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[2021] ZAKZDHC 7
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Nedbank Limited v Soodho N.O and Others (2115/2016) [2021] ZAKZDHC 7 (12 March 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION : DURBAN
CASE NO: 2115/2016
In the matter
between:
NEDBANK
LIMITED
PLAINTIFF / APPLICANT
(Registration
No. 1951/000009/06)
and
ROY SOODHOO
N.O.
FIRST DEFENDANT / FIRST RESPONDENT
AARON GANESH
N.O.
SECOND DEFENDANT / SECOND
RESPONDENT
NEVILLE NAGURAN
N.O.
THIRD DEFENDANT / THIRD RESPONDENT
ROY
SOODHOO
FOURTH DEFENDANT / FOURTH RESPONDENT
ROMILA DEVI
SOODHOO
FIFTH DEFENDANT / FIFTH RESPONDENT
ORDER
Delivered
on: Friday, 12 March 2021
Judgment is
granted in favour of the plaintiff against the R Soodhoo Family Trust
(Master’s reference IT1551/2008/PMB), represented
by the first,
second and third defendants in their capacities as Trustees, and
against the fourth defendant, the liability of the
said Trust and of
the fourth defendant being joint and several, the one paying, the
other to be absolved, for
(a)
payment of the
sum of R12,3 million;
(b)
interest thereon
at the rate of 9.5% per annum from 2 March 2016 to date of payment;
(c)
costs of suit.
JUDGMENT
Delivered on:
Friday, 12 March 2021
OLSEN J
[1]
The plaintiff in this action is Nedbank Limited, which I will refer
to as the “bank”.
It sued the first three defendants in
their capacities as trustees of the R Soodhoo Family Trust. One
of those defendants
(the first) is Mr Roy Soodhoo. The fourth
defendant is Mr Roy Soodhoo in his personal capacity, and the fifth
his wife, Mrs
Romila Devi Soodhoo. I will refer to the first
three defendants collectively as the “Trust”, the fourth
defendant
as Mr Soodhoo and the fifth defendant as Mrs Soodhoo. The
latter two are married to each other in community of property.
[2]
In broad outline the bank’s claims are pleaded as follows.
(a)
The bank lent money in
terms of four loan agreements to a close corporation known as
Hourglass Trading 51 CC (“Hourglass”).
(b)
Two of the agreements
were concluded on 5 August 2009, and the principal sum lent in terms
of each of those was R3,4 million.
The other two agreements
were concluded in September 2009 and in terms of those the principal
sum lent was R2,75 million.
(c)
Hourglass was wound-up
as a result of which the full balance outstanding under each of the
loan agreements became due and payable.
(d)
The Trust executed
deeds of suretyship guaranteeing the performance by Hourglass of its
obligations under each of the four loan
agreements, as did each of Mr
and Mrs Soodhoo. In terms of each of the deeds the surety’s
liability was limited to the amount
of capital advanced (ie R3,4
million in the case of each of the first two loan agreements, and
R2,75 million in the case of each
of the second two loan agreements)
plus “interest, discount, commission, legal costs on the
attorney and client scale, and
all other necessary and usual charges
and expenses”.
(e)
The sureties were sued
because they had not discharged the balance owing following the
winding-up of Hourglass.
[3]
Although it was not necessary for the bank to plead it specifically,
there is no dispute
about the fact that the documentation generated
in respect of these transactions reflects that each of the loans:
(a)
was granted to
facilitate the purchase by Hourglass from a close corporation known
as Hope Fountain Investments 30 CC (“Hope
Fountain”) of a
sectional title unit in a sectional title scheme known as Sante Fe,
Blythedale Beach for a price of R4,25
million; and
(b)
was to be supported
(and in fact was supported) by a mortgage bond registered over the
unit in question in favour of the bank for
the amount of the loan on
usual mortgage terms.
[4]
The defendants pleaded collectively to the bank’s claims.
Concerning the
loans to Hourglass, the defendants denied the
conclusion of each loan agreement but contended:
(a)
that if the bank could
prove conclusion of each loan agreement, the written express terms
would be those set out in the copy of
the agreement in question
annexed to the particulars of claim; and
(b)
that each such loan
agreement “would further have been subject to a suspensive
condition that the market value of the property
would be at least
R4.25 million”.
As to this latter
contention that there was an unwritten suspensive condition, it is
difficult to discern what the pleader had in
mind in the light of the
fact that it is undisputed that the loan agreements were duly
implemented, the money lent to Hourglass,
and the bonds registered
over the unit to which each loan related. None of the evidence
led at trial elucidated this, although
there is a relationship
between this allegation and other defences pleaded, to which I have
still to come. There is no doubt
on the evidence that the loan
agreements between the bank and Hourglass were concluded. (It
was drawn to my attention during
argument that an admission in that
regard had been made at the Rule 37 conference.)
[5]
The defendants then denied both the conclusion and the validity of
all of the suretyships
relied upon by the bank. However they
accepted that if the bank proved the validity and execution of each
of the deeds, its
terms were those set out in the copy of each deed
annexed to the particulars of claim. At the rule 37 conference
the defendants’
position was clarified. It was admitted
that Mr Soodhoo signed the deeds under which the Trust was sought to
be bound, but
denied that he was authorised to do so. The
execution of the deeds by Mr Soodhoo in his personal capacity was
admitted, but
it was denied that he did so with the consent of his
wife. It was denied that the signatures to the deeds relied
upon by
the bank in claiming against Mrs Soodhoo were in fact hers.
At the commencement of the trial it was anticipated that evidence of
handwriting experts would be called on this latter issue. That
did not happen as the bank later recorded that it no longer
contended
that the signatures were those of Mrs Soodhoo.
[6]
A plea that the provisions of the
National Credit Act 34 of 2005
governed the transactions was not pursued at trial and no more need
be said about it.
[7]
I have thus far dealt only with the defendants’ responses to
the contents of
the particulars of claim. The joint plea of the
defendants went on to raise a defence that the loan agreements and
suretyships
could in any event be avoided by the defendants on the
basis that they were induced by deliberate (ie fraudulent) or
negligent
misrepresentations made by the bank to the effect that the
units were each worth the price at which it had been bought. Mistake
and rectification were also pleaded.
[8]
The bank called two of its employees or officials who were involved
in the transactions
with which this action is concerned. A Mr
Hurrienarain was the one more directly involved in the transactions.
His
senior, a Mr Haselau, was also called as he and Mr Hurrienarain
worked quite closely together.
[9]
In 2009 Mr Haselau was a team leader and consulted in the division of
the bank known
as BOE Private Bank. Mr Hurrienarain held a
position as a private banker. In general terms each of these
witnesses
conveyed that what they were dealing with was a series of
transactions which was not abnormal, and which was capable of being
dealt
with and processed following the bank’s ordinary rules
and procedures.
[10]
Mr Soodhoo was not an existing client of Nedbank. He was
introduced to the bank (through
Mr Hurrienarain) by a Mr Hemanth
Singh who was an existing client of the bank. Mr Singh
contacted Mr Hurrienarain over the
telephone to tell him that Hope
Fountain had sold two of the Sante Fe units to Mr Soodhoo, and that
Mr Singh would like the bank
to assist Mr Soodhoo with finance.
Mr Hurrienarain subsequently went to meet Mr Soodhoo at the latter’s
offices in
Durban to discuss his requirements and to obtain an
understanding of Mr Soodhoo’s business, his income and wealth,
all of
which was required for the purposes of considering whether it
would be appropriate for the bank to finance the purchase by Mr
Soodhoo
himself of two units in the Sante Fe development. The
price of each of them was R4,25 million. Agreements of Sale had
been concluded between Mr Soodhoo and Hope Fountain. Mr Singh’s
interest in the matter lay in the fact that he was
the sole member of
Hope Fountain.
