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[2021] ZASCA 93
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Silostrat (Pty) Ltd & Others v Pieter Hendrik Strydom N.O & Others (845/2019, 898/2019) [2021] ZASCA 93 (25 June 2021)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 845/2019 and 898/2019
In the matter between:
SILOSTRAT (PTY)
LIMITED
FIRST
APPELLANT
THE STANDARD BANK OF
SOUTH AFRICA
LIMITED
SECOND
APPELLANT
SUIDWES
LANDBOU (PTY) LIMITED THIRD
APPELLANT
and
PIETER HENDRIK STRYDOM
NO
DEON MARIUS BOTHA NO
CAROLINE MMAKGOKOLO
LEDWABA NO
(in their capacities as
joint trustees of the Insolvent
Estate
of Frederick Barend Christoffel Kirsten)
FIRST
RESPONDENT
THE LAND &
AGRICULTURAL
DEVELOPMENT
BANK OF SOUTH AFRICA SECOND
RESPONDENT
TECHNICHEM
OESBESKERMING
(PTY)
LIMITED
THIRD
RESPONDENT
Neutral
citation:
Silostrat
(Pty) Ltd & Others v Pieter Hendrik Strydom N.O & Others
(case no 845/2019 and 898/2019)
[2021]
ZASCA 93
(25 June 2021)
Coram:
PONNAN, DAMBUZA and NICHOLLS JJA,
GORVEN and MABINDLA-BOQWANA AJJA
Heard:
15 February 2021
Delivered:
This judgment was handed down
electronically by circulation to the parties' representatives by
email, publication on the Supreme
Court of Appeal website and release
to SAFLII. The date and time for hand-down is deemed to be 10h00 on
25 June
2021.
Summary:
Law of Contract – cession –
interpretation of three competing cessions – principles of
interpretation of legal
documents applicable – importation of
words not used in the cession not permitted.
Rectification of cession
– insufficient evidence to prove mistake common to both parties
to the cession for purposes of a
claim for rectification thereof.
Insolvency
- Institution of proceedings against the trustees of the insolvent
estate where a debt had been proved and admitted by
the trustees
improper.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Janse van Nieuwenhuizen J,
sitting as court of first instance):
The
appeal in each instance by:
(i)
the first appellant, Silostrat (Pty)
Ltd, against paragraphs 2 and 3;
(ii)
the second appellant, Standard Bank,
against paragraph 1; and
(iii)
the third appellant, Suidwes Landbou (Pty) Ltd, against
paragraph 6;
of
the order of the court below is dismissed with costs, including those
of two counsel where so employed.
JUDGMENT
Dambuza
JA (Ponnan, Nicholls JJA and Gorven and Mabindla-Boqwana AJJA
concurring)
Introduction
[1]
Central to this appeal is the validity and ranking of three cessions
executed by Mr
Frederick Christoffel Kirsten (Kirsten), whose estate
was sequestrated in August 2016. The three cessionaries were: the
second
appellant, Standard Bank of South Africa Limited (Standard
Bank or the bank), the third appellant, Suidwes Landbou (Pty) Ltd, a
dealer in agricultural commodities (Suidwes), which had ceded a
portion of its book debt to the second respondent, the Land and
Agricultural Development Bank of South Africa (Land Bank), and the
fifth respondent, Technichem Oesbeskerming (Pty) Ltd (Technichem),
a
supplier of agricultural chemicals. In the high court each of the
three cessionaries, relying on their respective cessions, asserted
an
entitlement to the proceeds of Kirsten’s 2015 maize crop. The
first appellant, Silostrat, a grain trader, also laid claim
to those
funds, based on contracts of sale for the 2015 maize produce, which
it had concluded with Kirsten at the start of the
2015/16 maize
production season.
[2]
The high court:
1. Dismissed Standard
Bank’s claim against each of the trustees of Kirsten’s
insolvent estate, Suidwes and the Landbank,
with costs including
those of two counsel.
2. Dismissed Silostrat’s
conditional counterclaim against Standard Bank with costs including
those of two counsel.
