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[2011] ZASCA 80
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Frans Jacobus Kruger h/a Kruger Attorneys v Property Lawyer Services (Edms) Bpk (420/2010) [2011] ZASCA 80 (27 May 2011)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 420/2010
In
the matter between:
FRANS JACOBUS KRUGER
h/a KRUGER ATTORNEYS
…..........................................................................
Appellant
and
PROPERTY
LAWYER SERVICES (EDMS) BPK
…....................................
Respondent
Neutral citation:
Kruger v Property Lawyer
(420/2010)
[2011] ZASCA
80
(27 May 2011)
Coram:
Mpati P,
Brand, Lewis, Malan and Tshiqi JJA
Heard:
4 May
2011
Delivered: 27 May 2011
Summary:
Bridging
finance – undertaking by transferring attorney to pay against
registration of transfer – construction of undertaking
–
undertaking to pay from proceeds of sale.
___________________________________________________________________
ORDER
On
appeal from the North Gauteng High Court, Pretoria (Murphy J sitting
as court of first instance):
(a) The appeal is upheld
with costs including the costs of two counsel;
(b) The order of the
court below is set aside and replaced by the following:
‘
The
application against the first respondent is dismissed with costs.’
___________________________________________________________________
JUDGMENT
MALAN
JA (Brand, Lewis, Maya and Tshiqi concurring)
[1] The appellant appeals
against the whole of the judgment and order of Murphy J in the North
Gauteng High Court, Pretoria in terms
of which the appellant was
directed to pay to the respondent an amount of R271 244,90
together with interest and costs. This
appeal is with leave of the
court below.
[2] The appellant, a firm
of practising attorneys, furnished a written letter of undertaking to
the respondent, a provider of bridging
finance to sellers of
immovable property and their agents, mainly attorneys. The bridging
loan was to be made pending transfer
of certain properties in which
the appellant was engaged, albeit not as the conveyancer, as attorney
on behalf of the sellers.
The undertaking of the appellant is
addressed to the respondent and commences with a reference to the
properties to be transferred
and who the transferors and transferee
were. The material part reads as follows:
‘
Ons
onderneem hiermee onherroeplik om die bedrag van R500 000,00
(Vyfhonderd Duisend Rand) tesame met 20% (twintig persent)
en 10%
(“raising fee”) in die volgende rekening in te betaal op
datum van registrasie van die bogemelde eiendomme in
die Aktekantoor
te Pretoria:
Proplaw Bridging
Absa, Brooklyn
Branch: 632 005
Account Number:
4071652511
tensy ons van regsweë
verhoed word of aangestel word as agente namens die Suid Afrikaanse
Inkomste Diens ooreenkomstig Art
99 van die Wet op Inkomstebelasting
No. 58/1962 soos gewysig.’
[3] The seller of six of
the properties referred to in the undertaking, Bell Investments (Pty)
Ltd (the company), was liquidated
and its liquidators claimed the
proceeds arising from the sales. The seller of the seventh property
was Mr I M Bell. All the properties
were sold to the same purchaser,
Philadelphia Game Ranch (Pty) Ltd.
[4] The respondent, when
considering an application for finance, requires certain
documentation including a request for bridging
finance and mandate to
pay signed by the client, an
identity
document, a copy of the sales agreement and also a letter of
undertaking from the conveyancer or attorney that the amount
of the
bridging finance will be repaid by the conveyancer against
registration of transfer of the sale property. The ‘Bridging
Request and Mandate to Pay’ in this case, signed by Mr Bell for
himself and also on behalf of the Bell Ontwikkkelings Trust
(the
client), refers to the properties involved and the particulars of
their transfer. It was submitted to the respondent by the
appellant
(referred to as the ‘law firm’) on behalf of the client.
The borrowers were Mr Bell and the Trust and the
sellera of six of
the properties was the company and Mr Bell the seller of the seventh.
Apparently both the company and the Trust
were controlled by Mr Bell.
