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[2011] ZASCA 213
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Honey & Partners Inc and Others v Quince Property Finance (Pty) Ltd (345/11) [2011] ZASCA 213 (29 November 2011)
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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
No precedential significance
Case no: 345/11
HONEY
& PARTNERS INC.
…........................................................................................................
First
Appellant
E
F SAFFY
…..............................................................................................................................
Second
Appellant
R
J BRITZ
…...................................................................................................................................
Third
Appellant
J
J VAN ZYL
…............................................................................................................................
Fourth
Appellant
N
J NAUDE
…..................................................................................................................................
Fifth
Appellant
J
M BURGER
…..............................................................................................................................
Sixth
Appellant
N
J G DREYER
…......................................................................................................................
Seventh
Appellant
C
J POTGIETER
….......................................................................................................................
Eighth
Appellant
H
L BUCHNER
…...........................................................................................................................
Ninth
Appellant
J
DU TOIT
…..................................................................................................................................
Tenth
Appellant
G
DE BEER
…..........................................................................................................................
Eleventh
Appellant
N
H BARNASCHONE
….............................................................................................................
Twelfth
Appellant
D
J J DE VILLIERS
…............................................................................................................
Thirteenth
Appellant
S
J LE ROUX
…....................................................................................................................
Fourteenth
Appellant
J
J FEUTH
…............................................................................................................................
Fifteenth
Appellant
L
B SAFFY
…..........................................................................................................................
Sixteenth
Appellant
H
E VAN DER WALT
….....................................................................................................
Seventeenth
Appellant
A
PRINSLOO
…....................................................................................................................
Eighteenth
Appellant
G
S GOODES
…....................................................................................................................
Nineteenth
Appellant
and
QUINCE
PROPERTY FINANCE (PTY) LIMITED
…............................................................................
Respondent
Neutral citation:
Honey & Partners Inc v Quince Property
Finance (Pty) Ltd
(345/11)
[2011] ZASCA 213
(29 November 2011)
BENCH:
HARMS DP, PONNAN, SNYDERS, LEACH and SERITI JJA
HEARD: 15 NOVEMBER 2011
DELIVERED: 29 NOVEMBER 2011
SUMMARY
:
Contract – defence of rectification – witness –
adverse credibility findings of trial court not challenged on
appeal
- appeal failing.
___________________________________________________________________
ORDER
___________________________________________________________________
On
appeal from
:
Free State High Court,
Bloemfontein (Ebrahim J sitting as court of first instance).
The appeal is dismissed with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
PONNAN JA (HARMS DP, SNYDERS, LEACH and SERITI JJA concurring):
[1] All too often, according to the respondent, Quince Property
Finance (Pty) Ltd, buyers and sellers of immovable property find
themselves cash-strapped whilst awaiting the registration and
transfer of the property sold. For it is usually only upon the
occurrence
of that event that funds standing to the credit of one or
the other of the parties fall to be released to them by the
conveyancing
attorney. The respondent, in its previous incarnations
Dynarc Bridge Finance (Pty) Ltd and ZS Rational Finance (Pty) Ltd, is
a
registered credit provider. The business model it had chosen for
itself is to lend and advance moneys to such persons in that hiatus
period on the understanding that once registration and transfer of
the property sold had been effected, it would be repaid by the
conveyancing attorney from monies standing to the credit of such
party. The respondent, appreciating that bridging finance was
an
inherently risky business venture, perceived that its business model
could only succeed if it secured guarantees from the conveyancing
attorney instructed in each instance to effect registration and
transfer of the property sold.
[2] Thus during 2004 the respondent approached the first appellant,
Honey and Partners Incorporated (Honey Inc), a Bloemfontein
firm of
attorneys, for assistance in formalising its new business venture. As
it was envisaged that a number of firms of attorneys
would be
involved in the venture, a standard master agreement to be concluded
by the respondent with those attorneys willing to
participate in the
venture, was formulated by Mr Deon Rossouw, an attorney, who was then
a professional assistant in the employ
of Honey Inc.
