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2023
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[2023] ZAFSHC 15
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Liberty Group Limited v CFS Solutions (PTY) Ltd and Another (1395/2022) [2023] ZAFSHC 15 (23 January 2023)
IN THE HIGH COURT OF
SOUTH AFRICA
FREE STATE DIVISION,
BLOEMFONTEIN
CASE NO. 1395/2022
In the matter between
LIBERTY GROUP
LIMITED
Plaintiff
versus
CFS SOLUTIONS (PTY)
LTD
First Defendant
ISHMAEL
THAMI
LINDA
Second Defendant
JUDGMENT
CORAM:
NAIDOO J
HEARD ON:
21 JULY 2022
DELIVERED
ON:
23 JANUARY 2023
[1]
The plaintiff (Liberty) issued Provisional Sentence Summons against
the first and second
defendants (CFS and Mr Linda, respectively) for
payment of the amount of One Million Seven Hundred and Ninety Three
Thousand Nine
Hundred and Seventy Two Rand and Ninety Eight Cents
(R1 793 972.98), which it alleges is owed to it in terms of
an Acknowledgment
of Debt (AOD) signed by CFS. Mr Linda’s
liability is alleged to arise out of a Deed of Suretyship in terms of
which he bound
himself to pay the debts of CFS. The defendants
entered an appearance to defend and filed an affidavit, proffering
the defence
that the amount claimed has been paid. Adv (Mr) LCM
Morland represented the plaintiff and Adv (Mr) NM Bahlekazi
represented the
defendants.
[2]
According to the averments in the opposing affidavit, on 16 January
2018, Liberty
and CFS entered into a Liberty Broker Franchise
agreement, in terms of which CFS was required to provide
inter
alia
broker
consultant services and services in the long and short-term insurance
industry. The defendants allege that from 2018 to March
2020,
business was conducted without any problems. When the Covid 19
pandemic hit South Africa and the country went into lockdown
in March
2020, CFS struggled to keep its business afloat. It was granted
financial assistance by Liberty for four months from March
to June
2020 to enable it to meet its running expenses. However, it was not
receiving any income as it was not able to do business
and applied
for further financial assistance from Liberty, which was refused. In
order not to lose the contract with Liberty, CFS
signed an AOD in
favour of Liberty, in the amount claimed.
[3]
The defendants alleges that since the AOD was signed, CFS continued
to submit work
to Liberty and that whatever commission it earned, was
used to reduce its debt arising from the AOD. It further alleges that
the
work it submitted to Liberty from 15 December 2020 to 16 July
2021 was not taken into account. CFS alleges that a commission
statement,
which was marked “E” and handed up as an
exhibit, received in July 2021 reflects a debt of R1 730 177
as
at March 2021, but that the following month, in April 2021, CFS is
reflected as having a positive balance. Therefore, it does not
owe
Liberty the amount claimed.
[4]
Liberty filed a Replying Affidavit in which it disputed the version
tendered by the
defendants, giving an explanation as to why the
defendants’ version is incorrect and alleging that the
defendants have acted
male fide
in advancing such a defence. I
pause to mention that the name of the deponent to the Replying
Affidavit was not included therein
and Mr Morland indicated that a
supplementary affidavit would be filed to correct that omission, but
that does not appear to have
been done. Mr Bahlekazi did not take
issue with the omission of the deponent’s name. Liberty
explained that CFS is a franchised
branch of Liberty and as such is
remunerated by a management fee referred to as an “overrider
fee”. This fee is calculated
according to the mathematical
formula set out in the Broker Franchise Agreement that the parties
entered into. The defendants have
not disputed the methodology
employed in such calculation.
[5]
Liberty alleged that the figure of 1 730 177 referred to by
the defendants
is not the Rand value of fees payable to CFS. The
volume of written policies accepted by Liberty from brokers serviced
by CFS is
referred to as Production Credits (PCR’s), which is a
mathematical metric used in the calculation of the overrider fee. It
is this “metric” on annexure E that the defendant refers
to, and is not a reflection of the fee paid by Liberty to
CFS.
Liberty explains further that the overrider statement is accompanied
by a monthly commission statement which not only serves
as a tax
invoice, but reflects the net financial position of the broker after
deductions or allowances have been taken into account.
Liberty
attached copies of a commission statement for October 2021, which
reflected the financial position for September 2021.
From that
statement it appears that CFS owed a net amount of R2 158 824.76
to Liberty. This statement was not disclosed by
CFS.
