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[2017] ZAGPJHC 337
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Changing Tides 17 Limited NO v Mweli and Another (2017/23508) [2017] ZAGPJHC 337 (10 November 2017)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO
: 2017/23508
Not
reportable
Not
of interest to other judges
Revised.
In
the matter between:
CHANGING
TIDES 17 (PTY) LIMITED N
O
Plaintiff
and
MWELI
:
VUSUMUZI
PETRUS
First
Defendant
MWELI
:
FELICITY LETTA
PHUMELELE
Second
Defendant
JUDGMENT
ADAMS
J
:
[1].
This is an application by the plaintiff for summary judgment
against the first and second defendants. The defendants are opposing
the application on the basis that they had been induced to enter into
the ‘loan agreement’ with the plaintiff by
misrepresentations
made by the plaintiff and / or its agents. The
misrepresentations consisted of statements made on behalf of the
plaintiff to the
effect that the immovable property, which they
intended purchasing with the amount borrowed, was in ‘good
condition’,
when in fact and in truth it had a number of
serious defects. Had they known the true state of affairs, so the
defendants allege,
they would not have entered into the loan
agreement. The defence raised by the defendants in their affidavits
resisting summary
judgment is therefore primarily based on grounds
which, if proven by them, would entitle them to avoid the contract
for the purchase
and sale of the immovable property in question.
[2].
The defendants however do not dispute the fact that the
plaintiff is entitled to claim payment of the loan amount from them
in that
the capital amount of the loan agreement had been advanced to
them. But for the defence of fraudulent misrepresentation raised by
the defendants, they seem to accept their indebtedness to the
plaintiff and the fact that they are in breach of the agreement
between them and the plaintiff, which entitled the plaintiff to claim
from them the relief claimed in this application for summary
judgment. In other words, the defendants in my view do not take issue
with the fact that the amount had been advanced to them and
that they
are at present in arrears with the payment of their monthly repayment
instalments. This may be somewhat of an oversimplification
of the
matter, but in a nutshell this is the case for the defendants in this
application for summary judgment.
[3].
Reduced to the essentials and with a little simplification in
order to assist the narrative, it appears from the particulars of
plaintiff’s claim that on the 20
th
May 2013 the
first and the second defendants (‘the Borrowers’) entered
into a loan agreement with Blue Banner Securitisation
Vehicle RC1
(Pty) Limited (‘the Lender’), pursuant to which the
capital amount of R1 400 000 was lent and
advanced to the
defendants. The plaintiff undertook to indemnify the lender against
default by the defendants in terms of their
aforementioned loan
agreement obligations. In consideration for the provision by the
plaintiff of such guarantee the defendants
undertook in terms of a
separate contract, described as the 'Indemnity', to accept liability
to the plaintiff, as a principal obligation,
in the full amount
outstanding in terms of the loan in the event of the lender advising
the plaintiff that the defendants were
in default of the repayment
obligations under the loan and having called upon the plaintiff to
stand good in terms of the aforementioned
guarantee. At the date of
the signing of the loan agreement by the defendants on the 17
th
May 2013 the total indebtedness of the defendants to the lender,
inclusive of the capital sum, interest payable over the period
of the
life of the loan and other administration charges, was an amount of
R3 070 964.33, payable in 240 monthly instalments
of
R12 795.68 per month.
[4].
To afford security for the performance of their contingent
obligation to the plaintiff under the aforementioned 'Indemnity'
should
the need arise, the defendants mortgaged in favour of the
plaintiff their immovable property, being Erf […] Benoni
Extension
10 Township, which the defendants had purchased from a
party unrelated and unconnected to either the lender or the
plaintiff. The
loan amount of R1 400 000 was used to
finance the purchase price of the property from the third party. It
requires emphasising
that, but for the fact that they were involved
in the financing of the purchase price, the lender and the plaintiff
had no involvement
whatsoever in the purchase of the property by the
defendants.
[5].
The defendants are alleged to have fallen into arrears with
their repayments and the consequent action instituted against them by
the plaintiff is premised on the enforcement of the 'Indemnity'
agreement and the attendant mortgage contract. As required, the
plaintiff gave notice to the defendants in terms of s 129(1) of the
National Credit Act, 34 of 2005 (‘the NCA’).
[6].
The defendants deny that they are indebted to the plaintiff in
the amount claimed or in any amount at all
.
