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[2017] ZAGPJHC 40
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Darier v Firstrand Bank Limited (32115/2015) [2017] ZAGPJHC 40 (20 February 2017)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, JOHANNESBURG)
REPUBLIC
OF SOUTH AFRICA
Reportable:
NO
Of
interest to other judges: NO
Revised.
20/2/2017
Date
of hearing: 15 February 2017 Date
of judgment: 20 February 2017
In
the matter
between: Case
number 32115/2015
WILLIAM
ARTHUR
DARIER
Applicant
and
FIRSTRAND
BANK
LIMITED
Respondent
JUDGMENT
BRENNER,
AJ
1.
This application involves the rescission of an order for default
judgment against the applicant, William Darier, ("William
Darier"), on 17 June 2016.
2.
On 15 March 2011, and In advance of the loan facility adumbrated
below, William Darier stood surety for and agreed to act as
co-principal debtor in solidum with principal debtor Cimco SA Pipes
CC ("Cimco") for Cimco's debts to the respondent,
Flrstrand
Bank Limited ("FRB"). On the same date, his parents, Eric
and Jean Darier, also agreed to stand surety for
the debts of Cimco.
3.
Six months later, on 20 September 2011, a written loan agreement was
concluded between FRB and Cimco, in terms of which R8,9
million was
agreed to be lent to the latter.
4.
From time to time, the facility was revised and whenever this
occurred, the deeds of suretyship were revised to ensure that same
applied to the variations of the loan agreement with FRB. This is not
in issue.
5.
Messrs Eric and Jean Darier, married in community of property,
secured their obligations in terms of the facility by way of a
mortgage bond over their property situate at portion 2 of erf […]
Northcliff Extension 1, Gauteng. This property was acquired
on 25
July 2011and registered on 20 January 2012. The purchase price was
R9,5 million and the property was encumbered in favour
of FRB for
R6,5 million.
6.
On 15 September 2014, some three years after the grant of the loan,
Cimco voluntarily liquidated itself by order of Court. This
followed
Cimco's initial business rescue application.
7.
Circa mid 2014, Cimco had fallen into arrears with the repayment of
the loan to FRB.
8.
On 10 September 2015, FRB launched motion proceedings for judgment
against all of the Dariers, jointly and severally. The application
was opposed. They were represented by Greeff Attorneys. On 19 October
2015, Eric Darier deposed to a fourteen page answering affidavit,
supported by confirmatory affidavits dated 19 October 2015 from
William and Jean Darier. All of these affidavits were signed before
one Louisa van den Berg at Postnet Northcliff.
9.
On 17 February 2016, certain Immovable property situate at erf […]
Northcliff Extension 12, Gauteng, purchased on 8 July
2015, for
R3,8million,was registered In William Darier's name, subject to a
bond for R2,6million in favour of SB Guarantee Co RF
(Pty) Ltd.
10.
On 22 March 2016, Messrs Eric and Jean Darier were provisionally
sequestrated at the behest of Blue Strata Trading (Pty) Ltd,
and
finally sequestrated on 11August 2016. Their trustees are not joined
to this application, and no objection to this omission
was preferred
at the hearing of this matter.
11.
On 17 June 2016, considering the intervening provisional
sequestration of Messrs Eric and Jean Darier, FRB abandoned its claim
in the main application to declare the encumbered property of Eric
and Jean Darier specially executable. Instead, it applied for
default
judgment against William Darier. Judgment was granted against him for
payment of the sum of R6 258 481,36, plus mora interest
and costs.
12.
On 14 July 2016, a writ against movable property was Issued against
William Darier. Same was served on 20 July 2016, when the
sheriff
rendered a nulla bona return of service.
13.
On 16 August 2016, FRB brought an application under Rule 46(1) of the
Rules to declare William Darier's property specially executable.
A
notice to oppose was served on 6 September 2016, by Greeff Attorneys
on William Darier's behalf.
