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[2017] ZAECPEHC 40
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Sedwin Investments (Pty) Ltd v Datnow and Another (1819/2017) [2017] ZAECPEHC 40 (24 August 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION – PORT ELIZABETH
Case
No.: 1819/2017
In
the matter between:
SEDWIN
INVESTMENTS (PTY) LTD
Applicant/Plaintiff
and
NATHAN
ALEC DATNOW
First
Respondent/Defendant
MARIA
JOHANNA DATNOW
Second
Respondent/Defendant
JUDGMENT
REVELAS
J
:
[1]
This
is an application for summary judgment against the two defendants.
The plaintiff claims repayment of two loans advanced by
it to the
first defendant during January 2014, and to both defendants during
February 2014, claims interest on the aforesaid amounts.
There
are also two claims for alternative relief.
[2]
The
defendants apply for condonation of the late filing of their opposing
affidavits wherein they rely on two defences:
Lis
alibi pendens
and
the plaintiff’s alleged non-compliance with section 40 of the
National Credit Act, 34 of 2005
(“the
Act”)
.
The defendants were previously married to each other but were
divorced a few years ago.
[3]
The
parties herein concluded two separate, verbal loan agreements in
January and February 2017. These agreements and their
terms
were recorded in two written acknowledgments of debt, the first of
which was signed by the first defendant on 20 January
2014, and the
second by both defendants on 10 February 2014.
[4]
In
terms of the first loan agreement the plaintiff lent and advanced to
the first defendant the sum of R3,000,000.00.
The
interest agreed upon the capital amount loaned was R750,000.00.
Both the capital amount and the interest were to be fully
paid up by
31 January 2015. The interest on the capital loan had to
be paid in 12 monthly installments of R62,500.00
each. In terms
of the second loan agreement, the plaintiff lent and advanced
R1,200,000.00 to the first and second defendants.
The
interest on this amount was agreed between them to be the sum of
R300,000.00, also payable in 12 monthly installments of
R125,000.00.
Both the capital sum and all the interest on
it due within a year, by 28 February 2015.
[5]
The
plaintiff alleges that the first defendant had only made payment of
the sum of R500,000.00 by the due date in respect of the
first loan
agreement. In respect of the second loan agreement, the
defendants had only paid back R175,000.00 by the
due date (28
February 2015).
[6]
The
plaintiff pleaded that despite demand the defendants have failed to
make any further payments in terms of the two respective
loan
agreements.
[7]
Clauses
7.1 to 7.3 of the two acknowledgements of debt, which are identical,
read as follows:
“
7.1
In the event of my failing or neglecting to pay any sum or sums due
and payable hereunder promptly on due date,
or to carry out any of
the other conditions and stipulations of this Acknowledgement of
Debt, or in the event of my insolvency
or application for voluntary
surrender of my estate, or the transfer of my estate for the benefit
of the creditor, the capital
and collection commission together with
all other monies owing hereunder, shall immediately become due and
recoverable without
notice.
7.2
The creditor has signed a sale of property agreement that will come
into operation and be effective
should any sums due hereunder not be
payable and upon transfer of the property into the name of the
Creditor or his nominee this
document shall be cancelled, provided
that the property referred to in such sale agreement is valued by an
independent valuator
at an amount equal to or higher than the debt
referred to herein.
7.3
The creditor may at any time elect to register a mortgage bond over
the property for the full amount,
including any and all costs
associated therewith or incurred by the creditor to date of
registration, and I undertake and agree
to sign and execute all
necessary documents and to supply any documents required for the
registration of such mortgage bond.”
[8]
In
reliance on clause 7.1 in both acknowledgements of debt, the
plaintiff claims payment against the first defendant in the amount
of
R3,000,000.00 (the first claim), and against both defendants for
payment in the amount of R1,325,000.00 (the second claim) plus
interest on both amounts at the rate of 15,5% per annum, from 31
January 2015 and 28 February 2015, respectively. The two
claims
referred to are claims A and C. Claims B and D are alternative
claims that came about in the circumstances set out
below.
[9]
The
plaintiff is not a registered credit provider under the Act
[1]
,
but contends that it was not obliged to register as a credit provider
under the Act, which therefore finds no application. It
pleaded
however, in the alternative to the two main claims (A and C), that in
the event of it being found that the Act indeed applies
to both loan
agreements, and the agreements were accordingly illegal and void,
(none of which the plaintiff concedes), it must
be found that the
defendants were unjustifiably enriched at the expense of the
plaintiff. The plaintiff contends that it
transferred the
amounts of R3,000,000.00 and R1,200,000.00 to the defendants in terms
of the two respective loan agreements in
the
bona
fide
,
but mistaken belief that the agreements were valid and enforceable,
and that it was obliged to perform under them.
