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[2016] ZAECPEHC 60
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Plett Building Supplies CC v Mgobo (2906/2013) [2016] ZAECPEHC 60 (22 September 2016)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION – PORT ELIZABETH
Case
No: 2906/2013
In
the matter between:
PLETT BUILDING SUPPLIES CC
t/a
PLETT BUILT
IT
Applicant
and
MLUNGISI BONGANI WILLIAM MGOBO
(ID
NUMBER:
…)
Respondent
JUDGMENT
REVELAS
J
:
[1]
This
is an application for judgment on confession in terms of rule
31(1)(c) of the Uniform Rules of Court. The applicant seeks an
order
in the following terms against the respondent:
(a)
Payment
of the sum of R1,518,691.29 (One Million Five Hundred and Eighteen
Thousand Six Hundred and Ninety-One Rand and Twenty-Nine
Cents);
(b)
Payment
of interest at the rate 15.5% per annum from 1 May 2013 to 28 August
2014 in the sum of R376,443.21 (Three Hundred and Seventy-Six
Thousand Four Hundred and Forty-Three Rand and Twenty-One Cents);
(c)
Further
interest at the rate of 9% per annum from 29 August 2014 to date of
final payment;
(d)
Payment
of legal costs up to and including 28 August 2014 in the sum of
R216,962.36 (Two Hundred and Sixteen Thousand Nine Hundred
and
Sixty-Two Rand and Thirty-Six Cents);
(e)
An
order declaring the following immovable properties owed by the
respondent to be specially executable:
(i)
Erf
…3, Aston Bay, in the Kouga Municipality, Division of
Humansdorp, Province of the Eastern Cape, in extent 629 (six hundred
and twenty-nine) square metres, held by Deed of Transfer No.
T73437/2006 (hereinafter referred to as “
the
Aston Bay Property”)
;
and
(ii)
Erf
…1, Dainfern, Extension 11, in the City of Johannesburg
Muncipality, Province of Gauteng, in extent 1004 (one thousand
and
four) square metres, held by Deed of Transfer No. T4445/2008
(hereinafter referred to as “
the
Dainfern property”)
;
(f)
Costs
of the attorney and client scale from 29 August 2014 to date of final
payment.
[2]
The
applicant is a distribution and retailer of building products. During
April 2013, Amaxibiso Structural and Civils CC
(“Amaxibiso”)
became indebted to the applicant in the amount of R1,787,308.66 for
goods sold and delivered in terms of a credit agreement. The
respondent, the sole member of Amaxibiso signed the agreement on
behalf of Amaxibiso. A year later and pursuant to the aforesaid
credit agreement, the parties concluded a written acknowledgement of
debt
(“AOD”)
on
15 April 2014. In terms thereof the respondent, who is
the sole member of Amaxibiso, stood surety, as co-principal
debtor
for payment of the aforesaid debt and interest thereon. In
terms of the AOD the applicant undertook to hand the roof
certificates which aver payment certificates for work done by
Amaxibiso for the Koukamma Municipality
(“the
municipality”),
to Amaxibiso in return for the acknowledgment of its debt.
The respondent, as surety, for its obligations contained
in the
credit agreement and the AOD, with specific reference to the amounts
contained in the roof certificates, undertook to register
a bond over
his immovable property in Aston Bay and another bond over his
immovable property in Dainfern, Gauteng.
The AOD also
stipulates that the respondent may not sell any of his properties
without the prior, written consent of the applicant.
An
interdict was also registered against this property at a later
stage. The AOD also provided that in the event of
Amaxibiso or the respondent’s failure to comply with the terms
of acknowledgment, the whole debt will become immediately
“
owing
and payable”
.
[3]
According
to the applicant, save for two payments of R100,000.00 and R80,000.00
made respectively on 31 March 2014 and 23 May 2014,
Amaxibiso failed
to make further payments on the agreed dates. According
to Amaxibiso, a payment of R100,000.00 was
made on 1 March 2014.
[4]
The
applicant subsequently issued summons against the respondent for the
whole amount of the debt, plus interest and costs on 2
September
2014. Thereafter, in an attempt to resolve the dispute, the
respondent, Amaxibiso and the applicant, on 23 September
2014,
concluded an “
addendum”
to
the AOD.
[5]
In
this addendum, Amaxibiso and the respondent admit and confirm their
indebtedness to the applicant as set out in the AOD and also
their
failure to comply with its terms. They gave an undertaking that the
respondent’s total indebtedness would be paid off
by 1 October
2015, and that R1,700,000.00 of the debt would be paid off by 1 May
2015.
[6]
The
addendum also provided for signature of a confession to judgment by
the respondent, incorporating a consent to his immovable
properties
being declared executable. It was specifically stated in the addendum
that the registration of a covering bond over
the respondent’s
Dainfern property would be a material term of the acknowledgment and
the addendum. The Dainfern property
is the respondent’s primary
residence.