[11]
The bank was at one stage going to finance the Sante Fe development,
but as it turned out it
did not. It had however lent money to
Hope Fountain against mortgage bonds registered over four units in
the development.
[12]
Mr Haselau described the process for an approval of a loan. The
information concerning the client
(referred to above) was obtained
and an application for approval of the loan was drawn up and signed
by the client. The bank
would usually (as in this case) obtain
a valuation of the property concerned from an external valuer.
The use to which the
properties was proposed to be put is of
importance, as if one is dealing with residential property, the bank
would at that time
advance a higher percentage of the price of the
property for a primary residence than it would for a property bought
for letting
or investment. In this case, according to the
officials, Mr Soodhoo said that the two units he was buying would be
for use
as a primary residence for him and his family. The
bank’s credit department is in Cape Town. The credit
application
(and the valuation of the property) is considered in Cape
Town where it is granted or refused. The bank’s
department
dealing with loans on residential property is in
Johannesburg. That department instructs attorneys who, it
appears, deal
with the loan documents as well as the conveyancing.
[13]
Mr Soodhoo’s financial position was found to be good enough to
justify the two loans of
R3,4 million each. However, a lot of
his income and worth resided in the Trust, and he was accordingly
advised, when the
loans were approved in principle, that they were
subject to conditions which were recorded in an email from Mr
Hurrienarain to
Mr Soodhoo as follows.
‘
Conditions
-
Surety of the R Soodhoo Family Trust
-
Valuation of no less than R4 250 000.’
[14]
On or about the day that Mr Soodhoo was informed of the approval in
principle of his loan applications
he requested that the same loans
be granted to a close corporation which would substitute for him as
purchaser. The close
corporation in question was Hourglass.
It was a shelf close corporation owned at the time by Mr Singh, but
Mr Soodhoo would
become the sole member of it. It appears that
the grant of that application was a mere formality on the footing
that Mr Soodhoo
would, in the circumstances, also be a surety for the
due performance of the obligations of Hourglass.
[15]
The evidence of the two bank officials then went on to describe how,
subsequently, Mr Soodhoo
applied on behalf of Hourglass for finance
for the acquisition of two further units, this time for investment
purposes. For
that reason, although the price of the units was
the same as the first two, the amount to be advanced on each unit was
R2,75 million.
[16]
On this occasion the condition of the grant of the loan in principle
relating to the valuation
of the property read as follows.
‘
Receipt
of a valuation from the bank’s approved valuer, in form and
substance to the satisfaction of the bank, in respect
of R4 250 000
for which valuation is required.’
[17]
Although in the relevant emails the condition with regard to having
the property valued were
rendered differently, in the light of the
evidence of the bank officials, there is no reason to interpret them
differently.
In each case the bank would not lend the amount
requested unless an independent valuer valued the properties for and
at the request
of the bank as being at least the amount of the price
at which they were being purchased. A Mr EJ Pike, a registered
professional
associated valuer, was engaged to value each of the
properties. Mr Pike was included in a panel of independent
valuers used
by the bank. He submitted valuation reports in
respect of each of the units valuing them at R4,25 million. The
bank
(through its Cape Town credit office) found the valuations in
order and, the other conditions as to the provision of suretyships
being apparently satisfied, the loans were made, the units
transferred to Hourglass, and mortgage bonds passed over the units in
favour of the bank.
[18]
There was to be expert evidence to establish what the true value of
each unit was at the material
time, they having realised nothing like
the values attributed to them by Mr Pike when sold upon the
liquidation of Hourglass.
The plaintiff called no such evidence
prior to closing its case. Just before the defendants’
case was closed it was
recorded that the plaintiff admits that over
the period 2009 to 2012 the four units had a value of no more than
R500 000 each.
As neither Mr Pike nor any other valuers
were called, the reason for the gross disparity between the admitted
value and the one
produced by Mr Pike has not been revealed.
But presumably another admission for which the defendants’
pressed, and
the plaintiff granted, must have made a substantial
contribution to the disparity. It was to the effect that there
were no
occupational certificates for the relevant units in the Sante
Fe scheme from 19 March 2009 to 16 October 2020.
[19]
It is convenient, before moving on to the evidence of other witnesses
called by the bank, to
deal with a few matters which have a bearing
on some of the issues which have to be decided. The first of
these arose out
of the evidence in chief of Mr Haselau, who was asked
to have regard to emails to which he was not party in the bundle of
documents,
but which in their text create the impression that
payments to the bank on account of the loans in issue in this case
were emanating
from others besides Mr Soodhoo. In particular,
there is a schedule which was forwarded by Mr Soodhoo to Mr Singh on
3 December
2010, the contents of which were not in dispute.
That schedule is one of payments made to Hourglass in order to
service the
bank loans. It runs from 2 September 2009 through
to 22 November 2010. The schedule shows that an entity known as
ICT
paid R200 000 to Hourglass for that purpose on 2 September
2009 and one known as VP paid R342 000 to Hourglass on 9 March
2010. (The schedule shows also that Mr Singh paid R372 132
to Hourglass during the period in question, and Mr Soodhoo
R721 768.60.) Mr Haselau confirmed that ICT was a company
which was developing a large shopping complex known as the
Ballito
Bay Mall. He believed that it was owned by Mr Singh, Mr
Soodhoo, a Mr Ouderajh and a Mr Jackson. He believed
also that
VP was a company known as Victory Parade, which was developing a
hotel near the Ballito hospital. He understood
Mr Singh and Mr
Soodhoo to be shareholders in that company, and perhaps Mr Ouderajh
as well. Both the mall and the hotel
were under construction at
the material time.
[20]
The following emerged during the course of cross-examination of Mr
Haselau.
(a)
He did not believe that
he met Mr Soodhoo at the time that the applications for the loans in
question were received and being processed.
(b)
He was unable to
comment on Mr Soodhoo’s contention that he did not say that he
intended the first two units to be the primary
residence of him and
his family.
(c)
He confirmed, when it
was put to him, that the bank wanted to do a proper valuation of the
units. (The question had to do
with the condition that the bank
should receive such a valuation before the loan could be advanced.)
(d)
He confirmed that the
bank had funded three units in February 2009 for Hope Fountain.
As I understand the evidence these were
the penthouses upon the
security of each of which the bank lent Hope Fountain R4 182 100
(ie over R12 million in all).
(e)
On being referred to
the deeds of suretyship signed by Mr Soodhoo and apparently also by
Mrs Soodhoo, the witness said that he did
not know why she had been
asked to sign instead of merely consenting to her husband’s
execution of the documents. (It was
not an expressed condition for
the grant of the loans that Mrs Soodhoo should execute a deed of
suretyship.)
(f)
Mr Haselau did not know
the reason why there was a multiplicity of payers into Hourglass’s
account. He knew no more
than he could derive from the papers
before the court.
(g)
It did not come to the
attention of the bank at the time that these loans were being
negotiated and granted that there were no occupation
certificates for
the units in question.
[21]
The following emerged from cross-examination of Mr Hurrienarain.
(a)
The income of the Trust
was used to support the serviceability of the loans sought by Hope
Fountain. The Trust was not a mere
surety.
(b)
In filling in the
application information for the first two loans, Mr Hurrienarain
recorded that the units in question would be
Mr Soodhoo’s
primary residence and that of his children. His evidence was
that Mr Soodhoo must have told him that.
He denied that Mr
Singh told him that. It was put to him that all Mr Soodhoo had
said was that the two units would serve
as occasional holiday
apartments for him and his family. Mr Hurrienarain did not
agree with that.
(c)
It was put to Mr
Hurrienarain that he knew that the question of the value of the units
that Mr Soodhoo had bought was of importance
to him (Mr Soodhoo) and
not just to the bank. That was not how Mr Hurrienarain recalled
the matter.
(d)
Mr Hurrienarain
stressed that the documentation for the transaction was administered
by the bank from Johannesburg, by what he called
the “Home
Loans Division”. This included the suretyships, which as
presented required the signature of Mrs Soodhoo.
