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[2010] ZAGPJHC 142
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Sethi v Abalegani Supplies (Pty) Ltd and Another (45091/09) [2010] ZAGPJHC 142 (18 February 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
SOUTH GAUTENG HIGH COURT
JOHANNESBURG
CASE No. 45091/09
DATE: 18-02-2010
REPORTABLE
In the matter between:
HARBINDER
SINGH
SETHI
Plaintiff
and
ABALEGANI
SUPPLIES (PTY) LTD
First
Defendant
ZUNAID
ABBAS
MOTI
Second
Defendant
JUDGMENT
WILLIS
J:
[1]
The plaintiff claims provisional sentence. He relies upon a cheque
made payable to himself “or bearer” in an amount
of R5
million drawn by the second defendant on behalf of the first
defendant. The cheque is dated 3 October, 2009. The cheque was
duly
presented for payment. It was returned to the plaintiff, unpaid by
the bank upon which it had been drawn, with the advice
“payment
stopped”
[1]
. In other
words, there had been a countermand of payment
[2]
.
[2] It
is open to a defendant in provisional sentence proceedings to contest
the underlying
causa
for
the claim.
[3]
As
Goldstone J (as he then was) pointed out, if a defendant successfully
places the underlying
causa
for
a claim based on a cheque in dispute, the claim then becomes
illiquid, even though the cheque itself remains, of course,
liquid.
[4]
Once
the claim becomes illiquid, provisional sentence must be refused.
[5]
The
defendants, in their affidavit disputing their liability, have indeed
placed the underlying
causa
in
dispute. It is therefore necessary to consider the facts in
contention.
[3] On 5th August,
2008 Rakhee Investments CC (“Rakhee”) sold to Villa Via
Developments Limited (previously known
as Zambrotti Investments 38
(Pty) Limited) a “property” described as “32
sectional title units in the sectional
scheme SS Villa Via, Scheme
43/1995”. This property or “properties” are
situated in Sandown. The transaction
was recorded in a written
agreement. In the agreement the purchase price has been recorded as
being R65 million. The agreement
further records,
inter alia
,
that “the seller hereby irrevocably transfers, cedes and
assigns all and/or any benefit licence, title and interest
in the
hotel
and/or bed and breakfast licence and or authority vested in
it and/or the property, to the purchaser” (my emphasis) and, as
a so-called warranty, that “the property has the zoning rights
suitable to operate a
hotel
and/or bed and breakfast business”
(my emphasis). The dispute turns, essentially, on the meaning to be
attributed to the
word “hotel”.
[4]
Rakhee was, at all material times, duly represented by the plaintiff.
He has described himself as “the beneficial owner
of each of
the sellers” and has been described by the defendants as “the
controlling mind” of the seller.
Although, on the
defendants’ version, the date has not been made clear, it seems
that on 5th August 2008 four cheques totalling
R16 million were
signed by the second defendant, the natural person duly authorised to
act on behalf of the first defendant as
the drawer and physically
handed over to the plaintiff as the named payee. In regard to the
cheques, the first respondent, an associated
company of the
purchaser, at all material times acted for and on behalf of the
purchaser. All the cheques were left payable to
the named payee “or
bearer”. Three of these cheques were for R5 million each and
another for R1 million. The cheque
which has given rise to the claim
for provisional sentence was one of the three cheques for R5 million
each. The cheques in question
were post-dated. According to the
plaintiff, the cheques were drawn in this manner and handed over to
him at his request. “As
I was the beneficial owner of each of
the sellers, it made sense to have the cheques made out to me
personally”. The defendants
dispute that the name of the
plaintiff had been filled in on the cheques at the time when they
were handed over and contends that
they were left blank. Nothing
turns on this as,
prima
facie
,
the bearer of an inchoate cheque has the authority and the right to
fill in details left blank.
[6]
[5] On 22nd August
2008, the seller and the purchaser agreed upon a so-called “Addendum
1 to the Sale of Immovable Property
and Hotel Business Agreement”.
In the addendum, the purchase price is recorded as being R64 500 000
(i.e. R500 000 less than
previously) and it is recorded that the
seller had received a payment of R15 million “by way of
cheque”, “as
a partial reduction of the purchase price”.
[6] On 14th October,
2008 the seller and the purchaser entered into a so-called
“Addendum 2 to the Sale of Immovable
Property and Hotel
Business”. “Addendum 2” is recorded in a written
instrument. In the second addendum “the
property” is
described as the 32 sectional units aforesaid but the following words
are added “and includes the hotel
business operated in regard
thereto and/or thereon”. The purchase price remains recorded as
being R64 500 000 (i.e. the amount
reflected in “Addendum 1”).
