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[2017] ZAGPJHC 406
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National Empowerment Fund v C-Pro Construction (Pty) Ltd and Others (10191/2017) [2017] ZAGPJHC 406 (28 November 2017)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
Case
Number:
10191/2017
Not
reportable
Not
of interest to other judges
Revised.
28/11/2017
In
the matter between:
NATIONAL
EMPOWERMENT FUND
APPLICANT
and
C-PRO
CONSTRUCTION (PTY) LTD
1
ST
RESPONDENT
STANDARD
BANK OF SOUTH AFRICA LTD
2
ND
RESPONDENT
FIRST
NATIONAL BANK, a division of FIRSTRAND BANK LTD
3
RD
RESPONDENT
ABSA
BANK LTD
4
TH
RESPONDENT
NEDBANK
LTD
5
TH
RESPONDENT
TWO
SHIPS TRADING 326 (PTY) LTD
t/a
SUSUKI MOTORS
(REGISTRATION
NO. 2006/023185/07)
6
TH
RESPONDENT
LANSERIA
AIRPORT (PTY) LTD
(REGISTRATION
NO. 1991/001749/07)
7
TH
RESPONDENT
THE
WALTER SISULU UNIVERSITY
8
TH
RESPONDENT
THE
MANGUANG METROPOLITAN MUNICIPALITY
9
TH
RESPONDENT
DEVELOPMENT
BANK OF SOUTHERN AFRICA
10
TH
RESPONDENT
TSHWANE
UNIVERSITY OF TECHNOLOGY
11
TH
RESPONDENT
UNIVERSITY
OF JOHANNESBURG
12
TH
RESPONDENT
HLABATSHANE
SCHOOL
13
TH
RESPONDENT
NEW
SEHLABENG INTERMEDIATE SCHOOL
14
TH
RESPONDENT
NEW
TWEESPRUIT PRIMARY SCHOOL
15
TH
RESPONDENT
JUDGMENT
FISHER
J:
INTRODUCTION
[1]
This application, having first been brought in the urgent court and
found not to be sufficiently urgent, now comes before me
in the
normal course. The applicant seeks an order in terms of which it be
allowed to exercise certain security provisions under
a loan
agreement with the first respondent.
[2]
The applicant, the NEF was established in terms of
the National Empowerment Fund Act of 1998 (“
the
Act
”) for the purposes of
facilitating the redressing of economic inequality by
providing historically disadvantaged persons with structured and
directed
financial support.
[3]
The first respondent, C-Pro applied for and
was granted a loan by the NEF in terms of a Revolving Credit Facility
Agreement (“the
agreement”). In terms thereof the
facility was to be used to finance
the working capital requirements of C-Pro to execute a contract to
construct a fire
station at Lanseria (“the Lanseria contract”)
and a contract with Suzuki Motors to build a new vehicle show room (
“the Suzuki contract”).
[4]
In terms of the agreement, security was
provided for the loan in various forms including cession of proceeds
of the Suzuki contract.
It is these securities that the NEF seeks to
enforce in this application.
[5]
Pursuant to an express provision of the agreement, a written deed of
cession
(“the cession
”)
was entered into in favour of the NEF of the proceeds of the Suzuki
contract. It is the terms of the cession which are
central to the
determination of this matter. The parties to the cession are C-Pro,
the NEF, and the sixth respondent Two Ships
which trades as Suzuki
Motors. Two Ships is the entity from which the proceeds ceded in
terms of cession were to flow. In terms
of the cession, C-Pro ceded
and transferred to the NEF all rights and interest in the proceeds as
security for payment under the
agreement.
Clause
5 of the deed of cession is important and reads as follows:
“
5.1.
To
give effect to this cession, two ships shall pay the balance of the
proceeds of the Contract due as at the date of last signature
to this
cession document to the Cedent into the following bank account;
Account
Name:
National
Empowerment Fund
Bank:
Standard
Bank
Account
Number:
[…]
Branch:
Sandton
Branch
Code:
019
205
5.3.
The Cessionary shall deduct from such proceeds all amounts due to it
in terms of the Revolving Credit Agreement and shall pay
the balance
to the Cedent.
5.4. The Cessionary hereby warrants
that the above mentioned banking details are accurate and correct.
5.5. Further the Cedent
hereby indemnifies two ships against all claims arising from its
compliance with clause 5.1
.”
[6]
In terms of the agreement, provided no default had occurred, C-Pro
would be entitled to disbursements from the NEF in the amount
of R 5
200 000 and a further amount of R2,800,000.00 was made available
conditionally, in that it could be drawn to meet any delays
that
could have financial implications on the Lanseria and Suzuki
contracts, should the need arise.
[7]
The capital amounts owing under the agreements were to be repaid
quarterly and the outstanding balance would be settled on the
final
repayment date. C-Pro would be entitled to request a disbursement of
any portion of the facility that has been repaid by
it to the NEF.
[8]
The initial advance of R 5 200 000 was made under the agreement to
C-Pro and it is common cause that it was liable to make the
first
repayment on 31 January 2017.
