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[2014] ZASCA 121
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Vesagie N.O. and Others v Erwee N.O. and Another (734/2013) [2014] ZASCA 121 (19 September 2014)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
NOT
REPORTABLE
Case
no: 734/2013
In
the matter between:
BENJAMIN
CHARLES JOSEPH VESAGIE
NO
.............................................
FIRST
APPELLANT
BENJAMIN
FRANCIS VESAGIE
NO
..........................................................
SECOND
APPELLANT
BENJAMIN
CHARLES JOSEPH
VESAGIE
..................................................
THIRD
APPELLANT
and
PAUL
ERWEE
NO
.............................................................................................
FIRST
RESPONDENT
LOUIS
STEFANUS VENTER
NO
..............................................................
SECOND
RESPONDENT
Neutral
citation:
Vesagie NO & others v
Erwee NO & another
(734/2013)
[
2014]
ZASCA 121
(19 September 2014)
Coram:
Brand, Bosielo, Shongwe and Majiedt JJA and
Gorven AJA
Heard
:
8 September 2014
Delivered:
19 September 2014
Summary:
Contract-sale of shares- contract which
makes provision for deferred payments of the purchase price and for
the payment of interest
on such deferred payments is a credit
transaction in terms of s8(4)(
f
)
of the
National Credit Act 34 of 2005
- contract null and void ab
initio where seller of shares not registered as a credit provider in
terms of
s40
of that Act.
ORDER
On
appeal from:
Gauteng North High Court,
Pretoria (Makgoba J sitting as court of first instance):
1
The appeal is upheld with costs.
2
The order of the court a quo is set aside
and substituted by the following
order:
‘
a)
The claim is dismissed with costs.
b)
The agreement, Annexure “A” to the plaintiff’s
particulars of claim, is declared to be null and void ab initio.’
JUDGMENT
Gorven
AJA (Brand, Bosielo, Shongwe and Majiedt JJA concurring)
[1]
This
appeal turns on whether an agreement of purchase and sale provides
that interest will be payable on deferred payments. If it
does, the
agreement amounts to a credit transaction under
s 8(4)(
f
)
of the
National Credit Act 34 of 2005
. In such a case, unless the
party extending the credit is registered as a credit provider in
terms of
s 40
of the Act, the agreement is unlawful. The
consequence of such a finding is that a court is required to declare
the agreement null
and void ab initio.
[1]
[2]
The first two appellants, as trustees of
the BEN Trust, were nominated by the third appellant as the
purchasers under an agreement
for the sale of shares and loan
accounts in various companies. The third appellant concluded an
agreement to this effect with the
respondents as trustees of the ACE
Trust. The third appellant in his personal capacity guaranteed the
performance of the trustees
of the BEN Trust. The shares and loan
accounts were transferred to the first and second appellants.
Payments of R750 000 were
made under the agreement. No further
payments were made. The respondents sued the appellants for the
balance of R14 250 000,
interest and costs.
[3]
By the time the matter went to trial, the
only live issue between the parties was whether the agreement in
question constitutes
a credit transaction as envisaged by
s 8(4)(
f
)
of the Act. It was agreed that, if the court found that the agreement
falls within the ambit of
s 8(4)(
f
)
of the Act as a credit transaction, the claim should fail because the
ACE Trust had not registered as a credit provider in terms
of
s 40
of the Act. Conversely, if the court found that the agreement does
not amount to a credit transaction, the ACE Trust would be entitled
to judgment as prayed.
[4]
Section 8(4)(
f
)
reads as follows:
‘
An
agreement, irrespective of its form but not including an agreement
contemplated in subsection (2), constitutes a credit transaction
if
it is–
(
f
)
any other agreement, other than a credit facility or credit
guarantee, in terms of which payment of an amount owed by one person
to another is deferred, and any charge, fee or interest is payable to
the credit provider in respect of–
(i)
the agreement; or
(ii)
the amount that has been deferred.’
The
parties were ad idem that the agreement is not one contemplated in
subsection (2), nor is it either a credit facility or a credit
guarantee. In addition, it does not attract a charge or fee. The only
issue is whether it provides that interest is payable in
respect of
the amount for which payment has been deferred.