[3] On 25 August 2004 Honey Inc itself became a party to the master
agreement with the respondent. The preamble to the master agreement
reads:
'WHEREAS the Attorney has received instructions to
proceed with the registration of transfers of properties in terms of
Deeds of
Sale.
AND WHEREAS the funds for the payment of the transfer
duty, transfer and bond costs and any other costs, related to the
transfer,
have been included in a bond to be registered in favour of
a Financial Institution.
AND WHEREAS the purchasers wish to utilise the funds of
DYNARC BRIDGE FINANCE to pay transfer duty and rates & taxes.'
To the further extent here relevant the agreement provided:
‘
1.
THE
ATTORNEY’S OBLIGATIONS
The Attorney undertakes unto and in favour of DYNARC
BRIDGE FINANCE that:
(i) The maximum capital sum will only be utilised for
the purpose of obtaining a Transfer Duty Receipt and/or Rates and
Taxes Certificate,
as the case may be, and for no other purpose
whatsoever, unless agreed thereto in writing between DYNARC BRIDGE
FINANCE and the
attorney.
. . .
3.
THE ATTORNEY'S UNDERTAKINGS
The Attorney hereby irrevocably undertakes to:
(i) Use DYNARC BRIDGE FINANCE where possible as
financier in a conveyancing transaction where the Attorney is the
Conveyancer and
where a purchaser or seller requires finance with
regards to the payment of transfer duty and / or rates and / or taxes
and to
use no other financier for the currency of this agreement.
(ii) Make payment to DYNARC BRIDGE FINANCE of the
financed amount within a period of 72 hours from the date of
registration of transfer
of the property.
(iii) Make payment to DYNARC BRIDGE FINANCE of the
administration fee of 3% (minimum R300) and finance charges
calculated at 2,3%
on the amount advanced for a 30-day period within
a period of 72 hours from the date of registration of transfer of the
property.
(iv) In the event of cancellation of the transaction and
where the loan amount is still in the possession of the attorney, to
pay
DYNARC BRIDGE FINANCE any balance of the capital amount advanced
and also the administration fee within a period of 72 hours after
cancellation. If the Attorney neglects or refuses to make payment of
the balance held by the Attorney within 72 hours of cancellation,
DYNARC BRIDGE FINANCE shall be entitled to recover from the Attorney
all amounts due including the administration fee and finance
charges.
If the Attorney does not hold sufficient funds to pay the capital
amount and administration fee, the Attorney undertakes
to take all
reasonable steps to recover the outstanding monies from the Purchaser
and upon recovery to make payment thereof to
DYNARC BRIDGE FINANCE.
If the attorney has already made payment to the Receiver of Revenue
and/or the relevant local authority,
he undertakes to take all
reasonable steps within a reasonable time to recover the money paid
and shall immediately upon recovery
of any money, make payment to
DYNARC BRIDGE FINANCE of the money recovered. He does not however
warrant this payment of this amount
but warrants that he will assist
DYNARC in all necessary litigation steps to recover the money from
the party concerned.
. . .
7.
RESPONSIBILITY
(i) Furthermore the warranties given by the Attorney in
this agreement and furthermore the conditions of this agreement, the
Attorney
accepts that he is responsible for payment of all amounts
due to DYNARC BRIDGE FINANCE by the borrower.
(ii) DYNARC BRIDGE FINANCE will cede its claim, against
the borrower, to the Attorney, after payment thereof by the Attorney
to
recover the amount paid to DYNARC BRIDGE FINANCE in terms of this
agreement.'
[4] On 9 March 2006 one of Honey Inc's clients, Bothma Diamante CC,
concluded an agreement of purchase and sale with Joroy 0002
CC in
respect of the latter's property erf 8995, Kimberley for the purchase
price of R1.6 million. The agreement was subject to
the suspensive
condition that Bothma Diamante obtain a loan for the purchase price
from a registered financial institution to be
secured by the
registration of a mortgage bond over the property.
[5] On 23 March 2006 Honey Inc concluded a further agreement with the
respondent (the finance agreement). The finance agreement
to the
extent here relevant provided:
‘
1.