As indicated
above, in their affidavits resisting summary judgment, the defendants
allege that they are entitled to avoid the loan
agreement on the
basis that they were induced by fraudulent representations by the
plaintiff and its agents to enter into the said
agreement. The main
and most obvious difficulty with this contention on behalf of the
defendants is that the claim against them
by the plaintiff is based
on an ‘Indemnity’ agreement which is separate and
distinct from the loan agreement, and which
stands completely on its
own and which formed the basis for the registration of the Indemnity
Bond by the defendants in favour
of the plaintiff over the immovable
property of the defendants. There is therefore no legal basis on
which the defendants can rely
on a misrepresentation which clearly
relates to the purchase agreement, which may or may not be causally
connected to the home
loan agreement, in its attempt to avoid the
Indemnity agreement. In any event, the Indemnity agreement concluded
between the plaintiff
and the defendants expressly provides as
follows:-
‘
A
party may not rely on any representation which allegedly induced that
party to enter into this Common Term Agreement and / or
any Guarantee
unless the representation is recorded in this Common Terms Agreement
or the relevant Guarantee.’
[7].
This, in my judgment, puts paid to the
defendants’ defence of fraudulent misrepresentation. The point
is that the defendants,
in my view, obfuscate the duties and legal
obligations of the seller of the property with the legal duties of
the plaintiff, a
guarantor, who has no connection to the sale
agreement. The defendants’ cause of action is ill –
advised and not sustainable.
[8].
Additionally, Mr Pullinger, who appeared on
behalf of the plaintiff, argued that the defendants in their
affidavits resisting summary
judgment have not alleged the material
elements necessary to sustain a defence based on fraudulent
misrepresentation. I find myself
in agreement with these submissions.
The defendants complained that the Valuer appointed by the plaintiff
and its agents assured
them that the immovable property was free of
defects at the time of purchase. This was factually incorrect, so it
was claimed by
the defendants. Therefore, so the argument is further
developed by the defendants, during June 2016 they stopped payments
towards
the bond as, according to them, the total instalments paid up
to that point in time was sufficient and presumably a fair price for
what they purchased. This again demonstrates how ill – advised
the defence of the defendants is. Importantly, this allegation
seems
to suggest that the defendants are claiming damages based on the
misrepresentations, and that they are not claiming an avoidance
of
the contract on the basis of a material misrepresentation. This
brings me back to the submission by Mr Pullinger that the defendants
have failed to tender restitution of whatever they received pursuant
to the agreement which they are now endeavouring to avoid,
that being
the ‘Indemnity’ agreement. At the very least, the
defendants ought to have tendered return of the loan amount,
that
being R1 400 000. They have not tendered
restitutio
in integrum
, and for that reason alone
their defence falls flat.
[9].
In terms of the Indemnity, the amounts at
any time owing by the defendants to the plaintiff (including any
interest and the rate
at which interest is to be calculated, as well
as further charges) and the fact that such indebtedness is due and
payable may be
determined and proved by a certificate signed by any
manager, trustee or account of the Trust. Such certificate shall be
accepted
as proof of the facts stated therein, unless the mortgagor
is able to prove the facts as incorrect.
[10].
In this application for summary judgment, the plaintiff’s
claim is for payment of an amount of R1 406 151.11,
together
with interest thereon at the rate of 11.30% per annum, an
order declaring the defendants’ immovable property specially
executable
and cost of suit. The capital amount claimed is supported
by a ‘
Certificate of Balance’,
as provided for in
the mortgage bond and referred to supra. According to the particulars
of plaintiff’s claim, as verified
by the affidavit in support
of summary judgment, the arrears on the defendants’ bond
account on the 1
st
of March 2017 amounted in total to
R146 865.24. None of the aforegoing issues are dealt with in any
way by the defendants
in their affidavits resisting summary judgment.
Applying some basic arithmetic and assuming that the defendant made
regular and
timeous payment of the monthly instalments up to June
2016, when they decided to stop making payment, they had paid to date
the
total amount of R12 795.68 X 12 (months per year) X 4 (years
since date of agreement on 20 May 2013) = R614 192.64, which
means that the defendants still owe on the capital amount alone a
balance of approximately R600 000.
[11].
As indicated above, the defendants, in their affidavits
resisting summary judgment, take issue with the plaintiff in relation
only
to cancellation and avoidance
ab intio
of the contractual
relationship between the parties. It is the case of the defendants
that they are legally entitled to avoid the
agreement between them
and the plaintiff, which means that the plaintiff is not entitled to
summary judgment. That is the sum total
of the facts alleged by the
defendants in support of their denial that they owe to the plaintiff
the amount claimed. The clear
and unequivocal claim by the plaintiff
in the application for summary judgment is that the defendants owe it
an amount of R1 406 151.11
in respect of the Indemnity
agreement. Plaintiff also stated unequivocally that the defendants
are in breach of the loan agreement
with the Lender in that they are
in arrears with their monthly payments to the tune of R146 865.24,
which in turn entitles
it (the plaintiff) to call up the loan in full
as provided for in the Indemnity Mortgage Bond, which contained an
acceleration
clause.