The deposit is recorded as being R5 545 626,56 which includes the
cheque for R1 million
referred to previously. This addendum also
records that the purchase price of R64 500 000 includes:
An amount of R15 000 000
(fifteen million rands), by way of cheque, which cheques the seller
hereby acknowledges receipt of payment,
as a partial reduction of the
purchase price, which cheques the Seller (being Rakhee Investments)
hereby acknowledge as being in
respect of the hotel business,
furniture and accessories required to operate the hotel business as
at date of occupation
Furthermore, the addendum
records a warranty and a “material representation” that
the seller “is in possession
of all applicable and valid
licences and/or authorities enabling it to conduct and/or operate its
hotel and/or bed and breakfast
business from the property”. The
transfer of the properties took place on 20th March, 2009, the
“purchase consideration”
in respect thereof being
recorded as R49 500 000.
[7] On 27th August
2009 the Executive Director: Development Planning and Urban
Management of the City of Johannesburg wrote
to Hugo Olivier &
Associates, the attorneys then acting for the purchaser in respect of
the zoning of the hotel to advise that
Portion 2 of Erf 43 Sandown
could not be used for an hotel by reason of its zoning. On
28th August 2009, Knowles Husain
Lindsay, the attorneys acting
for the purchaser in its dealings with the seller, wrote a
letter to the seller to advise that
the hotel had been sold as a
going concern for R15 million, that the three post-dated cheques (of
which one has given rise to this
claim for provisional sentence) had
been given for the acquisition of the hotel, that in view of the
difficulties in regard to
zoning, the purchaser had elected to cancel
the agreement in respect of the hotel and tendered the return of it
(“the hotel”)
against the return of the post-dated
cheques. In that letter, Knowles Husain Lindsay advise that their
client, the purchaser, would
instruct its bankers to stop payment on
the cheques (which would have included, obviously, the one which has
given rise to the
claim for provisional sentence).
[8] In summary,
therefore, the defendants version of events is that the seller
purchased an hotel as a going concern for R15 million,
that the
cheque in question was handed over in part payment of this “purchase
consideration”, that the seller had not
and could not deliver
to the purchaser the hotel as a going concern and that, accordingly,
the purchaser had validly cancelled
the agreement and stopped payment
of the cheque.
[9]
Ex facie
the
affidavits filed on behalf of the defendants, they have successfully
challenged the underlying
causa
for payment by way of the
cheque. The dispute which has arisen certainly cannot, merely upon
reading the defendants set of affidavits,
be found to be so
far-fetched or untenable that the court can reject the defendants’
version. Moreover, it is clear that
the plaintiff, before he issued
provisional sentence summons, was aware of the defendants’
version of events.
[10]
It is trite that the general rule set out in Johannes Van Der
Linden’s
Verhandeling
over de Judicieele Practijcq of Vorm van Procedeeren
,
[7]
first published in 1794, still holds good: extrinsic evidence, beyond
the document itself, is not permissible to establish a claim
for
provisional sentence.
[8]
The
plaintiff could not therefore, in the provisional sentence summons,
file a founding affidavit. He did, however, file a replying
affidavit, as he was entitled to do, in terms of Rule 8 (5). In this
affidavit, the plaintiff alleges that, by the time the second
addendum had been signed, the purchaser had already been conducting
the so-called Villa Via business. According to the plaintiff,
this “Villa Via business” had always been understood,
between the parties, as the “hotel business”. The
plaintiff goes on to say that, nevertheless, the properties upon
which this “hotel business” operates have not ever
been
an hotel in the sense recognised by the City of Johannesburg. The
“hotel” has always consisted of luxury suites
typically
having two bedrooms, two bathrooms (one of which is
en
suite
)
and an open plan kitchen/lounge/dining-room. These suites are fully
furnished. The suites are and, at all material times, have
been let
out as such. No provision of food or drink has ever been made by the
business to these units. These facts have, at all
material times,
been well known to the defendants. This business, according to the
plaintiff, has been operating for several years
without objection by
the City of Johannesburg. The suites in respect of which this
business is conducted are “sandwiched
between major Sandton
hotels including the fairly recently developed Radisson Hotel, the
Hilton Hotel, The Courtyard, Hotel, the
Don Apartments, the Balla
Laika Hotel and the Holiday Inn Hotel”. The defendants always
knew that these properties were not
and would not be licensed by the
City as “an hotel”. Addendum 2 was recorded as it was so
that certain of the units
would be sold as a going concern (which
they were), and would accordingly be “zero-rated for purposes
of registration of
transfer”. The deal in the second
addendum was structured so that a portion of the purchase price was
for the purchase
of an “hotel” as a going concern which
would, furthermore, have saved the defendants a considerable amount
of VAT (Value
Added Tax). The second addendum had been agreed to by
the plaintiff to assist the purchaser in saving money. Moreover, the
sale
of the hotel business could not, as a matter of fact and law, be
severable from the sale of the units upon which the “Villa
Via
business was conducted”: once the units were transferred to the
purchaser, the purchaser,
ipso
facto
,
acquired “the hotel business.” There is nothing further
that the seller could deliver other than what has been transferred
on
20th March, 2009 and the purchaser, at all material times, has
been fully aware of this. According to the plaintiff, there
has been
no misrepresentation or breach of contract by the seller whatsoever:
the purchaser has, at all material times, known exactly
what this
“Villa Via business” entailed. There is, furthermore, no
need for the purchaser to obtain any licence for
the “Villa Via
business” to continue as it always has, a fact of which the
defendants were at all times fully aware.