The extent
to which the defendants were enriched (according to the plaintiff),
was the amount of the sums transferred to the first
defendant under
each of the two loans, less the sum of the payments already made by
the defendants in terms of the loan agreements.
Therefore, the
two enrichment claims (B and D) amount to R2,500,000.00 and
R1,025,000.00 respectively.
[10]
When
the defendants noted their intention to defend the plaintiff’s
action, the plaintiff brought the present application
in terms of
Uniform Court Rule 32(1)(b), on the basis that the defendants had no
bona
fide
defence. The defendants, in their affidavit resisting summary
judgment against them, contend that they have the two
bona
fide
defenses referred to above, and discussed below.
(a)
Lis
Alibi Pendens
In
support of this defense the defendants rely on the fact that the
plaintiff had brought an application under, case number 2873/2014
in
this court, for orders to compel transfer of the defendants’
two immovable properties into the plaintiff’s name.
The defendants had offered the properties as collateral for the two
loans in question and when the parties signed the two
acknowledgements
of debt, they also concluded agreements of sale of
the two properties (as foreseen in clauses 7.1 and 7.2 of the loan
agreements,
cited above). The agreements of sale would become
operative in the event of the defendants defaulting in repaying the
loans. The
plaintiff has premised its application to compel transfer
of the properties on these sales transactions.
(b)
Non-compliance
with the
National Credit Act
The
defendants contend under this heading, that the plaintiff ought to
have registered as a credit provider, since the loan agreements
were
credit agreements as foreseen in section 8(4)(f) of the Act. The
defendants argue that the plaintiff had formulated the two
loan
agreements in a manner specifically designed to circumvent certain
peremptory requirements and provisions in the Act.
In
particular, the defendants point out, that had the plaintiff
performed an affordability assessment, as it would have been obliged
to do under the Act, then at the very least, the second credit
agreement would have been regarded as reckless credit and would
not
have been concluded.
[11]
The defendants also challenge the plaintiff’s entitlement to
introduce alternative claims in a summary judgment application.
They submit that the claims are mutually exclusive. They submit
that the two claims for enrichment (Claims B and D) are essentially
claims for damages and therefore parties and the agreements
themselves must be tested by leading and testing evidence at a trial.
Condonation
[12]
The
plaintiff opposes the defendants’ application for condonation
on the grounds that there is no proper explanation for the
delay in
filing the opposing affidavits and that the defendants have no
prospects of success in defending the claims against them.
[13]
In
general, when litigants deliver affidavits out of time in motion and
summary judgment proceedings, they must satisfy the requirements
of
Uniform Court Rule 27(3), in order to be indulged by way of
condonation. Firstly, an explanation must be proffered for
the
late delivery of the affidavits why such conduct ought to be condoned
by the court. In addition, it must be demonstrate
“
good
cause”
which
is comprised of a reasonable explanation for the neglect; the
application for condonation must be
bona
fide
and not dilatory; and there must be an absence of willfulness on the
part of the party seeking condonation. A
bona
fide
defense
must also be disclosed. They must also show reasonable prospects of
success in defending the claim. That much is trite.
[14]
The
defendants’ explanation for the delay in resisting the
application for summary judgment, is a very important consideration
in determining the question of condonation. The defendants
filed their opposing affidavits the day before the matter was
argued
and the application for condonation was only filed on the morning of
the day of the hearing. The defendants were required
to file
their opposing affidavits by no later than noon on the court day, but
one preceding the day on which the applications is
to be heard
[2]
.
Neither party was prejudiced by the defendants’ tardiness. By
virtue of the expeditious nature of summary judgment application,
the
delays can seldom be for more than a day as was the case in this
application, The defendants’ attorney explained that
he
misconstrued Rule 32(3)(b). The explanation was unconvincing but I
did not understand it to be the defendants themselves who
were at
fault. I took this factor into account since I have concluded
that, as will emerge more fully below, the defendants
have
demonstrated prospects of success in defending the claims against
them. In my view, the application for condonation
should
be granted.
Discussion
Lis
Alibi Pendens
[15]
A
defendant who wishes to raise the defense of
lis
pendens
must
demonstrate that there is pending litigation between the same parties
(or their privies)
[3]
based on the same cause of action
[4]
in respect of the same subject matter
[5]
.