(e)
Concerning the
valuations from Mr Pike, Mr Hurrienarain said that he would
presumably have read them, but could make no assessment
of them.
He just looks for the figure to see whether it meets the bank’s
requirements. He accepted that he formed
no opinion about
whether the valuation was sensible. He had never been to the
Sante Fe development.
[22]
A Mr G V Usher, an attorney, was one of the co-liquidators of
Hourglass. He was called
to give evidence primarily to deal
with the issue as to the authority of Mr Soodhoo to sign deeds of
suretyship on behalf of the
Trust. The four units in question
in this case were unit numbers 17 to 20 inclusive. At the
outset of the trial the
authority of Mr Soodhoo to sign any of the
Trust deeds of suretyships was denied.
[23]
A little earlier in the trial it was placed on record that only the
resolutions of the Trustees
giving the requisite authority in respect
of units 19 and 20 were in dispute. The position changed during
the course of Mr
Usher’s evidence. It was placed on
record that the resolutions authorising the Trust’s suretyships
in respect
of units 18 and 19 were authorised.
[24]
Mr Usher’s evidence was to the effect that an enquiry was
convened in respect of Hourglass
at the request of the bank. It was
conducted by a well-known attorney, Mr Geyser. Mr Soodhoo was
subpoenaed to appear but
did not. Ms Ramdayal, the conveyancer
who attended to all of the transactions, did appear with her files.
These were
handed in formally on the record. Mr Usher was
requested in advance of his evidence to attend upon Mr Geyser to
obtain the
necessary copies of the documents which were submitted at
the enquiry, and he recovered and made copies of three of the
resolutions
by the Trustees authorising Mr Soodhoo to execute the
deeds of suretyship. He produced them in evidence without any
objection
as to the secondary nature of the evidence. Two of
the three which he found related to units 17 and 20.
[25]
The Trustees were not called to deny their signatures. (The
question as to whether Mr Soodhoo’s
signatures on the Trust’s
resolutions were denied was not really canvassed in evidence.
It was irrelevant because he
signed the deeds of suretyship, a fact
which became common cause.)
[26]
In addition Mr Soodhoo confirmed that the other Trustees were well
aware of the fact that he
was to execute deeds of suretyship in
respect of units 17 and 20. It was not argued that the
authorising resolutions of the
Trust had to be reduced to writing.
[27]
There is no need to go further into the evidence of Mr Usher.
In my view the authority
of Mr Soodhoo to sign the deeds of
suretyship on behalf of the Trust is proved on a balance of
probability. Ms Ramdayal was
not called to give evidence.
Mr Usher said that she no longer practised and that he did not know
where she could be found.
It is worth mentioning that she sent
letters to the bank after the registration of each of the mortgage
bonds enclosing what she
called “registration documents”.
Each of these letters enclosed not only the so-called “registration
documents”,
but also the suretyships of the Trust and those
admittedly signed by Mr Soodhoo in his personal capacity, and thought
by the bank
to have been signed also by Mrs Soodhoo. At the
lower right hand corner of the deeds one sees the same imprint on the
suretyships
as is found on the mortgage bonds. It is
“
GhostConvey 11.4.2.11
”
.
I mention this because, given the presentation of especially the deed
of suretyship prepared for signature by both Mr and
Mrs Soodhoo, and
the fact that those documents were transmitted by the conveyancer to
the bank, the bank’s concession that
the apparent signature of
Mrs Soodhoo is not hers does not appear to reflect upon the bank’s
integrity. It was not
a requirement stipulated by the bank that
Mrs Soodhoo should sign any deed of suretyship. It should also
be observed that
in terms of the agreements of sale of the units,
conveyance of any unit, and the registration of any mortgage bond
over any unit,
had to be attended to by Ms Ramdayal. She was
the nominee of Hope Fountain.
[28]
The final witness called by the bank was Mr Hemanth Singh who is an
attorney and businessman.
His evidence was to the following
effect.
(a)
In June 2009 Mr Soodhoo
and Mr Singh secured a 30% interest in ICT at a cost of R15 million.
Mr Soodhoo paid in R7 million
and Mr Singh the balance.
(b)
Each of them were
shareholders and directors of ICT and Victory Parade. Both of
these investments required funding.
(c)
There was a promise (at
some or other level) of funding for the Ballito Bay Mall from Rand
Merchant Bank. (There was a prior
promise by Nedbank, but that
was revoked.) Money was required on a short term basis in order
to complete the construction
works necessary to enable shops to be
handed over to Checkers and Game on 1 October 2009, in order to allow
them two months to
fit out their premises to open in December.
None of the other shareholders had any money.
(d)
It appears that Mr
Singh’s ability personally to fund further borrowings was
already used up. The bank finance for the
mall would collapse
if Checkers and Game did not open on time.
(e)
Mr Singh did not have
sight of the financial information relating to Mr Soodhoo and the
Trust which had been submitted to the bank
in support of the loan
applications. He accepted Mr Soodhoo’s statement that he
could not without more simply finance
the immediate requirements of
ICT and Victory Parade.
(f)
Mr Singh was the sole
member of Hope Fountain, and he and Mr Soodhoo devised a plan which
would involve Mr Soodhoo buying the first
two units and Hope Fountain
using the money to assist ICT with bridging finance.
(g)
He subsequently advised
Mr Soodhoo that it would be better to use a close corporation
(Hourglass) to buy the units as the idea was
that the bridging
finance would only be required for 60 to 90 days, after which ICT’s
bank finance should come through, and
the bridging finance provided
to ICT repaid. The bank’s loans on the two units would be
repaid and transferring the
member’s interests in Hourglass
from Mr Soodhoo back to either Hope Fountain or Mr Singh in order to
return the two units
would be cheaper and easier than transferring
the two units from Mr Soodhoo to Hope Fountain (or Mr Singh).
That was agreed.
(h)
The conveyancers
attending to registration of the bonds over the two units was
instructed to issue her guarantees in favour of a
company known as
Gearwise, which was attending to the work on the mall necessary to
accommodate Checkers and Game. The monies
were in fact paid
directly to ICT, and not to Hope Fountain.
(i)
The balances of the two
purchase prices (ie what would ordinarily be the deposits paid by a
purchaser to a seller) were never paid
to Hope Fountain and were
never intended to be paid. (The agreements in respect of all four
units are silent on the arrangements
for payment of the balance of
the price in each case.)
(j)
Subsequently he and Mr
Soodhoo decided to follow the same arrangement in respect of another
two units in Sante Fe in order to raise
money necessary for Victory
Parade. Victory Parade was in the throes of building its hotel
and was in need of finance.
The proceeds of the second two
loans went to Victory Parade.
(k)
Insofar as the purchase
price of R4,25 million per unit was concerned, Mr Singh’s
evidence was that he determined the price
which he believed to be the
market value of the units. Again the difference between the loans
granted by the bank and the price
in each case was not paid by
Hourglass.
[29]
Mr Roy Soodhoo was the only witness called for the defendants.
He said that he first became
involved with Mr Singh early in 2009
when there was a suggestion that Mr Singh could help or involve him
in investments.
He was led to believe that Mr Singh was worth a
very considerable sum of money. He claims to have been
impressed by Mr Singh
both as a man of substance and as a lawyer, and
said that on the latter account he trusted him even more.
[30]
He had meetings with Mr Singh on the subject of investments and
eventually he was taken to see
the Ballito Bay Mall which was then
under construction. He was impressed. His attitude was
that one makes money, or
at least gets out what you put in, when you
are involved in property investment. Following that Mr Soodhoo
started to invest
in ICT. The company known as Gearwise was at
that time a contractor on site and was not being paid. That
appears to
have been the motive (perhaps on Mr Singh’s part)
for soliciting further investment.