Finally, the plaintiff
submits that, as matter of law, in terms of the Businesses Act, No 71
of 1991, an application for rezoning
can only be made by the owner of
that business. Now that transfer has taken place, it is beyond the
power of the seller to secure
a rezoning: this can only be done by
the purchaser. The version of the plaintiff, in his replying
affidavit, certainly places the
defendants’ version in a very
different perspective.
The
defendants at one stage applied to file a further, supplementary
affidavit in answer to the plaintiff’s replying affidavit
but,
before I could even consider the matter, they withdrew this
application.
[11]
In
Barclays
National Bank Ltd v Serfontein
[9]
Goldstone J referred with approval to the judgment of Erasmus J
in
De
Bruin v Munro
(1)
[10]
to hold that a plaintiff in provisional sentence proceedings is
obliged to establish his cause of action in the summons, and may
not
do so in his replying affidavit.
[12] Perhaps aware of his
difficulties, Mr
Watt-Pringle,
who together with
Ms
Lundström
appeared for the plaintiff, relied very heavily on
the following:
(i)
the
dictum
in
Froman
v Robertson
[11]
by Corbett JA (as he then was) that the
onus
rests
on the defendant to establish any of his special defences (such as a
lack of
causa
)
on a balance of probabilities; and
(ii) the plaintiff was,
he submitted, a holder in due course, and accordingly entitled to the
special protection afforded by the
Bills of Exchange Act, No. 34 of
1964, as amended (“the Bills of Exchange Act”) provides.
I shall deal with the
question of
onus
more fully later on but I accept that it
informs or “colours” Mr
Watt-Pringle’s
submissions in connection with the plaintiff being the holder in
due course.
[13]
There can be no question that the payee of a bearer cheque (such as
the one in question) may qualify as a holder in due course.
[12]
The question in this case is: does this particular plaintiff enjoy
the special protections provided for in the Bills of Exchange
Act?
It is important to remember that the law of bills of exchange (which
includes cheques
[13]
) derives
from the law merchant and that our Bills of Exchange Act is, in
effect, a codification of the law merchant in regard to
these
instruments. The same position obtains in many other countries around
the world. It is easy to forget that the law merchant
preceded not
only the electronic transfer of funds which nowadays dominates our
commercial exchange but also the motor vehicle
and the steam engine.
The law merchant is closely linked to aspects of chivalry, with its
love of ritual (residually apparent,
for example, in “presenting”
a cheque for payment), codes of honour (a cheque should be “as
good as gold”,
for example) and so on. It would have often
taken many hours, if not days and weeks to ride, clip-clop on
horseback to present
cheques and other similar instruments for
payment. The difficulties in presenting cheques for payment had the
result that, generally,
cheques would change hands many, many more
times than they do so now. Despite its somewhat arid appearance, the
Bills of Exchange
Act represents a drama, vivid in colour and
character. It might not have the literary quality of Geoffrey
Chaucer’s
Canterbury
Tales
but,
behind that formidable exterior, lurk tales that are no less
arresting of our attention. One may delight in the seemingly dry
sense of humour of Holmes JA when he said in regard to certain
features of the law relating to cheques that “one is dealing
with an evolved mystique of hieroglyphs”.
[14]
Nevertheless, implicit in his observations may be detected a sense
that, as objects of law, cheques can be regarded with a sentiment
that approaches affection once one has some understanding of their
history. The “hieroglyphs” were part of “the
code” – the code of honour. The point of this
discursus
is
to explain that the special protection for the holder in due course
arose precisely because a cheque or bill of exchange could
have
changed hands many times over such that the ultimate holder was quite
oblivious of its history. If a cheque was to be “as
good as
gold”, honour required, in such circumstances, that it should
be paid.
[14] Section 27(1) of the
Bills of Exchange Act provides that:
A holder in due course is
a holder who has taken a bill, complete and regular on the face of
it, under the following circumstances,
namely –
(a)
he must have become the holder of it before it was
overdue, and if it had previously been dishonoured, without notice
thereof; and
he must have taken the bill in good faith and for value,
and at the time the bill was negotiated to him, he must have had no
notice
of any defect in the title of the person who negotiated it.
Mr
Watt-Pringle
submitted that the probabilities were overwhelming, especially as the
defendants carefully avoided mentioning the date on which
the
plaintiff took the cheque, that this occurred on 5th August,
2008, the date upon which the first written agreement between
the
purchaser and the seller was signed. Mr
Watt-Pringle
submitted
that, whatever might appear in the second addendum to this agreement,
it has been quite clear that on the date when the
plaintiff took the
cheque, the plaintiff,
at that time
(i.e. on 5th August,
2008), was in good faith and took it for value. Accordingly, so the
argument went, the plaintiff was
entitled to payment on the cheque.
