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[2021] ZAGPPHC 224
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Firstrand Bank Limited v Moodliyar and Others (70554/2015) [2021] ZAGPPHC 224 (17 March 2021)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH OF SOUTH
AFRICA
THE
GAUTENG DIVISION, PRETORIA
(
1)
REPORTABLE: NO
(2)
OF INTEREST TO OTHER JUDGES:NO
(3)
REVISED.
17/03/2021
CASE NO.: 70554/2015
In the matter between:
FIRSTRAND
BANK LIMITED
Plaintiff
and
SAVITA
MOODLIYAR
1
st
Defendant
LOGANATHAN
SATHIANAND NAICKER
2
nd
Defendant
THRIPASUNDARI
NAICKER
3
rd
Respondent
J U D G M E N T
MNGQIBISA-THUSI
J:
[1] The
plaintiff is seeking for the following relief against the defendants
in the following terms:
1.1 payment of
an amount of R1, 646, 834.95, together with interest at the
rate of
9.20% per annum, calculated daily and compounded monthly from 29
August 2015, to date of final payment;
1.2 an order
declaring the first defendant’s immovable property described
as
Holding 14 Gerhardsville Agricultural Holdings, Registration Division
J.R., The Province of Gauteng measuring 2,2061 Hectares,
held
by Deed of Transfer No T70638/2006 (a k a 14 First Street,
Gerhardsville, Gerhardsville Agricultural Holdings,
Gerhardsville,
Centurion, Gauteng) (the immovable property”),
specially executable;
1.3 an order
authorising and directing the Registrar of the High Court to
issue a
writ against the immovable property of the first defendant; and
1.4 and costs
on an attorney and client scale, to be taxed.
[2] On or about
07 December 2006, the plaintiff, FirstRand Bank Limited,
and the
first defendant, Mrs Savita Moodliyar, concluded a written credit
agreement which operated as an overdraft facility (“the
main
agreement”) and an addendum with additional terms to the main
agreement.
[3] The
agreement provided,
inter alia
, the following terms, which are
not in dispute:
3.1 That
plaintiff would from time to time lend and advance monies to the
first defendant in an FNB ONE facility account (“facility
account”) up to a
maximum amount of R1, 936, 000.00 plus R17,218.25;
3.2 The term of
the overdraft facility was 240 months;
3.3 The
applicable initial interest rate was 10.20% based on an interest
rate
discount of -1.8% below the plaintiff’s loan mortgage base rate
of 12%
per annum;
3.4 That the
first defendant would pay all cheques, promissory notes, bills
of
exchange and other negotiable instruments which are made and accepted
by the first defendant and to debit amounts to the facility
account;
3.5 That the
overdraft was payable on demand and the plaintiff reserved its
right
to call-up the facility at any time it deems necessary;
3.6 That the
plaintiff would debit the facility account with all its charges
consistent with the generally accepted banking practice;
3.7 That the
plaintiff would calculate interest daily on any overdrawn outstanding
balance from time to time at the plaintiff’s applicable
overdraft interest rate for the relevant class of overdraft subject
to any maximum rate that may legally apply and compound such interest
monthly;
3.8 That the
plaintiff would register a first covering mortgage bond over
the
immovable property of the first defendant as security for the
overdraft.
3.9 The full
amount still owing under the agreement would be payable in the
event
that the first defendant defaults on her payment and she fails to
remedy the default within 7 days from the date of the written
notice
of default.
3.10 With regard to the repayment
of the overdraft, the bond reads as follows:
…
“6. REPAYMENT
6.1
The Mortgagor agrees that, notwithstanding any other provisions of
this agreement,
the Facility is always repayable on demand.
Accordingly, the Mortgagor must pay the debit balance within 7 days
of receipt
of a notice from the Bank requesting repayment.
6.2 In addition to
this, the Mortgagor must repay.
[4] On 12/17
May 2007 a mortgage bond over the immovable property in favour
of the
plaintiff was registered.
