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[2021] ZAGPPHC 113
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Nel and Others v Cilliers (44111/2020) [2021] ZAGPPHC 113 (15 February 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
Case
No: 44111/2020
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:NO
REVISED
DATE:
15 FEBRUARY 2021
In the matter between:
J.J.G
NEL
First Plaintiff
IVY
JEWEL 3 (PTY)
LTD
Second Plaintiff
IVY
JEWEL 4 (PTY)
LTD
Third Plaintiff
LABONTE
1 (PTY)
LTD
Fourth Plaintiff
LABONTE
2 (PTY)
LTD
Fifth Plaintiff
SILKBLAZE
3 (PTY)
LTD
Sixth Plaintiff
SILKBLAZE
4 (PTY)
LTD
Seventh Plaintiff
RUSTYROSE 52 (PTY)
LTD
Eighth Plaintiff
and
P.J.J
CILLIERS
Defendant
JUDGMENT
BAQWA
J:
INTRODUCTION
1.
This is an action in which the plaintiffs
seek an order for specific
performance and for a money judgment against defendant. The
plaintiffs seek an order in terms of which
defendant must effect
certain developments on specified erven on the Legend Golf and Safari
Resort (“the Legend”) and
to pay levies, rates and taxes
in respect thereof.
Further
the plaintiffs seek judgment for the payment of the sum of R23
million with interest, alternatively the payment of R5 million
with
interest together with costs suit.
2.
The first plaintiff is Jacobus J.G Nel (“Nel”)
a
businessman of the farm Baviaanskloof 290 in the district of
Potgietersrus, Limpopo Province whilst the second to the eighth
plaintiffs are companies which were incorporated by the first
plaintiff and which individually own an erf each on the Legend.
3.
The defendant is Petrus J.J Cellier a businessman
of Entabeni Private
Game Reserve, Haakdoring Road, Sterkrivier, district Potgietersrus,
Limpopo Province.
BACKGROUND
4.
During 2006 the defendant was in the process
of developing an
upmarket golf estate, the Legend. First plaintiff and defendant were
business acquaintances and they had discussions
during which first
plaintiff expressed his interest to invest in the development.
5.
It was agreed between first plaintiff and
defendant that the latter
would sell shares in the Legend to first plaintiff for the sum of R8
million. It was also part of that
agreement that first plaintiff
would acquire (7) seven erven in the development for which he (first
plaintiff) undertook to arrange
financing. The investment amounts
were paid to the development company and subscription for shares in
it.
6.
It is common cause that upon acquisition of
the shares in Legend,
first plaintiff had them transferred to the Koos Nel Trust. The
property investment was made by acquiring
the properties in the seven
companies each of which obtained a bank loan from ABSA Bank for the
purchase price of each erf and
for which first plaintiff stood as
surety.
7.
During November 2007 defendant recruited new
investors from Kuwait.
Subsequent to this
development first plaintiff opted to withdraw from the investment he
had made in Legend. The reason for opting
out was that defendant had
brought the Kuwaitis in as business partners: first plaintiff was
unwilling to partner with new entrants
on account of their race and
creed. As he put it in his e-mail, he said “...ek trek nie in
juk saam met ‘n mohamedaan
nie... ”
8.
Defendant tried to persuade first plaintiff
not to withdraw from the
partnership which they were in the process of stablishing. After a
while, in February 2008 defendant agreed
to buy his interest for 2,5%
of what defendant estimated the development would be worth after
another 3 years.
9.
First Plaintiff drafted the document which
contained the new
agreement and which for purposes of these proceedings has been
referred to as “D1”. He recorded therein
that the
“payments” to him were to be in terms of “..
.belasting
vriendelik ...”
transactions.
Put simply, this meant the repurchase of his shares would have
resulted in a profit of R23 million for him, subject
to capital gains
tax of 40% as (an individual) and 28% (if in a company).
10.
In the circumstances, paragraph 2 of “D1” ought not to
be
taken literally to mean that the R30 million was to be paid in cash
to first plaintiff personally three years later. The reference
to the
future “
transaksie”
which “..