THE
CONVEYANCING ATTORNEY WARRANTING HIS AUTHORITY UNDERTAKES THE
FOLLOWING OBLIGATIONS:
THE CONVEYANCING Attorney undertakes unto and in favour
of ZS RATIONAL FINANCE that:
i) The maximum capital sum will only be utilized for the
purpose of the Transfer Duty and/or Rates and Taxes, and/or advance
on
profit of sale and/or advance on proceeds of bond registration as
the case may be, and for no other purpose whatsoever
ii) The maximum capital sum from the bond Grantor shall
be deposited directly into the attorneys trust account and no other
iii) The attorney will furnish a certified copy of the
transfer duty receipt of the South African Revenue Services on demand
of
ZS RATIONAL FINANCE
2.
THE CONVEYANCING ATTORNEY'S WARRANTIES
The CONVEYANCING ATTORNEY unequivocally warrants to
ZS RATIONAL FINANCE that:
i) An agreement of Sale for the property . . . or a loan
agreement between the Mortgagee and the bank has been concluded and
signed
and all suspensive conditions in relation thereto above have
been fulfilled and waived
ii) All material facts relating to the transaction are
true and correct in every material aspect
iii) That he is unaware of any impediment to this
agreement
iv) That his implied duties both under the contract and
in terms of the Attorneys' Act and any other applicable statutory
authority
or common law hereto apply.
3.
THE ATTORNEYS UNDERTAKINGS
The Conveyancing Attorney hereby irrevocably undertakes
to:
i) Pay ZS RATIONAL FINANCE the full and capital sum of
the sum borrowed plus the interest described therein as at section c
above
within a period of 72 hours from the date of registration of
transfer of the property or registration of the bond, as the case may
be, as described above
ii) Pay ZS RATIONAL FINANCE the application fee and
service charges as set out above within a period of 72 hours from the
date of
registration of transfer of the property as described above
iii) In the event of cancellation or the transacti9on or
the borrower becoming deceased, to pay ZS RATIONAL FINANCE within 72
hours
of demand by ZS RATIONAL FINANCE the full amount advanced as
described in B above
iv) Pay ZS RATIONAL FINANCE on demand all the amounts
due including finance charges and fees in the event of the
transaction being
delayed, for whatever reason for a period of more
than 90 days.'
[6] Pursuant to the finance agreement Honey Inc advanced to Joroy
0002 CC the sum of R300 000, which was described in the agreement
as
an advance on profits. Despite Honey Inc having warranted in terms of
clause 2.1 of the finance agreement that all of the suspensive
conditions had been fulfilled by Joroy 0002, it subsequently emerged
that the latter had failed to secure a loan for the purchase
price
from a financial institution. In due course the first bondholder on
the property, the subject of the sale between Joroy 0002
CC and
Bothma Diamante CC, caused it to be sold in execution. The loan from
the respondent to Joroy 0002 not having been repaid,
the respondent
caused summons to be issued in the Free State High Court against
Honey Inc as the first defendant and its directors
as the second to
nineteenth defendants.
[7] The summons alleged:
'22. On or about the 23
rd
of March 2006 and
at Bloemfontein, Plaintiff [the respondent] as represented by Mario
Nel, and Joroy 0002 CC, as represented by
Mr L A Celliers and First
Defendant [Honey Inc], as represented by Mr D P Rossouw (concluded a
bridging finance agreement) and
in terms of the aforesaid agreement
the Plaintiff advanced an amount of R300,000.00 to Joroy 0002 CC on
the 23
rd
March 2006. For full particulars of this
agreement, see "QPF1" attached hereto.'
23.
The salient relevant terms of the aforesaid
agreement between [the respondent] and [Honey Inc] relevant to this
case are that:
23.1 [Honey Inc] would pay to [the respondent] the full
and complete sum of the sum borrowed by Joroy 0002 CC plus finance
charges
and a service charge thereon ... within 72 hours from date of
registration of the transfer of the property or registration of the
bond, as the case may be; and/or
23.2 Pay [the respondent] the application fee and
service charge and finance charges as set [out] above within a period
of 72 hours
from the date of registration of transfer of the property
as described; and/or
23.3 Pay [the respondent] on demand all the amounts due
including finance charges and service fee in the event of the
transaction
[being] delayed for whatever reasons for a period of more
than 90 days.