[15] Section 36 (b) of
the Bills of Exchange Act provides that a holder in due course
…
holds
the bill free from any defect in the title of prior parties as well
as from mere personal defences available to prior parties
among
themselves, and may enforce payment against all parties liable on the
bill
The
reference to “prior parties” in this section links up
with what I have said about the
ratio
for
the special protection for a holder in due course: a bill may have
changed hands several times over such that the ultimate holder
is
unaware of the underlying
causa
.
In this case, on the plaintiff’s own version of events, there
was no payee prior to him. Indeed he was the first person
and only
person to have taken it as holder. Accordingly, he cannot, in terms
of section 36 (b), hold the cheque free from the defence
available to
the defendants of there being no underlying
causa
once
the cheque was presented for payment. I am fortified in this view by
reference to the well-known case of
Moti
and Co v Cassim’s Trustee.
[15]
Although
the court had to deal with a different issue from the one before me,
Innes CJ said
[16]
:
Moreover, as was pointed
out in
Herdman v Wheeler
(1902 1 KB 361)
, the issue of a note
by delivery to the payee is a very different thing from its transfer
thereafter from hand to hand. In the
one case the parties are simply
bound by their own contract; in the other the transferee may acquire
w a better title than the
transferor possessed; and that is the
result of negotiation, not issue.
In
Karabus
Motors (1959) Ltd v Van Eck
,
[17]
Watermeyer
J (as he then was), after referring to
Moti
v Cassim’s Trustee
and
the fact that “plaintiff and defendant are immediate parties”
said: “That being so defendant may set up against
the defendant
any defence which would have been available to him had the action
been brought on an ordinary written contract”.
[18]
In
Viljoen
v SIK Investment Corporation (Pty) Ltd
[19]
the
court adopted a similar opposition and specificall referred to
Karabus
v Van Eck
with
approval.
[20]
Both
Karabus
v Van Eck
and
Viljoen
v SIK Investment Corporation
were
approved in the Supreme Court of Appeal as having been consistently
applied in the South African courts and as having “the
weighty
support of the House of Lords” in the
Ramsukh
v Diesel-Electric
case.
[21]
[16]
From the above, more particularly Goldstone J’s judgment in
Barcalys
v Serfontein
,
the law appears to be clear that a plaintiff in provisional sentence
proceedings cannot rely on his replying affidavit to establish
a
cause of action. In any event, even if one were to have regard
thereto, one must not lose sight of the observation, made by
Grosskopf J (as he then was) in
C.G.E.
Construction Co v Administration, Cape and Another
[22]
that the granting of provisional sentence required “the
production of strong
prima
facie
proof
of debt”. On the other hand, there seems to be little point in
having a replying affidavit in such proceedings if it
is simply to be
disregarded, more especially as the plaintiff, save in certain
exceptional circumstances not relevant to this case,
may not rely on
evidence extrinsic to the document itself in order to succeed: no
founding affidavit would have been permissible.
[17] In summary, the
court has the following conundrum before it:
(i)
the plaintiff is the named payee of a bearer
cheque;
(ii)
in their affidavit, disputing liability on
the cheque, the defendants have established, on the probabilities,
that the plaintiff
is not entitled to the special protection of a
holder in due course and have established a defence on the merits of
the plaintiff’s
claim for payment;
(iii)
the replying affidavit of the plaintiff casts
considerable doubts on the probabilities of the defendants’
success and, considering
the claim for provisional sentence as a
whole, may be said to shift the probabilities in the plaintiff’s
favour considerably;
(iv)
the plaintiff may not, however, rely on a replying
affidavit to establish his cause of action;
(v)
it is in the nature of provisional sentence
that a plaintiff does not rely on a founding affidavit but upon a
liquid document upon
which the liability of the defendant appears to
be self-evident;
(vi)
ordinarily, the only way in which a defendant can
escape provisional sentence is by way of affidavit;
(vii)
it is
not clear whether the onus of the defendant referred in
Froman
v Robertson
is
one to be discharged solely in the affidavit to be filed in terms of
Rule 8 (5) of the High Court Rules or whether it is to be
discharged
in some “overall” way, by regard being had to all the
affidavits (in
Froman
v Robertson
Corbett
JA certainly referred to the replying affidavit,
[23]
although the defendant’s case appears to have foundered, in the
end, on its own deficiencies);
(viii)
if the defendants are required to discharge the
onus
regard
being had to their affidavit only in this particular case, they will
have succeeded but this, as will be apparent, may visit
injustice
upon the plaintiff;
(ix)
if the
onus
is to be discharged by the defendants in an
overall way (by looking at the complete set of all the affidavits
before the court)
the probabilities are almost so evenly balanced
that it is hard indeed to make a decision as to where they lie;
(x)
It
is difficult indeed to decide “the probabilities” where,
as here, neither version in the respective sets of affidavits
is
inherently improbable – these versions need to be subject to
cross-examination, whereupon the criteria set out in
Stellenbosch
Farmers’ Winery Group Ltd and Another v Martell et Cie and
Others
,
[24]
can
come into operation;
(xi)
Obviously,
if the probabilities were exactly even then the defendants would have
failed to discharge the
onus
and
provisional sentence should be granted
[25]
;
(xii)
In any event, a finding that the defendants have
failed to discharge the
onus
(after
looking at the complete set of all the affidavits before the court)
would, at best, be made with such a marginal degree of
certainty as
to where the probabilities lie that, to grant provisional sentence,
may visit injustice upon the defendants and, moreover,
would have the
result of allowing the plaintiff to establish his claim by way of his
replying affidavit.
