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[2010] ZAECPEHC 33
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Stanard Bank of SA Ltd v Auto Press CC and Another (1093/2010) [2010] ZAECPEHC 33 (17 June 2010)
FORM A
FILING SHEET FOR EASTERN CAPE
HIGH COURT, PORT ELIZABETH JUDGMENT
ECJ:
PARTIES
:
STANDARD BANK OF SA LIMTED
AND
AUTO PRESS CC +1
Registrar:
1093/2010
Magistrate:
High
Court:
EASTERN
CAPE HIGH COURT, PORT ELIZABETH
DATE
HEARD:
25/05/10
DATE
DELIVERED:
17/06/10
JUDGE(S):
GROGAN
AJ
LEGAL
REPRESENTATIVES –
Appearances:
for
the Plaintiff(s):
ADV:
Zietzman
for
the Defendant(s):
ADV:
Mullins
Instructing
attorneys:
for
the Plaintiff
(s):
PAGDENS
STULTINGS ATTORNEYS
for
the Defendant(s)
:
RICHARD
LAWRANCE ATTORNEYS
CASE
INFORMATION -
Nature
of proceedings
:
SUMMARY JUDGMENT
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE, PORT ELIZABETH)
CASE
NO.: 1093/2010
In
the matter between:
STANDARD
BANK OF SA LIMITED Plaintiff
and
AUTO
PRESS CC First Defendant
DARELL
ALBUTT Second Defendant
JUDGMENT
GROGAN AJ
:
[1] This is an opposed
application for summary judgment. The plaintiff seeks payment on two
claims. The first (Claim 1) is in the
amount of R301 978.55 plus
interest of 11% per annum calculated daily and compounded monthly in
arrears from 24 December 2009
to date of payment. The second (Claim
2) is for payment of R161 890.82 plus interest calculated on the
same basis and for
the same period.
[2] According to the
particulars of claim, Claim 1 arises from an alleged breach by the
defendants of a “Business Revolving
Credit Plan Agreement”
(the credit agreement) in terms of which credit to the maximum of
R480 000.00 would be extended
to the first defendant’s
predecessor in title, with interest calculated at 1, 25% above the
prime rate, provided that the
first defendant paid a monthly amount
of R13 714.00 plus interest set at the applicable rate. The
credit agreement also provides
that in the event of default by the
client, the applicant may recover all amounts owing under the
agreement. That the first defendant
assumed all rights and
obligations under the agreement when it converted from a limited
liability company to a close corporation
is not in dispute. Nor is
the second defendant’s liability as surety and co-principal
debtor in solidum with the first defendant.
The plaintiff claims that
the first defendant breached its obligations under the credit
agreement by failing to pay the stipulated
monthly payments, by
notifying the plaintiff that it was not able to do so, and by making
an offer of compromise.
[3] In respect of the
overdraft facility (Claim 2), the alleged breach consists of the
first defendant’s failure to pay the
required monthly
instalments, and that the first defendant informed the plaintiff that
it was unable to meet its monthly commitments
and made an offer of
compromise.
[4] The claims against
the second defendant are based on a deed of suretyship in favour of
the plaintiff in terms of which he bound
himself as surety and
co-principal debtor
in
solidum
with the first defendant in respect of its liability to the
plaintiff.
[5] The documents filed
by the plaintiff indicate that the facts on which these claims are
based are on the face of it well founded.
[6] The second defendant
opposes the application in his personal capacity as well as in his
capacity as sole member of the first
defendant. The second defendant
claims that he has a
bona
fide
defence
and also raises a special plea. This is that the deponent to the
affidavit used in the summary judgment application did
not have
personal knowledge of the facts to which she deposed. This averment
is based solely on the fact that the deponent is based
in Cape Town,
while all the defendants’ “dealings” with the
plaintiff have been in Port Elizabeth. This objection
is without
merit. The deponent to the affidavit filed on behalf of the plaintiff
is the manager of the plaintiff’s Customer
Debt Management
Department. Her affidavit does no more than verify the cause of
action and the defendants’ indebtedness to
the plaintiff in the
amounts set out in the particulars of claim. The deponent also
certified the “certificate of balance”
relating to the
credit plan. The affidavit suffices for purpose of an application for
summary judgment. The mere fact that a bank
official is located in a
particular city is an insufficient reason in itself to warrant the
inference that she does not have personal
knowledge of affairs in
other branches or regions. The defendants’ special plea
accordingly falls to be dismissed.