.sal...wees”
was an indicator of the manner in which the “payment”
was to be made and was still to be agreed to make it “
belasting
vriendelike”.
11.
First plaintiff and defendant began negotiations concerning the
payment of R30 million which would be made to first plaintiff in a
manner that would avoid a huge tax liability. Notably, the
development
had by then not yet generated significant profits though
the parties remained optimistic. At that point, first plaintiff
accepted
that a downright payment of R30 million would not be
feasible.
12.
In the evidence “D2” is translated as follows:
“
whereas the
parties had concluded
an agreement about 18 February
2008 [that is now D1]...”
“
In terms
thereof an amount of R30 million was repayable [terug betaalbaar]
within a three-year period and whereas the parties have
renegotiated
the agreement [heronderhandel]. Therefore, the parties now agree as
follows:
(1)
The amount of 6 million as payable immediately [which is
already been paid];
(2)
Cellier, that is the defendant, undertakes to pay a further R6
million in cash in
three equal annual instalments. The
first instalment shall be paid on the first business day of May 2012
and the same for the subsequent
years. The aforementioned annual
payments will bear compounded interest which shall be calculated
monthly at the prime lending
rate of ABSA Bank plus 3.5 percent from
March 2011.”
13.
Three years later in June 2011, the parties agreed that instead
of
the 30 Million, there will now be the R6 million which had already
been paid and another R6 million which must be paid in three
annual
instalments and which will bear interest. This is “D2”.
THE
LAW
14.
The relevant provisions of the
National Credit Act
34 of 2005
(“the NCA”) are as follows:
14.1
Section 8(4):
“
An
agreement, irrespective of
its
form
but
not
including an
agreement contemplated in subsection (2), constitutes
a
credit
transaction if it is: -
(a)
…
(b)
…
(c)
…
(e) …
(d)
…
(e) …
(f)
any other agreement, other than a
credit facility or
credit guarantee, in terms of which payment of an amount owed by one
person to another is deferred, and any charge,
fee or interest is
payable to the credit provider in respect of-
(i)
the agreement; or
(ii)
the amount that has been deferred."
14.2
Section 40 (4):
“
A credit
agreement
entered
into by
a
credit
provider who
is required to be
registered
in terms of subsection (1) but who is not so registered is unlawful.”
14.3
Section 89 (5):
“
If a credit
agreement is unlawful in terms of this section, despite any other
legislation or any provision of an agreement to the
contrary, a court
must make a just and equitable order including, but not limited to an
order that-
(a)
the credit agreement is void as from the date the agreement
was entered into.”
14.4
Section 90 (2)
“
A
provision
of
a
credit
agreement
is unlawful if-
(a)
its general purpose or effect is to-
(i)
defeat the purposes or policies of this Act;
(ii)
…”
EVIDENCE
15.
The only evidence tendered in this trial was first plaintiff’s
evidence. He confirmed the facts which are common cause, namely, that
he and defendant had entered into a share purchase agreement
in
Legend and that they had subsequently concluded agreements which have
now been identified as “D1” and “D2”.
16.
Initially first plaintiff was adamant that “D1” had been
drawn up by defendant but later conceded under cross-examination that
he had made an error when he said so. “D1”, so
he
admitted, had been drawn up by first plaintiff himself. He confirmed
that he purchased 2.5 million percent shares in Legend
for an amount
of R5 million and that in clause 2 of that agreement five erven in
the development would be given as security for
payment of the amount
of R5 million as well as an amount of R2 million in respect of a
company known as Verylasminute which is
not the subject of the
present case.
17.
A huge amount of detail was elicited from first plaintiff in his
evidence in chief and under cross examination about the tax
implications of the agreements which first plaintiff and defendant
entered into but I do is not propose to dwell on those in this
judgment for reasons which will become clear below.
18.
First plaintiff confirms that after his attempted withdrawal
from the
share purchase agreement in Legend, that led to the conclusion of a
written agreement on 18 February 2008 which was a
one-pager document,
referred to as “D1”. This is the agreement in which it
was stated that the transactions should
be “
belasting
vriendelik”
which was intended to mean that profit should
be shown as a capital gain rather than income and that such capital
gain would be
in a company rather than in a trust. First plaintiff
conceded that for this reason “D1”was inchoate.