[18]
In
Rich
and Others v Lagerwey
,
[26]
Wessels JA, delivering the unanimous decision of the then Appellate
Division referred the judgment of De Wet JP in
Extension
Investments (Pty) Ltd v Ampro Holdings (Pty) Ltd
[27]
and observed as follows in respect of the learned Judge President’s
judgment: “After surveying the relevant authorities
and
considering the practice of the Courts, he concluded that a Court has
no such inherent power (to hear
viva
voce
evidence
in provisional sentence cases). I am in respectful agreement with
this conclusion”.
[28]
Wessels JA went on to say that, other than where the verity of the
defendant’s signature (or that of his agent) was in dispute,
“I
would observe that, having regard to the nature and purpose of
provisional sentence proceedings, a Court would exercise
such a power
only in very exceptional circumstances”.
[29]
[19]
Since the cases of
Stellenbosch
Farmers’ Winery Ltd v Stellenvale Winery (Pty) Ltd
[30]
and
Plascon-Evans
Paints Ltd v Van Riebeeck Paints
,
[31]
decision-making
by the courts when a final order is sought in motion proceedings and
there are disputes of fact on affidavits has
generally been hugely
facilitated. Where provisional orders are sought, the position is not
quite as straightforward. That the
question of deciding probabilities
where a dispute falls to be decided by affidavit is not always an
easy one as was recognized
by the then Appellate Division when it
decided the well known case of
Kalil
v Decotex
(Pty)
Ltd and Another
.
[32]
In
Kalil
v Decotex
Corbett
JA (as he then was) referred to some of the difficulties that may
arise for a court in deciding whether either provisional
or final
orders for the winding-up of a company should be made. Corbett JA,
delivering the unanimous judgment of the court in that
case, pointed
out that a refusal of a provisional order of winding-up represents a
final decision against the applicant and, if
such a decision is
always to be made purely on the affidavits, injustice may be done to
an applicant.
[33]
The
Learned Judge said that where there is a dispute on the affidavits in
a situation such that the probabilities cannot be decided
by
reference to all the affidavits,
[34]
the
court should retain a discretion to refer the matter to oral
evidence.
[35]
Later,
I shall give my reasons why I do not consider that the refusal of
provisional sentence necessarily entails the making of
a final
order. The “
Kalil
v Decotex
solution”
of referring the dispute to oral evidence is problematic, however,
because, as I have mentioned before, the position
is clear that it is
only in exceptional circumstances that a dispute relating to the
grant of provisional sentence should be referred
to oral evidence. In
any event, Rule 8 (7) may envisage that oral evidence is to be heard
only as to the authenticity of the defendant’s
signature (or
that of his agent) and the agent’s authority.
[20]
In deciding how to deal with this matter, I am mindful of the fact
that the effect of granting provisional sentence is quite
drastic:
the defendant must pay the amount claimed together with taxed costs,
although he may require the plaintiff to provide
security
de
restituendo
(see Rule 8 (10), read with Rule 8(9)). I accept,
however, as Mr
Watt-Pringle
has submitted, that provisional
sentence is not as drastic a remedy as summary judgment and that, of
course, different criteria
must apply in deciding whether or not to
refuse or grant provisional sentence from those that apply in summary
judgment applications.
Indeed, Mr
Watt-Pringle
, on more than
one occasion, submitted that I could not treat the defendants’
set of affidavits in the same way as would be
the case if the
defendants were resisting an application for summary judgment. This
submission gave me cause for reflection. Mr
Watt-Pringle
is
correct that there must be a difference in approach to the two
procedures. First, the consequences of granting the orders sought
are
respectively different in provisional sentence and summary judgment
proceedings. Secondly, the question arises as to why
different
proceedings would exist, if they were to be determined in the same
way?
[21]
Referring to various other cases Grosskopf J, in
Koornklip
Beleggings Bpk v Allied Minerals Ltd
[36]
said
that “Affidavits in summary judgment matters are customarily
treated with a certain degree of indulgence”.
In broad
terms, Grosskopf J’s judgment appears to have been endorsed by
the Supreme Court of Appeal in
Soil
Fumigation Services Lowveld CC v Chemfit Technical Products (Pty)
Ltd
.
[37]
I
think it is true to say that here in the South Gauteng High Court, in
Johannesburg, the case of
Breitenbach
v Fiat
[38]
is
generally taken as a cautionary note that a court should be careful
not to be too indulgent in summary judgment proceedings.
Breitenbach
v Fiat
has
been described in the
Soil
Fumigation Services Lowveld CC v Chemfit Technical Products (Pty) Ltd
case
as “the classic exposition”.