14.
On 26 September 2016, William Darier served the rescission
application on. FRB. The Rule 46(1) application was accordingly
postponed at FRB's election, pending the outcome of the rescission
application.
15.
William Darier relies on the provisions of Rule 31 (2) (b) of the
Uniform Rules of Court and/or the common law in this application.
Under this Rule, an applicant may, within 20 days after it has
knowledge of the judgment, apply to rescind same upon good cause
shown. "Good cause" requires that the applicant provides a
reasonable explanation for the default, proof that the application
is
bona fide and was not made with the intention of delaying the claim
against him, and that he has a bona fide defence to the
respondent's
claim.
16.
A prima facie defence suffices. It is not necessary for the applicant
to traverse the merits in the same detail as required
for a trial
hearing or to produce evidence that the probabilities are in his
favour.
17.
I refer to the condonation sought by William Darier. His application
was out of time under Rule 31(2)(b). In reliance on the
common law,
it was served over two months after he had first learnt of the
judgment, on his version. He provides no explanation
for this delay.
He simply asks for condonation, which is in indulgence. t is his
obligation to prove at common law that the lapse
of time between 10
July 2016 and 26 September 2016 was reasonable. He made no effort to
provide evidence to substantiate this.
18.
Nevertheless, for the purpose of this judgment, I will assume that
condonation is warranted. Objectively speaking, the delay
was not
inordinate.
19.
The requirements for condonation were enunciated in
Minister of
Safety and Securlty v Scott and Another
2014 (6) SA 1
(SCA);
"The
principles relating to condonation are well established. The factors
that this court will have regard to in considering
such an
application include the adequacy of the explanation, the extent and
cause of the delay, any prejudice to the parties, the
importance of
the case, a respondent's interest in the finality of the judgment of
the court below, the avoidance of unnecessary
delay in the
administration of justice and the applicant's prospects of success on
the merits. Condonation is an Indulgence, not
to be had for the
asking. A litigant who does not comply with the rules is required to
show "good cause" why the rules
should be relaxed.
"
20.
Succinctly summarized, William Darier's version is as follows. In his
opinion, an answering affidavit was filed on his behalf
by Eric
Darier In the main application but no defences were advanced
regarding his position qua surety. This was because his father
had
assured him that the matter would be dealt with properly and that his
direct involvement was not required. On the morning of
the
application there was no appearance on his behalf. He asserts that,
although his application is out of time under Rule 31(2)(b),
it is in
time under the common law, having being launched within a reasonable
period of time of 20 July 2016.
21.
In his defence on the merits, he asserts In his seven page affidavit
that FRB was
reckless and irresponsible in the manner that it
conducted itself in relation to the principal debtor, directly and
the sureties
Indirectly.”
RMB, so he states, had approved a
facility of R8 million in 2011with monthly instalments of R71 000,00,
only for Cimco to have been
liquidated three years later. In his
view, the facility should not have been approved as Cimco was unable
to service same at the
time. RMB had permitted Cimco to regularly
draw on the loan when Cimco was Insolvent. This constitutes reckless
conduct which prejudices
not only the principal debtor but also the
sureties. In the result, so he argues, the sureties should be
released from their obligations.
This is the sum total of the defence
raised by Wiiiiam Darier on the merits.
22.
Although not obliged to do so, I interpose to summarise the defences
raised in the answering affidavit In the main application.
The
Dariers had argued that:
a. RMB had undertaken not
to issue summons until after 31 December 2015;
b. RMB may lack locus
standi because the debt may have been securitized;
c. RMB had prejudiced the
sureties by virtue of reckless trading;
d. The National Credit
Act 34 of 2005 ("the NCA") did not apply to the facts in
casu.
23.