3. Dismissed Silostrat’s
conditional counterclaim against Suidwes with costs including those
of two counsel.
4. Declared Technichem’s
cession dated 5 October 2014 valid and enforceable.
5. Held that
Technichem’s cession predates the cessions relied upon by
Suidwes and the Landbank in respect of Kirsten’s
2015 crop
income.
6. Ordered Suidwes to pay
Technichem’s costs.
Standard
Bank appeals against paragraph (1) of the order of the high court,
Silostrat against paragraphs (2) and (3) and Suidwes
against
paragraph (6). In each instance the appeal is with the leave of the
high court.
Background
[3]
Until his estate was sequestrated in 2016, Kirsten was a widely
respected maize, sunflower
and cattle farmer in the North West
Province, having taken over the farming enterprise from his father,
and extended it by renting
some of the neighbouring farms. In the
course of his farming operations, Kirsten held several bank accounts
and enjoyed credit
facilities with Standard Bank. He also enjoyed
credit facilities with Suidwes and Technichem. As security for these
credit facilities,
Kirsten executed deeds of cession in favour of his
creditors, Standard Bank, Suidwes and Technichem. He also registered
a mortgage
bond in favour of Standard Bank and a General Notarial
Covering Bond in favour of Suidwes.
[4]
From October 2014, Kirsten defaulted on his loan repayments. He also
failed to deliver
the 2015 maize crop, which Silostrat had bought
from him. On 13 August 2015, Standard Bank instituted proceedings
against Kirsten
and the other parties herein, asserting its
entitlement to payment of the balance outstanding in Kirsten’s
loan account from
the proceeds of his 2015 maize crop. On 29 April
2016, his estate was provisionally sequestrated. This triggered a
contest amongst
the cessionaries. On 31 August 2016, a final order of
sequestration was granted against Kirsten. After his sequestration,
Kirsten
was substituted by his three joint trustees (the Trustees) in
the proceedings before the court below. They are collectively cited
as the first respondent in the present appeal.
The Standard Bank
claim
[5]
As a client of the bank, Kirsten held an overdraft and several loan
accounts. From
2009, his credit profile was reviewed by the bank
during September of each year. In 2011, Mr Lood Mathee (Mathee), a
relationship
manager with the bank, conducted the review of Kirsten’s
bank accounts. At that time, Kirsten’s indebtedness to Standard
Bank was R6.5 million. Kirsten had applied for an increase in his
overdraft facility to R 8 million. His financial position was
assessed as ‘extremely strong’ and his farming operation
as ‘outstanding’. At that stage, the bank held
no
security for the line of credit afforded to Kirsten. The increase
sought was duly approved on condition that he execute a deed
of
cession in favour of the bank in respect of his crop income and
provide proof of the maize that he then held in the silos. It
was
recorded in his bank file that he owed R16 432 428 to
Suidwes and R5 836 988 to another agricultural
co-operative,
Senwes Limited. Mathee had to investigate and confirm
that Kirsten had paid these moneys to the respective institutions.
[6]
On 6 October 2011, Mathee visited the Suidwes premises where he
discussed Kirsten’s
account with the Suidwes relationship
manager, Mr Louis Botha. Botha advised that Kirsten still owed R11,5
million to Suidwes on
a revolving credit loan with a credit limit of
R15 million. Mathee recorded this information in Kirsten’s
file, together
with the following:
‘
With
above in mind he will definitely again make use of Suidwes’
assistance for the next season on the Revolving credit loan.
We
therefore will not get that confirmation that he will not make use of
any credit facilities at the Co-op. He does not owe Senwes
any funds,
but they also make a production facility of R4 million available’.
[7]
On 22 November 2011, Kirsten executed a Deed of Cession in favour of
Standard Bank. In the
relevant clauses the cession provided:
‘
1
Giving of cession
I, Frederik Barend
Christoffel Kirsten (700407 5240 080) (“Cedent”) cede and
transfer in favour of The Standard Bank
of South Africa Limited (“the
Bank”), or anyone who takes transfer of the Bank’s rights
under this cession, all
the Cedent’s rights in and to all
income and/or moneys due and to become due to the Cedent by
agricultural producers (‘Producers”)
in respect of Maize
supplied by the Cedent and/or agricultural produce (“produce”)
purchased from Producers and sold
to buyers of the produce from time
to time, upon the terms and conditions set out in this agreement.