19.
First plaintiff testified that on 20 June 2011 the parties entered
into a further agreement, “D2”The purpose of “D2”
was to structure the manner in which defendant would
pay the R30
million agreed upon in “D1”. In “D2” the cash
portion payable was reduced to R12 million, R6
million of which had
already been paid. The remaining balance of R6 million would be
payable over the next three years in three
annual instalments subject
to interest at prime (ABSA Bank) plus 3.5% per annum. This in essence
is the money which the plaintiffs
seek judgment against the
defendant, namely the cash amount in paragraph 2 of “D2”
alternatively , in the event that
“D2” is found to be
unenforceable, the balance of R23 million arising from paragraph 2 in
“D1”.
20.
Before discussing the merits of the plaintifs’ claim
I need to
briefly dicuss two issues arising from an amendment of the
defendant’s plea and the other arising from the plaintiff’s
evidence-in-chief and from submissions by plaintiffs’ counsel.
FIRST
PLAINTIFF
NOT A PARTY
21.
The defendant submits that the plainiffs have failed to demonstarte
that first plaintiff had acted in his personal capacity when
concluding “D1” and “D2”.
22.
They submit that first plaintiff’s own evidence confirms
that
at all times he had been acting as a trustee of Koos Nel Trust and
that in “D1” and “D2” first plaintiff
was
dealing with trust assets, namely, the Legend shares and the shares
in the seven companies which were all registered in the
name of Koos
Nel Trust.
23.
First plaintiff was cross-examined at length regarding his
relationship with the Koos Nel Trust and it was repeatedly suggested
to him that he could not, at will, and without reference to
the other
trustees deal with trust assets as if they were his own personal
property. Whilst seemingly conceding that what was put
to him was the
correct legal postion he doggedly refused to accept that the trust
assets no longer belonged to him and that he
no longer had the right
to deal with trust assets on his own. In first plaintiffs refusal to
accept his lack of capacity to deal
with trust assets he did not
dispute that in 2001 he had transferred the assets in all his
businesses and companies to the Koos
Nel Trust.
24. According
to first plaintiff, he regards the trust as his “alter
ego”
and states that he did not need permission of other trustees for each
and every decision regarding the trust assets.
As far as he was
concerned, all the bank accounts in the whole group are his own
“...Koos Nel Group are my accounts it is
my Group...”
25.
In his own words, acquiring the Legend shares in Koos Nel Trust
was
his “footwork ... to minimise tax responsibilities and I wanted
the capital growth in this development which was promising
at that
stage to rather occur in my trust...”
26.
Defendant’s defence which surfaced later in his case
that he
never concluded an agreement with first plaintiff in his capacity but
in his capacity as trustee of Koos Nel Trust is inconsistent
with an
affidavit he had filed in opposition to an application for summary
judgment. In that affidavit he admits under oath that
“D1”
and “D2” were concluded between first plaintiff and
himself. No mention was made at all of the Koos
Nel Trust.
27.
It also seems apparent from a perusal of both “D1”
and
“D2” that the description of the parties refers to them
in their personal capacities. It is common cause that “D1”
was drafted by first plaintiff and endorsed by defendant and that
“D2” was drafted by defendant.
28.
In the circumstances it does not seem that much credence can
be
placed on defendant’s defence that he concluded agreements with
the Koos Nel Trust and not with first plaintiff.
29.
The plaintiffs submit that even if it were to be accepted that
first
plaintiff acted in his capacity as a trustee of the Koos Nel Trust
without defendant knowing that furst plaintiff acted for
an
undisclosed principal (“the Koos Nel Trust”), it would
not make any difference to first plaintiffs
locus standi
to
claim specific performance from defendant.
30.