. . .
26. The transfer of the property in question has not
taken place but a period of 90 days has expired since the money was
lent and
advanced to Joroy 0002 CC and consequently the amount due is
now due and owing in terms of the above mentioned clause.
. . .
29. The Second, Third, Fourth, Fifth, Sixth, Seventh,
Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth,
Fifteenth,
Sixteenth, Seventeenth, Eighteenth and Nineteenth
Defendants are jointly and severally liable with [Honey Inc] in terms
of Section
23 of the Attorneys Act, 53 of 1979 to pay the amount of
R591 469.20 as set out above to [the respondent].'
[8] Although various defences were raised by Honey Inc in its plea to
the respondent’s summons only one still remains relevant.
It is
this:
‘
(a) The finance agreement does
not correctly record the agreement between [the respondent], [Honey
Inc] and Joroy in that clause
3 thereof incorrectly purports to
oblige [Honey Inc] to pay to [the respondent] R300 000,00 loaned to
Joroy plus interest and administration
costs in the event of the
transaction being delayed for more than 90 days.
(b) The continuing common intention of the parties was
that the obligations of [Honey Inc] were to be as set out in clause 3
of
the [master] agreement.
(c) The incorrect description of [Honey Inc's]
obligations was occasioned by a common error of the parties and the
parties concluded
the finance agreement in the
bona fide
but
mistaken belief that it recorded the true agreement between the
parties.
(d) In the premises the finance agreement falls to be
rectified by deleting clause 3 thereof and replacing it with terms
identical
to those in clause 3 of the [master] agreement.'
[9] The matter proceeded to trial before Ebrahim J who found for the
respondent and accordingly granted judgment in its favour
against all
nineteen of the defendants jointly and severally in the agreed sum of
R744 833.02 together with costs on the attorney
and client scale.
Leave to appeal was initially granted on 14 June 2010 by the learned
judge against the whole of her judgment
to the 'Full Bench' of the
Free State High Court — no doubt a reference to the full court.
On 23 May 2011, however, that
order was amended to grant leave to the
appellant to appeal to this court, ostensibly because the appellants
are well known to
most of the judges of the high court.
[10] In the main, the defence advanced by Honey Inc is to be sourced
in the evidence of Mr Rossouw, who by the time of the trial
had
become one of its directors. He testified:
‘
You are aware of the fact that
the finance agreement which you signed . . . it contains clauses
which holds your firm liable for
the debts of the borrower in the
event of a default, is that fairly stated? --- No.
No? --- No.
Sorry, then I have misunderstood the last ten minutes of
your evidence because I have understood you to have been saying that
the
finance agreement does place a liability on the attorneys as it
stands but that was not your intention . . . Now are you now
detracting
from that evidence? --- No it was stated to me that the
financing agreement that Honey attorneys signs has got certain
warranties
and undertakings by the attorney that will apply to that
attorney and I do not agree with it, although it has got those
warranties
and undertakings in the standard wording and in the
standard format, it was never the intention that that applies to
Honey attorneys.
No no no, I made my question to you very clear, let us
talk about the finance agreement as it stands. --- Okay.
I referred you to the fact that it is a document that
you yourself drafted, correct? --- Correct.
So you were aware of its terms, surely? --- Yes.
And were you aware that its terms contained undertakings
in terms of which the attorney as defined in the contract . . . would
be
liable in terms of that contract . . .? --- Yes.
Thank you. Now I come back to my question. When you
signed this contract you signed it on behalf of Honey & Partners?
--- Correct.
You are aware that it contains terms which holds Honey &
Partners liable in event of a default but you do not take the trouble
of simply drawing a line through clause 3 just before you append your
signature. Is that your evidence? --- M'lady, it is not necessary
to
draw a line through that clause because I have got another document
that regulates that clause. We have got a signed agreement.