[5] The second
defendant, Loganathan Sathianand Naicker, and the third defendant,
Thripasundari Naicker, bound themselves as sureties and coprincipal
debtors, jointly and severally with the first defendant in
favour of
the plaintiff for all the debts of the first defendant up to the
amount of R1,1936,
000.00.
[6] On 4 August
2015 the plaintiff sent the defendant a letter of demand,
followed by
a notice in terms of s 129(1)(a) of the National Credit Act
[1]
as a result of the plaintiff. Summons was issued and served on
first, second defendants and on 02 September 2015 and 09 and
10
September 2015, respectively. Defendants filed a notice of
intention to defend. Consequent thereto the plaintiff
filed an
application for summary judgement against the defendants to which the
first defendant filed an affidavit resisting summary
judgement and a
plea. The second and third defendants have joined issue with
the first defendant in support of her opposition
to the plaintiff’s
claim.
[7] It is the
applicant’s contention that the first defendant was not
consistent in paying her monthly instalment and as a result fell into
arrears. The first defendant defaulted on payment and
plaintiff
issued notices to the defendants in terms of section 129 of the
National Credit Act.
[8] In its plea
the first defendant contends that the plaintiff was not entitled
to
issue summons against her because at the time summons were issued,
she was not in default on her payments. It is the first
defendant’s contention that on a proper interpretation of the
main agreement the maximum limit of the overdraft facility
was
intended to remain the same, that is at R1,936, 000.00 for the entire
term of the overdraft facility. Further, it is
the first
defendant’s contention that through the course of the term of
the overdraft facility, the plaintiff had unilaterally
and
arbitrarily charged her an incorrect rate of interest which is not in
line with the interest rate specified in the main agreement.
As
a result, the effect of the plaintiff charging an incorrect interest
rate and reducing the limit of the overdraft facility resulted
in her
falling into default of her payments.
[9] The first
defendant counter-claims against the plaintiff on the ground
that the
plaintiff was in breach of the agreement by charging her an incorrect
interest rate during the relevant period in a total
amount of R
398,462.82, resulting in the first defendant falling onto arrears
with her payments. Further that the agreement
did not stipulate
any monthly payments to be made by the first defendant. The
first defendant also demands that plaintiff
should adjust its
accounting records to reflect the amount of R398,462.82 as a credit
in her account and to reinstate the agreed
maximum credit limit of
R1,936, 000.00.
[10] The issues to be decided
are:
10.1 whether the plaintiff
charged interest against the first defendant’s account at
the
correct interest rate; and
10.2 whether the plaintiff was
entitled to reduce the credit limit of the overdraft
facility.
[11] In the event that a finding
is made that the plaintiff applied the correct interest rate
and that
on a proper interpretation of the agreement, the credit limit was to
be reduced in accordance to its period, the issue
to be decided is
whether an order should be granted declaring the immovable property
specially executable.
[12] The plaintiff does not
dispute the validity of the agreement and that the provisions of
the
National Credit Act
[2]
have been complied with.
[13] The plaintiff called Mr
Shiven Govender (“Mr Govender”), an attorney, a
recoveries
manager in the plaintiff’s Private Lending
Division. His evidence is as follows. During 2006 the
plaintiff offered
the first defendant an FNB ONE facility account in
order to assist her in consolidating her debt which would result in
her saving
on bank charges. According to Mr Govender, this type
of account allows a client a repayment of 240 months. On 7
December
the plaintiff had signed the facility and the addendum
thereto subject to her registering a mortgage bond in favour of the
plaintiff
over her immovable property as described above. As a
result, the facility letter (inclusive of the addendum) and the
mortgage
bond, constituted the agreement. Mr Govender admitted
that although the first defendant had signed the agreement and
returned
it to the plaintiff’s offices, it was not signed by
the plaintiff as this was not necessary because once the plaintiff
signed,
the agreement came into effect
[3]
.
Attached to the agreement was a schedule which set out,
inter
alia
, the maximum total amount of the overdraft facility (i.e R1,
760.000,00); and the additional 10% valuation (176,000.00) of the
immovable property added and the term of the facility. Mr
Govender testified that the that the plaintiff would calculate
interest daily on any overdrawn outstanding balance from time to time
at its applicable overdraft interest rate for the relevant
class of
overdraft subject to any maximum rate that may legally apply and
compound such interest monthly.