The judgment of
Colyn v Tjger Food Industries Limited t/a
Meadow Feed Mills (Cape)
2003 (6)
SA 1
(SCA)
involved a case in which the Bellville office of a firm of attorneys
were instructed to defend the case but the proper address
for service
of process was that of Its Cape Town office. The Cape Town office
received a summary judgment application but failed
to notify the
Bellville office as it should have done. Summary judgment was duly
granted. The Court had this to say, at page 9F
et sequitur, about the
explanation for the default of the applicant In its rescission
application:
"I
have reservations about accepting the defendant's explanation of the
default is satisfactory. I have no doubt that he wanted
to defend the
action throughout and that it was not his fault that the summary
judgment application was not brought to his attention.
But
the reason why it was not brought to his attention is not explained
at all. The documents were swallowed up somehow in the offices
of his
attorneys as a result of what appears to be inexcusable Inefficiency
on their part.
It is difficult to regard this as
a reasonable explanation.
While the Courts are slow to
penalise a litigant for his attorney's inept conduct of litigation,
there comes a point where there
Is no alternative but to make the
client bear the consequences of the negligence of his attorneys
(Saloojee and Another NNO v Minister
of Community Development
1965
(2) SA 135
(A)) Even if one takes a benign view, the Inadequacy of
this explanation may well justify a refusal of
rescission on
that account unless, perhaps, the weak explanation is cancelled out
by the defendant being able to put up a bona fide
defence which has
not merely some prospect, but a good prospect of success (Melane v
Santam Insurance Co Ltd
1962 (4) SA 531
(A)”).
(my
emphasis)
24.
In casu, the explanation for the circumstances under which judgment
was granted In absentia is conspicuous by its absence. Whatever
the
case, Inexcusable inefficiency resided somewhere.
25.
Heads of argument were filed by Counsel on behalf of the Dariers in
the main application. Yet William Darier does not venture
to explain
why there was no appearance at Court on his behalf. At all material
times, Greeff attorneys were his attorneys of record.
There is no
supporting affidavit from Greeff or the attorney who deal with the
case for Greeff to apprise the Court of precisely
what occurred and
whether Greeff took instructions from· the Dariers on this
most crucial of aspects.
26.
Assuming that William Darier relied implicitly on his father’s
assurances that the matter would be dealt with properly,
such
reliance was neither responsible nor reasonable. There is no
supporting affidavit from Eric Darier to confirm this and to
apprise
the Court of his communications with Greeff. There is also no
explanation why Greeff did not establish the outcome of the
application on or shortly after 17 June 2016,after the notice of
enrolment had been served on his office as far back as 12 February
2016.
27.
I refer to the defence on the merits which, if it reveals good
prospects of success, on a prima facie basis, may potentially
compensate for the poor explanation for the default. The gist of
William Dariers defence in the rescission application is that
of
reckless lending by RMB leading to prejudice to Cimco and the
sureties. This was already mentioned in the previous answering
affidavit. It is not res nova which was incorrectly omitted from the
first affidavit, as Intimated by Wllllam Darter in this application.
It is an embellished reiteration of what was said in Eric Darier's
affidavit.
28.
William Darier makes bald, unsubstantiated denlals on issues which
fall squarely within his personal knowledge. Albeit that
these are
peripheral to the material issues, he provides no evidence to
substantiate proof of a pactum de non petendo with RMB,
nor of the
purported securitlzation of the debt in casu such as to vitiate RMB's
locus standi.
29.
He provides no evidence of the enquiries made and documents and
information sought by RMB of which he must have had personal
knowledge prior to RMB extending the substantial advance. He provides
no detail at all of the nature and extent of Information
given to RMB
by Cimco and the sureties, nor its accuracy, before the loan was
approved. He does not specify what RMB should have
done but did not
do before authorizing the advance. He provides no proof that RMB was
made aware or was aware at any stage that
Cimco was trading under
insolvent circumstances when further amounts were paid to it.
30.
He fails to state when he first became aware of Cimco's insolvent
circumstances. He was in a far better position to assess Cimco's
financial position from time to time than RMB ever was.