In
Botha v Giyose t/a Paragon Fisheries
[2007]
SCA 73
(RSA) the Court had to determine whether a
person acting as an agent for an undisclosed principal was entitled
to sue in his own
name. The Court a
quo
sitting in an appeal
from the Magistrates’ Court found that the agent of an
undisclosed principal had no
locus standi to
sue. The Supreme
Court of Appeal overturned the decision of the Court a
quo
and
said:
“
[8]
It would appear that the doctrine of the undisclosed principal was
not
fully understood. The rights of the agent as against the third
party are succinctly
summarised
by Joubert,
LAWSA 2ed paras 228 and 231 as follows:
Par 228: ‘In
a
standard situation of representation the representative acquires
no rights and incurs no liabilities from the contract concluded
by
him or her on behalf of his or her principal. The rights and
obligations come into being between the principal and the third
person. In an undisclosed principal situation, the intermediary and
the third person create vincula iuris between themselves by
the
contract concluded in
their
own
names, but
also
so
it is
said,
alternative vincula iuris
between the undisclosed principal and the third person.’
Par 231: ‘The
contract is concluded between the third person and the intermediary
acting in his or her own name. The third
person is in terms of the
contract liable to the intermediary. He or she cannot avoid liability
to the intermediary on the ground
that he or she is liable to the
undisclosed principal, unless and until the undisclosed
principal elects to hold him or her liable.’...
‘
I
am
therefore
of
the
view
that
both
on
principle
and
on
the
authorities
it
is not proper for an agent to sue as
representing his principal by suing in his own (that is the agent’s
own) name, where
the claim being enforced is that of the
principal and the principal is the true plaintiff. This does
not, of course, apply
where the
agent has
the right to sue in his own name, as is the case where he
has
contracted on behalf of an undisclosed principal and sues on the
relevant contract.’
The appellant
throughout the negotiations and conclusion of the agreement acted in
his personal
capacity.
No mention was
made of the close corporation. It seems clear that what happened, (as
so often does with lay persons), is that the
appellant did not see
the close corporation as
a
separate legal entity and
considered that he and the close corporation were one and that
he was entitled personally to sell the business
.
.
.”
31.
Evidently from the above judgment, an intermediary does have
locus
standi
to sue in his own name until the undisclosed principal
elects to hold the third party liable, which was not the case in the
present
case.
32.
In the result, the objective facts do not support the defence
which
the defendant raises regarding the first plaintiff’s
locus
standi.
On the defendant’s own evidence, the Koos Nel Trust
was a mere adjectus in the relationship between first plaintiff and
defendant.
See
ABSA Brokers (Pty) Ltd v Stolz and Others
[2002]
4 ALL SA 476
(NC).
SETTLEMENT
AGREEMENT
33.
The plaintiffs submit in their closing argument that “D2”
was intended by the parties to be a “...settlement of their
disputes and that clauses 2,3 and 4 of “D2” do not
fall
foul of the provisions of Section 8 of the NCA. They seek support for
this proposition in the matter of
Ratlou v MAM Financial
Services SA (Pty) Ltd
2019 (5) SA 117
(SCA).
34.
This submission by the plaintiffs is being raised irregulary
in that
heads of argument are not pleadings and a party may not raise a
potential defence in that manner.
35.
Further, during the evidence-in-chief plaintiffs’ Counsel
tried
to introduce the settlement issue through a leading question which
attracted an objection. In response, plaintiifs’
Counsel stated
that “settlement” was not the correct characterisation of
“D2” and disavowed any reference
to the Ratlou decision.
36.
Another reason why the “settlement” argument is
not
sustainable is that it was never pleaded as part of the plaintiffs’
case.
37.
The most baffling aspect of the submission that “D2”
ought to be interpreted as a settlement is that plaintiff had unti
the latter stages of this case conceded that clauses 2,3 and
4 of
“D2” fall within the ambit of clause 8(4) of the NCA.
38.
Besides the provisions of Section 8 it is not in dispute that
none of
the plaintiffs were registered as credit providers in terms of the
Act. This renders “D2” unlawful in terms
of Section 89
(2)(d) and nullifies any agrument to the contrary.
ENFORCEABLITY
OF PLAINTIFFS’ CLAIMS
39.
First’s plaintiff evidence was that “D2”
was
substituted by “D1” and this resulted in a new set of
obligations for the parties.
40.
