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[2018] ZAECPEHC 3
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Beacon Lighting (Pty) Ltd v Infra-Meg (Pty) Limited and Another (3916/2015) [2018] ZAECPEHC 3 (13 February 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, PORT ELIZABETH
Case
No.: 3916/2015
Date
Heard: 6&7 February 2018
Date
Delivered: 13 February 2018
In
the matter between:
BEACON
LIGHTING (PTY) LIMITED
Plaintiff
and
INFRA-MEG
(PTY)
LIMITED
First Defendant
ANDRé
MARAIS
Second
Defendant
JUDGMENT
EKSTEEN
J:
[1]
The
plaintiff issued summons against the first defendant for payment of
the amount of R1 306 865,23 in respect of goods
sold and
delivered. It is alleged that second defendant, a director of
the first defendant, is liable, jointly and severally
with the first
defendant, for payment of the aforestated amount as surety and
co-principal debtor. At the trial the first
defendant admitted
its liability to the plaintiff and the parties agreed that the
quantum of the plaintiff’s claim as against
the first defendant
amounts to R1 139 696,00. What remains in issue is
the liability of the second defendant.
[2]
The dispute
arises from the completion of a credit application form completed on
11 July 2014 at Port Elizabeth which purports to
embody a personal
suretyship by the directors of the first defendant. The second
defendant denies that he bound himself as
surety and co-principal
debtor in respect of the debt of the first defendant.
[3]
It is
common cause that the first defendant carried on the business of
civil and general construction in Port Elizabeth. The
first
defendant had secured a sub-contract in respect of the supply and
installation of streetlight facilities in John Tallant
Road (the John
Tallant Road project) in Port Elizabeth. The plaintiff is a
supplier of lighting and related materials.
The first defendant
wished to obtain materials from the plaintiff in order to perform its
obligations under the contract.
In order to do so it was
required to open an account and to submit an application for credit.
[4]
A pro forma
application form was provided to the second defendant for
completion. The information required on the form was
completed
by the second defendant’s wife, Natasha Marais (Natasha)
for signature by the second defendant. For
reasons which are
not apparent from the evidence there appears to have been some delay
in the signature of the document.
In the interim, materials
ordered by the first defendant and required for the John Tallant Road
project were invoiced to Mega-Arc
CC (Mega-Arc) a close corporation
of which the second defendant was the sole member. This was
done as Mega-Arc already had
an account with the plaintiff.
[5]
Natasha is
employed as a senior accounting clerk in a large firm of accountants
and she was charged with the bookkeeping of both
Mega-Arc and the
first defendant. Upon receipt of the invoice reflecting the
materials required for the John Tallant Road
project on the account
of Mega-Arc she requested that a credit note be issued to Mega-Arc
and that the materials be invoiced to
the first defendant. In
order to achieve this an account had to first be opened in the books
of the plaintiff for the first
defendant. The plaintiff was
unwilling to open an account for the first defendant unless and until
a signed credit application
was submitted and approved. In
these circumstances, whereas the second defendant was not immediately
available, Natasha signed
the credit application form in his stead
and forwarded same to the plaintiff. The application was approved and
an account was duly
opened. For an extended period thereafter
during the performance of the John Tallant Road project materials
were supplied
to the first defendant. For reasons which are not
material to the present judgment the first defendant was unable to
meet
its obligations to the plaintiff, hence the summons.
[6]
It is not
in dispute that the plaintiff bears the onus to establish its
contract of suretyship and the terms thereof. It is
therefore
necessary to have regard to the written document. The
application appears on a single page printed on both sides.
At
the top of the page is a prominent heading “CREDIT APPLICATION
FORM” in large bold print. The remainder of
the first
page reflects the particulars of the first defendant completed in the
hand of Natasha. At the foot of the page
the following appears:
“
I,
the undersigned, acting on behalf of the DEBTOR and being duly
authorised thereto, do hereby warrant that the above information
is
true and correct and further, do hereby accept and agree to the
conditions as set out on the reverse hereof which conditions
I
acknowledge having read and understood.