[5]
No evidence was led. The trial court found
that the agreement does not provide for interest to be paid in
respect of the amount
for which payment was deferred and that the
agreement is therefore not a credit transaction. As a result, the
court held that it
was enforceable by the respondents. The appellants
were ordered to pay the balance of the purchase price, interest and
costs. The
appellants appeal with the leave of that court. It should
be mentioned that the respondents indicated prior to the hearing of
the
appeal that, although the first respondent would be in attendance
and that the appeal was opposed, no formal appearance on behalf
of
the respondents would take place and no heads of argument would be
delivered.
[6]
The only paragraph of the agreement which
bears on the issue at hand is paragraph 2. It is necessary to set
this out in full. It
reads as follows:
‘
2.1
Totale koopprys is R15 Miljoen waarvan die eerste R5 M betaalbaar is
na 12 maande en die res, 18 maande na ondertekening van
hierdie
ooreenkoms.
2.2
Rente sal gehef word teen prima minus 1 %.
2.3
‘n Minimum betaling van R50 000.00 pm betaalbaar nie later
as die 28e van elke maand vanaf 28 Oktober tot 28 Februarie
2009.
Daarna ‘n minimum betaling van R100 000.00 per maand voor
die 28e van elke maand.
2.4
Enige uitstel of verlenging van tyd vir betaling kan onderhandel word
maar geskrewe toestemming tot die terme moet 14 dae voor
die
prestasie datum ooreeengekom word.
2.5
Indien enige betaling of enige voorwaarde tov hierdie ooreenkoms nie
nagekom word nie:
2.5.1
sal ‘n finale aanmaning om te presteer gestuur word per e-mail.
2.5.2
Indien die regstelling nie binne 14 dae gemaak word na versending van
die e-mail, sal die totale uitstaande koopsom onmiddellik
betaalbaar
en opeisbaar wees.
2.5.3
Rente op laat betalings sal gehef word.’
[7]
The agreement was concluded on 24 October
2008. The scheme of the agreement is as follows. There is no dispute
that it provides
that payment of the purchase price is deferred. In
this regard, paragraph 2.1 specifies payment of R5 million by 23
October
2009 and of the balance by 23 April 2010. Paragraph 2.2
provides that interest shall be levied at a specified rate. Paragraph
2.3 provides that minimum monthly payments must be made. Paragraph
2.4 provides a mechanism to reach agreement if the purchasers
wish to
further defer payments. Paragraph 2.5 provides what happens on
breach. This is to the effect that, if the purchasers default
on any
payment and persist in the default despite written demand to remedy
it within 14 days of the demand being sent by email,
the balance of
the purchase price outstanding at that time would become claimable
and interest would be levied on late payments.
[8]
The
trial court held that paragraph 2.2 ‘has no meaning at all’
but it states that interest shall be charged at the
prime overdraft
rate less one percent. Granted, it does not in terms say whether this
interest is to be charged from the outset
on the amounts outstanding
without any default on the part of the purchaser. This does not,
however, render the paragraph meaningless.
At the very least, the
parties are agreed that it specifies the rate at which interest must
be charged on default. It must therefore
be interpreted according to
accepted principles.
[2]
[9]
Makgoba J took as his starting point for
interpreting documents that ‘a court should …uphold the
agreement rather than
destroy it.’ In support of this departure
point, he called in aid the maxim ‘
ut
res magis valeat quam pereat
’.
This court has held that the maxim operates as follows:
‘
It
appears to me that, in construing a contract, the Court is not
entitled to strain words because of the provisions of an Act which
might affect the validity of the contract, or to be influenced by
those provisions in determining whether the contract is reasonably
capable of a meaning which will not make the contract invalid, but
that when it has come to a conclusion that the contract is reasonably
capable of such meaning, it will apply the maxim.’
[3]
What
is clear from this dictum, and the cases that follow it, is that the
normal principles of interpreting a contract must be applied.
This
will determine whether the contract is reasonably capable of a
meaning which will not make the contract invalid. If it is
not
reasonably capable of bearing such a meaning, the maxim does not
apply. Where it is so capable, the maxim must be applied and
the
contract held to be valid.