[31]
Thereafter Mr Singh invited him to invest in the hotel through the
company known as Victory Parade.
He agreed to do that.
[32]
Later he was once again approached by Mr Singh who said he needed
money and had flats which were
worth R4,25 million each. Mr
Soodhoo took the opportunity to state more than once that Mr Hemanth
Singh represented to him
that the bank would value those flats at
R4,25 million.
[33]
After he had signed the sale agreements he was contacted by Mr
Hurrienarain to arrange finance.
That was done. He was
asked whether he discussed how much loan finance was being sought and
his answer was that he never
asked Mr Hurrienarain that question.
He said his concern was the valuation.
[34]
Mr Soodhoo said that Hourglass became the purchaser under the
transaction because Mr Singh had
said to him that it would be better
to put the flats into the ownership of a close corporation so that if
he sells them it would
make it easier. Mr Singh offered him the
shelf corporation.
[35]
Mr Soodhoo said that he did not ever see Mr Pike’s valuation.
Nor could he remember
having been told specifically about it.
As I understood his evidence, he knew that the grant in principle of
the loan was
dependent upon the bank receiving a satisfactory
valuation of the property, and assumed that the bank had received
such because
he was advised ultimately that the loan was granted.
[36]
According to Mr Soodhoo various documents which were required to be
signed in respect of the
first two units were brought to him at his
office. He thinks Mr Hurrienarain brought them but cannot be
certain. (Mr
Hurrienarain did not accept that he took documents
to Mr Soodhoo to be signed by him.) Mr Soodhoo denied that the
persons
who witnessed his signature were actually present.
[37]
In his evidence in chief Mr Soodhoo was referred to the copy of the
trustees’ resolution
authorising him to sign a deed of
suretyship in respect of Unit 18 (one of the first two) for an amount
of R3,4 million, and confirmed
the signatures of his Trustees to that
document. Without any explanation he also confirmed the
signatures of the Trustees
to a resolution for the provision of a
suretyship for R3,4 million, a document produced by the defendants in
their bundle.
That resolution purports to stipulate a proviso
to the authority it conveys, that “a valuation of not less than
R4 250 000
per unit be confirmed by the bank”.
It was never suggested that the content of that resolution had been
shown to any
of the bank’s officials. Mr Soodhoo offered
no explanation as to the duplication of authorities and the conflict
between
them. His explanation of the circumstances in which he
signed the documents relating to the first two loans does not explain
how the Trustees resolutions came to be executed and delivered to the
bank. No more need be said about this as I am satisfied
that Mr
Soodhoo was indeed authorised by the Trust to sign all of the
suretyships in question.
[38]
When asked why Hourglass came to buy the second pair of units Mr
Soodhoo’s answer was that
Mr Singh had told him that the value
of the units was going up and so he decided to take another two.
[39]
On the subject of the parting of the ways between Mr Singh and him,
Mr Soodhoo said that he had
kept up his end of the bargain in
connection with the development of the Ballito Bay Mall (ICT), but Mr
Singh did not. Concerning
the affairs of ICT, he claimed that a
lot of fraud was going on which he had picked up later. In
about August 2012 he took
a decision to sell the units that Hourglass
had bought but an estate agent said he would never get the price he
had paid.
He employed a valuer who told him that, as is, the
units were worth about R500 000 each and would be worth about
R900 000
in good condition. Apparently this valuer
informed Mr Soodhoo of the problem with occupation certificates.
Concerning
these revelations, he said that he was shocked and that he
had been taken in by someone he had trusted (ie Mr Singh). He
claimed that with hindsight he came to believe that there was a
relationship between the bank and Mr Singh. (By that I
understood
him to convey a suspicion that the bank had combined with
Mr Singh in order to put Mr Soodhoo in the position in which he found
himself with regard to the units.)
[40]
Under cross-examination the following emerged concerning Mr Soodhoo’s
property investments.
(a)
He had invested R17,5
million in the Ballito Bay Mall project (ICT).
(b)
He had invested R7,5
million in Victory Parade (the hotel development).
(c)
He accepted that these
expenditures were part of his investment business.
(d)
He accepted that the
Sante Fe units were the third business venture made available to him.
[41]
Mr Soodhoo accepted that he was impressed by Mr Singh, that he placed
reliance on what Mr Singh
told him about the Sante Fe units, and that
it was Mr Singh’s representation which informed his decision to
buy the units.
That was on both occasions. Nevertheless,
he took more than one opportunity to reiterate that what Mr Singh had
said to him
was that the bank would find the requisite value (R4,25
million) in each of the units.
[42]
Mr Soodhoo reiterated his denial of the fact that he informed the
bank officials that the first
two units would comprise his primary
residence. But he added that he could not recall whether he had
told the bank officials
that he proposed to use the first two units
for what he called “holidays and weekends”. His
evidence was that
after two years he decided that the units had
better be rented out. At that time he had only stayed at one of
the units for
a night on two occasions. His evidence was that
one unit had some furnishings installed – that is to say a
lounge chair,
a lounge suite and a small bar fridge. When asked
to explain why the loans granted on the security of the second pair
of
units were lower than those granted on the first pair, Mr Soodhoo
claimed not to know, and suggested that it was perhaps based on
his
income that the bank reduced the quantum of the loans on the second
pair.
[43]
Mr Soodhoo endorsed the proposition that the loans to Hourglass had
been granted upon the footing
that they would be serviced and repaid
out of the income of the sureties. Once the loans were repaid
the units would either
be kept or sold. He said that the
investments in the units were long term, as in his experience
“building is a long
term investment”.
[44]
Mr Soodhoo’s denial of Mr Singh’s version of events
raised the question as to the
“deposits” on the four
units (ie the difference between the purchase price and the amount of
the loan in each case).
Mr Singh had said in evidence that
nothing had been paid in that regard, and that bank statements could
be examined to establish
that. Under cross-examination Mr
Soodhoo’s evidence was that he had indeed paid the deposits.
He said that he
had given the money in cash to Mr Singh –
“paper money” – over a period of time, and not in
one hit.
He said that he had no proof that the payments had
been made. This allegation that these monies had been paid in
cash was
not put to Mr Singh when he was cross-examined. A
little arithmetic reveals that the amount in question was R4,7
million.
[45]
Mr Soodhoo was referred to another schedule of payments into the
account of Hourglass (for onward
payment to the bank) which went
beyond the time period of the schedule referred to earlier in this
judgment. This schedule
ran up to March 2012. No further
payments had been received from either ICT or Victory Parade after
March 2010. By
March 2012 Mr Soodhoo had paid (in round
figures) R1 518 000 to Hourglass and Mr Singh R922 000.
When pressed
on the apparent contradiction between these
figures, and especially Mr Singh’s contribution to the
instalments Hourglass
had to pay to the bank, and Mr Soodhoo’s
version that the transactions with regard to the four units comprised
ordinary arms-length
investments, Mr Soodhoo’s explanation was
that Mr Singh was making these payments to Hourglass as set-offs
against the shortfall
in his contribution to the ICT investment (ie
the shortfall when measured against Mr Soodhoo’s
contribution). No details
at all that matter regarding these
transactions were given. When challenged as to why there is no
accounting with the regard
to the ICT investment, and Mr Singh’s
contribution to Hourglass, Mr Soodhoo gave the answer that it was
unnecessary because
Mr Singh was well aware of the shortfall and why
he was making contributions to Hourglass.
[46]
Mr Soodhoo was shown two emails which are of some significance in
this matter.
(a)
On 29 December 2011 he
sent an email to the bank asking for the debits in respect of two of
the Hourglass loans to be raised against
ICT, and furnishing the ICT
bank account as the source of such payments. His explanation,
as far as it went, was that Mr
Singh had asked him to send that
email.
(b)
The second email of
some significance was one he sent to Mr Singh in May 2012. The
relevant portion reads as follows.
