to be lent and advanced’. Clause 3 provides
‘It should always be at Nedbank’s
discretion to determine
the extent, nature and duration of the banking facilities to be
allowed to the principal debtor’.
Clause 4 provides that the
suretyship is unconditional. Clause 16 provides that ‘we agree
that this suretyship is in addition
and without prejudice
to any other securities, including other suretyships, now or in the
future held from or on behalf
of the principal debtor and that it
shall remain in force as a continuing covering security for all any
sum or sums of money which
may now or in the future be owing to or
claimable by Nedbank from any clause aforementioned and any other
clause of whatever nature…..’.
Accordingly the
sureties are not limited to the revolving credit agreement.
[11]
The second leg of this defence is that it was the ‘of the
respondents that whatever the wording of the suretyship may
have
been, their liability would be limited to the revolving credit
agreement and could not be linked to any other form of indebtedness.
This line of defence cannot be invoked because it would require a
rectification which is unsustainable in the face of the express
terms
of the agreement.
[12]
A variation of this theme is that no
consensus
ad idem
existed and the suretyship agreements fail on that ground. The
intentions of both parties are relevant. If such a defence was
viable, one would have expected the affidavit to deal extensively
with the facts which might support it. Rule 32 requires full
disclosure and the required degree of disclosure is absent.
[13]
Lastly, an attempt was made to suggest that steps by Nedbank to
secure other further security for the loan agreement implies
that
‘new’ security was necessary because the suretyships did
not apply. This is incorrect. Although true that
Nedbank did
initially pursue further security, the steps were abandoned. At
best, the probabilities are that the decision
not to procure more
security was motivated by the fact that the existing security was
sufficient; after all, the capital sum was
identical.
The
certificate of Balance
[14]
The contention is that the certificate is contaminated and unusable
because it stipulate that a rebuttal was not possible.
Paragraph 6 of
the suretyship reads:
“
The nature and
amount of our obligation………..shall be determined
and proved by a certificate purporting to have
been signed by the
manager ……..of Nedbank, whose capacity or authority it
will not be necessary to prove (or any
other form evidence
contemplated in section 169(2) of the National Credit Act… if
applicable. This certificate or
other form of evidence as the
case may be,
will
upon the mere production thereof be binding on us and be proof of the
contents of such certificate on the face of it and of
the fact that
such amount is due and payable
in any legal proceedings against us, and will be valid as a liquid
document against us in any competent court’ (underlining
added)
[15]
It was contended that there was support for the proposition that this
clause was unenforceable from the recent unreported decision
of Van
der Linde J in
Nedbank Ltd v Binder SHGJ 1483/2011,
delivered
on 7 April 2016. This was a judgment in which Van Linde J had
to deal with the identical text as this suretyship.
It
was held:
“
[7] The clause in
the suretyship agreement relied upon by the plaintiff for the
legitimacy of exD is clause 6.” (The Judge
then quoted the
clause which is identical to that being addressed now)
[8] Interpretation starts
with the ordinary meaning of words. The ordinary meaning of the
words used in this clause has the
effect of that the defendant cannot
challenge the certificate of balance. Clauses of this ilk were
specifically referred
to and authoritatively examined by [the Abstein
case]”
[9] That Court held
that the clause such as the one under discussion is on the authority
of
Sasfin
v Beukes
invalid
as offending public policy. The offensive aspect was that the
terms purported to oust the jurisdiction the Courts
to inquire into
and determine the accuracy and the validity of the issue covered by
the certificate. The Court held that where
the certificate was
authored by an independent third party,that was different, and was
permissible. But where as in that case,
and also in the present case,
a certificate was to be authored by the other contracting party the
objection applied.’
[16]
The effect of that judgment is that clause 6 is unenforceable.
That has the inevitable consequence that all of Nedbank’s
suretyships with this text are invalid to that extent.
[17]
However, to counter this contention, counsel on behalf of Nedbank
invited me to hold that Van der Linde J was clearly wrong
in
Binder.