The bridging request contains a request by the client for payment of
an amount of R500 000 (the
amount of the loan) and continues:
‘
And
whereas [the respondent] requires that the client in return cedes in
their [favour] his right, title and interest to the proceeds
in the
above transaction in the amount of (requested amount plus 20 % as
well as a raising fee of 10 %)
R100 000,00 (Een
Honderd Duisend Rand) plus die “raising fee” van 10%
R50 000.00 (Vyftig Duisend Rand)
Now therefore the
[appellant] is hereby irrevocably instructed to issue a Bank
Guarantee / Letter of Undertaking, in the last mentioned
amount in
favour of [the respondent] payable on registration of the above
transaction. Should the transaction for whatever reason
be cancelled
or not registered within six (6) months from signature then the
amount will immediately become due and payable to
[the respondent].’
[5] At the end of the
bridging request there is a ‘Confirmation by Registering
Attorney’ in the following terms signed
by the appellant (or
the law firm):
‘
I,
the undersigned Marthinus Jacobus Pretorius on behalf of the law firm
hereby confirm that:
We have been instructed
to attend to the registration of the above matter.
That all conditions
precedent, or otherwise, to the said transaction as well as linked
transactions (if applicable) have been
met, all registration
documents have been signed, costs have been paid or provision for
the payment thereof have been made and
that no reason exists why
registration triggering the payment of the guarantee/undertaking
should not take place on the said
expected date.
3. Approval hereof relies
materially upon the above request and confirmation.’
[6] The appellant
furnished both the letter of undertaking and the bridging request to
the respondent. Registration of transfer
of the properties did not
take place within the six month period envisaged in the bridging
request but only thereafter. After liquidation
of the company the
liquidators elected to abide by the sales and the properties were
duly transferred. An amount was available
from the proceeds of the
sale of the seventh property (by Mr Bell) which was paid to the
respondent leaving the balance claimed.
[7]
Two issues were raised on appeal: first, the proper construction of
the letter of undertaking, particularly whether it constitutes
an
undertaking independent of the underlying transaction, that is the
bridging loan to Mr Bell and the Trust; and, secondly, if
the letter
of undertaking is not an independent undertaking, whether it is
enforceable since
the
bridging finance loan does not comply with the provisions of the
National Credit Act 34 of 2005 (NCA). In this regard, the appellant
submitted that the letter of undertaking, in any event, constitutes a
‘credit guarantee’ as defined in the NCA. In
the court
below Murphy J found in favour of the respondent on all these issues.
Relying on
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd & others
2010
(2) SA 86
(SCA) he found that the letter of undertaking gave rise to
an independent obligation and was not of an accessory nature, nor was
it unenforceable due to non-compliance with the provisions of the
NCA. He gave judgment in favour of the respondent. For the reasons
that will appear from this judgment it is not necessary to consider
the applicability of the NCA.
[8]
The letter of undertaking was issued pursuant to the bridging loan
made by the respondent to Mr Bell and the Trust. It must
be construed
in that context, the factual matrix in which the parties operated,
1
so as
to give it a commercially sensible meaning.
2
It is
clear from the wording of the undertaking that the appellant
undertook to pay the amounts stipulated against registration
of
transfer of the properties. It is also clear that the appellant did
this on the instructions of the client: it uses the word
‘onherroeplik’ implying that the mandate to the appellant
could not be revoked by its principal, the client. The fact
that the
appellant acted as the agent of the borrowers in giving the
undertaking
does
not mean, of course, that it could not have incurred a personal
liability in terms of the letter of undertaking.
3
The
word used is ‘onderneem’ leaving no doubt that a personal
obligation was envisaged. The real question, however,
is not whether
the appellant undertook to pay but what the content of this
undertaking was.
[9]
The purpose of the undertaking was that the appellant, as the
attorney involved in the transfer of the properties, would make
payment to the respondent of the money lent and other charges from
the proceeds received from the sale of the seven properties
by the
company and Mr Bell.