The plaintiff argues that the defendants are precluded from raising
the defence of
lis
pendens
since the relief sought in its application to compel transfer of the
defendants’ two immovable properties (under case number
2873/2014) is entirely different from the present matter, and
accordingly the subject matter is not the same.
[16]
The
defences of
lis
pendens
and
res
judicata
are
both governed by the principle that there should be finality in
litigation.
“
By
the same token the suit will not be permitted to be revived once it
has been brought to its proper conclusion (
res
judicata
).
The same suit, between the same parties, should be brought only once
and finally... There is room for the application of
that
principle only where the same dispute, between the same parties, is
sought to be placed before the same tribunal (or two tribunals
with
equal competence to end the dispute authoritatively). In the absence
of any of those elements there is no potential for a
duplication of
actions.”
[6]
[17]
Should
the plaintiff succeed (as applicant) in the matter under case number
2873/2014, the defence of
res
judicata
could
possibly be raised by the defendants during a trial wherein the loan
agreement claims are adjudicated. However, if the
plaintiff
were to obtain summary judgment in its favour in these proceedings,
the defence of
res
judicata
if
raised in the other application, would probably not succeed, since
the plaintiff would pursue it on the basis that the loans
were
secured by the sale of the properties. It appears to me that
the agreement of sale was concluded with the specific purpose
of
avoiding the inconvenience and costs associated with excussion of
orders sounding in money in its favour, in the event of the
defendants not complying with the judgment or only complying with
part thereof. In my view, the issue of
lis
pendens
is not capable of being definitively decided in these proceedings and
are best suited for determination during a trial.
The
National Credit Act
[18
]
Section
40
of the
National Credit Act, prior
to its amendment
[7]
applied at the time when the acknowledgements of debt were concluded,
i.e. January and February 2014. The relevant point
of the
section reads as follows:
“
40(1)
A person must apply to be registered as a credit provider if –
(a) that person, alone or in conjunction
with any associated person,
is the credit provider under at least 100 credit agreements, other
than incidental agreements.”
[19]
The
plaintiff’s complaint against this second defense is that there
is no averment by the defendants that the plaintiff is
a credit
provider under at least 100 credit agreements, other than incidental
agreements. This complaint is misplaced, if
not a bit rich, in
circumstances where the plaintiff itself does not state anywhere in
its particulars of claim that the two loans
were single loans, and
neither does the plaintiff give details in support of its assertion
that section 40(1) of the Act is not
applicable. The plaintiff
also did not, as is the general practice in drafting particulars of
claim, give any particulars
of the nature of its business. In
addition, it anticipated a possible finding that it ought to have
registered a credit provider.
Hence the alternative claims. In
addition, the plaintiff delivered a notice to the first defendant as
contemplated in sections
129(1) and 130 of the Act even though it is
not a registered credit provider. This aspect is clearly a triable
issue and if proved,
would constitute a
bona
fide
defence, in which case the alternative claims would be considered
[20]
In
National
Credit Regulator v Opperman
[8]
the
court with reference to the author Visser
[9]
restated the legal position regarding unlawful agreements, namely
that the party seeking restitution of money paid in pursuance
of an
unlawful agreement, must make use of the condition
ob
turpem vel iniustam causa
since
he is precluded from doing so under the unlawful agreement itself.
The
condictio
in question is an action based on unjustified enrichment and aimed at
restoring economic benefits to the plaintiff, at whose expense
they
were obtained, and for the retention of which a defendant has no
legal justification. The requirements of the
condictio
are generally that ownership must have passed with the transfer; the
transfer must have taken place in terms of an unlawful agreement;
and
the claimant must tender the return of what he received.
[21]
The
Constitutional Court in
National
Credit Regulator
considered
the question whether section 89(5)(c) of the Act was inconsistent
with section 25(1) of the Constitution, and therefore
invalid.
Section 89(5)(a), stated that an agreement which was unlawful (for
want of compliance of the Act) was to be declared
void since its
inception
[10]
.
Section 89(5)(c) provided that the rights of the credit provider
under the agreement to recover money paid or goods delivered
to the
consumer, must be either cancelled or forfeited to the state if the
consumer would be “
unjustly
enriched, regardless of turpitude or other factors relevant in a
fairness or public interest enquiry”.
Harsh
words indeed, since they negated the credit provider’s
common-law right to restitution a without any judicial discretion
to
be exercised in the matter. Fortunately the legislature amended
the Act (as Cameron J suggested it should) in his minority
judgment
in the
National
Credit Regulator
case).
[22]
Section
189 (5) now reads plainly that:
“
If
a credit agreement is unlawful in terms of this section, despite any
other legislation or any provision of an agreement to the
contrary, a
court must make a just and equitable order including but not limited
to an order that –
(a)
the
agreement is void from the date the agreement was entered into.”