Signature: pp Natasha
Marais
Full Name: André Marais
Capacity in which signed:
Director
Date: 2014/07/11”
[7]
On the
reverse side of the page the heading “B EACON LIGHTING (PTY)
LIMITED CONDITIONS FOR CREDIT” appears in large
bold letters.
Immediately below that the words “please sign this page”
are reflected in bold letters of slightly
smaller print.
Thereafter the document reflects 20 paragraphs in small print.
Of significance are paragraphs 19 and
20 which record:
“
19.
The conditions set out above are the only conditions applicable and
no other terms,
conditions or representations shall be of any effect
whether made prior to or subsequent to the date of the order unless
confirmed
by the CREDITOR in writing.
20.
If the DEBTOR is a Close Corporation or Company, the Members or
Directors
bind themselves as sureties and co-principal DEBTORS for
any debt and or liabilities incurred by the DEBTOR.”
[8]
The second
defendant admits that the application form was signed by Natasha on
his behalf. He contends, however, that she was authorised
only to
sign the credit application on his behalf as signatory for the first
defendant and that she did not have authority to bind
him personally
as surety and co-principal debtor. He contends further and in
any event, that Natasha was unaware that the
document contained a
suretyship provision as the document is headed “Conditions for
credit” and no reference is made
on the face of the document to
any suretyship nor was her attention drawn to such a provision
contained in the small print on the
revere side of the document. His
evidence in this regard finds support in Natasha’s testimony.
[9]
Three
issues arise. Firstly, whether, on the proper interpretation of
the document, the second defendant was bound as surety
and
co-principal debtor to the plaintiff. Secondly, in the event
that I find for the plaintiff on the first issue, whether
Natasha, in
signing the document on behalf of the second defendant, was
authorised to bind the second defendant as surety to the
plaintiff in
respect of the debts of the first defendant. Thirdly, in the
event of my finding for the plaintiff in respect
of both the first
and the second issues, whether the second defendant is excused from
the consequences of the suretyship by virtue
of a unilateral error on
the part of Natasha at the time of signature thereof.
[10]
The first
issue relates purely to the interpretation of the contract.
There has been some development in the law relating
to the
interpretation of documents in recent years, however, the current
position was authoritatively summarised in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593 (SCA) in para [18] where Wallis JA stated:
“
[18]
Interpretation is the process of attributing meaning to the words
used in a document, be
it legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading the particular provision
or provisions in the light of the
document as a whole and the circumstances attendant upon its coming
into existence. Whatever
the nature of the document,
consideration must be given to the language used in the light of the
ordinary rules of grammar
and syntax; the context in which the
provision appears; the apparent purpose to which it is directed and
the material known to
those responsible for its production. Where
more than one meaning is possible each possibility must be weighed in
the light of
all these factors. The process is objective, not
subjective. A sensible meaning is to be preferred to one that
leads to insensible
or unbusinesslike results or undermines the
apparent purpose of the document. Judges must be alert to, and guard
against, the temptation
to substitute what they regard as reasonable,
sensible or businesslike for the words actually used. To do so in
regard to a statute
or statutory instrument is to cross the
divide between interpretation and legislation; in a contractual
context it is to make
a contract for the parties other than the one
they in fact made. The 'inevitable point of departure is the language
of the provision
itself’, read in context and having regard to
the purpose of the provision and the background to the preparation
and production
of the document.”
[11]
Save that
the document was prepared by the plaintiff for purposes of the
adjudication of credit applications little is known as
to the
preparation and production of the document. The application
appears, however, as alluded to earlier, under the bold
heading
“CREDIT APPLICATION FORM” and the undisputed evidence is
that the signature of the form was required before
an account could
be opened for the first defendant. The reverse side of the
document reflects the terms and conditions which
would apply to the
agreement between the parties. On the face of it the apparent
purpose of the document is to assess the
creditworthiness of the
first defendant and to regulate the contractual terms which would
find application to the credit agreement.