Okay. Show me where the master agreement . . . regulates
this specific transaction that involves bridging finances being
granted
to Joroy with the intervention of Honey & Partners. Show
me in the contract if you can at page 4 any reference to that
specific
transaction. --- It is necessary then at this point in time
to explain how the master agreement has come about. When my office
received instructions ... (intervenes)
Can I first get you agreeing with me there is no
reference to this specific transaction . . . I am referring to . . .
the transaction
whereby bridging finances is awarded to Joroy and it
is a transaction to which Honey & Partners is a co-signee. That
is not
referred to in the master agreement. Do you concede that? ---
No, no it is not referred to in the master agreement.
Sorry, then you can proceed with the rest of your
answer. --- All right. When the business started up and when they,
when Dynarc
ventured into this type of business the original idea was
that they will only be financing certain types of property
transactions
being rates and taxes and ...
Transfer duty. --- Transfer duty. Now the nature of such
a transaction there must be a deed of sale, the borrower will always
be
a purchaser because, well it can also be a seller in the instance
of rates and taxes but that is where the business idea originated
from and at that point in time when this master agreement was drafted
that was the type of financing that they would entertain.
Correct, that is 100% correct I agree with you 100% as
actually has been pointed out and if you look at the terms of the
master
agreement, you were in court when Mr Le Roux went through
those various terms, the preamble, al[l] that shows that is the
contract,
this master agreement refers to that type of transaction.
Would you agree with that? --- Ja I agree.
And indeed it goes further at clause 1(i) it goes
further and says:
"The maximum capital sum will only be utilised for
the purpose of pertaining a transfer . . . and or rates and taxes as
the
case would be and for no other purpose whatsoever unless agreed
with in writing between Dynarc Bridge Finance and the attorney."
You do not have any complaint or objection to that
clause. That clause is as it stand[s] and you agree with that clause,
that is
what it is. --- Yes.
So what is required in any other case such as an advance
on profit is a separate written agreement, correct? --- On the
interpretation
of this master agreement, correct.
. . .’
[11] As emerges from the quoted excerpt, the following significant
concessions were made by Rossouw under cross-examination: first,
that
he had drafted the finance agreement; second, that he had signed the
agreement on behalf of Honey Inc; third, that he was
aware of its
terms and in particular that Honey Inc would be liable; fourth, that
he could - but had failed to - delete what he
considered to be the
offending clause; fifth, that the master agreement only applied to
transactions involving advances on rates,
taxes and transfer duty;
sixth, the master agreement does not refer to a transaction such as
the Joroy transaction; and, seventh,
the master agreement envisaged a
further written agreement in respect of a transaction such as one
encounters here, namely an advance
on profits.
[12] The cumulative effect of all of those concessions may well be
wholly destructive of Honey Inc’s defence of rectification.
But
it is unnecessary to make any firm finding in that regard. For, on
the view that I take of the matter, the appeal falters at
a more
fundamental and less profound level. Of Rossouw as a witness, the
learned trial judge stated
inter alia
: ‘I reject out of
hand the testimony of . . . Rossouw . . . on this crucial aspect, as
being so highly improbable that it
is incapable of any credence
whatsoever’; ‘[the] evidence in this regard is
unconvincing and improbable’ and
‘[r]egrettably though
for [Honey Inc], I am unable to find in their favour, that, on the
probabilities, either of these witnesses
were credible witnesses’.
Those adverse credibility findings were not challenged on appeal
before us. Nor could they be given
that a perusal of the record
supports them. And for as long as those findings remain undisturbed –
as indeed they must –
the appeal cannot succeed.
[13] In the result the appeal is dismissed with costs.
_________________
V M PONNAN
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: J P de Bruin SC
A J R van
Rhyn SC
Instructed
by:
Lovius
Block Attorneys
Bloemfontein
For
Respondent: D C Joubert
Instructed
by:
Marais
Müller Yekiso Inc
Cape Town
Symington
& De Kok
Bloemfontein