4
This
is clear from the terms of the bridging request. It recites that all
the conditions precedent to the sales have been fulfilled
and that
registration was expected to take place not later than the end of
August 2008. It records that the client, that is Mr
Bell and the
Trust, requested payment of the amount borrowed and that the
respondent requested the client ‘in return’
to cede ‘his
right, title and interest to the proceeds in the above transaction in
the amount of “(requested amount
plus 20% as well as a raising
fee of 10%)”’ to the respondent. As security for the
bridging loan the client therefore
ceded part of its
right
to the sale proceeds to the respondent.
5
Because
payment was expected by no later than the end of August 2008 the
appellant was instructed to issue the letter of undertaking.
The
appellant’s confirmation at the end of the bridging request in
so many words confirms
that,
because all the conditions for registration and payment of the costs
have been met, ‘no reason exists why registration
triggering
the payment of the guarantee/undertaking should not take place on the
said expected date’. It is only by virtue
of his control over
the proceeds of the sales that effect to the entire transaction could
have been given.
[10]
The undertaking is not to pay ‘regardless’ but to effect
payment from the receipt of the proceeds of the sales.
Nor was it
envisaged that the proceeds would vest in the appellant: by virtue of
the ‘cession’ the proceeds in the
agreed amount had to be
paid to the respondent. It would have been absurd for the appellant
to have given an unconditional, independent
undertaking
in these circumstances. The letter of undertaking itself contains a
reference to the bridging finance provided to Mr
Bell and the Trust,
recites the properties to be transferred and links payment of the
undertaking to registration of transfer.
Seen in this context, the
undertaking amounts to no more than an undertaking to make payment
from the proceeds of the sales.
6
It is
common cause that the sales of the company’s properties left a
deficit. The proceeds of the sale of the seventh property
by Mr Bell
left a net balance which was paid to the respondent. It follows that
the respondent is not entitled to any further payment
from the
appellant.
[11] The following order
is made:
(a) The appeal is upheld
with costs including the costs of two counsel;
(b) The order of the
court below is set aside and replaced by the following:
‘
The
application against the first respondent is dismissed with costs.’
_________________
F R MALAN
JUDGE OF APPEAL
APPEARANCES:
For Appellant: A Subel SC
J Pretorius
Instructed by:
Eversheds Attorneys
Johannesburg
Webbers
Bloemfontein
For Respondent: D B du
Preez SC
Instructed by:
Strydom &
Bredenkamp Inc
Brooklyn
E G Cooper & Majiedt
Inc
Bloemfontein
1
See
KPMG Chartered Accountants (SA) v
Securefin Ltd & another
2009 (4)
SA 399
(SCA) para 39;
Swart & ‘n
ander v Cape Fabrix (Pty) Ltd
1979 (1)
SA 195
(A) at 202C-D.
2
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
(457/2008) ZASCA 154 [2009] [27
November
2009]; 2010 (2) SA 498
(SCA);
[2010] 2 All SA 195
(SCA)
para 13;
Masstores (Pty) Ltd v Murray &
Roberts Construction (Pty) Ltd & another
[2008] ZASCA 94
;
2008
(6) SA 654
(SCA) para 7.
3
Cf
Ridon v Van der Spuy and Partners
(Wes-Kaap) Inc
2002 (2) SA 121
(C) at
137I-138B.
4
Venter
& others v Credit Guarantee Insurance Corporation of Africa Ltd
& another
[1996] ZASCA 50
;
1996 (3) SA 966
(A) at
973D-E.
5
The
fact that a partial, and hence an invalid, cession was involved is
not relevant for the purposes of this matter: apparently,
all the
parties regarded it as valid.
6
See
also
The Minister of Transport and
Public Works: Provincial Government of the Western Cape and The Head
of the Department of Transport
and Public Works: Provincial
Government of the Western Cape v Zanbuild Construction (Pty) ltd and
Absa Bank Limited
(68/2010)
[2011
ZASCA 10
(11 March 2011) paras 14 ff on the importance of
interpreting the terms of the particular undertaking or guarantee
under consideration.