2
Amount secured under this cession
The maximum amount
secured under this cession is unlimited.
3
Continuing covering security
This
cession will be a continuing covering security for all amounts
(including interest, collection cost, default administration
charges
and other cost and fees permissible in terms of the underlying debt
and value added tax) which the Cedent now or in the
future may owe to
the Bank for whatever reason whether directly, contingently as surety
or otherwise (“debts”) even
if the debts are temporarily
settled at any time . . .’
[8]
Prior to the execution of this cession, on 16 November 2011, Mathee
wrote to Botha
of Suidwes, advising that Kirsten had pledged and
ceded to Standard Bank all crops and all right, title and interest
and claims
arising from the proceeds thereof. On 24 November 2011 Mr
Olivier of Suidwes responded that Suidwes had approved Kirsten’s
application for a revolving credit against cession of his crop and
that Standard Bank could obtain a cession for surplus production.
[9]
Over time Kirsten’s indebtedness to the bank continued to
increase steadily.
By October 2012, the balance outstanding on his
overdraft facility was R19 million. But the bank kept approving
further loan applications.
During the latter part of 2013, a second
production loan was advanced to Kirsten. This loan was to be repaid
in full by 31 August
2014. It was approved on condition that Kirsten
would provide a ‘cession over [his] crop and crop proceeds’.
However,
no cession, other than the 2011 cession, was executed by
Kirsten in favour of the bank. A further ‘long term loan’
of R20 million, payable over a 10 year period was approved in favour
of Kirsten, on condition that he would register first mortgage
bonds
in favour of the bank over two of his farms.
[10]
During the period 17 September 2013 to 22 December 2014, Standard
Bank concluded six instalment
sale agreements with Kirsten in
relation to the purchase of farming implements and vehicles. The
value of these loan agreements
was R79 367 633.04. The bank’s
records revealed that the relevant bank officials were of the
impression that the bank
was in possession of an ‘unrestricted
cession of [Kirsten’s] crops and crop income’ executed by
him in favour
of the bank as security for his credit facilities.
[11]
During November 2014, the bank approved a production loan application
of R21 million in Kirsten’s
favour. This loan was intended for
use in financing production costs in respect of the 2014 to 2015
maize production season. Part
of this loan amount was a roll-over of
the unpaid portion of the loan from the previous season (2013).
[1]
The loan agreement between Kirsten and the bank provided that Kirsten
would provide collateral security in the form of an ‘unrestricted
cession of crops and crop income’ together with an unrestricted
cession of a comprehensive crop insurance, and an ‘input
cost
insurance contract’. On 27 November 2014 Standard Bank extended
to Kirsten, an overdraft facility with a maximum limit
of
R5 000 000.00.
[2]
In
the overdraft agreement it was recorded that under the November 2011
cession the bank was in possession of collateral security
in the form
of ‘monies due and to become due [to Kirsten]’.
The Silostrat claim
[12]
To ensure payment of the 2014/2015 production loan, Kirsten sold
35 000 tons of his 2015
maize produce to Silostrat. This
arrangement was implemented through a business relationship between
Standard Bank and Quattro-Vest
(Pty) Ltd, an entity which conducted
the business of ‘arranging’ finance for farmers, among
other things.
[13]
Under this arrangement, Kirsten sold his anticipated 2015 maize
produce to Silostrat in three
forward contracts, concluded during
November 2014, January 2015 and February 2015 respectively. In terms
of the first of these
agreements the maize was sold at a variable
purchase price, pegged to the SAFEX maize price as at 31 July 2015.
In the other two
contracts the purchase price was fixed. Kirsten
undertook to deliver the maize before July 2015.