31.
In the process, William Darier appears to inexplicably abdicate all
responsibility for the manner in which the business of Cimco
was
managed, despite his having been a member of this corporation. The
ultimate point of diminuendo is his patent omission to explain
how
and why Cimco came to spend R8,9 million over three years, what
became of this money, and why Cimco was subsequently liquidated.
32.
As pertinently pointed out by Counsel for RMB, the loan agreement,
signed by the sureties, at clause 1 page 3 states:
"The
Bank is obliged to
assess
whether you are able to afford the
repayment of the total credit facility applied for. To do so, the
Bank is reliant on Information
requested from you and furnished by
you. "
33.
And at clauses 5 and 7 of the loan agreement, signed by Eric Darier
on behalf of Cimco:
"To
the best of our knowledge and belief, the information provided to the
Bank is true, accurate and complete;
We
are able to afford the repayments set out herein.
"'
34.
I refer to the dictum in
Wightman t/a JW Construction v
Headfour (Pty) Ltd and another 2008(3) SA 371 (SCA)
,
at
paragraph 13, which, while dealing with disputes of fact, traverses
the consequences of bare allegations, (my emphasis included):
"A
real, genuine and bona fide dispute of fact can exist only where the
court is satisfied that the party who purports to raise
the dispute
has in his affidavit seriously and unambiguously addressed the fact
said to be disputed. There will of course be instances
where a bare
denial meets the requirements because there is no other way open to
the disputing party and nothing more can therefore
be expected of
him. But even
that may not be sufficient if the fact averred
lies purely within the knowledge of the averring party and no basis
is laid for disputing
the veracity or accuracy of the averment.
When
the facts averred are such that the disputing party must necessarily
possess knowledge of them and be able to provide an answer
(or
countervailing evidence) if they be not true or accurate but, instead
of doing so, rests his case on a bare or ambiguous denial
the court
will generally have difficulty in
finding that
the test is
satisfied
. I say
"generally" because factual
averments seldom stand
apart from a broader factual matrix of circumstances all of which
needs to be borne in mind when arriving
at a decision. A litigant may
not necessarily recognise or understand the nuances of a bare or
general denial as against a real
attempt to grapple with all relevant
factual a/legations made by the other party. But -when he signs the
answering affidavit, he
commits himself to its contents, inadequate
as they may be, and will only in exceptional circumstances be
permitted to disavow
them. There is thus a serious duty imposed upon
a legal adviser who settles an answering affidavit to ascertain and
engage with
facts which his client disputes and to reflect such
disputes fully and accurately in the answering affidavit. If that
does not
happen it should come as no surprise that the court takes a
robust view of the matter.
"
35.
I was referred by Counsel for William Darier to the judgment in
Absa
Bank Limited v Lowting 2013 JDR 1826 (GNP).
At paragraph 55 of
this judgment, the Honourable Ms Justice Jansen spoke of a situation
where:
"......the
banks may see a loophole to advance exorbitant amounts of credit to
juristic persons such as close corporations
and have the members sign
suretyship and co-principal debtor agreements in the full knowledge
that they will not be able to repay
the credit granted."
36.
The sureties in casu are plainly not individuals who are financially
constrained, nor illiterate, on the objective facts. Eric
and Jean
Darier could afford to buy a property in Northcliff for R9,5 million
two months before RMB granted the loan. William Darier
was able to
acquire another property, In Northcliff, in February 2016, for R3,8
million, post Cimco's liquidation, and the launch
of the main
application.
37.
To qualify for mortgage bonds, the Banks conduct rigorous enquiries
to ensure that repayment of instalments are fully sustainable.
To
qualify for substantial loans to corporate entities, the Banks are
similarly rigorous and usually call upon members or directors
to
stand surety, (and Indeed co-principal debtor), conducting similar
checks on the sureties to ensure that the suretyships obtained
will
provide for potential recovery. I may take judicial notice of the
aforegoing as established commercial banking practice.