[39]
In
Breitenbach
v Fiat
Colman
J, delivering the judgment of the Full Court, said that:
What
I have set out in that regard (referring to the suggestion of the
creator of Pooh-Baah (a member of the English Bar, as well
as a
satirist) that ‘corroborative detail’ could ‘give
artistic verisimilitude to an otherwise bald and unconvincing
narrative’) is not a demand for, or an encouragement to
present, lengthy and prolix affidavits in summary judgment cases.
All
that is required is that the defendant’s defence be not set out
so baldly, vaguely or laconically that the Court, with
due regard to
all the circumstances, receives the impression that the defendant
has, or may have, dishonestly sought to avoid the
dangers inherent in
the presentation of a fuller or clearer version of the defence which
he claims to have.
In
Maharaj
v Barclays National Bank Ltd
[40]
Corbett
JA, delivering the unanimous judgment of the court, said in regard to
the requirement that a defendant in summary judgment
proceedings
should disclose fully the nature and grounds of his defence and the
material facts upon which it is founded that
…
while
the defendant need not deal exhaustively with the facts and the
evidence relied upon to substantiate them, he must at least
disclose
his defence and the material facts upon which it is based with
sufficient particularity and completeness to enable the
Court to
decide whether the affidavit discloses a
bona
fide
defence…
At the same time the defendant is not expected to formulate his
opposition to the claim with the precision that
would be required of
a plea; nor does the Court examine it by the standards of pleading.
If
one bears in mind the decisions referred to in this paragraph, it
seems that the difference between the approach of a court to
a
defendant’s affidavit in provisional sentence proceedings and
summary judgment proceedings is that a greater degree of
precision
and exhaustiveness is to be expected in the former than the latter.
[22]
In the present matter, the defendants have indeed set out their
defence with a high degree of precision and exhaustiveness.
Although
the defendants’ version invites a few questions, it has been
put before the court with clarity, amplified by not
inconsiderable
supporting documentation. What is in dispute is the veracity of this
version. As their version reads, the defendants’
set of
affidavits resisting provisional sentence establishes the
probabilities in their favour. As I have already said, their version
cannot be found to be so far-fetched or untenable
that the court can reject it as it stands.
On
the other hand, as I have also already said, the plaintiff’s
replying affidavit casts doubt on these probabilities to a
considerable extent. The plaintiff’s version may perhaps raise
questions as to whether or not the plaintiff was a party to
a tax
fraud. On the other hand, parties may lawfully structure their
commercial arrangements in a way that one or both of them,
by tax
avoidance, minimises tax. If the plaintiff’s version is true
and the transaction was lawful, then the plaintiff should
succeed in
obtaining judgment in his favour.
[23]
As I have mentioned earlier, the defendants at one stage applied to
file further supplementary affidavit in answer to the plaintiff’s
replying affidavit but then thought better of it. In this case, it
does not matter how many sets of affidavits are filed. The matter,
ultimately, will have to be decided largely on findings as to
credibility. Thus one goes round in circles. The only practical
solution, it seems to me, is to refer the matter to trial.
[24]
To add to the difficulties in adjudicating the matter, it seems that
some confusion may have arisen as to whether or not a
judgment
refusing provisional sentence precludes the plaintiff from proceeding
by way of an illiquid summons.
[41]
Provisional
sentence (or
namptissiment
or
handvulling
),
although of French origin, is part of our inheritance from
Roman-Dutch common law.
[42]
Although
Rule 8 (6) refers to a court giving “final judgment” in
provisional sentence proceedings, it seems, however,
to have been
clear enough that a judgment granting provisional sentence has, as
its very name implies, been regarded in the old
authorities as being
provisional only.
[43]
Particularly
in view of the fact that the former Appellate Division has decided
that proceedings for provisional sentence are interlocutory
in
nature,
[44]
I
prefer the view of the learned author Malan
[45]
that
provisional sentence is a form of interim relief. Consequently, it
seems to follow that, ordinarily, a plaintiff in respect
of whom
provisional sentence has been refused should not necessarily face a
bar to proceeding by way of ordinary trial action.
On the other hand,
there may be situations where it would be appropriate in provisional
sentence proceedings to dismiss the plaintiff’s
claim entirely:
for example, where a defendant presents an apparently watertight
defence to which the plaintiff does not reply.
[25] In my view, it would
not only be practical but also obvious that, in order to do justice
in this particular case, the matter
should proceed to trial. By
adopting this approach, one can make sense of allowing replying
affidavits in provisional sentence
proceedings. Moreover, an
expeditious referral to trial, in appropriate circumstances, will
also reconcile the tension that may
seem to exist in our law at
present as to the process which a court should follow where a good
defence has been put forward but
has been matched by a reply that, in
turn, casts a different light on the matter. Thus:
(a)
the plaintiff cannot rely on a replying
affidavit to establish his cause of action; but the replying
affidavit can avoid the action
being dismissed in its entirety.
