Summary of Judgment

Introduction

The proceedings were an application for summary judgment brought by a commercial bank in action proceedings, seeking final relief on motion against defendants who had entered an appearance to defend. The applicant was ABSA Bank Limited as plaintiff, and the respondents were Kirk Herman (first defendant) and Liza Herman (second defendant), who were married to each other out of community of property.

The matter arose from suretyships concluded in 2010, in terms of which both defendants bound themselves to the bank in relation to the obligations of Shelfzone 119 (Pty) Ltd as principal debtor. After summons was issued and the defendants opposed the claim by delivering a notice of intention to defend, the plaintiff invoked the summary judgment procedure under the Uniform Rules.

The general subject-matter of the dispute concerned the enforcement of suretyship obligations (including liability as co-principal debtors) and whether the defendants had disclosed any bona fide defence sufficient to defeat or delay summary judgment in respect of two claimed indebtedness amounts, each supported by a certificate of indebtedness.

Material Facts

The court proceeded from the following material facts reflected in the pleadings and the summary judgment papers. In 2010 the defendants each signed a suretyship in favour of the plaintiff bank for the obligations of Shelfzone 119 (Pty) Ltd, the principal debtor. The suretyship terms recorded, among other provisions, that each surety would be jointly and severally liable as surety and co-principal debtor for the debtor’s obligations. The suretyships further contained a clause to the effect that a certificate signed by a bank manager would constitute sufficient proof, for purposes of judgment, of the interest rate and the amount owing under the suretyship.

In the summons, the plaintiff’s cause of action against the defendants was pleaded as arising from those suretyships, and the suretyship documents were attached to the summons. The plaintiff also attached certificates of indebtedness stating that, as at 19 November 2012, amounts were due and payable to the plaintiff in respect of a cheque account and a term loan account. The amounts claimed in the summary judgment application were R930 566.69 (linked to the cheque account) and R1 129 374.39 (linked to the term loan), together with interest and costs.

The summary judgment application was supported by an affidavit deposed to by Rumark Creswell Watson, described as a manager of the plaintiff. He stated that he had read the summons and verified the cause of action and the defendants’ indebtedness to the plaintiff in the amounts and on the grounds stated in the summons.

The opposition to summary judgment was advanced through an affidavit deposed to by the second defendant. She alleged that she was authorised by the first defendant to depose to the affidavit, and further stated that the facts were within her personal knowledge. The plaintiff criticised the absence of a confirming affidavit by the first defendant, but the court treated the second defendant’s affidavit as adequate for purposes of opposing summary judgment on behalf of both defendants.

As to the substantive defences, the defendants asserted (in the opposing affidavit) that the debt was not due, owing, or payable, that the plaintiff failed to provide the relevant loan agreement from which the principal debt allegedly emanated (and therefore had not established the validity of the suretyship), and that the defendants had not waived the beneficium excussionis, coupled with an allegation that the plaintiff had not excussed the principal debtor. They also relied, initially, on the fact that the principal debtor had been liquidated on 26 March 2013, contending that liquidation should be finalised so that the plaintiff could recover from the principal debtor before proceeding against the sureties. In addition, the defendants initially advanced further defences concerning the National Credit Act 34 of 2005, but these were not persisted in during oral argument.

Where the court differentiated between what remained live and what fell away, it treated the National Credit Act-related defences and certain other defences as having been abandoned in argument, and it addressed the remaining contentions concerning prematurity, proof of indebtedness, and excussion.

Legal Issues

The central legal question was whether the defendants had disclosed a bona fide defence (and a defence good in law) sufficient to defeat the plaintiff’s entitlement to summary judgment under the Uniform Rules.

This required the court to determine, as a matter of applying law to the facts placed before it, whether the plaintiff had complied with the procedural and evidentiary requirements for summary judgment, including whether the supporting affidavit satisfied the rule and whether the claim was properly supported by liquid documents and certificates of indebtedness.

A further legal issue concerned the proper treatment of the beneficium excussionis in circumstances where the sureties had bound themselves as co-principal debtors, and in circumstances where the principal debtor had been placed in liquidation. This involved the application of suretyship principles to the defendants’ asserted defence that the bank should first proceed against, or “excuss”, the principal debtor.

Court’s Reasoning

The court began by restating the accepted purpose of summary judgment procedure, namely to provide a remedy where a defendant enters an appearance to defend for purposes of delay in circumstances where the defendant cannot raise a bona fide defence to the plaintiff’s claim. The inquiry was therefore directed at whether the defendants’ opposition disclosed a defence that was both genuine and legally sustainable on the papers.

