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[2021] ZAGPJHC 622
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DNI Financial Services (Pty) Ltd v Morningside Three of Erf One Three Four Three CC and Others (43577/2019) [2021] ZAGPJHC 622 (8 May 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 43577/2019
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED:
NO
8/5/2021
In
the matter between:
DNI
FINANCIAL SERVICES (PTY)
LTD
Applicant
(Reg
No.2004/024824/07)
and
MORNINGSIDE
THREE OF ERF ONE
1
st
Respondent
THREE
FOUR THREE CC
(Reg
No. 1991/007426/23)
JOANNA
KOPEL
2
nd
Respondent
ROLAND
MARTIN
KOPEL
3
rd
Respondent
EMANUEL
JEWELLERS
4
th
Respondent
JUDGMENT
Transmitted
by email to the parties’ legal representatives. The Judgment is
deemed to have been delivered on 15 September
2020
SENYATSI
J:
[1]
This is an opposed application
for summary judgment in the sum of R 7 889 091.50
as at 31
October 2019 together with interest of 36% per annum.
[2]
During 2014 and 2015, the parties concluded three loan agreement in
terms of which
the applicant lent and advanced monies to the first
respondent and the second, third and fourth respondents stood as
sureties for
the fulfilment of the contractual obligations of the
first respondent to the applicant.
[3]
The first loan agreement which was concluded on 3 November 2014, was
for the sum of
R4 million and was to be secured by a first covering
mortgage bond of R6 million in favour of the applicant together with
a personal
deed of suretyship by the second respondent in favour of
the applicant. The interest to be charged was as set out in the
pre-agreement
statement and quotation, at 36% per annum compounded
monthly.
[1]
The pre-agreement
statement and quotation were signed by the parties and formed part of
the agreement. The third respondent also
stood surety for the first
respondent.
[4]
The second loan agreement dated 21 April 2015 was for the sum of R1.5
million. This
loan was also secured by the first mortgage bond of R6
million. The second and third respondents stood as surety for the
fulfilment
of the repayment obligations by the fist respondent to the
applicant. The interest charged was at 36% per annum compounded
monthly.
[5]
The third loan agreement dated 24 August 2015 was for the sum of R1
million. It was
also secured by the first mortgage bond of R6 million
together with deeds of suretyship from the second and third
respondents for
the fulfilment of repayment obligations by the fist
interest rate. The interest rate was charged at 36% per annum and
compounded
monthly.
[6]
As a consequence of default in repayment obligations, the applicant
issued summons
which was defended. Following the plea, the applicant
now, has already stated, applied for summary judgment for the amount
of the
claim.
[7]
The respondents, in resisting the summary application raise the
following defences,
namely:
(a)
the transactions were simulated as such there was no
animus
contraliendi
;
(b)
they deny that the agreements provided for interest to be compounded;
(c)
the interest charged is usurious;
(d)
there has not been compliance with the provisions of
S45(2)
and (3)
of the
Companies Act 71 of 2008
.
[8]
The Court, seized with the enquiry whether to grant the summary
judgment, need not
assess the merits of the case. All the court needs
to determine is whether or not the defence raised is not merely
intended to
delay the action.
[9]
As regards the first defence that the three transactions were
simulated, the facts,
which from the face of the documents before
this court, cannot be denied, are that all the loans advanced were
not paid to the
first defendant, but to the fourth defendant, Emanuel
Jewellers, which is a close corporation known as Rolko CC. The loans
themselves
were serviced by the fourth respondent which was trading
in jewels.
[10]
It is also not denied that the first defendant never repaid any
instalment but that in fact the
instalments were repaid by the fourth
respondent. The fourth respondent went into voluntary liquidation on
8 July 2019 prior to
the institution of this action.
[11]
It is also not in dispute that the first respondent had as its sole
member, the second respondent
who is the wife of the third
respondent. The latter was the sole member of Rolko CC, which traded
under the name and style of Emanuel
Jewellers. It follows therefore
in my respectful view that infact, all the amounts lent and advanced
were for Emanuel Jewellers.
As a consequence, this assertion requires
to be tested by oral evidence and the defence is therefore not raised
for the purpose
of delaying the action.
[12]
The test on whether, a transaction is simulated or not, whether the
parties stated in the agreement
intended to conclude a contract. The
respondents contend that the first respondent never intended to
borrow money as it was not
in business and that the only asset it
owned was a primary residence of the second respondent who is married
to the third respondent.
[13]
In
Commissioner
for the South African Revenue Services v NWK Ltd
[2]
Lewis JA held as follows on the test of a simulated transaction:-
“
In my view, the
test to determine simulation cannot simply be whether there is an
intention to give effect to a contract in accordance
with its terms.
Invariably where the parties structure a transaction to achieve an
objective other than the one ostensibly achieved,
they will intend to
give effect to the transaction on the terms agreed. The test should
thus go further and require an examination
of the commercial sense of
the transaction; of its real substance and purpose. If the purpose of
the transaction is only to achieve
an object that allows evasion of
tax, or peremptory law, then it will be regarded as simulated. And
the mere fact that the parties
do perform in terms of the contract,
does not show that it was not simulated: The charade of performance
is generally meant to
give credence to their simulation.”
[14]
There are two forms of simulated transactions. Firstly, if parties
make an agreement as a sham
or pretence for instance to mislead the
fiscus, then they do not intend to create obligations and their
simulated agreement is
invalid.
[3]
If the simulated agreement is a disguise for some other type of
transactions, the court will strip of the form of simulated agreement
and reveal its true nature, so that the law may operate.
[15]
Secondly where parties enter into an agreement and act in accordance
with the agreement but for
a different purpose then that which the
agreement contends for. In this case, depending on the evidence to be
adduced at trial,
it may well be that the true intention was for the
fourth respondent to be the lent and advanced the money for its
jewellery business.
[16]
If a transaction or agreement is genuine, would give effect to it and
if not, the court would
give effect to the underlying transaction
that it concealed.
[4]
I am of
the view, given the facts of what the respondents contend that the
simulation defence should be referred to oral evidence.
[17]
In my respectful view, it is not necessary to enquire the remaining
three defences raised and
for reasons already stated, these should
also be referred to oral evidence.
[18]
Having considered the facts of this case and the defences raised, I
am of the view the application
for summary judgment should not
succeed.
ORDER
[19]
The following order is made:
(a) The application for
summary judgment is refused with costs.
SENYATSI
ML
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
REPRESENTATION
Date
of hearing: 05 October 2020
Date
of Judgment: 08 May 2021
Applicant’s
Counsel: Adv JG Dobie
Instructed
by: Reaan Swanepoel Attorneys
Respondent’s
Counsel: Mr M Nowitz
Instructed
by: Nowitz Attorneys
[1]
This is found on page 66 of the Case Line.
[2]
See Commissioner for the South African Revenue Services v NWK Ltd
2(2011 (2) SA 67 (SCA) at para 35
[3]
See Long Oak Ltd v Edworks (Pty)Ltd 1994(3)SA 370(E) at 375-379
[4]
See Zandberg v Van Zyl
1910 AD 302
, Vases Dry Cleaners v Twycross
1979(1)SA 603(A) and Michan v MaizeBoard 2003(6) SA 459