“
Hemanth,
you need to get confirmation if ICT will pay the H/Glass loan
otherwise the burden will fall on us. I trust you know
how best
to deal with it. You still need to see how you are going to
arrange the arrears which I am sure it will not be long
before the
bank acts’.
(c)
Mr Soodhoo had no
explanation for these emails, which would reconcile them with his
denial of Mr Singh’s version of events.
[47]
Counsel have argued that it is necessary in this case to resolve the
dispute of fact between
Mr Singh and Mr Soodhoo concerning the
underlying cause of the decision made by Mr Soodhoo (and accordingly
Hourglass) to buy the
units and ask for and accept loan finance from
the bank. I have no hesitation in concluding that in its
essential features
Mr Singh’s account must prevail.
[48]
The correspondence which post-dates the transactions at issue in this
case supports and renders
probable Mr Singh’s explanation for
how it came about that, with the creditworthy support of Mr Soodhoo
and the Trust, Hourglass
bought the units in Santa Fe. When one looks
at the sale agreements in the light of Mr Singh’s evidence, one
sees that they
look more like documents drawn up between the parties
thereto for the purposes of generating the finance which Mr Singh
says was
the purpose of the transactions. The clauses which would
ordinarily be all important in the case of a normal purchase of
residential
units are not filled in.
[49]
Mr Soodhoo was a peculiarly unsatisfactory witness. In areas
that matter his answers appeared
to me to be glib and as vague as he
felt he could get away with. The issue of the payment of the
difference between the price
of each unit and the amount lent by the
bank on each unit, and how that was dealt with, not only supports Mr
Singh’s description
of the transactions, but dealt a heavy blow
to any argument that Mr Soodhoo should be regarded as a credible
witness. Mr
Soodhoo’s evidence that he paid some R4.7
million to Mr Singh in cash over a period of time clearly took his
own counsel
by surprise. Mr Singh’s evidence that the
amounts making up the sum had not been paid, and were not intended to
be
paid, was not challenged with an assertion that payment had been
made; let alone in the fashion contended by Mr Soodhoo in his
evidence.
SECTION 15 OF THE
MATRIMONIAL PROPERTY ACT.
[50]
No evidence was led to explain the presence of the apparently forged
signatures of Mrs Soodhoo
on the deeds of suretyship which were
supposed to be signed by her and her husband. In the case of the bank
this might be explained
by the fact that it was late in the day, as
far as could be judged from the bench, that the bank’s lawyers
realised that
they could not prove the authenticity of Mrs Soodhoo’s
apparent signature through the intended evidence of the bank’s
handwriting expert.
[51]
It has been argued on behalf of Mr Soodhoo that, for want of written
consent on the part of Mrs
Soodhoo, his liability (and consequently
the liability of the joint estate created by his marriage to Mrs
Soodhoo) is not established.
For that proposition Mr Soodhoo
relies on the provisions of s 15 of the Matrimonial Property Act 88
of 1984 (the ”Act”).
[52]
The position is that all of the provisions of s 15 of the Act which
may have a bearing on the
question as to whether Mr Soodhoo is liable
on the deeds of suretyship, as his signature to the document
suggests, must be considered.
In
Vukeya v Ntshane and Others
[2020] ZASCA 167
(11 December 2020) the court decided an appeal in a
matter similar to the present one applying the provisions of s
15(9)(a) of
the Act (which I will come to) despite the fact that the
applicability of that provision had not been raised in the case.
The following appears in paragraph 20 of the judgment.
“
The
High Court erred by not considering s 15(9)(a) in its enquiry.
Despite the fact that the appellant did not refer expressly
to s
15(9)(a) in his answering affidavit, as counsel for the first
respondent contended, as a trier of facts, the High Court was
bound
to consider s 15 in its entirety and not cherry pick certain
sections. The interpretation of any document including
legislation must be approached, as this court has indicated in
numerous judgments, contextually and holistically, taking into
account the purpose of the legislation under discussion. In
this case, the purpose of the provision was to strike a balance
between the interests of a non-consenting spouse, on the one hand,
and a third-party purchaser, on the other. As aptly noted
in
Marais
,
“[w]hile the consent requirement is designed to provide
protection to the non-contracting spouse against maladministration
of
the joint estate by the contracting spouse, the “deemed
consent” provision in s 15(9)(a) is intended to protect
the
interests of a
bona fide
third-party who contracts with that spouse”.”
(The reference is to
Marais and Another NNO vs Maposa and Others
2020 (5) SA 111
(SCA) para 26.)
[53]
The principal purpose of s 15 of the Act was the clarification of the
powers of spouses married
in community of property following upon the
abolition of the marital power and the granting of equal powers to
spouses married
in community of property provided for in ss 11,12 and
14 of the Act. To a substantial extent s 15 is a balancing
exercise.
For the protection of the community estate the section
provides that notwithstanding the general rule that either spouse may
perform
any juristic act with regard to the joint estate without the
consent of the other spouse, there are exceptions or restrictions,
the non-observance of which will put innocent third parties at risk.
For that reason, s 15 also provides for the protection
of a
third-party who may do business with an errant spouse, and unfairly
become the victim of the invalidity of a transaction with
that errant
spouse who acts without the required consent of the innocent spouse.
In that sense s 15 constitutes a single
package of measures designed
to regulate the matters mentioned in the section. If I were not
bound by the decision in the
Vukeya
, I would nevertheless be
inclined to the view expressed therein that a finding that a
transaction is invalid for want of consent
of a spouse cannot be made
without considering all of the provisions s15 of the Act relevant to
the transaction under consideration.
[54]
The provisions of s 15 relevant to the current inquiry are the
following.
’
15.
Powers of Spouses.
(1)
Subject to the provisions of subsections
(2), (3) and (7), a spouse in a marriage in community of property may
perform any juristic
act with regard to the joint estate without the
consent of the other spouse.
(2)
Such a spouse shall not without the written
consent of the other spouse-
…
(h)
bind himself as surety.
…
(5)
The consent required for the performance of the acts contemplated in
paragraphs …
and
(h) of subsection (2) shall be given separately in respect
of each
act and shall be attested
by two
competent witnesses.
(6)
The provisions of paragraphs … and (h) of sub-section (2) do
not apply where
an act contemplated in those paragraphs is performed
by a spouse in the ordinary course of his profession, trade or
business.
…
(9)
When a spouse enters into a transaction with a person contrary to the
provisions of
subsection (2) or (3) of this section, or an order
under s 16(2), and-
(a)
that person does not know and cannot reasonably know that the
transaction is being
entered into contrary to those provisions or
that order, it is deemed that the transaction concerned has been
entered into with
the consent required in terms of the said
subsection (2) or (3), or while the power concerned of the spouse has
not been suspended,
as the case may be;
(b)
that spouse knows or ought reasonably to know that he will probably
not obtain the
consent required in terms of the said subsection (2)
or (3) or that the power concerned has been suspended, as the case
may be,
and the joint estate suffers a loss as a result of that
transaction, an adjustment shall be effected in favour of the other
spouse
upon the division of the joint estate.’
[55]
In the present case the following questions arise under s 15 of the
Act.
(a)
Did Mrs Soodhoo provide
written consent as required by ss 15(2) and (5) of the Act?
(b)
If the answer is in the
negative, did Mr Soodhoo provide the suretyships in the ordinary
course of his profession, trade or business
as contemplated by
subsection 6?
(c)
If the answer to the
second question is in the negative, is Mrs Soodhoo’s consent
deemed to have been given as required by
ss 15(2) and (5) because the
bank could not reasonably have known that the transactions had been
entered into contrary to those
provisions?
[56]
If Mrs Soodhoo had signed the deeds of suretyship as the bank first
set out to prove, then s
15 of the Act would not have been engaged at
all. The community estate would have been rendered liable under
the signature
of both spouses.