[10]
The
maxim should therefore not be used as a point of departure in
interpreting agreements. It must be applied only once this has
happened and the agreement is ambiguous but is also reasonably
capable of a meaning which will not make the contract invalid.
[4]
It ‘cannot be used to justify an interpretation of a contract
contrary to its clear terms and the probable intent of the
parties
thereto’.
[5]
[11]
It must therefore be considered whether the
agreement is reasonably capable of bearing the meaning that interest
is not to be levied
on the deferred payment of capital. Paragraph
2.2, providing that interest shall be paid, is not qualified or made
conditional
on the occurrence of a future event. It simply provides
that interest shall be levied (‘gehef’) at the rate of
prime
less one percent. The plain, unvarnished meaning of these words
is that interest is to be charged by the sellers, not that it is
to
be charged only in certain circumstances.
[12]
As was submitted on behalf of the
appellants, since paragraph 2.2 follows directly after paragraph 2.1,
‘it is contextually
linked to the capital amount’. This
accords with the interpretation that interest is to be levied on the
outstanding capital
sum from time to time. The words and the context
taken together thus support this interpretation.
[13]
In addition, the location of paragraph 2.2
as a separate paragraph to the breach paragraph in 2.5.3, lends
support to the inference
that the interest mentioned in paragraph 2.2
applies without any breach needing to occur. Both clauses specify
that interest shall
be levied. There is no conceivable reason why two
paragraphs would be included if interest is only to be charged in one
circumstance.
If the drafters had wanted to limit the levying of
interest to an occasion of default, the logical way of doing so would
have been
to omit paragraph 2.2 and stipulate the interest rate in
paragraph 2.5 because interest would not apply under any other
circumstances.
[14]
As was submitted on behalf of the
appellants, therefore, ‘the apparent purpose to which clause
2.2 is directed is the levying
of interest on the capital amount and
the apparent purpose to which clause 2.5.3 is directed is the levying
of interest on late
payments’.
[15]
On the general principles of interpreting
agreements, accordingly, the agreement provides that interest is to
be levied on any deferred
payment from inception. The corollary of
this finding is that the agreement is not reasonably capable of
bearing the meaning that
interest is only to be levied in the event
of default. There is no ambiguity in this regard.
[16]
Even
if, after this analysis, it can be contended that any ambiguity
remains, recourse may be had to surrounding circumstances,
including
the conduct of the parties ‘showing the sense in which they
acted on the document’.
[6]
As will be seen, the sense in which the respondents acted on the
agreement is totally at odds with the interpretation they now
contend
for.
[17]
The first set of the respondents’
particulars of claim included in the record contains paragraph 10.4
which alleges that one
of the terms of the agreement is as follows:
‘
The
balance of the purchase price of the shares would bear interest
calculated from the date of conclusion of the agreement at a
rate 1%
below the prime rate of interest . . . ’.
After
alleging a breach, the particulars aver that:
‘
The
unpaid balance of the purchase price of the shares, inclusive of
interest thereon calculated at 1% below the prime interest
rate as
applicable from time to time and calculated up to 28 February 2012
amounts to R19 252 905.20, which amount is
constituted and
computed as set out in the account summary annexure “B”
hereto. The ACE Trust is furthermore entitled
to interest on the
aforesaid sum of R19 252 905.20 calculated at the rate of
8% per annum (being 1% below the prime interest
rate as currently
applicable) from 1 March 2012 to date of payment.’
The
schedule forming annexure “B” levies interest from day
one on the deferred payments. It does not only show interest
being
levied after default by the appellants. This clearly shows the
probable intent of the respondents that interest would be
charged on
the deferred payment of the capital sum.