[14]
Silostrat immediately sold the maize bought from Kirsten by way of
‘back-to-back’
agreements on the SAFEX commodities
exchange, and, consistent with the contracts concluded with Kirsten,
Silostrat was to deliver
the maize on 31 July 2015; except that
Kirsten never delivered the maize to it.
[15]
During May 2015, as Kirsten struggled to meet his obligations under
the various business transactions
it became apparent that his
creditors were intent on laying claim to the proceeds of his 2015
maize produce. It turned out that
during the same period over which
Kirsten had obtained loans and other credit facilities from the
Standard Bank and Suidwes, he
had secured similar credit facilities
with Technichem for amounts running into millions of Rand.
[16]
When Silostrat could not perform its obligations under the
back-to-back contracts because of
Kirsten’s non-performance, it
resorted to ‘buying in’ maize in order to fulfil its
obligations under those contracts.
It secured replacement maize at a
higher price than that contracted for with Kirsten, and incurred
purchase costs of R35 288 000.00.
The
Suidwes
(and the Land Bank) claims
[17]
Kirsten’s relationship with Suidwes also went as far back as
October 2009, when he executed the first
of what was to be annual
cessions in favour of Suidwes. The first two clauses thereof
provided:
‘
Die
kliënt sedeer hiermee aan Suidwes, wat die sessie aanvaar, al
die kliënt se reg, titel en belang in die totale opbrengs
van
alle oeste wat gedurende die 2010 produksieseisoen geproduseer word,
van watter aard total ook al en waar ook al verbou, wat
–
1.1
reeds deur die kliënt ingesamel, maar nog nie te gelde gemaak is
nie;
1.2
reeds aangeplant is, maar wat nog nie op die land is; en
1.3
alle oeste wat die kliënt in die toekoms mag aanplant.
2
Die sessie dien as sekuriteit vir die behoorlike betaling deur die
kliënt
aan Suidwes van alle gelde wat tans aan Suidwes
verskuldig is of in die toekoms verskuldig mag word ontstaande uit
watter skuldoorsaak
ook al’.
[18]
In terms of the second cession executed by Kirsten in favour Suidwes
on 15 October 2010, he ceded
to Suidwes ‘all future crops which
[he] might in the future plant’. Clause 3 of that cession
provided that it would:
‘
.
. . bly van krag totdat alle bedrae wat aan Suidwes verskuldig is
deur die kliënt betaal aan is en Suidwes, na betaling .
. . die
sessie skriftelik gekanselleer het.’
Further
cessions were executed in November 2011 and in 2013.
[19]
In August 2014, Suidwes concluded a service level agreement with the
Land Bank in terms of which
it sold and ceded part of its book debts
and related security to the Land Bank. A portion of Kirsten’s
debt with Suidwes
was sold to the Land Bank, while another portion
remained with Suidwes. Hence the Land Bank’s involvement in
these proceedings.
On 28 October 2014, Kirsten executed the last of
the annual cessions in favour of Suidwes, ceding his right, title and
interest
to the crop produced during the 2015 production season.
[20]
During May 2015, Suidwes demanded from Kirsten delivery of the 2015
maize crop produce. Subsequently,
Kirsten sold 22 619.52 tons of
his 2015 maize crop to Africum, a wholly owned subsidiary of Suidwes.
The maize was delivered
to Suidwes’ silos during the period
between 14 July 2015 and 21 September 2015. Africum sold the maize to
third parties.
The proceeds thereof were paid to Suidwes, who used
some of it to credit Kirsten’s debt due to Suidwes, and the
balance to
settle Kirsten’s debt with the Land Bank.