[9]
C-Pro was not in a financial position to make payment at this time.
It thus sought that it be allowed to draw the balance of
R 2 800 000.
It contends that the conditions for the drawing of this amount had
been met.
[10]
By this stage however events had unfolded which the NEF contends
amounted to default of the agreement and that it was thus
not obliged
to advance the amount of R 2 800 000. C-Pro, on the other hand,
contends that it was not in breach of the agreement
and thus was
entitled to the advance of the R 2 800 000. It contends further that
had the advance been made, it would have been
in a position to pay
the amount due to NEC under the agreement on time – i.e. by 31
January 2017. It states that a further
option, which is contemplated
in the agreement, would have been for the remaining amount to have
been “disbursed” by
the NEF deducting it from the payment
due. Had this been done, argues C-Pro, it would not be in default of
payment. It contends
that it follows that it should not be held to be
in default as the NEF was the author of its default.
[11]
In terms of the agreement, the NEF was entitled, in the event of
breach, to refuse to allow C-Pro to make any further disbursement
request against the facility and to exercise its rights in respect of
any security provided in terms of the agreement.
[12]
C- Pro thus agrees that in the event of this court finding that it
had breached the agreement, then it has no defence to the
claim. It
asserts however that there was no breach.
[
13]
The breach relied on by the NEF is a breach of the cession
.
In terms of the agreement, should the
cession agreement be breached then this would constitute default in
terms of the agreement.
It is common cause that the proceeds of
the contract were not paid by Three Ships to NEF, but instead were
paid to C-Pro.
It appears that this was on the instruction on C-Pro
in that on 09 March 2017 it wrote a letter to the NEF in terms of
which it
stated the following:
“
We
made a mistake by instructing Suzuki not to make payment to the NEF,
but to pay the amount due, directly to us, believing that
we were
acting correctly. We stress that the owners of Suzuki, Two Ships, was
at no stage involved in the decision to ignore the
cession and made
payments to C-Pro directly.(sic)”
[14]
It is contended on behalf of C-Pro that the failure to pay the amount
to the NEF was not a breach of the cession and hence
the agreement in
that, given that the cession was one
in
securitatem debiti
it could only be
relied on in the event of default of the agreement which it alleges
cannot be said to have occurred because of
the fact that the
draw-down of the R2 800 000 was not allowed.
[15]
This somewhat circular and contrived argument finds no substance in
the terms of the cession. What is clearly provided
in terms
thereof, is provision for the payments to be made immediately and not
only on default. Indeed provision is made in the
cession for the
payments due under the agreement to be deducted from the proceeds of
the Suzuki Contract. The payments under the
cession were thus a
payment mechanism as much as a security. It is clear that, on its own
admission, C-Pro at best acquiesced in
the failure to comply with the
cession and at worst orchestrated it. In any event it makes no
difference. The fact is that the
cession was indeed breached and it
follows that the agreement was breached. NEF is thus entitled to
enforce its security.
[16] It is argued on behalf of C-Prop
that the NEF has not adhered to the spirit and purpose of the Act in
seeking to enforce the
agreement under circumstances where more funds
could and should have been advanced so that the agreement could
continue and the
funding flow to C-Pro for the purposes of carrying
out the Lanseria and Suzuki projects. Indeed the undisputed facts
show that
it is C-Prop who has flouted the agreement. If the NEF
allowed its borrowers to conduct themselves in the manner that C-Pro
suggests
it should have been allowed to do, this would inure to the
detriment of the fund and its purposes.
ORDER
I
thus make the following order:
(a) The applicant is authorised
to debit, as and when funds are available in account Number: […]
as well as any other
accounts held by the First Respondent at the
Second Respondent and from all and any accounts held by the
First Respondent
at the Third, Fourth and/or the Fifth Respondents,
all amounts as are due to the Applicant by the First Respondent
under
the Credit Facility Agreement.
(b) The Second, Third, Fourth
and Fifth Respondents are ordered to pay to the Applicant or its
attorneys all and any amounts
as may be due to the Applicants by the
First Respondent in accordance with (a) above;
(c) No transactions by any
person other than the Applicant or its attorneys shall be
permitted to be transacted
on the accounts to which reference is made
in (a) until the full amount due under the Agreement is made and tha
Applicants attorneys
have in writing certified that such amount has
been fully paid.
(d) The Applicant is authorized
to claim payment of all amounts owing or which in future may become
owing to the First
Respondent by the Sixth to Fifteenth Respondents
and any other debtors of the First Respondent up to the extent of the
amount owing
in terms of the Credit Facility agreement.
(e) The costs of this
application are to be paid by the First Respondent.
________________________________
FISHER
J
HIGH
COURT JUDGE
GAUTENG
LOCAL DIVISION
Date
of Hearing:
08 November 2017
Judgment
Delivered:
28 November 2017
APPEARANCES:
For
the Applicant: Adv RL Kayingo instucted by Mothle Jooma Sabdia Inc .
For
the 1
st
Respondent: Adv JA Klopper
Instructed by KMG & Associates Incorporated.