[23]
The
amendment therefore restored the common-law right to restitution.
The plaintiff submits that if no restitution order
is made against
the defendants, it would be unjust to the plaintiff and should it not
succeed in obtaining default judgment on
the loan agreements, it
should at least succeed with its alternative claims based on
unjustifiable enrichment.
[24]
It
is not in dispute on the papers that the two acknowledgement of debts
were signed by the defendants, or that the amounts of R3,000,000.00
and R1,200,000.00 were indeed transferred to the defendants and that
they actually had received the amounts. None of the
facta
probanda
have been placed in dispute.
[25]
In
De
Bruyn v du Toit
[11]
,
the plaintiff also applied for summary judgment under an unlawful
credit agreement and argued that he ought to obtain summary
judgment
at least for the capital amount. Rogers J identified two
obstacles in the way of such an order. The first
was that the
plaintiff (unlike the plaintiff in the present matter) did not plead
an alternative claim based on enrichment. The
second obstacle,
substantive in nature, was that a common law enrichment action in
certain circumstances (similar to the present
case) does not allow
recovery of money as of right. The learned judge held that
[12]
:
“
It
would be entirely inappropriate, at the stage of summary judgment, to
assume that an unpleaded enrichment action for recovery
would
succeed. The court would need to be informed of the
circumstances in which the loans were made, the relationship between
the parties, whether the loans formed part of a large scheme of
business and the like.”
[26]
In
the event, his Lordship declined to grant summary judgment.
[27]
In
the present matter the alternative claims based on enrichment were
pleaded. The amounts in question are not in dispute
and are
based on liquid documents. The first defendant had actually
requested rectification of the first acknowledgement
of debt which
reflects the amount owed as R3,062,500.00, whereas the amount
actually advanced was only R3,000,000.00.
The plaintiff
has tendered such rectification. There can therefore be
little doubt that the latter sum was lent and
advanced to the
plaintiff.
[28]
However,
my concern lies in the pending application to compel transfer of the
defendants’ properties. If the plaintiff is
granted the
enrichment claims B and D, but pursues the claims for interest on the
capital amounts, granting leave to defend only
in respect of claims A
and C, would be cold comfort for the defendants when the applicant
succeeds later, in compelling transfer
of their properties into its
name. With the spectre of
lis
pendens
not
disposed of, the issues are rendered more complex and indeed
arguable. As such they are triable issues that may be determined
with
more accuracy if evidence is led. It would, in my view, be
inappropriate to grant alternative relief, in the form of orders
for
restitution (claims B and D) in these summary judgment proceedings.
Accordingly the following order is made:
a.
The
late filing of the defendants’ answering affidavits is
condoned;
b.
The
application for summary judgment is dismissed with costs;
c.
The
defendants are granted leave to defend the action instituted against
them by the plaintiff.
____________________
E
REVELAS
Judge
of the High Court
Appearances
:
For
the applicant/plaintiff: Adv R Stelzner SC and Adv N Garces
instructed by Davidson England Attorneys, Cape Town c/o Kaplan
Blumberg Attorneys, Port Elizabeth
For
the respondents/defendants: Adv K Williams instructed by
Biccari Bollo & Mariano Attorneys, c/o Strömbeck Pieterse
Attorneys, Port Elizabeth
Date
heard: 08 August 2017
Date
delivered: 24 August 2017
[1]
Section 40 of
the Act sets out the circumstances in which a creditor must be
registered as a credit provider.
[2]
Uniform Court
Rule 32(3)(b)
[3]
Ceasarstone
Sdot-Yam Ltd v The World of Marble and Granite 2000 CC and Others
2013
(6) SA 499 (SCA)
[4]
Nestlé
(South Africa) (Pty) Ltd v Mars Inc
2001
(4) SA 542 (SCA)
[5]
Williams v
Shub
1976
(4) SA 567 (C)
[6]
Nestlé,
paragraphs
[16] and [17] at 549 B – C.
[7]
By section 39 of
the National Credit Amendment Act, 19 of 2014 which came into effect
from 13 March 2015.
[8]
2013 (2) SA 1
(CC) at paragraph [15].
[9]
Unjustified
Enrichment (Juta & Co Cape Town 2008) in General.
[10]
This corresponds
with the common-law position. See:
Schierhout
v Minister of Justice
1926
AD 99
at 109.
[11]
Unreported Case
No. 1162/2015 (Western Cape) dated 27 February 2015.
[12]
At paragraph
[13].