38.
No facts are advanced to establish that RMB would or could have had
full knowledge of Cimco's or the sureties' Inability to
repay the
credit granted In casu. I respectfully disagree with the findings in
the
Lowting
case. This case was referred to me
to support the argument that sureties may rely on the NCA where they
are individuals who stand
on the same footing as the principal debtor
by standing surety as co-principal debtor in solidum with the
principal debtor, despite
the principal debtor being a juristic
person.
39.
I endorse the ratio in
Neon and Cold Cathode Illuminations (Pty)
Ltd y Ephron 1978(1) SA 463 (A)
which held, where a surety was
also a co-principal debtor, that this did not transform the contract
into any other species of agreement
other than a suretyship. This was
affirmed in a case post the NCA's promulgation, namely:
Firstrand
Bank Limited v Carl Beck Estates (Pty) Ltd and another
2009
(3)
SA 384
(T).
40.
I pause to mention the practical consequence of a surety for a
juristic corporate body being able to rely on the NCA for a defence
of reckless lending. The juristic body may safely argue that it
should be treated in similar fashion, without discrimination, and
that the NCA should apply equally to it, despite clear statutory
provisions to the contrary. The economic ramifications could be
dire.
41.
Banks may be dissuaded from lending large amounts of money to
potential corporate debtors where suretyships are sought, but
which
may not be legally actionable. The banks' interest in the lending of
money for the generation of economic activities in the
open market
could be seriously compromised as a result of a defence which the NCA
does not entertain for large debts. This cannot
be consistent with
what the legislature intended. After all, the NCA exists to protect
both money lenders and borrowers.
42.
The alleged prejudice In this case was plainly caused by conduct
which fell within the terms of the loan agreement read with
the
suretyships. Accordingly, whatever prejudice may have been suffered
was prejudice which the sureties undertook to suffer. See
Absa
Bank Limited v Davidson
2000 (1) SA 1117
(SCA).
43.
Finally, for the sake of comprehensiveness, I refer to the NCA. Under
section 78(1) of the NCA, the reckless credit provisions
of sections
81, 82 and 83 do not apply to consumers who are juristic persons,
such as Cimco in this case.
44.
The principal debt exceeds R250 000,00. Under section 4(1)(b),
section 9(4)(b),section 7(1)(b), section 4(2)(c) and section
8(5) of
the NCA, the NCA does not apply to the loan In question, and the loan
does not apply to ancillary debts undertaken by sureties.
See
RMB
Private Bank v Kaydeez Therapies cc (in liquidation) and others
2013(6) SA 308 (GSJ).
45.
There was no reasonable explanation for William Darier's wilful
default in failing to argue the matter on the date of enrolment
of
the main application. Nor was William Darier able to prove a bona
fide, genuine, prima facie defence with a good prospect of
success.
His founding affidavit was devoid of any relevant factual
substantiation for the bald statements made by him to prove
even a
prima facie defence which would justify the case being referred to
motion or trial proceedings.
46.
On a totality of the evidence, William Darier failed to prove good
cause for the setting aside of the order against him dated
17 June
2016.
47.
The rescission application was without foundation and Ill conceived.
The deed of suretyship accommodates a claim for costs on
the attorney
and client scale. For these reasons, an exemplary award of costs is
indicated.
48.
In the result, the following order Is made:
a. The application is
dismissed;
b. The applicant is
directed to pay the costs of the application on the attorney and
client scale.
_____________________________
T
BRENNER
ACTING
JUDGE OF THE HIGH OURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
20
February 2017
Appearances
Counsel
for the Applicant:
Advocate Humphries
Instructed
by:
Greeff Attorneys
Counsel
for the Respondent:
Advocate M de Oliviera
Instructed
by:
Jason Michael Smith Inc Attorneys