[6]
Another statement that Liberty attached was an “overrider fee
account”,
which reflected CFS’s nett financial position
after deduction of overrider fees previously paid, from the overrider
fees
actually earned. Liberty then attached a reconciliation
statement which it referred to as a “settlement account”
and
alleges that when the overrider fee and settlement accounts are
reconciled, two amounts were owing to it by CFS on 4 February 2021,
namely, R59 990.99 and R1 195 981.99, although there was a
typographical error in citing the latter amount in para 25
of the
Replying Affidavit. Reference to the settlement account reflects the
correct amount. The total of these two amounts, namely
R1 793 972.98,
is what CFS acknowledged itself to be liable for in the AOD, which
was signed in December 2021
[7]
Liberty explained that the vehicle of the AOD was employed to assist
CFS, as it would
not be permitted by its electronic systems from
putting through such a large amount as a serviceable debt in ordinary
business
operations. The AOD was intended to assist CFS as the latter
would be permitted to maintain cash flow whilst it repaid the debt
in
terms of the AOD. Liberty therefore alleges that CFS acted
male
fides
in not disclosing to the court all the relevant
documentation and its true indebtedness to Liberty.
[8]
The relevant portions of Uniform Rule 8 provide as follows:
(1)
Where by law any person may be summoned to answer a claim made for
provisional sentence, proceedings shall be instituted by
way of a
summons as near as may be in accordance with Form 3 of the First
Schedule calling upon such person to pay the amount claimed
or,
failing such payment, to appear personally or by counsel or by an
attorney who, under section 4(2) of the Right of
Appearance
in Courts Act, 1995 (Act No. 62 of 1995), has the right of appearance
in the Supreme Court upon a day named in such
summons, not being less
than 10 days after the service upon him or her of such summons, to
admit or deny his or her liability.
(8)
Should the court refuse provisional sentence it may order the
defendant to file a plea within a stated time and may make such
order
as to the costs of the proceedings as to it may seem just. Thereafter
the provisions of these rules as to pleading and the
further conduct
of trial actions shall
mutatis mutandis
apply.
(9)
The plaintiff shall on demand furnish the defendant with security
de
restituendo
to the satisfaction of the registrar, against
payment of the amount due under the judgment.
(10)
Any person against whom provisional sentence has been granted may
enter into the principal case only if he shall have satisfied
the
amount of the judgment of provisional sentence and taxed costs, or if
the plaintiff on demand fails to furnish due security
in terms of
subrule (9).
(11)
A defendant entitled and wishing to enter into the principal case
shall, within two months of the grant of provisional sentence,
deliver notice of his intention to do so, in which event the summons
shall be deemed to be a combined summons and he shall deliver
a plea
within 10 days thereafter. Failing such notice or such plea the
provisional sentence shall
ipso facto
become a final
judgment and the security given by the plaintiff shall lapse.
[9]
It is trite that provisional sentence is a summary and interlocutory
remedy. It has
been accepted as such for over eight decades through
our case law. The learned author
Erasmus
in the work
Superior
Court Practice
at
RS 17, 2021, D1-98
succintly summarises
the position in our law as follows:
“
Provisional
sentence…..is an extraordinary, summary and interlocutory
remedy designed to enable a creditor who has liquid
proof of his
claim to obtain a speedy judgment therefor without resorting to the
more expensive and dilatory machinery of an illiquid
action.
Provisional sentence precludes a defendant with no valid defence from
‘playing for time’. Apart from the
fact that
provisional sentence is only available to a plaintiff who is armed
with a liquid document, two further inherent characteristics
of
provisional sentence have always rendered it distinguishable from
other remedies. The one is that it only leads to a provisional
or
interlocutory order. Final judgment is still to be considered in the
principal case. In the final instance, the claim against
the
defendant can still be dismissed. The other is that, while on the one
hand it entitles the plaintiff to payment of the judgment
immediately, that is, before entering into the principal case, on the
other hand it affords the defendant to insist on security
for
repayment pending the final outcome.
[10]
The defendants, in their Heads of Argument, referred to and relied on
the case of
Twee
Jonge Gezellen (Pty) Ltd v Land and Agricultural Development Bank of
South Africa t/a The Land Bank 2011(3) SA 1 (CC),
where
the court
made
the following order:
“
3.
The procedure for provisional sentence is declared to be inconsistent
with the Constitution and invalid, to the extent that
it does not
give to courts a discretion to refuse provisional sentence where:
(a)
The nature of the defence
raised does not allow the defendant to show a
balance
of success in his or her favour, without the benefit of oral
evidence;
(b)
the defendant is unable to
satisfy the judgment debt; and
(c)
outside 'special
circumstances', the court has no discretion to refuse
provisional
sentence.”
“
4.
The common law is developed, so that courts will in future have a
discretion to refuse provisional sentence, only in circumstances
where the defendant demonstrates:
(a)
An inability to
satisfy the judgment debt;
(b)
an even balance of
prospects of success in the main case on the papers; and
(c)
a reasonable prospect that
oral evidence may tip the balance of prospective success in his
or her favour.”