The Technichem claim
[21]
During the same period as the conclusion of the transactions set out
above (2014), Kirsten bought
agricultural chemicals from Technichem
under a credit agreement. As security for this indebtedness Kirsten
executed a Deed of Cession
dated 5 October 2014, in terms of which he
ceded all of his rights to the income from his 2015 crop produce to
Technichem. In the
relevant clause the Technichem Deed of Cession
provided:
‘
As
sekuriteit vir betaling van enige of alle bedrae geld wat die
aansoeker aan TECHNICHEM verskulding is of mag raak, ongeag wat
die
skuldoorsaak daarvan is, sedeer en dra en maak die aansoeker hierby
oor aan en ten gunste van TECHNICHEM al die aansoeker se
reg, titel,
belang en aanspraak in en op alle oesopbrengste van die aansoeker
verbou het of in die toekoms mag verbou. Verder geskied
sodanige
sessie op die volgende voorwardes:
Die
AANSOEKER verklaar en bevestige dat hy gesamentlik en/of afsonderlik
die volgende gewasse aangeplant en verbou het en/of van
voorneme is
om dit te bou, gesamentlik en/of afsonderlik die eienaar daarvan is
en dat dit nie aan enige ander party of instansie
verpand is, hetsy
by ooreenkoms of statuter nie. . . .’
[22]
It was not in dispute that the Technichem cession, having been
executed 19 days prior to the
2014 Suidwes cession, ranked before the
latter cession. It is in this context that Suidwes relied on its
earlier cessions which,
it maintained, were evergreen. I deal with
this contention later in this judgment. By July 2015, an amount of
R8 062 498.94
was owing by Kirsten on his credit account
with Technichem.
The sequestration
proceedings
[23]
At the time of sequestration Kirsten’s liabilities exceeded his
assets by approximately
R44 751 458.20. Standard Bank, the
Land Bank and Technichem proved their claims against his insolvent
estate.
[3]
Silostrat’s
claim against the insolvent estate was conceded by the trustees
during the course of the trial in the high court
and judgment was
entered by agreement in respect thereof. Nevertheless, Silostrat
persisted with its counter claims against Standard
Bank and Suidwes.
Proceedings before the
court a quo
[24]
On 13 August 2015, Standard Bank instituted proceedings against
Kirsten, Suidwes, and Silostrat
for payment of the proceeds of
Kirsten’s 2015 crop produce. For this claim Standard Bank
relied on the cession executed by
Kirsten in its favour on 22
November 2011. The Trustees were subsequently substituted in his
place. Later, the Land Bank and Technichem
were joined in the
proceedings.
[25]
As against Kirsten, Standard Bank claimed payment of the moneys
advanced pursuant to the conclusion
of the third production loan
agreement concluded on 10 November 2014, for which the bank held, as
security, the deed of cession
executed by Kirsten in its favour on 22
November 2011.
The bank
contended
that, properly interpreted, that cession meant that Kirsten had ceded
and transferred to it all of his rights in and to
his entire maize
crop, and to all income due and to become due to him in respect of
maize sold and supplied by him. It asserted
that the amount secured
under the cession was unlimited and that the cession was a continuing
covering security for all amounts
owed by Kirsten to the bank at the
time of its execution and in the future.
[26]
As an alternative, the bank contended that the failure to record in
the Deed of Cession the common
intention held by itself and Kirsten
as set out above, was occasioned by a common and bona fide error in
the drafting of the cession
and that the cession therefore fell to be
rectified to accord with the following intended meaning:
‘
1
Giving of cession
I
Frederik Barend Christoffel Kirsten (700407 5240 080) (“Cedent”)
cede and transfer in favour of the Standard Bank
of South Africa
Limited (“the Bank”), or anyone who takes transfer of the
Bank’s rights under this cession,
all
the Cedent’s rights in and to the Cedent’s entire Maize
crop and all income and/or moneys due and to become due
to the Cedent
in respect of Maize supplied and sold by the Cedent and/or
agricultural produce (“produce”) purchased
from
agricultural producers and sold to buyers of the produce from time to
time, upon the terms and conditions set out in this
agreement.
’(Emphasis added.)
[27]
The bank maintained that the cession should be interpreted to mean
that it was entitled to all
the proceeds of Kirsten’s 2015 and
2016 maize crop harvest. It sought a declarator that its cession (as
rectified, if necessary)
was valid and enforceable, and that it
pre-dated the cessions executed by Kirsten in favour of Suidwes and
Technichem. It contended
that its cession trumped the others and
therefore all proceeds realised from Kirsten’s 2015 maize
produce should be paid
to it. However, the bank later accepted that
the 2016 produce fell to be dealt with in the insolvent estate and
abandoned its claim
in that regard.