[7] Insofar as it may be
relevant, I also reject the submission that the Court should have no
regard to the letters confirming the
defendants’ acknowledgment
of its inability to meet its obligations and the so-called offer of
compromise, which are annexed
to the summons. There is no indication
in either of these letters that they are intended to be regarded as
having been made on
a “without prejudice” basis. The
defendants simply used the services of an attorney to communicate a
request to the
bank that his client be treated with leniency because
of the difficulties it was experiencing. This was well before
litigation
was contemplated. It follows that this point also falls to
be dismissed.
[8] On the merits, the
second defendant claims in respect of Claim 1 that the plaintiff was
not entitled to call in the balance
owing on the credit agreement
because it was not in breach thereof. He avers in this regard that
the amount the plaintiff claims
is owing is well below the credit
limit of R480 000.00 and that the monthly instalments are not
fixed at R13 714.00,
as the respondent claims, but are variable.
This, says the second defendant, means that the monthly amount the
first defendant
is bound to pay could vary from month to month. If,
so the submission goes, the plaintiff’s argument is taken to
its logical
conclusion, the defendant would have to pay R13 714.00
per month even if only R1.00 was outstanding on the loan. The second
defendant contends on this basis that it was not in breach of the
agreement.
[9] The difficulty with
this argument is that it is entirely hypothetical. The second
defendant does not deny in terms that the
defendants are indebted to
the plaintiff for a significant amount. Nor, in the face of the
provision in the credit agreement that
a certificate issued by the
bank shall be conclusive proof of the amount owing, can it do so. A
condition of the credit plan is
that a minimum monthly instalment of
R13 714.00 is payable,
and
that
interest calculated on a daily balance on the outstanding balance
will be charged at
1, 25% above the prime
interest rate. In any event, this argument is inconsistent with the
tender made on the defendants’
behalf by their attorney in
October 2009. That makes it clear that the first defendant was
experiencing financial difficulties
which made it impossible for it
to meet its obligations and that the second defendant was “desirous
of making
full
payment of his indebtedness to yourselves” (my emphasis).
Furthermore, the “letter of grant” preceding the credit
agreement clearly provides for the amounts payable monthly, and
records an agreement that the defendants would increase the
minimum
monthly instalment to R20 000.00. The agreement itself grants
the plaintiff the right to convert the plan to a loan facility
payable on demand and provides that the agreement is terminable by
notice.
[10] With regard to Claim
2, the second defendant avers that the amount owing is below the
credit limit of R161 890.82. He
contends that since the credit
limit is R200 000.00, the defence to Claim 1 is equally
applicable. I deal with this defence
below.
[11] The defendants also
contend that they did not receive reasonable prior notice of
cancellation of the respective agreements.
The short answer to this
submission is that the credit plan expressly provides that it may at
any time be converted into a loan
payable on demand in the event of
the client
inter
alia
failing to pay any instalment due in terms of the agreement. The
standard overdraft facility expressly states that the bank may
demand
payment “at any time”, and that a certificate signed by
the manager containing details of the amount, including
interest,
shall be sufficient proof of the amount owed.
[12] The precise date on
which the plaintiff made its demand does not appear from the papers.
However, it seems clear that the
defendants have known of the demand
since at the very latest January 2010. Since then, the plaintiff has
instituted action twice.
On the first occasion, the plaintiff
withdrew the action and tendered the defendants’ costs. Mr
Mullins
,
who appeared for the defendants, contends that this was done because
the defendants disclosed a
bona
fide
defence.
That submission begs the question before this Court. I merely observe
that in the first application the defendants raised
two points
in
limine
,
one of which is dealt with above and has since been abandoned. For
all I know, this may have been the reason why the plaintiff
decided
to withdraw the first action and to reconsider its options. But I
need not speculate in that regard. The question remains
whether the
defendants have now proved that they have a
bona
fide
defence.