Following
the
Twee Jonge Gezellen
judgment and order, it appears that
the Rules Board for Courts of Law intends to amend rule 8(10) to
read:
“
(10)
Any person against whom provisional sentence has been granted may
enter in to [
sic
]
the principal case if:
(a)
he or
she shall have satisfied the amount of the judgment for provisional
sentence and taxed costs, or
(b)
the
plaintiff on demand fails to furnish due security in terms of
sub-rule (9); or
(c)
leave
has been granted by the court.”
[11]
The court in Twee Jonge Gezellen remarked at paras 21, 22 and 23 as
follows:
“
[21]
But a defendant, who relies on a defence which goes beyond the
liquid document, is required to produce sufficient proof
of that
defence to satisfy the court that the probability of success, in the
principal case, is against the plaintiff, before provisional
sentence
can be refused. If there is no balance of probabilities either way
with regard to the principal case, the court will
grant
provisional sentence. It follows that, if there is a balance in
favour of the plaintiff, provisional sentence will also be
granted.…
[22]
It has been said that the balance of probability which the defendant
must raise must be substantial before the court will refuse
provisional sentence. However, as was pointed out in
Rich and
Others v Lagerwey
, our law knows only two standards of proof,
namely, proof beyond reasonable doubt which applies in criminal
cases, and the civil
standard of proof on a preponderance of
probability. In order to escape provisional sentence, the defendant
must therefore
satisfy the court on a preponderance of probability
that the plaintiff is unlikely to succeed in the principal case.
[23]
This onus, moreover, can only be discharged upon facts raised
on affidavit. The court has no inherent discretion to hear
oral
evidence on issues other than the authenticity of the defendant's
signature on the document, where the plaintiff, in any event,
bears
the onus….”
[12]
In the present matter the defendants make the allegation that they
have paid the debt that they
owed to Liberty. They do not allege that
they are unable to pay the debt. Implicit in that assertion is the
concession that they
were indebted to Liberty. Where the defendants
raise a defence beyond the AOD, the onus is on them to satisfy the
court, on a balance
of probabilities, that they will succeed in the
main case, or put differently, that the plaintiff will not succeed
with its claim.
The only financial record that the defendants
attached to the Answering Affidavit is Annexure E which I referred to
above. Based
on the detailed explanation given by Liberty, which I
have set out above, regarding the financial relationship and payment
procedures
between it and CFS, together with the supporting documents
I have referred to, it is clear that the defendants have not played
open cards with the court and have deliberately withheld the full set
of documentation relevant to this matter. When regard is had
to
annexure E, it is clear
ex facie
the document, that the
figures relied on by the defendants, fall into a column that does not
have a monetary or Rand value as the
last two columns on that
document do. The explanation given by Liberty with regard to the
meaning of PCR (Production Credits) is
rational, reasonable and
credible, and accords with the rest of its version as well as the
rest of the documentation furnished
by Liberty.
[13]
The defendants have not indicated how the the defence they raised
does not allow them to show
a balance of success in their favour,
without the benefit of oral evidence. The so-called dispute they have
raised is contrived
and does not appear to be
bona fide
. In
any event, as pointed out in Twee Jonge Gezellen, this court does not
have inherent jurisdiction to hear oral evidence on any
issue except
a dispute as to the authenticity of the defendant’s signature
on the AOD. It does not assist the defendants
to put up a
“bare-bones” type of defence and expect this court to
come to their assistance, where it seems very probable
that they have
deliberately withheld important documentation from this court, which
would not support their version.
[14]
I am not satisfied that the defendants have
discharged the onus on them to show on a balance of probabilities
that the plaintiff, Liberty, will not succeed in the main action. The
second defendant, Mr Linda, has put forward no defence at
all, other
than to stand by CFS’s assertion that the debt was paid in
full. In this regard, the dicta of the court in Twee
Jonge Gezellen
do not assist them. The defendants in this case have not met the
requirements set out in the Twee Jonge Gezellen
case, to enable them
to escape Provisional Sentence.
[15]
In the circumstances the following order is made against the first
and second defendants jointly
and severally, the one paying the other
to be absolved:
15.1 Provisional
Sentence is granted against the first and second defendants in the
amount of One Million Seven Hundred and
Ninety Three Thousand Nine
Hundred and Seventy Two Rand and Ninety Eight Cents (R1 793 972.98);
15.2 The first and
second defendants are ordered to pay interest on the aforesaid amount
at the rate of 7% per annum, and
15.3 The first and
second defendants are ordered to pay the plaintiff’s costs of
the action
S NAIDOO J
On behalf of the
Applicants:
Adv LCM Morland
Instructed
by:
Gerings Attorneys
Johannesburg
c/o Hendre Conradie Inc
(t/a Roussouws Attorneys)
119 President Reitz
Avenue
Westdene
Bloemfontein
(Ref: GER29/0049)
On behalf of the
Respondent:
Adv
NM Bahlekazi
Instructed
by:
Makubalo Attorneys
Suite 115-118 Sunday
School Building
154 Charlotte Maxeke
Street
Westdene
Bloemfontein