[12].
The question then is whether, if regard is had to the
aforegoing, whether the plaintiff is entitled to summary judgment.
[13].
Uniform Rule of Court 32(3)(b) requires the defendants to satisfy the
court by affidavit that they have a
bona fide
defence to the
plaintiff’s claim. ‘
Satisfy’
does not mean
‘
prove’
. What the rule requires is that the
defendants set out in their affidavit facts which, if proved at the
trial, will constitute
an answer to the plaintiff’s claim. If
the defence is based upon facts, in the sense that material facts
alleged by the plaintiff
in its summons are disputed or new facts are
alleged constituting a defence, the court does not attempt to decide
these issues
or to determine whether or not there is a balance of
probabilities in favour of the one party or the other.
[14].
All that the court enquires, in deciding whether the defendant has
set out a
bona fide
defence, is: (a) whether the defendant has
disclosed the nature and grounds of his defence; and (b) whether on
the facts so disclosed
the defendant appears to have, as to either
the whole or part of the claim, a defence which is
bona fide
and good in law.
[15].
In terms of subrule (5): ‘
The court may enter summary
judgment.’
The word ‘
may’
in this
subrule confers a discretion on the court, so that even if the
defendant’s affidavit does not measure up fully to
the
requirements of subrule (3)(b), the court may nevertheless refuse to
grant summary judgment if it thinks fit. The discretion,
clearly, is
not to be exercised capriciously, so as to deprive a plaintiff of
summary judgment when he ought to have that relief.
[16].
Applying these principles
in
casu
, I am satisfied that in their
resisting affidavits the defendants have not demonstrated a
bona
fide
defence on the merits of the
plaintiff’s claim. The plaintiff is therefore entitled to
summary judgment.
Rule
46(1)(a) Considerations
[17].
Uniform Rule 46(1)(a) provides that no writ
of execution against the immovable property of any judgment debtor
shall issue until
—
‘
a
return shall have been made of any process which may have been issued
against the movable property of the judgment debtor from
which it
appears that the said person has not sufficient movable property to
satisfy the writ; or
such
immovable property shall have been declared to be specially
executable by the court or, in the case of a judgment granted in
terms of rule 31(5), by the registrar: Provided that, where the
property sought to be attached is the primary residence of the
judgment debtor, no writ shall issue unless the court, having
considered all the relevant circumstances, orders execution against
such property’.
[18].
The effect of the proviso is that only a
court is competent to declare any or all of a judgment debtor’s
residential immovable
property specially executable under the
provisions of rule 46(1)(a)(ii).
[19].
If such residential property consists of
the judgment debtor’s primary residence, the court has, in
terms of the proviso to
rule 46(1)(a)(ii), to consider
all
relevant circumstances
before ordering
execution against such property. In deciding whether or not to
declare the primary residence of a judgment
debtor who is a natural
person specially executable, the court must consider all relevant
circumstances as contemplated in the
sub-rule. This means ‘
legally
relevant circumstances’
.
[20].
In
Jaftha v
Schoeman; Van Rooyen v Stoltz
,
[2004] ZACC 25
;
2005 (2)
SA 140
(CC), the Constitutional Court gave the following examples of
such circumstances:
(a)
Whether the rules of court have been
complied with;
(b)
Whether there are other reasonable ways in
which the judgment debt can be paid;
(c)
Whether there is any disproportionality
between execution and other possible means to exact payment of the
judgment debt;
(d)
The circumstances in which the judgment
debt was incurred;
(e)
Attempts made by the judgment debtor to pay
off the debt;
(f)
The financial position of the parties;
(g)
The amount of the judgment debt;
(h)
Whether the judgment debtor is employed or
has a source of income to pay off the debt;
(i)
Any other factors relevant to the
particular case.
[21].
In
Gundwana v
Steko Development CC & Others,
2011
(3) SA 363
(CC), the Constitutional Court added the following to the
circumstances referred to above: It is only when there is a
disproportionality
between the means used in the execution process to
exact payment of the judgment debt, compared to other available means
to attain
the same purpose, that alarm bells should start ringing. If
there are no other proportionate means to attain the same end,
execution
may not be avoided.
[22].
It is obvious that not each and every one
of the above considerations will of necessity have to be taken into
account in every matter.
The enquiry must always be fact bound to
identify the criteria that are relevant for the particular case.
[23].
Applying the aforegoing principles
in
casu
, I have had regard to the
following circumstances:
(a)
By all accounts, the plaintiff has complied
in all respects with the court rules applicable to the type of relief
sought in this
application. Additionally, the plaintiff has complied
with the provisions of the Practice Manual of this division as well
as the
guidelines contained in the relevant case authorities.