[28]
In their plea, the Trustees contended that the interpretation of the
cession advanced by Standard
Bank was legally incompetent and that
the Standard Bank cession was void for vagueness, a view shared by
all the other parties.
A further contention by the Trustees was that
it was not possible to determine from the cession which maize crop or
income was
being ceded. Alternatively, the ceded rights were limited
to Kirsten’s rights against agricultural producers in respect
of
maize supplied to them, ie, the rights ceded in the cession had
nothing to do with the proceeds of maize sold to grain dealers such
as Silostrat and Suidwes.
[29]
Suidwes and the Land Bank filed similar pleas. In respect of the
Standard Bank claim they asserted
that from 2009 until 2014 Kirsten
provided Suidwes with annual evergreen cessions which trumped those
he executed in favour of
Standard Bank and Technichem.
[30]
Suidwes and the Land Bank also asserted their rights flowing from the
General Notarial Bond registered
by Kirsten in favour of Suidwes over
Kirsten’s movable property, and ceded to the Land Bank on the
same day of its registration.
The Notarial Bond had been perfected by
agreement between Kirsten and Suidwes. It was contended that
the General Notarial
Bond included Kirsten’s 2015 maize
produce. This argument was, however, not pursued on appeal.
[31]
Suidwes and the Land Bank further pleaded that although the maize was
delivered by Kirsten to
the Suidwes silos and held by Suidwes in
pledge on behalf of both entities, it was then sold by Kirsten to
Africum and the latter
sold it to third parties. The proceeds were
paid to Suidwes in settlement of Kirsten’s debts to Suidwes and
the Land Bank.
Incidentally, the payment made by Africum to Suidwes
became the subject of a separate action instituted by the Trustees of
Kirsten’s
insolvent estate against Africum.
[4]
[32]
Silostrat responded to the Standard Bank claim with its own claim
against Kirsten’s insolvent
estate, for payment of the
R35 288 000.00, which it had suffered as a result of
Kirsten’s breach of contract in
failing to deliver the 2015
maize produce contracted for in the three forward agreements. It also
asserted a conditional delictual
counter-claim against Standard Bank
based on alleged negligence by the bank in failing to ensure that the
cession provided by Kirsten
would protect it (Silostrat) in the event
of Kisten’s failure to deliver the 35 000 tons of maize.
[33]
As an alternative to that conditional counterclaim, Silostrat claimed
delictual damages against
Suidwes for ‘appropriation’ and
disposal of the 22 619.52 tons of maize delivered by Kirsten to
its silos. Silostrat
alleged that there was a legal duty
[5]
on Suidwes not to interfere with its contractual rights under the
three forward purchase agreements. It contended that by accepting
delivery of Kirsten’s maize and disposing of it with full
knowledge of Silostrat’s contractual rights, Suidwes usurped
the maize and appropriated it to itself.
[6]
[34]
In its plea to the Standard Bank claim, Technichem asserted its
entitlement to the proceeds of
Kirsten’s 2015 maize produce on
the basis of the unpaid balance of Kirsten’s indebtedness to it
amounting to R7 665 946.44,
and its cession.
Technichem
disputed Standard Bank’s claim as pleaded under the 2011
cession and maintained that its cession trumped both the
Standard
Bank and the Suidwes cessions, as well as the General Notarial Bond
relied on by Suidwes. However, it
also
conceded the right of the Trustees to the proceeds of Kirsten’s
2016 harvest.
Judgment of the high
court
[35]
In dismissing Standard Bank’s claim, the high court found that
the interpretation contended
for by the bank on the wording of its
cession was untenable. The learned judge further found that, having
proved its claim against
the insolvent estate in the sequestration
proceedings, Standard Bank had no cause of action in relation to the
2015 maize crop.
Further, no proper basis had been laid for
rectification of the cession as the bank had failed to establish that
Kirsten and the
bank were labouring under a common mistake when the
cession was executed. The learned judge held that, in any event,
rectification
of the cession subsequent to the establishment of the
concursus creditorum
would place Standard Bank in a stronger position than it occupied at
concursus creditorum
,
to the prejudice of the other creditors.