[26]
Precedent for referring provisional sentence proceedings to trial is
to be found in
Cohen
v Louis Blumberg (Pty) Ltd and Another
[46]
and
also
Fichardt’s
Estate v Mitchell and Others
,
[47]
Roberts
v Willet
,
[48]
Ottico
Meccania Italiana v Photogrammetic Engineering (Pty) Ltd
,
[49]
Cronje
v Cronje
,
[50]
and
Lesotho
Diamond Works (1973) (Pty) Ltd v Lurie
.
[51]
[27]
Nevertheless, in all these cases, other than the
Cohen
v Louis Blumberg
matter,
the approach of the court has been either to postpone or suspend the
provisional sentence proceedings, pending the outcome
of the trial. I
prefer the approach of Ramsbottom J in the
Cohen
v Louis Blumberg
case.
Should the plaintiff’s claim be good, “converting”
the provisional sentence proceedings into a trial action
will
minimise the prejudice which the plaintiff will suffer in being
deprived of the speedy relief of provisional sentence. That
was the
objective of Friedman J (as he then was) in the
Ottico
Meccania
case.
[52]
Besides, unless the decision to “convert” provisional
sentence proceedings into a trial action (in contradistinction
to
postponing or suspending the provisional sentence proceedings) is a
purely discretionary matter, I am bound to follow Ramsbottom
J’s
decision unless I am convinced that it was wrong, the reason being
that Ramsbottom J’s decision was delivered in
this division and
the other decisions elsewhere.
[53]
The format of Ramsbottom J’s order in the
Cohen
v Louis Blumberg
case
also has the advantage of singular clarity. The parties could not
complain that they were confused as to the steps that should
be
followed. Accordingly, I shall broadly and respectfully follow the
format of Ramsbottom J’s order in
Cohen
v Louis Blumberg
.
[21] In the result, the
following order is made:
(a)
Provisional sentence is refused;
The provisional sentence
summons is to stand as the summons in the principal case;
(b)
The defendants’ set of affidavits
resisting provisional sentence is to serve as an appearance to
defend;
(c)
The plaintiff is to file a declaration
within 15 days of this order;
(d)
After the filing of the declaration, the
ordinary Rules of the High Court as to the filing of further
pleadings are to apply;
The question of the costs
of these proceedings is reserved for determination at the trial.
DATED AT JOHANNESBURG
THIS 18th DAY OF FEBRUARY, 2010
N.P. WILLIS
JUDGE OF THE HIGH
COURT
Counsel
for the Plaintiff:
Adv.
C.E. Watt-Pringle
SC (with him,
D.N. Lundström
)
Counsel
for the Defendants:
Adv.
A.E.Bham
SC (with him,
G.Ameer
)
Attorneys
for the Plaintiff:
Bouwer,
Kobeli & Morabe
Attorneys
for the Defendants:
Knowles
Husain Lindsay Inc
Date
of hearing:
4th February,
2010
Date
of judgment:
18th
February, 2010
[1]
This is the standard
advice where there has been a “countermand of payment”.
I refer, immodestly, to my own book,
Willis, N. 1981
Banking
in South African Law,
Cape
Town: Juta’s.
[2]
Section 73 (b) of the
Bills of Exchange Act No. 34 of 1964, as amended, provides that a
bank’s duty to pay a cheque drawn
on it by its customer is
terminated by receipt of a “countermand of payment”.
[3]
See
Froman
v Robertson
1971
(1) SA 115
(A) at 120F-121E and
Barclays
National Bank v Serfontein
1981
(3) SA 244
(W) at 249HE-F. See, also:
Radus
& Mindel v Plaza Outfitters
1945
TPD 350
;
Schweizer
Reneke Garage v Meyer
1963
(1) SA (1) SA 391 (T);
Slabbert,
Verster & Malherbe (Bloemfontein) Bp
k
1963 (1) SA 835(O)
at 840 and Malan F.R. and others, 2009,
Bills
of Exchange, Cheques and Promissory Notes
,
Durban: LexisNexis, p75.
[4]
Barclays National
Bank Ltd v Serfontein
1981
(3) SA 244
(W) at 249G.
[5]
Barclays National
Bank Ltd v Serfontein
1981
(3) SA 244
(W) at 249H-250F.
[6]
See section 18 of
the Bills of Exchange Act, No. 34 of 1964, as amended and
Ramsukh
v Diesel-Electric (Natal) (Pty) Ltd
[1997] ZASCA 56
;
1997
(4) SA 242
(SCA) at 249G-250A and the authorities therein cited.
[7]
Vol 1, Book 2, Chapter
6, section 13.
[8]
See,
for example,
Union
Share Agency and Investment Ltd v Spain
1928
AD 74
at 79 and
Rich
and Others v Lagerwey
1974
(4) SA 748
(A) at 755H.
[9]
Supra
at 249B.
[10]
1971 (4) SA 624
(O) at
628B-E.
[11]
1971 (1) SA 115
(A) at
120B.
[12]
See
Ramsukh
v Diesel Electric (Natal) (Pty) Ltd
[1997] ZASCA 56
;
1997
(4) SA 242
(SCA) at 249A.
[13]
The Bills of Exchange
Act defines a cheque as a bill of exchange drawn on a bank payable
on demand.