[14] With regard to the interest
to be charged, Mr Govender referred to clause 8 of the mortgage
bond
which reads as follows:
“
8.
DEBIT INTEREST
8.1
Interest on the debit
balance of the Facility, subject to 8.4 below, is calculated at a
rate linked to the published prime rate,
being the interest rate
published from time to time by First National Bank … as being
its prime overdraft rate, at the margin
indicated in the interest
table on the Facility letter.
8.2
The interest payable will
be calculated daily on the debit balance as from the date that any
part of the Facility sum is advanced.
Interest is due monthly
on the instalment date and will be capitalised on that date if not
paid.
8.3
The Bank may vary the
published prime rate. Variations in the prime rate and the
effective date of variation will be published
in the press and
printed on the Mortgagor’s statement as soon as possible after
variation.
8.4
Interest on the debit
balance of the Facility will be calculated at a penalty interest rate
determined by the Bank in its sole discretion
in the event that:
8.4.1
from the date the
facility sum is exceeded to the date the excess is repaid;
8.4.2
from the date of any
default by the Mortgagor or any surety, whether or not the Bank has
given notice of default, to the date the
default is rectified;
8.4.3
to the date that all the
security required in terms of this agreement has been provided.”
[15] According to Mr Govender,
the first defendant’s initial approved interest rate was
calculated at the prime rate minus 1.8%.
[16] Mr Govender testified that
on 5 December 2006, the prime overdraft rate was 12%, as reflected
in
the facility letter. Further, Mr Govender explained that the
applicable interest rate would be 0.5% higher than the initial
rate
if the balance of the account exceeded 80% of the value of the prop
but did not exceed 100% of the value of the property.
At the
time the mortgage bond was registered, the immovable property was
valued at R1,760,000.00. He further explained what
the term LTV
(Loan to Valuation) meant and how it was applied in calculating
interest due.
[17] During his evidence Mr
Govender explained how the interest on the first defendant’s
loan account was calculated, making reference in particular to the
variation of the LTV, depending on the balance was above 80%,
between
80% and 90%
[4]
or exceeded 100%
5
of the valuation of the immovable
property. He further testified that the applicable interest
rate would be changed only
when the bank’s prime rate changed.
Furthermore, he testified during the first 10 years of the facility
the initial
amount of the facility reduced on a monthly basis.
[18] With regard to the interest
calculations done by the first defendant in order to prove
that she
was over-charged on interest, Mr Govender testified that the first
defendant’s calculations were incorrect in that
she had applied
that incorrect interest rate and had also not adjusted the interest
rate applicable on the day when the prime rate
changed.
[19] The first defendant’s
evidence is as follows. The first defendant testified
that
according to her knowledge and since no specific monthly instalment
was stipulated in the facility letter, the maximum facility
amount
would remain the same for the entire term of the loan and that she
was not aware that it would be reduced during the course
of the
loan. Further that the only condition she was aware of with
regard to the facility amount was that it was not supposed
to be
above the maximum amount loaned. She also denied knowing what
the term LTV meant. However, the first defendant,
despite her
initial assertion that the plaintiff had consistently applied an
incorrect interest rate, concede that her calculations
of the
applicable interest rate were wrong. In light of her assertion
that the facility amount was not supposed to be reduced
through the
term of the facility, on being questioned as to how she was going to
repay the loan at the end of its term, the first
defendant testified
that she and her husband had planned other options on how to repay
the loan.
[20] With regard to the
executability of the immovable property, it is common cause that the
property is the primary residence of the first defendant and her
husband. The first defendant further testified that the
second
dwelling on the property is used by the second and third defendants
and the third dwelling is leased to a third party.