[12]
I have
quoted the declaration at the foot of the first page of the
application which is signed by Natasha. It records,
unequivocally
that the “undersigned” is acting on behalf
of the “debtor” being duly authorised thereto. The
debtor,
it is common cause, is the first defendant. There is no
indication in the language of the document that the signatory,
irrespective
of the identity of the signatory, acts in his personal
capacity so as to bind himself as surety. In considering the
language
used in these provisions in the light of the ordinary rules
of grammar and syntax in the context in which it appears together
with
the declared intention of the document as reflected in the
heading thereto I conclude, as a matter of interpretation, that the
document clearly and unambiguously declares that the signatory is
acting only on behalf of the first defendant.
[13]
Moreover,
the document proceeds to record that the signatory undertakes to
“accept and agree to the conditions as set on the
reverse”
of the document which conditions she acknowledged having read and
understood. The signatory does not purport
to agree to any
other undertaking. This undertaking must, in accordance with
the ordinary rules of interpretation, be read
in the context of the
document itself. The content of paragraph 19 on the reverse is
set out earlier herein. Accordingly
what the signatory has
accepted and agreed to are the conditions set out in paragraph 1 to
18 on the reverse. Paragraph 20
on the express provisions of
paragraph 19, does not constitute part of the conditions which the
signatory accepted and agreed to.
In the circumstances, as a
matter of interpretation, I do not consider that the document
purports to bind the second defendant
to the plaintiff as a surety
for the liabilities of the first defendant. On this ground
alone the action must fail.
[14]
In the
event that I err in the conclusion to which I have come in respect of
the interpretation of the document and on the assumption
that it may
be found that the document does purport to bind the second defendant
as surety it is necessary to consider the authority
of Natasha to
have bound the second defendant as surety and co-principal debtor.
This is a purely factual enquiry.
The plaintiff acknowledges,
correctly, that it bears the onus of proving the authority of Natasha
to bind the second defendant
as a surety and co-principal debtor. The
only evidence upon which the plaintiff relies for this contention is
the document itself
and the passage which I have referred to
earlier. It is not in dispute that Natasha signed the document
with the letters
“pp” alongside her signature and that
the name of the signatory is reflected as “André Marais”
in
his capacity as director of the first defendant. While her
evidence casts some doubt on her understanding of the abbreviation
“pp” Natasha acknowledges that she signed the document on
behalf of second defendant. This she did without recourse
to
him as he had authority to represent the first defendant. The
evidence of both the second defendant and Natasha was that
they had
not discussed the issue of suretyship prior to her signing the
documentation and she was not authorised to bind him as
surety.
Her evidence, to which I shall revert in greater detail below, is
that she was unaware of the fact that the document
even contained a
suretyship clause and that she had not read the reverse side of the
document prior to signature. Her objective,
as revealed in the
evidence, was to submit an application for credit facilities in order
to facilitate the opening of an account
in the name of the first
defendant.
[15]
Natasha
testified that it was her understanding that the application form
which she signed and upon which the plaintiff relies was
merely an
interim measure and that the second defendant would be required to
sign an application for credit himself and deliver
the original
thereof to the plaintiff which would then supersede the document
which she had signed. This, the second defendant
states that he
did on 14 July 2014. A copy of the latter document is annexed
to the second defendant’s plea.
Significantly on this
copy paragraph 20 on the reverse side of the document (the alleged
suretyship) was deleted and initialled
by the second defendant.
Second defendant says that he delivered this application form to the
plaintiff, either to Mrs Spriggs
or to one Dwayne, a sales
representative of the plaintiff, shortly after signature and probably
on the same day. He cannot,
however, recall with any certainty
to whom he handed the document. Mrs Spriggs, who was the office
manager of the plaintiff,
denies that she received such a document.