[36]
The high court rejected the interpretation of Suidwes’ cessions
as evergreen. It found
that each cession related to the crop produced
in a specific season. As to the Suidwes 2014 cession, the court held
that it ranked
after the Technichem cession because it was executed
later. With regard to the perfected General Notarial Bond, it found
that,
due to the sale by Suidwes of part of its book debt to the Land
Bank, neither entity held any security from Kirsten.
[37]
Silostrat’s forward agreements were upheld by the high court
(in line with the concession
made by the Trustees). This meant that
Silostrat’s claim would be administered in the insolvent
estate. However, as already
stated, Silostrat persisted with its
conditional counter claims, even on appeal.
[38]
With regard to its delictual claim against Suidwes, the court found
that, contrary to the allegation
by Silostrat, Suidwes had not
appropriated Kirsten’s maize. Instead, Kirsten had sold the
maize to Africum ‘on his
own folio number in his own name’.
[39]
The high court upheld Technichem’s claim, having found that its
cession, executed by Kirsten
on 5 October 2014, predated the Suidwes
cession. It is noteworthy that none of the parties have sought to
assail this conclusion
on appeal. The court then awarded the costs
incurred by Technichem in the application against Suidwes.
The
Standard Bank appeal
[40]
I first consider the submission made on behalf of the Trustees and
Suidwes/Land Bank that Standard
Bank had no cause of action against
them. The argument was that, given that the bank had proved its claim
against the insolvent
estate, its claim in the summons for the same
debt against the insolvent estate, Suidwes and Land Bank was
unsustainable.
[41]
The bank did not deny that its cession was
in
securitatem debiti
. It had held the
cession pending the repayment of the moneys advanced to Kirsten. Once
it had proved its claim against the insolvent
estate, it fell upon
the Trustees to deal therewith in the course of the administration of
the insolvent estate. The claim had
clearly not been disputed by the
Trustees. The institution of proceedings against the insolvent estate
and the other parties was
contrary to established principles in the
Law of Insolvency. The proceedings instituted by the Trustees against
Africum for payment
of the same proceeds clearly illustrate this
point.
[42]
Regarding the validity and ranking of its cession, Standard Bank
contended that the high court’s
interpretation of its cession
was unbusinesslike, that it overemphasised the grammatical and
objective meaning of the term ‘agricultural
producers’
rather than considering the purpose of the cession and the context in
which it was executed, and that the court’s
interpretation
resulted in an absurdity. It was submitted on behalf of Standard Bank
that there was no evidence that any income
was due to Kirsten from
agricultural producers to whom he had sold the maize. The only
contemplated sales were to grain dealers,
it was argued.
Consequently, the interpretation that took into account the reference
to agricultural producers in the Standard
Bank cession was illogical.
[43]
The interpretation advanced by the bank runs contrary to the
established approach to interpretation
of legal documents that has
been repeatedly emphasised by our courts. Central to the
interpretation of legal documents is the principle
that meaning must
be attributed to the words used by the parties in the document.
Although evidence of context is admissible as
an interpretative aid
such evidence may not be led to alter the meaning of the clear and
unambiguous words used in an agreement.
[7]
The interpretation advanced on behalf of the bank meant that the
words used in the cession would have to be disregarded and other
words substituted in their place.
[44]
The bulk of the evidence led on behalf of Standard Bank pertained to
the conditions that were
stipulated by the bank for the approval of
Kirsten’s applications for increased credit facilities. It was
not disputed that
in some instances the conditions for approval of
the credit facilities included that Kirsten would provide, as
security for the
loans and overdraft facilities, his ‘crop and
crop proceeds’. The evidence of Mathee and Ms Winnie Pienaar
(Pienaar),
the bank’s credit manager who approved Kirsten’s
overdraft facility in November 2011, regarding those conditions, was
not in dispute.