[18]
An amendment to the particulars of claim
was precipitated by the appellants’ plea to the effect that the
agreement amounts
to a credit transaction and that, because the
respondents had not registered as credit providers in terms of
s 40
of the Act, the respondents could not base a cause of action on the
agreement. The amended particulars of claim replaced paragraph
10.4
with one referring to interest being charged only on breach and,
after alleging a breach included the following paragraph:
‘
The
unpaid balance of the purchase price of the shares and loan accounts
in the amount of R14 250 000.00 was payable by
no later
than 24 April 2010, being a date 18 months after the date of
signature of the agreement. By reason of the failure of the
Ben Trust
to make payment of the balance of the purchase price by 24 April
2010, the ACE Trust is furthermore entitled to interest
on the sum of
R14 250 000.00 calculated from 25 April 2010 to date of
payment, at a rate of 8% per annum compounded and
capitalised monthly
on the last day of each month, being 1% below the prime rate of
interest which has applied at all times since
24 April 2010.’
[19]
It is clear that the first time the
respondents contended that the agreement only levied interest in the
event of default, was after
the point was taken in the plea. The
conduct of the respondents in acting on the agreement accordingly
adds further support to
the conclusion that interest is to be levied
on deferred payments and not only in the case of default.
[20]
It remains to consider the finding of the
court
a quo
that to interpret the agreement ‘in such a manner that it would
be rendered invalid due to the fact that it is struck by
the
provisions of
section 8(4)(
f
)
of the
National Credit Act, will
lead to unbusinesslike or oppressive
consequences’. Far from leading to unbusinesslike consequences,
the payment of interest
on a deferred payment is a routine provision
in business agreements. This is all the more so when the merx has
been transferred
and the purchaser has the use and enjoyment thereof
without full payment having been made, as is the case in the present
matter.
[21]
As
to oppressive consequences, the learned judge held that such an
interpretation would require the respondents to refund the R750 000
paid to them without recovering the shares transferred by them to the
appellants. One cannot, without more, make a finding that
this would
be oppressive. The respondents have had the benefit of the use of the
shares and loan account. There is no evidence
as to what that benefit
might have been worth. I can therefore find no warrant for such a
conclusion. It is so that
s 89(5)(
b
)
in terms provides for the refund of any money received by the credit
provider. The section which previously provided that the
credit
provider could not recover any performance made under the agreement
has been struck down as unconstitutional.
[7]
[22]
The agreement in question is clearly a
credit transaction as envisaged by
s 8(4)(
f
)
of the Act. It is accordingly void ab initio. The parties are
required to make restitution of any performance which took place
pursuant to the agreement. Makgoba J erred in using as his starting
point for interpretation the point of view that a court ‘should
uphold the agreement rather than destroy it’. This starting
point in essence decided the very issue which was in dispute.
In this
he erred and the appeal must be upheld.
Section 89(5)
of the
Act requires a court to order that an agreement is void as from the
date it was concluded if it is rendered unlawful by
the Act. This
will therefore form part of the order.
[23]
The following order shall issue:
1
The appeal is upheld with costs, such costs
to include those consequent upon the employment of two counsel where
two counsel were
employed.
2
The order of the trial court is set aside
and replaced by the following order:
‘
a)
The claim is dismissed with costs.
b)
The agreement, Annexure “A” to the plaintiff’s
particulars of claim, is declared to be null and void ab initio.’
T
R Gorven
Acting
Judge of Appeal
Appearances
For
Appellant: A B Rossouw SC
Instructed
by:
Van
Zyl Le Roux, Pretoria
Honey
Attorneys, Bloemfontein
For
Respondent: No appearance
[1]
Other
consequences also ensue which will be discussed later in the
judgment.
[2]
As
to which see a summary of the approach in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) para 18.
[3]
Hughes
v Rademeyer
1947
(3) SA 133
(A) at 138.
[4]
This
is also the thrust of the dictum in
Annamma
v Moodley
1943 AD 531
at 539, where it was said: ‘If the agreement is
capable of two meanings it should rather be construed in that sense
in
which it can have some operation than in that in which it cannot
have any.’
[5]
Per
EM Grosskopf JA in
Sunshine
Records (Pty) Ltd v Frohling & others
1990 (4) SA 782
(A) at 792J-793A.
[6]
Coopers
& Lybrand & others v Bryant
[1995] ZASCA 64
;
1995
(3) SA 761
(A) at 768C-E.
[7]
This
was
s 89(5)(
c
)
and was struck down in National
Credit
Regulator v
Opperman
2013
(2) SA 1
(CC).