[21] The following facts are not
in dispute:
21.1 that the amount of the
overdraft was R1,936,000.00 and that it was repayable over a period
of 240 months;
21.2 that the initial interest
rate applicable would be prime minus 1.8%;
21.3 that when the facility
letter was signed the prime rate was 12%;
21.4 that the applicable interest
rate would change in line with any changes in the prime rate
and the
balance outstanding on the loan;
21.5 that at the time the
mortgage bond was registered that immovable property was valued at
R1,760,000.00.
21.6 that the overdraft was
payable on demand and that the plaintiff was entitled to call up
the
loan at any time it deemed it necessary;
21.7 that there were certain
months when the first defendant did not pay any amount towards
that
loan; and
21.8 that the plaintiff sent
monthly statements of the loan account to the first defendant.
[22] The evidence of the first
defendant that she was not aware that she had to make at least
monthly payments on the loan in order to reduce the amount due is not
plausible if one takes into account that the period of the
loan was
240 months. The first defendant’s contention that she had
plans on how to repay the amount owing at the end
of the term of the
loan is not convincing. In his evidence, the plaintiff’s
witness succinctly testified as to the
applicable interest rate from
time to time. His evidence in this regard was convincing,
having regard to the terms of the
facility to which the first
defendant had agreed upon. The first defendant did not provide
any evidence to controvert the
plaintiff’s evidence on the
applicable interest rate applied and on the fact that, in view of the
period of the term, the
amount of the loan was susceptible to a
reduction through the first defendant making monthly repayments
towards the loan.
The first defendant has conceded that she did
not make any payments during some months and that her calculation of
the applicable
interest rate was incorrect. Furthermore, in
light of the fact that on certain months the first defendant did not
make any
repayments, she could not dispute the plaintiff’s
assertion that she was in default of her obligations under the
agreement
to make payments towards the loan.
[23] I am satisfied that the
plaintiff has shown on a balance of probabilities that the first
defendant was in breach of the agreement and that it was entitled in
terms of the provisions of the facility to demand payment
of the
total outstanding amount of the loan. The interpretation the
first defendant wants to be ascribed to the terms of
the agreement
with regard to repayments on the loan, the applicable interest rate
and her default in making payments towards the
loan are far-fetched
and do not accord with the clear terms of the agreement.
[24] No submissions were made on
behalf of the defendants with regard to the executability
of the
immovable property and there is no plausible reason why the plaintiff
should not be granted an order for the execution against
the
immovable property. However, although summons was issued before
the provisions of Uniform Rule 46A, its provisions have
to be
complied with.
[25] In the result the following
order is made:
1.
The defendants are ordered, jointly and severally, the one
paying the
other to be absolved, to pay to the plaintiff an amount of R1, 646,
834.95, together with interest at the rate of 9.20%
per annum,
calculated daily and compounded monthly from 29 August 2015, to date
of final payment;
2.
an order is made declaring the first defendant’s immovable
property described as Holding 14 Gerhardsville Agricultural Holdings,
Registration Division J.R., The Province of Gauteng
measuring
2,2061 Hectares, held by Deed of Transfer No T70638/2006 (aka
14 First Street, Gerhardsville, Gerhardsville
Agricultural
Holdings, Gerhardsville, Centurion, Gauteng) (the immovable
property”), specially executable;
3.
an order authorising and directing the Registrar of the High
Court to
issue a writ against the immovable property of the first defendant
subject to a reserve price being determined; and
4.
the defendants to pay the costs on an attorney and client
scale, to
be taxed.
N P
MNGQIBISA-THUSI
Judge of the High Court
Appearances:
For
the Plaintiff: Adv J H Mullentzy (instructed by PDR Attorneys)
For the Defendants: Adv Bedhesi
(instructed by Moodliyar & Bedhesi Attorneys)
[1]
Act 34 of 2005.
[2]
Act 34 of 2005.
[3]
Clause 4 of the facility letter provides that: “Unless
provided otherwise in the Standard Terms and Conditions, the
effective
date of this Facility Letter shall be the date that: a.
You have signed and returned this Facility Letter to us. b. All
documents
required to effect the security have been signed.”
[4]
The applicable interest rate would be 0.5% higher than the initial
rate.
5
The applicable interest rate would be 1.5% higher
than the initial rate.