On the preliminary issue regarding the opposing affidavit, the court accepted that an opposing affidavit need not necessarily be deposed to by the defendant personally, provided it is made by a person who can swear positively to facts showing a bona fide defence. Although the first defendant did not file a separate affidavit confirming the second defendant’s authority, the court regarded the second defendant’s assertion that the facts were within her personal knowledge as sufficient to allow consideration of the affidavit in relation to both defendants.

Turning to the plaintiff’s compliance with summary judgment requirements, the court referred to Rule 32(2) of the Uniform Rules, which requires that the notice of application be accompanied by an affidavit made by the plaintiff or a person who can swear positively to the facts, and that where the claim is founded on a liquid document, a copy of that document be annexed. The court treated the manager’s affidavit as satisfying the requirement that a suitable deponent verify the cause of action and the indebtedness. It further noted that the suretyships were attached to the summons and that certificates of indebtedness were also attached, which, on the suretyship terms, constituted sufficient proof of the amounts owing for purposes of judgment.

In addressing the defendants’ contention that the debt was not due and payable, the court noted that the defendants did not furnish reasons for that assertion. The argument advanced on their behalf was that there was no allegation that the principal debtor had defaulted so as to “trigger” surety liability, and therefore that the action was premature. The court rejected this line of argument as lacking merit in light of the suretyship terms, emphasising that the defendants had bound themselves as co-principal debtors and were jointly and severally liable. The court also stated that it had no reason to doubt the accuracy of the certificates of indebtedness, and considered them sufficient proof that the indebtedness existed and that the claimed amounts were due and payable.

On the defence based on the beneficium excussionis, the court applied the principle that a surety who binds themself also as a co-principal debtor is deemed to have renounced the benefit of excussion. The court further stated that even where a surety has not renounced excussion, the defence is not available if the principal debtor is insolvent. The court referred in this connection to The Law of South Africa (LAWSA), Joubert, Second Edition, paragraph 298. On the facts before it, the court noted the second defendant’s statement that the principal debtor’s liquidation had been ordered on 26 March 2013, and treated this as consistent with the conclusion that the excussion-based defence could not assist the defendants.

Having considered the remaining defences pursued in argument, the court concluded that it was not persuaded that the defences raised amounted to bona fide defences that were good in law. The court therefore held that the plaintiff was entitled to summary judgment on the claims as formulated.

Outcome and Relief

The court granted summary judgment in favour of the plaintiff against both defendants jointly and severally, the one paying the other to be absolved.

The defendants were ordered to pay R930 566.69 with interest at 13.5% per annum from 20 November 2012 to date of payment, and to pay R1 129 374.39 with interest at 11.5% per annum from 20 November 2012 to date of payment.

The court awarded costs between attorney and client, and also granted the costs of the summary judgment application in favour of the plaintiff.

Cases Cited

No reported South African case law was cited in the judgment.

Legislation Cited

National Credit Act 34 of 2005.

Rules of Court Cited

Uniform Rules of Court, Rule 32(2).

Held

The court held that the defendants’ opposition did not disclose any bona fide defence sufficient to resist summary judgment. The suretyships, which bound the defendants as sureties and co-principal debtors on a joint and several basis, together with the certificates of indebtedness contemplated by the suretyship terms, were treated as sufficient proof that the amounts claimed were due and payable. The court further held that reliance on the beneficium excussionis was unavailable in light of the co-principal debtor undertaking and, in any event, could not avail a surety where the principal debtor was insolvent, with the principal debtor having been placed in liquidation. Summary judgment was therefore granted with interest and attorney-and-client costs.

LEGAL PRINCIPLES

The judgment applied the principle that the purpose of summary judgment is to prevent abuse of the process where a defendant enters appearance to defend merely to delay enforcement in the absence of a bona fide defence.

It applied Rule 32(2) to the effect that the plaintiff must support summary judgment with an affidavit by a person who can swear positively to the facts, and that where a claim is founded on a liquid document, the relevant documents must be placed before the court. In the context of suretyship litigation, the court treated properly formulated certificates of indebtedness, where contractually agreed as proof, as sufficient evidence of the amount due and payable for purposes of judgment.

On suretyship doctrine, the judgment applied the principle that a surety who binds themself as a co-principal debtor is regarded as having renounced the beneficium excussionis. It further applied the principle that even absent renunciation, a surety cannot insist on excussion where the principal debtor is insolvent, and treated a liquidation order as relevant to that conclusion.