It is correct that the plaintiffs’ claim is premised
on “D1”
or alternatively on “D2”. The viability of the claim
becomes questionable from the very onset,
when one considers that
“D1” had been renegotiated by the parties and
substituted. The payment of R30 million by defendant
at the end of
February 2011 had been reduced in “D2” to R12 million.
“D1” cannot be rescucitated in any
form in the absence of
an agreement between the parties to that effect. Plaintiffs’
attempt to revive “D1” by
restating its terms in their
particulars of claim cannot bring it back into existence.
41.
As stated above, clauses 2,3 and 4 of “D2” constitute
a
“credit agreement as defined in Section 8(4)(f) of the Act and
it is common cause that none of the plaintiffs were registered
as
credit providers in terms of the Act.
42.
The only conclusion that can be reached in the circumstances
is that
“D2” is unlawful in terms of Section 89 (2)(d).
43.
Considering first plaintiffs evidence and the overarching intention
of what the parties sought to achieve in the original agreement and
in the subsequent “D1” and “D2”, I
am not
persuaded, as was argued, that clauses 2,3 and 4 of “D2”
are severable from the rest which would leave the whole
of “D2”
unlawful.
44.
The applicability of the Act generally and Section 40 in particular
to the agreements between first plaintiff and defendant is emphasised
by the Supreme Court of Appeal in the matter of
Du Bruyn N.O
and Others
v Karsten
2019 (1) SA 403
SCA
where the following was
said:
“
[21]
Section 40(1) was amended by Act 19 of 2014 to delete any reference
to 100 credit agreements.
It now reads as follows:
‘
A person must
apply to be registered as
a
credit provider if the total
principal
debt owed to that credit provider under all
outstanding credit agreements, other than incidental credit
agreements, exceeds the
threshold prescribed in terms
of
s 42 (1).’
Therefore the amount
of credit provided is now the sole determining factor to
ascertain whether
a
credit
provider
is
obliged
to
register.”
45.
The Court went on further to state the following:
“
[27]
While it may be reasonable, and indeed eminently sensible, to
interpret s 40 as being inapplicable
to once-off transactions where
the role players are not
participants in the
credit market, it is difficult to reconcile this
interpretation
with
the language of the
provision, its context and purpose. The legislature has set
thresholds that trigger the obligation to register
where
a
single
transaction is in excess of the prescribed amount. To conclude that
this does not apply to once off transactions or
to those who are
not regular participants in the credit market, is, however attractive
and sensible it may sound, not being true
to the text and the context
of the
statute. As stated in Potgieter, to find
otherwise would be to
substitute what is justifiably
seen as regulatory overreach with judicial overreach.[15] Lamenting
the dismal drafting of the NGA,
the Constitutional Court suggested
that we accept the words of the provision of the statute, acknowledge
the drafting error and
leave it to parliament to correct.
[28]
In summary the only conclusion to be drawn is that the requirement to
register
as
a
credit provider is applicable to all credit
agreements once the prescribed threshold is reached, irrespective of
whether the credit
provider is involved in
the credit
industry and irrespective of whether the credit agreement
is
a
once off transaction. That it is an imperfect solution
is readily accepted, but it is for
the legislature to
remedy, rather than for the courts to attempt to accommodate
deficient drafting by attributing
a
meaning to s 40(1)(b) that
is not justified by
the wording of the statute.”
46.
None of the parties have claimed that “D2” be declared
void or invalid nor have they claimed restitution.
47.
In the circumstances the finding and conclusion I come to is that
“D2” is unlawful and unenforceable.
ORDER
48.
In the result, I make the following order:
48.1
The plaintiffs' claims are dismissed with costs.
SELBY BAQWA
JUDGE OF THE HIGH COURT
OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
Matter Heard On
:
5 October 2020 to 16 October 2021
Judgment
Reserved On
: 15 October 2021
Judgment
Delivered On
: 15 February 2021
APPEARANCES:
Counsel
for the Plaintiffs
: Adv. AB Rossouw [SC]
:Adv. JHA Saunders
Attorneys
for the Plaintiffs
: Jaco Roos Attorneys Inc.
Counsel
for the Defendant :
Adv. JD Maritz [SC]
Attorneys
for the Defendant : Savage,
Jooste and Adams Inc.