[57]
If Mrs Soodhoo did not sign the deeds of suretyship (as is now
conceded), one is left with Mr
Soodhoo’s assertion that his
wife did not consent in writing to the deeds of suretyship, and with
the failure of the bank
to tender any other evidence of the existence
of such written consent. Notwithstanding my not insubstantial
misgivings about
Mr Soodhoo’s evidence, the conclusion, for the
purposes of this case, must be that the required written consent was
not given.
[58]
In
Strydom v Engen Petroleum Ltd
2013 (2) SA 187
(SCA) para
[13] it was held that
‘…
it
does not suffice for a person seeking to rely on s 15(2)(
h
)
to say that they were married in community of property and that their
spouse did not consent to the transaction in order to bring
themselves within the ambit of the section. That is because the
section only operates in certain limited circumstances.
If they
wish to rely upon it they must bring themselves within the full range
of operation.’
Properly construed,
according to the majority judgment in
Strydom
, the provisions
of s 15 of the Act requiring written consent to a spouse binding
herself or himself as surety do not apply to the
provision of a
suretyship in the ordinary course of the profession, trade or
business of the spouse executing the deed. It
was accordingly
for Mr Soodhoo to establish that he did not bind himself as surety in
the ordinary course of his business.
[59]
Counsel for Mr Soodhoo has argued that what emerges from his evidence
is that the first two units
were bought as holiday homes, and the
second two as property investments. As to the first two, they
were not used as holiday
homes in the years following their purchase,
and I reject Mr Soodhoo’s evidence that he intended to use them
as holiday homes.
Mr Soodhoo mentioned on a number of occasions
that he regarded investment in immovable property as good as you
seldom lost money
on such transactions. I think it fair to say
that his version is that all four units were bought as investments.
[60]
Counsel for Mr Soodhoo developed his argument, with reference to
paragraph 10 of the judgment
in
Strydom
, along the lines that
the words “ordinary course of his profession, trade or
business” are intended to refer only to
whatever business
constitutes or generates the principal income of the spouse. As
I understand the argument it seeks support
in the final sentence of
paragraph 10 of the judgment. However, that sentence must be
read in the context of the paragraph,
which in relevant part reads as
follows.
‘
Where
a business is carried on through an incorporated vehicle such as a
company or close corporation, or even an unincorporated
vehicle, such
as a partnership or trust, the question to be answered is whether the
surety’s involvement in that business
is his or her business
and whether the execution of the suretyship was in the ordinary
course of the surety’s business, not
the business of the
company, close corporation, partnership or trust. It may not be
the surety’s business if they are
a mere salaried employee,
having no commercial interest in the business’ success or
failure. However, a person who
holds a number of non-executive
directorships that are the principal source of their income may well
when executing a deed of suretyship
for one of those companies be
acting in the ordinary course of their business.’
Quite obviously the
last sentence in the passage quoted above merely furnishes an example
of a connection between a spouse and a
company (ie non-executive
directorship), unaccompanied by a share in the company, which may
justify a suretyship in favour of such
company without the consent of
the surety’s spouse when the surety’s principal income
flows from that and other non-executive
directorships. The
learned Judge had no intention of restricting the ambit of the
operation of s 15(6) of the Act to the
“principal”
profession, trade or business of the spouse in question.
[61]
Strydom’s
case,
Amalgamated Banks of South Africa Bpk
v De Goede
en ‘n Ander
1997 (4) SA 66
(SCA) and the
unreported judgment of Hurt J in this division in
Investec Bank
Ltd and another v Naidoo and others
(D&CLD Case No 9640/98,
referred to in paragraph 12 of the judgment in
Strydom
) all
endorsed the proposition that the investment a party makes in a
corporate vehicle justifies a conclusion that standing surety
for the
corporate body may be regarded as an act in the ordinary course of
the surety’s business when the purpose is, as
it will almost
inevitably be, the advancement of the success of the investment.
[62]
Accordingly, on Mr Soodhoo’s version the suretyship he signed
did not require his wife’s
consent under s 15 of the Act.
But Mr Soodhoo’s version has been rejected.
[63]
Counsel for Mr Soodhoo has argued that on Mr Singh’s version
the transaction with the bank
which generated the need for the
suretyships was a “scam”, and that this took Mr Soodhoo’s
guarantees outside
the scope of the “ordinary course” of
business.
[64]
Counsel for the bank has argued that Mr Singh’s version
established that the purpose of
the transactions with the bank was to
generate the capital required:
(a)
in the case of the
first two transactions, to save the investments in ICT (ie Ballito
Bay Mall); and
(b)
in the case of the
second two transactions, to save the investments in Victory Parade.
[65]
As I understand
De Goede’s
case (at 77 – 78) there
is a perhaps distant relationship between the “ordinary course
of business” dealt with
in s 29 of the Insolvency Act, 24 of
1936, and s 15(6) of the Act. With reference to,
inter alia
,
Ensor NO v Rensco Motors (Pty) Limited
1981 (1) SA 815
(A) the
court in
De Goede
held that whereas the objective test under
the Insolvency Act examined the ordinary course of business of
solvent practitioners,
the enquiry in the present context is simply
into the ordinary conduct of business persons. In
Ensor’s
case (at 825A) the court held that to determine whether an alienation
was “in the ordinary course” of a business one
must have
regard “to what is done or would be done in other similar
businesses in similar circumstances”. The
circumstances
in the present case were characterised by a problem which required to
be addressed urgently.
[66]
In order not only to save but also to advance the investment of some
R15 million which Mr Singh
and Mr Soodhoo had already made in ICT, it
was necessary to address the cash flow problems with which ICT was
confronted, and which
could break the investment already made in the
construction of the shopping mall. It appears clear that Mr
Singh’s
credit had been exhausted. However, he had the units in
Santa Fe which were available to secure borrowings from the bank if
the
bank was satisfied with the creditworthiness of the person whose
obligation it would be to service the mortgage finance. It
is
not disputed that Mr Soodhoo was very much such a person.
(Judging from the undisputed statement of assets and liabilities
and
income enjoyed by him and the Trust, which was presented to the bank,
Mr Soodhoo may very well have found it possible to provide
the
finance needed for ICT directly from his own resources. One can only
assume that, perhaps wisely, he felt it better to use
borrowed
funds.) As between Mr Singh and Mr Soodhoo it was agreed that
the sales of the units would be undone as soon as
ICT’s finance
came through and the bank was consequently repaid. From the
bank’s perspective, its essential requirements
would be met in
the sense that:
(a)
the properties would be
transferred to Hourglass;
(b)
Hourglass would pass
mortgage bonds over the properties in favour of the bank; and
(c)
Mr Soodhoo and the
Trust would be liable under their suretyships if anything should go
wrong.
It was not argued,
nor could it have been, that it was outside the ordinary course of
business for a bank to require a member of
a close corporation like
Hourglass to stand surety for its borrowings.
[67]
What Hope Fountain, as the seller of the units, proposed to do with
the proceeds of the sale
was not a concern of the bank. It was
not put to the bank witnesses that it ought to have been.
[68)
Notionally the same outcome could have been achieved if Hope Fountain
had mortgaged the properties
in favour of the bank and Mr Soodhoo and
the Trust had stood surety for the discharge of those mortgage
obligations. However,
the requirement as between Messrs Singh
and Soodhoo that the properties actually be transferred to a close
corporation of which
Mr Soodhoo would be the sole owner gave a
measure of security to Mr Soodhoo which, on an overview of the
transaction, was fair
and reasonable.
[69]
The predicament in which Mr Singh and Mr Soodhoo found themselves
with regard to their investments
in ICT and Victory Parade required
some lateral thinking. In my view one cannot say that ordinary
persons of business would not
have financed the investment in ICT and
Victory Parade in the fashion in which Mr Singh and Mr Soodhoo sought
to do. What
is normal and ordinary surely turns on the
circumstances to be addressed.