She cannot, however, dispute that the document was delivered on 14
July 2014 to
someone in the office. The only significance of
this document to the present enquiry is that it does exhibit a
reluctance
on the part of the second defendant at the time to bind
himself as surety. This reluctance Natasha confirms and I think
that
it enhances the probability that the second defendant did not
authorise Natasha to bind him as personal surety.
[16]
Natasha
made a favourable impression as a witness and her evidence in this
regard was untainted by cross-examination. I have
no reason to
doubt the integrity of her evidence on this issue and in view of the
form of the document and the events of 14 July
2014, which are set
out earlier, I do not find her evidence to be improbable. In
the circumstances the plaintiff has failed
to establish the authority
of Natasha to bind the second defendant personally as a surety.
On this ground too the action
must fail.
[17]
In the
event that I err in both of the aforegoing respects and on the
assumption that both these issues ought to have been decided
in the
plaintiff’s favour there remains the issue of the alleged
unilateral error. In
Tesoriero
v Bhyjo Investments Shareblock (Pty) Ltd
2000 (1) SA 167
(W) at 175F-H Wunsh J considered the circumstances in
which a mistake or
justus
error
would provide a defence for a surety and concluded:
“
The
general principle, where a person has signed a contract and
wishes to escape liability on the ground of justified error
as to the
nature or contents of the document, is that he or she must show that
he or she was misled as to the nature of the document
or as to the
terms which it contains by some act or omission (where there was a
duty to inform) of the other contracting party.
The misrepresentation
need not have been fraudulent or negligent. The duty to inform
would or could arise where the document
departs from what was
represented, said or agreed beforehand or where the other contracting
party realises or should realise that
the signatory is under a
misapprehension or where the existence of the provision or the
contract is hidden or not apparent by reason
of the way in which it
is incorporated in a document or where the provision, not
clearly presented, is unusual or would not
normally be found in the
contract presented for signature.”
(See
also
George
v Fairmead (Pty) Ltd
1958
(2) SA 465
(A) at 472A-B;
Spindrifter
(Pty) Ltd v Lester Donovan (Pty) Ltd
1986
(1) SA 303
(A).)
[18]
Natasha’s
ignorance of the suretyship clause would therefore not, of itself,
excuse the second defendant from the consequences
of the agreement.
The second defendant bears an onus to establish that Natasha was
misled as to the nature of the document
and the terms thereof through
the misrepresentation on the part of the plaintiff as to the nature
of the document and the terms
thereof. If the misrepresentation
which led to her error is material he may be entitled to rescind the
contract provided
that he is able to show that she would not have
signed the document had she known the truth (see
Brink
v Humphries and Jewell (Pty) Ltd
2005
(2) SA 419
(SCA) at 421G). Even that is, however, not enough.
The question must still be asked: would a reasonable man have
been misled? If so the error would be “
justus”
.
[19]
Natasha
testified that prior to the completion of the forms she had
communication with Mrs Spriggs. Mrs Spriggs advised that
an
account could not be opened until the application for credit had been
made and only when that had occurred could goods ordered
be invoiced
to the first defendant. I do not understand the evidence of Mrs
Spriggs to place this evidence in dispute.
It was Natasha’s
understanding flowing from these communications that it was an
administrative requirement to provide the
particulars of the first
defendant and trade references in order to assess the
creditworthiness of the first defendant. It
was her further
understanding from the interaction with Mrs Spriggs that the document
which she completed was intended merely for
administrative purposes
to enable the opening of the account in the interim whilst awaiting
the original application for credit
bearing the signature of the
second defendant. She submitted the application for credit
under the cover of an email sent
to Mrs Spriggs recording as follows:
“
Hi
Dawn
Sorry to only
send this to you now. I’m still waiting for André
to give me his signed copy. I have signed
on his behalf in the
meantime, for you to be able to open the account. I will send
you the one with his signature next week.