[18]
The basis advanced for such a finding is premised on an alleged error
which is said to be Van der Linde J ignoring the import
of the words
“on the face of it” as they appear in clause 6. Counsel
argued that clause 6 of the suretyship with those
words is of
identical import
to clause 16 in the loan agreement with
Immobilise. Clause 16 reads:
“
The nature and
amount of the client’s indebtedness to the bank in terms of
this agreement , as well as the interest payable
in respect thereof,
will at any time be determined and proved by a certificate purporting
to have been signed by a manager or accountant
for the time being of
the branch or head office of the bank whose capacity or the
authority it will not be necessary to prove,
which certificate or
other form of evidence as the case may be
will
upon the mere production thereof be binding on the client and be
prima
facie
proof of the contents of such certificate and of the fact that such
amount was due and payable
in any legal proceedings against the client, and will be valid as a
liquid document against the client in any competent court.”
(underlining added)
[19]
The contention is that when these two clauses are compared it
is apparent that Van der Linde J overlooked giving due
weight to the
phrase in clause 6 “on the face of it” which has the same
meaning as “
prima
facie
proof” in clause 16 and if that is so, the contention runs, the
judgment is clearly wrong.
[20]
In my view, this submission must fail. In clause 16 the
critical phrase is: “….upon the mere production
thereof
be binding on the client and be prima face proof of the contents of
such certificate.” The critical phrase in clause
6 is:, “will
upon the mere production thereof be binding upon me and be proof of
the contents of such certificate on the
face of it…..”
[21]
The two clauses are not saying the same thing. Clause 6 does not
provide for
prima
facie
proof. The use of the phrase “on the face of it” in the
particular sentence does not give rise to a meaning that there
is
‘prima face’ proof, but rather that the contents of the
certificate itself ‘on the face of it’ are to
be taken as
proof. The source of the error in the submission is the
assumption that the words “
prima
facie
”
when translated into English mean “on the face of it”.
This is incorrect. The words “on the
face of it” if
one is obliged to use Latin, it is correctly translated as “
ex
facie
”
not
prima
facie
.
Prima
facie
means the first or provisional view. ‘On the face of it’,
or
ex
facie
,
means exactly that, on the face of it, it is so.
[22]
Accordingly there is no basis upon which to find that Van der Linde J
was clearly wrong in this case. Indeed I express
my agreement
with his views as set out in
Binder.
[23]
The consequence of that outcome is that Nedbank cannot rely on its
certificate of balance. Indeed, any suretyship with the
text of
clause 6 is unenforceable as to the extent of clause 6.
[24]
Recognising that difficulty, counsel for Nedbank invited me to have a
look at the certificate which had been issued in regard
to the loan
agreement between the bank and Immobilise, the principal debtor.
The argument, is if you can conclude that the
principal debtor owes
money, then by using its certificate in respect of that debt, the
accessory debt of the surety can also be
proven.
[25]
In my view, this is not a viable proposition. In the first
place, the claim which the respondents had to meet was not
one based
on any certificate being issued in terms of the loan agreement in
relation to Immobilise but rather on a certificate
of balance in
respect of their suretyships.
[26]
It may well be true that there is little reason to doubt that proof
of the principal debt is easily and sensibly proved by
a certificate
in terms the loan agreement. But for the purposes of summary
judgment where that is not what the respondents
are invited to
respond to and where there is no room to expand, by way a rebuttal of
the plaintiff’s claim, after the answering
affidavit is filed,
it seems to me to be inappropriate that any reliance can be placed on
the certificate which relates to Immobilise,
for summary judgment
purposes.
[27]
The consequence of that is that the amount owing has not been
established for the purposes of summary judgment and on that
ground,
therefore, the resistance by the respondents is well founded.
The
Order
[28]
The appropriate order to make in this case is for leave to defend to
be granted and costs to be costs in the action.
It is so
ordered.
_______________________________
Roland
Sutherland
Judge
of the High Court, Gauteng Local Division,
Johannesburg
Hearing
and judgment: 28 June 2016
Judgment
revised: 4 August 2016
For
applicant:
Adv
M. de Oliviera, instructed by KWA attorneys
For
Respondents:
Adv
L. Morland, instructed by SC Verceil attorney