[70]
On this analysis, the reason why counsel for Mr Soodhoo argued that
the transactions with the
bank were “a scam” really lies
in the fact that Mr Soodhoo said that he intended the first two units
to become his
primary residence. Mr Soodhoo denies that he said
that and Mr Singh said he was not aware that Mr Soodhoo had said
that.
The purpose of the representation was, on the evidence
before me, to solicit a larger loan than would be granted if it was
disclosed
to the bank that the purpose of the transaction was
investment (as it was in the case of second two units). For the
rest
there is no evidence before me to suggest that the bank would
not have gone along with the transactions if it had been disclosed
to
them that
(a)
Hope Fountain intended
to disburse the funds in support of the investments of Mr Singh and
Mr Soodhoo in ICT and Victory Parade;
(b)
it was the intention of
the parties to unravel the transactions as soon as finance was
available from ICT and Victory Parade, respectively.
[71]
Making misrepresentations to a bank in order to secure finance from
it cannot in our law be regarded
as the ordinary course of business.
I say this notwithstanding the widespread experience of lawyers and
bankers that statements
of assets and liabilities, and of
expectations of income, provided by bankers’ clients in pursuit
of finance, are often more
optimistic than is justified, and
unreliable. If such misstatements are made in order to secure a
credit grantor’s
acceptance of the quality of a surety, is the
surety entitled to escape liability under s 15 of the Act on the
basis that the misrepresentation
made as to the creditworthiness of
the surety means that the suretyship was not executed in the ordinary
course of business, notwithstanding
the fact that the transaction
otherwise, objectively speaking, has all the hallmarks of one
executed by both parties in the ordinary
course of business? It
seems to me that the question need not be answered in this case.
[72]
It is not disputed that the statements of assets and liabilities, and
income, relating to Mr
Soodhoo and the Trust were a fair and proper
exposition of their financial positions. Neither is it
disputed, for that matter,
that those disclosures justified the
bank’s belief that, between them, Mr Soodhoo and the Trust were
good for the guarantees
they gave.
[73]
Mr Soodhoo’s misrepresentation regarding his and Hourglass’s
intentions for the first
two units meant that the loan agreements
between Hourglass and the bank for the first two units were in each
case for a higher
amount than the bank would have granted but for the
misrepresentation. But as between Hourglass and the bank, the
latter
was the wronged party. If any remedy lay in consequence
of the misrepresentation, it would be at the instance of the bank
against Hourglass. Objectively speaking the suretyships
provided by Mr Soodhoo were to protect and advance his property
investments in ICT and Victory Parade, via Hourglass. The fact
that Hourglass received what, in the greater scheme of things,
was a
little more by way of finance than it would otherwise have got but
for the misrepresentation, does not affect an overall
objective
evaluation of the circumstances of business which brought Mr Soodhoo
to execute the deeds of suretyship.
[74]
I conclude that also on Mr Singh’s version of the transactions,
that is to say the accepted
one, the suretyships were provided by Mr
Soodhoo in the ordinary course of his business as a property
investor.
[75]
Given the conclusion I have reached that the deeds of suretyship
signed by Mr Soodhoo, but not
by his wife, were executed in the
ordinary course of his business, there is no need to make a decision
on the impact of s 15(9)
of the Act.
[76]
Nevertheless, in case I am wrong concerning the impact of s 15(6) on
this case, I make the observation
that on the evidence before me it
is established that the bank did not know and could not reasonably
have known that the suretyships
were provided without the written
consent of Mrs Soodhoo. Accordingly the transactions are deemed
to have taken place with
the written consent of Mrs Soodhoo.
[77]
It will be recalled that each of the deeds of suretyship had been
sent by the conveyancer (after
transfer and the registration of
mortgage bonds in favour of the bank) to the branch of the bank with
which Mr Soodhoo had negotiated
the loan finance. It is not
clear whether it was the Johannesburg branch of the bank (which dealt
with residential mortgage
finance, and instructed the conveyancer) or
the conveyancer that decided that the easiest way of securing Mrs
Soodhoo’s written
consent was by requiring her also to sign the
deeds of suretyship.
[78]
Mr Soodhoo offered no explanation at all for what he was thinking
when, according to him, he
signed the deeds of suretyship and
returned them without his wife’s signature, when clearly the
bank required his wife’s
signature. From what little
emerges of the relationship between Mr and Mrs Soodhoo, it seems most
unlikely that Mr Soodhoo
would have left it to the bank to make
arrangements with his wife to sign the suretyships.
[79]
The position is that the suretyships handed to the bank were on the
face of it in compliance
with the Act. I am not sure what a
reasonable banker could have done in these circumstances in order to
achieve certainty
that it was Mrs Soodhoo who had signed, short of
implying that either Mr Soodhoo, or the conveyancers who sent the
signed deeds
to the bank, were not necessarily to be trusted.
It is not without significance that right to the trial the bank
pursued
its contention that Mrs Soodhoo had signed the deeds of
suretyship. I was informed by counsel for the bank that the
contention
that she had signed was abandoned because the authenticity
of the specimen signatures which the bank’s handwriting expert
had relied upon could not be established. Indeed, a
supplementary report from the defendants’ handwriting expert,
presented to me in the bundle of expert summaries, recorded the
differences between the specimens relied upon by the bank’s
expert, and the known genuine and authentic signatures available to
the defendants’ handwriting expert. It appears
that the
bank had been misled by other forged versions of Mrs Soodhoo’s
signature.
COMMON MISTAKE
[80]
The defendants argue that the bank, Hourglass, the Trust and Mr
Soodhoo laboured under a common
mistake concerning the value of the
units when they contracted with each other. Relying on
Dickinson Motors (Pty) Ltd v Oberholzer
1952 (1) SA 443
(A) at
450 it is argued that the Trust and Mr Soodhoo are entitled to avoid
any liability as surety, and that indeed, Hourglass
would be entitled
to avoid any liability under the loan agreements.
[81]
This argument is flawed in many respects, and I see no need to enter
into a discussion of all
of them. I propose to traverse what is
necessary without becoming immersed in matters of legal principle.
[82]
Firstly the argument is founded upon the proposition that Mr
Soodhoo’s version of the transactions,
and not Mr Singh’s
version, is found to be true. On Mr Singh’s version the
whole purpose of the transaction was
to secure as much finance from
the bank as could be got. Mr Soodhoo’s evidence that it
was absolutely crucial from
his perspective that the property should
be worth the prices he had already agreed to pay before he saw the
bank can safely be
rejected. In any event there is no evidence
that he took any steps whatsoever to establish that each unit he was
buying was
worth R4,25 million before signing the sale agreements
with Hope Fountain. He did not disclose to the representatives
of
the bank with whom he dealt that he was uncertain that he was
getting value for money at the prices he had agreed to pay. I have
no
doubt that had he done so the bank would have told him that they
could not either guarantee the value, nor conclude a contract
upon
the basis that it was conditional upon such value existing.
[83]
Even assuming, for the purposes of argument, that Mr Soodhoo was
genuinely mistaken in the sense
that he concluded the contracts in
the firm and honestly held belief that each unit was worth the price,
the bank did not make
the same mistake: ie there was no common
error.
[84]
The condition laid down by the bank when granting the loans in
principle, upon which its ultimate
decision to grant or refuse the
loans would depend, was that a valuer should value the properties at
least at the purchase price
of each of them. That condition was
fulfilled. On that footing the bank entered into the contracts,
placing their trust
not in the fact that each unit was worth the
price, but in the fact that a sworn valuer had expressed the opinion
that each was
worth the price. There is a difference between
the two. The bank would have realised, even if Mr Soodhoo claims that
he did
not, that it would have been entirely unbusinesslike to enter
into transactions of this nature (loan agreements and suretyships)
upon the footing that either party could resile if it could establish
subsequently that the property with respect to which the
finance had
been granted was worth something less than the price paid for it.