[14]
In
Standard
Bank of SA Ltd v Sham Magazine Centre
1977
(1) SA 484
(A) at 501H.
[15]
1924 AD 720.
[16]
At 732.
[17]
1962 (1) SA 451 (C).
[18]
At 453B-C.
[19]
1969 (3) SA 582 (T).
[20]
At 585A-G.
[21]
[1997] ZASCA 56
;
1997 (4) SA 242
(SCA) at
248C-D.
[22]
1976 (4) SA 925
(C) at 927A.
[23]
At 123B
[24]
2003
(1) SA 11
(SCA) at para [5]
[25]
See, for example,
Strachan
& Company v Murray
1939
WLD 93
at 100;
Allied
Holdings Ltd v Myerson
1948(2)
SA 961 (W) at 966;
Fisher
v Levin
1971
(1) SA 250
(W) at 253D.
[26]
1974 (4) SA 748 (A)
[27]
1961 (3) SA 429 (W)
[28]
At 756D
[29]
At 756F-G
[30]
1957 (4) SA 234 (C).
[31]
[1984] ZASCA 51
;
1984 (3) SA 623
(A).
[32]
1988 (1) SA 943 (A).
[33]
At 979F-H.
[34]
See 978E.
[35]
See 979F-G.
[36]
1970 (1) SA 674
(C) at
678E.
[37]
2004 (6) SA 9
(SCA) at
para [9]. The SCA also referred, with approval, the judgment of
Corbett J (as he then was) in
Stassen
v Stoffberg
1973
(3) SA 725
(C) which, in turn, also broadly endorsed the
Koornklip
Beleggings
case.
[38]
1976 (2) SA 226
(T).
[39]
At paragraph [24].
[40]
1976 (1) SA 418
(A)
at 426C-E.
[41]
See
Barclays
National Bank Ltd v Wollach
1986
(1) SA 355
(C) at 359G-G.
[42]
See the judgment of
Grosskopf J(as he then was) in
C.G.E
Rhoode Construction Co v Provincial Administration, Cape and Another
1976 (4) SA 925
(C) at 927A-928D and the judgment of Goldstone J in
Barclays
National Bank v Serfontein
1981
(3) SA 244
(W) at 249H. See, also: Dendy, M.
Step-by-Step
Provisional Sentence Proceedings
.
2003 (June)
De
Rebus
29.
[43]
Ibid
.
[44]
Oliff v Minnie
1952 (4) SA 369
(A) at
374 G.
[45]
Malan, F.R. and others.
1986.
Provisional
Sentence on Bills of Exchange, Cheques and Promissory Notes,
Durban:
LexisNexis, p196. See also De Vos, W. 1986
The
Course of Proceedings Upon the Refusal of Provisional Sentence,
TSAR 233-5.
[46]
1949 (2) SA 849
(W) at
853.
[47]
1921 OPD 152.
[48]
1928 CPD 529.
[49]
1965 (2) SA 276 (D).
[50]
1968 (1) SA 134 (O).
[51]
1975 (2) SA 142 (O).
[52]
See at 290D.
[53]
In
Ex
parte Hansmann
1938
WLD 89
at 93, Schreiner J (as he then was) said: “I am bound
to follow a Transvaal decision in preference to the decisions of
other provinces, at all events unless I am completely
satisfied of the incorrectness of the Transvaal decision”. The
Appellate Division disagreed with this decision but on a different
issue (the extraterritorial jurisdiction of courts functioning
within South Africa) in the case of
Estate
Agent’s Board v Lek
1979
(3) SA 1048(A)
at 1068-1069C. The
stare
decisis
point
in
Ex
parte Hansmann
was
expressly followed in
Klaassen
v Benjamin
1941
TPD 80
at 93,
Feun
v Pretoria City Council
1949
(1) SA 331
(T) at 354,
Mockford
and Others v Gordon and Abe Gordon (Pty) Ltd
1949
(3) SA 1173
(W) at 1174,
Simpson
v Simpson
1951
(3) SA 828
(W) at 830A,
Sebastian
and Others v Malelane Irrigation Board
1953
(2) SA 55
(T) at 59G,
R
v Philips Dairy (Pty) Ltd
1955
(4) SA 120
(T) at 122D,
S.
A. Clay Industries ltd v Katzenellenbogen
1957
(1) SA 220
(W) at 224H and
R
v Mnguni
1958
(4) SA 320
(T) at 322F. The reason for
Ex
parte Hansmann
having
disappeared from view in recent years seems to have to do with a
somewhat misleading reference in the noter-up as “not
approved” in the of
Estate
Agent’s Board v Lek
case.
It is instructive to read, in general terms, the affirmation of the
principle of
stare
decisis
in
Collett
v Priest
1931
AD 290
at 301
,
Bloemfontein Town Council v Richter
1938
AD 195
at 232
,
R v Nxumalo
1939
AD 580
at 586 and
Commissioner
for Inland Revenue v Estate Crew and Another
1943
AD 656
at 680, culminating in the landmark case of
Harris
& Others v Minister of the Interior & Another
1952 (2) SA 428
(A) at
452.