[7]
Also
on 23 September 2014, the respondent, assisted by his attorney signed
a document
(“the
consent”)
in terms whereof the applicant undertook to hold over the
application, subject to the respondent honouring the undertaking to
pay in terms of the addendum and more particularly confessed to the
claims as set out in the summons.
[8]
When
the respondent failed to comply with the terms of the addendum and
AOD, by not repaying the whole debt by October 2015, only
portion
thereof, the present application was brought. The applicant
avers that the respondent only made five payments of
R50,000.00 each
(in total R250,000.00) during the period 7 October 2014 to 2 February
2015. The respondent, despite the aforesaid
payment, failed to
pay the sum of R1,700,000.00 before 1 May 2015 and the total debt by
October 2015 in terms of the agreement.
His debt to the
applicant thus, according to the applicant, amounted to R1,518,691.29
together with interest and legal costs.
[9]
The
aforesaid is the history of the matter. The respondent’s
opposition to the relief sought is on the following grounds:
[10]
Firstly,
the respondent disputes that only five payments were made in the
amount of R250,000.00. He contends that he has made
payments in
the amount of R530,000.00 between March 2014 (during which month he
made two payments of R100,000.00 each including
the one referred to
herein before made on 2 March 2015) and 2 February 2015. Except
for the amount of R100,000.00 paid on
2 March 2014, the remainder of
the payments accord with the applicant’s averments in this
regard. Since the applicant has
not filed a replying affidavit, I
will accept for present purposes that the capital indebtedness of
R1,787,308.86 was reduced by
R530,000.00 leaving a total of
R1,257,308.86.
[11]
The
respondent further states that the applicant registered an interdict
against the Ashton Bay property in the amount of R350,000.00.
He has also sold this property for R650,000.00, of which R350,000.00
he says on oath, would be paid to the applicant. Accordingly
the capital of R1,259,308.00 would be reduced further, leaving
R907,308.86, which is less than the amount of R1,430,057.88, which
the applicant would obtain in its capacity as a cessionary, as
explained below and thus the applicant would therefore receive
R522,749.02 in excess as a result of the cession.
[12]
The
AOD contained a clause 6 under the heading “
Cession”.
This clause provided for an “
out-and-out
cession”
of
Amaxibiso’s right, title and interest in and to such payments
as the PRINCIPAL DEBTOR might receive from the municipality
“
and/or
the NMBM
pursuant
to the submission of the ROOF CERTIFICATES to them”
.
Clause 6 was deleted by the parties to the AOD. The
significance of this deletion becomes apparent when one
has regards
to the facts giving rise to the respondent’s second ground of
opposition below.
[13]
The
respondent contends that subsequent to the signature of the AOD on 15
April 2014, and the signature of the addendum on 23 September
2014,
the parties signed another document. This was an agreement of cession
drafted by the applicant’s attorney of record.
It is a
comprehensive, detailed document concluded by Amaxibiso (the
principal debtor) as “
the
cedent”,
the
applicant as “
the
cessionary”
and
the municipality
.
It is in my view, highly significant that the applicant makes no
mention of this agreement in its founding papers.
[14]
The
respondent’s main argument in opposition of the relief sought
by the applicant, is that the cession constitutes a novation
of all
the prior agreements and the applicant is consequently precluded from
relying on any of them and is thus not entitled to
a judgment by
confession.
[15]
The
applicant disputes that the parties ever intended to novate their
former agreements or that the cession agreement, in law, constitutes
a novation. In addition the applicant relies on the fact that
Amaxibiso, and not the respondent, was party to the cession
agreement.
Accordingly, it argues, the applicant was entitled
to pursue the current relief sought against the respondent.
[16]
The
agreement of cession provides that the agreement will become binding
if each party has signed a separate copy. The respondent
signed
the agreement of cession. On oath he stated that he left a copy
of the agreement signed by himself and the municipal
manager at the
offices of the plaintiff’s attorney. This is not in
dispute. Subsequently, in a letter,
the applicant’s
attorneys denied receipt of the agreement. Since they were the
author of the agreement it hardly matters.
In the absence of a
replying affidavit I will accept that a binding agreement occurred
between the parties. Counsel for the
applicant did not argue on
the basis that there was no such cession agreement. On the
contrary, the application was argued
on the basis its existence was
accepted. Only the consequences thereof, i.e. whether it
created a novation, was challenged.
[17]
The
relevant part of clause 2 of the agreement of cession reads:
“
2.5
“The CESSIONARY has:
(a)
demanded
payment of the CAPITAL and INTEREST from the CEDENT;
(b)
withheld
certain roof certificates from the CEDENT as a result of the
non-payment of the CAPITAL (the “ROOF CERTIFICATE”);
and
(c)
entered
into an Acknowledgment of Debt and Addendum to Acknowledgment of Debt
(“AOD”) with the CEDENT in favour of itself.
2.6
The CEDENT having breached the AOD and the full debt is now due and
owing to the CESSIONARY.
2.7
The CESSIONARY initiated an application for the liquidation of the
CEDENT in the Port Elizabeth High Court under case number
2973/13
(the “APPLICATION”).