[85]
Expanding on this argument, the Trust and Mr Soodhoo contend that the
suretyships fall to be
rectified, because, whereas there was a common
intention that the transactions were subject to the condition that
the market value
of each of the units must be at least R4,25 million,
that condition was erroneously omitted from the deeds of suretyship.
[86]
In my view what I have already said is the answer to this argument.
However, it is worth
noting that clause 4 of each of the deeds of
suretyship contains a provision which reads as follows.
‘
This
suretyship is unconditional and there are no conditions precedent
suspending its operation.’
The wording sought
to be added by rectification in the amended plea is not perfectly
clear. What is contemplated is a proviso
to clause 4, and I
think that it is intended to read as follows.
‘…
provided
that any property bonded in favour of Nedbank by the principal debtor
in respect of its indebtedness has a market value
of not less than
R4 250 000.’
The proposition that
the bank intended that, or would have agreed to that, verges on the
preposterous. That proposition
was certainly not put to
the bank’s witnesses.
MISREPRESENTATION
[87]
The defendants’ plea goes so far as to assert that the bank
(presumably represented by
Messrs Haselau and Hurrienarain)
fraudulently represented to Mr Soodhoo that the properties were worth
R4,25 million each when
the bank knew that to be false. In
argument counsel for the defendants confined the argument to the
proposition that the
misrepresentation would suffice for the purposes
of the defence even if it was innocent. Counsel had no
alternative, given
that there was no evidence at all to support the
claim that the bank knew of the true lower value of the property, or
of the value
which became the subject of an admission during the
course of the trial. There can be no suggestion that the bank was
negligent.
It engaged the services of a sworn valuer.
[88]
It is apparent that Mr Soodhoo’s instructions to his attorney
and counsel at the stage
of pleadings were very different to his
evidence. Counsel was left arguing that
(a)
the bank communicated a
condition to Mr Soodhoo, when the loan finance was approved in
principle, that whether there would be a
loan was conditional upon
the unit being worth at least R4,25 million; and that
(b)
by proceeding with the
transactions it effectively represented to Mr Soodhoo (and thereby to
Hourglass and the Trust) that each
unit was worth that money.
The first of these
propositions, (a), is false. The condition, as I have already
said, was that a valuer should express the
opinion that the
properties were worth what had been paid for them. The bank
gave no warranty and expressed no view that
the valuer was right.
[89]
In any event what was contended for contradicts clause 8 of each of
the loan agreements.
In its material parts the clause reads as
follows.
‘
8.
PROPERTY ASSESSMENT AND INSPECTIONS
8.1
It is recorded that Nedbank may have appointed a person, not
necessarily a valuer or construction
expert, to assess the property
to determine whether it is has sufficient value as security for the
loan. The value, if any,
placed on the property by Nedbank is
for Nedbank’s internal use only and need not be disclosed to
the client. Any assessment
is not necessarily intended to
determine the market value of the property or the replacement cost of
any improvements and does
not involve an inspection of materials,
finishes and workmanship. In addition, any value placed on the
property by Nedbank
does not have to be equal to or higher than the
loan or the purchase price of the property, and no reliance
whatsoever should be
placed thereon by the client or any other
person.
8.2.
The client warrants that the client is satisfied as to the market
value of the property, the
replacement cost of the improvements for
insurance and other purposes as well as the general quality and
condition of all improvements,
materials and workmanship, whether or
not the loan is a building loan. …
8.3.
The client acknowledges further that Nedbank does not act as the
client’s agent in this
regard and that Nedbank has no
responsibility whatsoever to the client arising from any assessment
of the property or value placed
thereon by Nedbank, or from any
failure by Nedbank to undertake an inspection, regardless of whether
or not the loan is a building
loan, and the client has no claim of
whatsoever nature against Nedbank arising from the foregoing
considerations.’
ONE SURETYSHIP OR
FOUR?
[90]
Finally, counsel for the defendants has argued that it is not
possible upon a reading of any
one of the four suretyships signed by
Mr Soodhoo, and any one of the four signed by him on behalf of the
Trust, to discern that
they speak to a multiplicity of debts, as
opposed to a single one; with the result that Mr Soodhoo and the
Trust should only be
held liable for R3,4 million.
[91]
There is no merit in this argument. No authority is needed for
the proposition that documents,
that is to say even ones which must
by law be in writing, must be interpreted in accordance with their
context. Between the
defendants there are eight original deeds
of suretyship. Mr Soodhoo, who signed all of them, acknowledges
all of them.
The relationship between each of them and the
purchase by Hourglass of a particular unit is common cause. In
the case of
the Trust, the resolutions authorising Mr Soodhoo to sign
each of the deeds actually refer to the particular unit number.
[92]
In addition to all that, in its relevant part clause 16 of each of
the deeds reads as follows.
‘
I
agree that this suretyship is in addition and without prejudice to
any other securities, including other suretyships, now or in
the
future held from or on behalf of the principal debtor and that it
shall remain in force as a continuing covering security for
all and
any sum or sums of money which may now or in the future be owing to
or claimable by Nedbank from any cause aforementioned
and any other
cause of whatever nature…’
CONCLUSION
[93]
The transactions which gave rise to this litigation were concluded a
long time ago. It
would have been difficult to unravel the
state of the account now if the parties had not reached agreement on
that. The judgment
I propose to give in favour of the plaintiff
is the one which the parties agreed to in the event of my finding, as
I do, in favour
of the bank.
[94]
The defendants argue that there should be judgment in favour of Mrs
Soodhoo with costs.
I do not propose to make that order for a
number of reasons.
(a)
First of all, the
proposition is somewhat artificial as, from the bank’s
perspective, a judgment against Mr Soodhoo is one
against the joint
estate, and a judgment also against Mrs Soodhoo would have made no
difference, one way or the other, to the liability
of the parties.
(b)
The costs occasioned in
this action by the dispute between the parties as to the authenticity
of Mrs Soodhoo’s signature would
be a small fraction of the
overall expense of the litigation. Given my finding that Mr
Soodhoo has given false evidence,
and also that he made false
allegations of fraud against the bank (without tendering any evidence
in support of them), I am reluctant
to allow him even the small
discount of a costs order in favour of Mrs Soodhoo.
(c)
The authenticity of the
signatures thought by the bank to be those of Mrs Soodhoo was but one
part of the general defence that the
suretyships were invalid for
want of written consent on the part of Mrs Soodhoo. That
defence failed.
I accordingly make
the following order.
Judgment is
granted in favour of the plaintiff against the R Soodhoo Family Trust
(Master’s reference IT1551/2008/PMB), represented
by the first,
second and third defendants in their capacities as Trustees, and
against the fourth defendant, the liability of the
said Trust and of
the fourth defendant being joint and several, the one paying, the
other to be absolved, for
(a)
payment of the sum of R12,3 million;
(b)
interest thereon at the rate of 9.5% per annum from 2 March 2016 to
date of payment;
(c)
costs of suit.
OLSEN
J
APPEARANCES
Date of
Hearing:
12, 13, 14, 15, 16 & 21 OCTOBER 2020
Date of Judgment
:
FRIDAY, 12 MARCH 2021
Plaintiff’s
Counsel:
Mr P J Combrinck SC
Instructed
by:
Garlicke & Bousfield Inc
Plaintiff’s
Attorneys
7 Torsvale Crescent
La Lucia Ridge
Office Estate
La Lucia
(Ref:
AWLiebenberg/lj/N062)
(Tel:
031 – 570 5483)
(Email:
andre.liebenberg@gb.co.za)
Defendants’
Counsel:
Mr J C King SC
Instructed
by:
Theyagaraj Chetty Attorneys
Defendants’
Attorney
296
Randles Road
Sydenham
Durban…4091
(Ref:
Mr T Chetty)
(Tel:
031 – 2080527)
(Email:
theyagaraj@telkomsa.net)