Will this be ok
in the meantime?”
[20]
This
was followed by an email from Mrs Spriggs an hour later recording:
“
That
will be in order. Please I need the original back. If it
can be dropped off at our offices next week some time.”
[21]
There
was much debate at the Bar as to the meaning of these emails.
Suffice it to say that there was dissensus between Natasha
and Mrs
Spriggs as to their respective understandings. Whatever Mrs
Spriggs may have intended by the term “original”
the
covering email which accompanied the submission of the application
signed by Natasha lends support to her understanding and
lends
credence to the second defendant’s evidence in respect of the
return of the further application for credit signed by
himself.
In all the circumstances I think that the second defendant has
established that Natasha was misled in respect of
the nature and the
terms of the document. Her evidence that it was never suggested
to her that the document contained an
undertaking on behalf of the
second appellant to be bound as a surety and co-principal debtor
accords with the probabilities.
[22]
The
prominent headings on each side of the page are not suggestive of any
suretyship contained in the credit application.
The declaration
appearing immediately above the signature creates the impression that
the signature is intended only to bind the
debtor. The alleged
suretyship clause is disguised on the reverse side of the document
along with the conditions for credit,
although it is not such a
condition. It is afforded no prominence in the form and is not
separated from the terms of credit.
In these circumstances
there was indeed a duty on the plaintiff, or its representatives, to
inform the signatory that signature
of the document would bind the
directors of the first defendant as sureties for the debts of the
first defendant. This was
not done. I therefore find that
Natasha was misled as to the nature of the document by the omission
to inform her of the
nature of the document and of the specific
suretyship clause in circumstances where a duty had arisen to alert
her to this provision.
[23]
The
second defendant, supported by Natasha, testified that she, employed
as she is, by a firm of accountants, had repeatedly advised
him never
to bind himself as a surety. This accords with his deletion of
the suretyship clause contained in the document
which he completed
and delivered on 14 July 2014. Natasha’s evidence that
she would not have signed the document had
she known that it
purported to bind the second defendant as a surety and co-principal
debtor accords with the probabilities.
She acknowledged under
cross-examination that she is acquainted with suretyships and
understood that suretyships were often sought
where credit was
extended to juristic persons. She conceded that this custom
made good business sense. I do not, however,
consider that this
evidence is destructive of her assertion that she would have declined
to sign the document had she known of
the implication.
[24]
Finally,
the question arises whether the reasonable man would have been misled
into believing that the document did not bind the
second defendant as
a surety. For the reasons set out in paragraph 22 above I think
that this question must be answered in
the affirmative. The
form which was presented to Natasha for completion and signature was
a trap for the unwary and she was
justifiably misled (compare
Brink
v Humphries and Jewell
supra
425D-426C).
[25]
In
these circumstances I have come to the conclusion that the second
defendant has established a unilateral error in the signature
of the
agreement which entitles him to rescind the contract. For this
reason too the action must fail.
[26]
The
terms of credit which was granted to the first defendant provides
expressly for an order for costs on a scale as between attorney
and
client against the first defendant where the plaintiff is required to
litigate in order to recover money due to it. Plaintiff
is
therefore entitled to such costs.
[27]
In
the result:
1.
There will be judgment for the plaintiff against the first defendant
for:
(a)
Payment of the amount of R1 139 696,00;
(b)
interest on the amount of R1 139 696,00 calculated at the
legal rate from the
date of demand to the date of payment; and
(c)
costs of the suit on a scale as between attorney and client.
2.
The plaintiff’s claims against the second defendant are
dismissed with
costs.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Plaintiff:
Adv Gajjar instructed by Goldberg &
De Villiers, Port Elizabeth
For
Defendant: Adv
Mullins SC instructed by Lawrence Masiza Vorster Inc, Port Elizabeth