[13] Ms
Zietzman
,
who appears for the plaintiff, contends that the bank is entitled to
payment of the amounts claimed because the defendants’
indebtedness arose at the moment the plaintiff decided to call in the
credit loan and the overdraft. The question raised by this
submission
is whether an overdraft or loan extended by a bank is payable on
demand. There may well be circumstances in which banks
and their
clients conclude agreements in which the calling in of loans and
overdrafts is qualified by special conditions. This
is not such a
case—the standard overdraft conditions specifically state that
the plaintiff may “demand payments of
all amounts owing to you
at any time”. The credit agreement, which is also essentially
an overdraft facility, similarly gives
the bank “the right,
without prejudice to any other rights or remedies available to us, to
terminate the Business Revolving
Credit Plan facility and claim
immediate payment of the outstanding balance by giving written
notice”. While the credit agreement
does not specify the form
or period of the notice, it is clear that the defendants were at all
material times fully aware that
the plaintiff wished to call in the
loan and the overdraft.
[14] The law on the
rights of banks in respect of the withdrawal of overdraft facilities
is set out in
Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd
1995
(4) SA 510
(C), in which the court stated:
“
When the customer
requests an overdraft he must be taken to know that the loan is
repayable on demand and that if he wishes to repay
the loan at a
later fixed date or only after receipt of notice of repayment from
the bank, he must conclude the necessary agreement
with the bank to
vary the common law [rule] that a loan without an agreed date of
repayment is repayable on demand without specific
notice.”
[15] The defendants’
defence amounts in essence to the claim that the bank acted
capriciously and without valid legal grounds
in making its demand. I
have adverted above to the provisions of the respective agreements.
In my judgment, those agreements did
not alter the common law as set
out above. The plaintiff was accordingly entitled to demand payment
of the amounts as set out in
the plaintiff’s current claims
when and in the manner it did. It has done so. To the extent that the
defendants contend that
the plaintiff acted unreasonably in so doing,
the following remarks by the High Court of Namibia in the unreported
judgment in
Standard
Bank Namibia Limited v Klazen
(case
no. (P) I 2180/2008, dated 23 February 2009, to which Ms
Zietzman
drew this Court’s attention), is apposite:
“
It goes without
saying that one of the obligations of the borrower is to repay the
money lent to him by the bank. Should the customer
of the bank fail
to repay the overdraft or exceed the limit the bank has the right to
demand payment. In my view it would be unrealistic,
if not absurd, to
expect the bank to enter into negotiations and agree with the
customer whether the bank should sue the customer
for the money owed
and if no such agreement were reached the bank would be held to be
acting unfair or unreasonable [
sic
]
if it proceeded to sue for the repayment of its money.... The
applicant did not need an agreement or consensus or permission from
the respondent before it could sue for the money admittedly owed by
the respondent.”
[16] The defendants have
done no more than dispute the amount the plaintiff alleges is due and
payable, without venturing to suggest
how much they claim is due. The
credit agreement expressly states that a certificate signed by a
manager is sufficient proof or
the amount due at any time, unless the
contrary is proved. The plaintiff has issued a certificate setting
out the amounts due.
The defendants have not proved the contrary. In
respect of the amount owing in respect of Claim 2, the common law
requires the
defendants to provide some basis for their challenge to
the claimed amount. There is none.
[17] I accordingly
conclude that the defendants have failed to prove a
bona
fide
defence.
[18] As to costs, both
agreements provide that the client will pay costs of recovery of
amounts owing on the scale as between attorney
and client. I see no
reason why the defendants should not be held to those terms.
[19] The following order
is accordingly issued:
Summary judgment is
granted against the defendants in the sum of R463 869.37, with
interest at the rate of 11% per annum
calculated daily and charged
monthly in arrears from 24 December 2009 to date of payment.
The first and/or second
defendants shall jointly and severally pay the plaintiff’s
costs on an attorney and client scale,
the one paying, the other to
be absolved.
______________________
J G GROGAN
ACTING JUDGE OF THE
HIGH COURT
11