(b)
I am of the view that, having regard to the
undisputed fact that as and at the 1
st
of March 2017 the arrears amounted in total to R146 865.24, the
possibility is slim in the extreme that the defendants will
liquidate
their indebtedness within a reasonable period without the plaintiff
having to resort to executing against the residence
of the
respondent.
(c)
The judgment debt due by the defendants to
the plaintiff is for the sum of R1 406 151.11, plus
interest thereon and costs
of suit. It can therefore not be said that
the amount due is of a trifling nature. Therefore, the issue of the
proportionality
of prejudice of the creditor if execution was to be
refused compared to the prejudice the debtor would suffer if
execution went
ahead and he lost his home, at best does not favour
the defendants.
[24].
As was said by Mokgoro J in the
Jaftha
matter (supra) at par [42]:
‘
The
interests of creditors must not be overlooked. There might be
circumstances where, notwithstanding the relatively small amount
of
money owed, the creditor’s advantage in execution outweighs the
harm caused to the debtor. In such circumstances, it may
be
justifiable to execute. It is in this sense that a consideration of
the legitimacy of a sale in execution must be seen as a
balancing
process’.
[25].
Also at par [43]:
‘
However,
it is clear that there will be circumstances in which it will be
unjustifiable to allow execution. The severe impact that
the
execution process can have on indigent debtors has already been
described. There will be many instances where execution will
be
unjustifiable because the advantage that attaches to a creditor who
seeks execution will be far outweighed by the immense prejudice
and
hardship caused to the debtor. Besides, the facts of this case also
demonstrate the potential of the section 66(1)(a) process
to be
abused by unscrupulous people who take advantage of the lack of
knowledge and information of debtors similarly situated to
the
appellants. Execution in these circumstances will also be
unjustifiable’.
[26].
The property in question has, by all
accounts, not been purchased with the assistance of a Government
Housing subsidy. The defendants
also are clearly not of the same ilk
from a means point of view as the debtors in the
Jaftha
matter. I do not have before me any indication that the execution
would infringe on the constitutional right of the defendants
to have
access to adequate housing. The execution for example would not
prevent them from obtaining finance in the future for purposes
of
acquiring immovable property.
[27].
The property in question is presumably
occupied by the defendants. There are no occupants who can be said to
fall within the category
of the vulnerable in our society. There is
most certainly no information and evidence before me of such
circumstances. I can therefore
safely infer that this is a
consideration which would not favour the defendants.
[28].
No indication is given by the defendants of
the reasons for the debts being incurred by them.
[29].
On the available evidence, it cannot
possibly be suggested that the plaintiff has instituted action with
an ulterior motive. If
anything, I am of the view that the plaintiff
has treated the defendants fairly and reasonably, with due regard to
their constitutional
rights.
[30].
These factors, in my view, mitigate against
the defendants and in favour of the plaintiff. I must just mention
that in their answering
affidavit resisting summary judgment, the
defendants do very little, if anything, by way of bringing to my
attention any circumstances
as envisaged in Rule 46(1)(a)(ii).
Instead the defendants opted to focus their attention on persuading
the court that they have
bona fide
defences in respect of the merits of the plaintiff’s claim. I
have already indicated that I am of the view that these defences
are
not sustainable.
[31].
In that regard, I am guided by what was
said in
FirstRand Bank Ltd v Folscher
and Another, and Similar Matters,
2011
(4) SA 314
(GNP), under the heading: ‘
The
manner in which the relevant information should be placed before the
court’,
at par [42]:
‘
If
a creditor's claim is opposed, the debtor will ordinarily be in the
best position to advance any contentions he may wish to make,
and
will be able fully to inform the court of any aspect that should be
taken into account’.
[32].
Defendants did not apprise me of any
further circumstances which may be relevant to my assessment relative
to whether it would be
just and equitable to issue a writ.
[33].
In the circumstances of this matter, I am
of the view that there are no aspects that might be regarded as
extraordinary which would
persuade a court to decline a writ of
execution. Accordingly, there is no reason why I should not declare
the immovable property
of the defendants specially executable.
Order
Accordingly,
I grant summary judgment against the first and the second defendants
jointly and severally, the one paying the other
to be absolved, as
per prayers (a), (b), (c)(i), (c)(ii) and (d) of the attached Draft
Order, which I have marked ‘
X’
, signed and dated.
_________________________________
L ADAMS
Judge of the High Court
Gauteng Local Division,
Johannesburg
HEARD
ON:
7
th
November 2017
JUDGMENT
DATE:
FOR
THE PLAINTIFF:
10
th
November 2017
Adv
A W Pullinger
INSTRUCTED
BY:
Moodie
& Robertson
FOR
THE SECOND DEFENDANT:
Adv
J G Dobie
INSTRUCTED
BY:
Nkosi
Nkosana Incorporated