2.8
Further, the CEDENT issued summons against the KOUKAMMA MUNCIPALITY
for an amount of R1 430 057,88 (ONE MILLION FOUR HUNDRED
AND THIRTY
THOUSAND AND FIFTY SEVEN RAND AND EIGHTY EIGHT CENTS) (“the
AMOUNT”) under case no.
2.9
The KOUKAMMA MUNICIPALITY has consented
to paying the CEDENT the
amount as per the summons
.
2.10
The KOUKAMMA MUNICIPALITY has agreed that the amount of R1 430 057,88
(ONE MILLION FOUR HUNDRED AND THIRTY THOUSAND AND FIFTY
SEVERN RAND
AND EIGHTY EIGHT CENTS) due to the CEDENT may be ceded and assigned
by the CEDENT to the CESSIONARY on the terms and
conditions reflected
in this agreement.”
(my
emphasis)
Discussion
[18]
In
Rodel
Financial Service (Pty) Ltd v Naidoo and Another
[1]
,
the
following was stated regarding the principles applicable to novation:
“
Novation
is the replacing of an existing obligation by a new one, where the
existing obligation becomes discharged. With voluntary
novation where
the existing contract is between the same parties, the issue is
essentially a matter of intention and consensus.
Since it involves a
waiver of right, there is a presumption against novation and the onus
of showing it has occurred lies with
the party asserting this. Thus,
where a creditor enters into a second contract, there must be a
clear, cogent and unequivocal proof
of novation.”
[19]
As
I understand it, the question is one of intention and that, in the
absence of any express declaration of the parties, the intention
to
effect a novation cannot be held to exist except by way of necessary
inference from all the circumstances of the case
[2]
.
It
will naturally depend on the facts of each case.
[20]
In
my view, the facts, history and the conduct of the parties in this
matter are consistent with an intention to novate and substitute
the
previous agreements between them. The very existence of the out
and out agreement of cession indicates a novation of
the previous
causa. It clearly replaced the previous obligations of
Amaxibiso with a new one. The following facts lends
support to
this interpretation:
(a)
The
applicant’s attorney who had drafted the AOD, addendum and
confession agreements, also drafted the agreement of cession
and
under the heading “
Background”
referred
to those agreements all pertaining to the same debt;
(b)
The
agreement states that it was the intention and effect of the cession,
to divest the cedent of any entitlement to the amount
subject to the
cession and that the municipality will effect direct payment to the
applicant, as the cessionary in respect of the
amount aforesaid.
(c)
The
agreement of cession expressly states that it is an out and out
cession and not made
in
secutitatem debiti.
The agreement also makes reference to the initial credit agreement
between Amaxibiso and the applicant which gave rise to
the summons
and AOD.
(d)
It
is recorded in the agreement of cession, that should the applicant
not procure payment, the applicant would apply for the liquidation
of
Amaxibiso and the sequestration of the respondent’s estate;
(e)
The
applicant is in possession of the roof certificates (payment
certificates) to be submitted for payment by the municipality.
This term was provided for in the AOD and is repeated in the
agreement of cession.
[21]
If
my interpretation is wrong, the following also militates against
granting the orders sought: The initial credit agreement
was
concluded between Amaxibiso and the applicant. So also
was the cession agreement. The summons subsequently
was
issued against the respondent as a surety in terms of the AOD.
The principal debt was owed by Amaxibiso. By entering
into the
agreement of cession, Amaxibiso extinguished its debt to the
applicant to the extent of R1,430,057.88. The
applicant
has not disputed that the respondent has already paid it R530,000.00
towards the principal debt and the respondent has
offered (on oath)
to pay the applicant the amount of R350,000.00 with a few weeks of
deposing to his answering affidavit, to which
the applicant has filed
no reply. The debt owed by the respondent has on these facts
been extinguished.
[22]
Moreover,
it is trite that if a principal debtor, which in this case is
Amaxibiso, pays its debt in full, the creditor is precluded
from
pursuing payment of the same debt against the surety. If the
municipality pays the applicant in terms of the cession
agreement the
applicant would have been paid in full. Should a judgment by
confession be granted and the respondent’s home
be sold in
execution, the applicant stands to have been paid twice for the same
debt. That would be iniquitous.
[23]
In
the circumstances the application is dismissed with costs.
____________________
E REVELAS
Judge
of the High Court
Appearances
:
For
the applicant, Adv K D Williams instructed by Joubert Galpin &
Searle, Port Elizabeth
For
the respondent, Adv L Franck instructed by Ian Levitt Attorneys c/o
Gouws Attorneys, Port Elizabeth
Date
heard: 1 September 2016
Date delivered: 22 September
2016
[1]
2013 (3) SA 151
(KZP) para [13]. See also
Barclays
National Bank Ltd v Smith
1975 (4) SA 675 (D).
[2]
Van
Coppenhagen v Van Coppenhagen
1947
(1) SA 576
(T)