[45]
However, that was never included in the cession that was executed by
Kirsten in favour of the
bank. The Deed of Cession only provided for
the cession of Kirsten’s rights:
‘
in
and to all income and/or moneys
due and
to become due to the Cedent by agricultural producers (“Producers”)
in respect of Maize supplied by the Cedent
and/or agricultural
produce (“produce”) purchased from Producers and sold to
buyers of produce
from time to time,
upon the terms and conditions set out in this agreement’.
(Emphasis added.)
[46]
There was nothing insensible or unbusinesslike about the limitation
of the expected income to
that which would be due to Kirsten ‘by
agricultural producers’. The definition of the word ‘produce’
is:
‘make, manufacture or create’;
[8]
and its derivative, ‘producer’ is defined as: ‘one
who produces: especially agricultural products or manufactures
crude
materials into articles of use’.
[9]
The fact that Kirsten was an agricultural producer in his own right
did not render unbusinessslike or absurd the reference to him
purchasing maize or agricultural produce from other agricultural
producers for the purpose of onselling it. The submission on behalf
of Standard Bank that the words used in the cession had to be
interpreted to include ‘expressly, impliedly or tacitly, that
Kirsten ceded to the bank his entire maize crop and all rights
thereto, including the right to the income due or to become due’
was untenable. The high court was correct in its interpretation of
the Standard Bank cession.
Rectification
[47]
To meet the onus of proving the alleged mistake common to both
parties to the cession, Standard
Bank relied on the evidence of
Mathee and Pienaar. However, neither of them tendered admissible
evidence in support of a case of
rectification. Neither of them had
the authority to decide on the wording of the cession nor any
contract on behalf of the bank.
Mathee viewed himself as merely a
conduit, who only served to facilitate Kirsten’s signature on
the cession. Kirsten did
not testify. It is thus difficult to see
how, absent his evidence, the bank could establish a mistake common
to the parties. According
to Mathee, the Deed of Cession was drafted
by officials of the Standard Bank legal department in Johannesburg.
Neither Kirsten
nor Mathee read it before it was signed. Mathee’s
insistence that, in as far as it was not recorded in the Deed of
Cession
that Kirsten had ceded his ‘crop and crop proceeds’,
the intention of the contracting parties had not been correctly
recorded, was plainly conjecture.
[48]
Consequently there was no factual basis to justify rectification. The
high court’s dismissal
of the application for rectification was
correct. And its finding that Standard Bank had no valid cession in
respect of Kirsten’s
crop income is unassailable. That being so
it is unnecessary to consider the issue of rectification post
concursus creditorum.
[49]
In any event, w
hen Standard Bank
approved Kirsten’s 2011 production loan and accepted his
cession, it was aware of the earlier cession executed
by Kirsten in
favour of Suidwes, and was also aware that Suidwes had misgivings
about the later cession. Hence, Standard Bank had
accepted that its
cession could only obtain in relation to the Kirsten’s surplus
production.
Silostrat’s
appeal
Delictual
claim against Standard Bank
[50]
In Silostrat’s conditional
counterclaim, it alleged that the Bank breached a legal duty owed to
it. The legal duty, so it
was contended, centred on the Bank’s
failure to ensure that Kirsten’s 2015 maize crop was
unencumbered by the Suidwes
cession, thereby preventing Silostrat
suffering damages. Silostrat’s conditional counterclaim, which
was dependent upon two
conditions, was framed as follows:
‘
In
the event of the Court finding that:
(i)
[the] rights acquired by [Suidwes] in terms
of a Deed of Cession . . . trumped and/or supersede [Standard Bank’s]
rights in
respect of the Deed of cession [executed by Kirsten in
favour of Standard Bank], and
(ii)
the sale of 35,000 tons of maize by Kirsten
to [Silostrat] is unenforceable and/or void ab initio . . .’
[51]
The high court found that whilst the first condition was met, the
second was not – hence
Silostrat’s appeal. Important in
this regard, the sale agreements were concluded between Silostrat and
Kirsten. Neither Silostrat,
nor the Trustees or Kirsten contend that
these sale agreements are void and/or unenforceable. Quite the
contrary, at the commencement
of the trial, and by agreement, the
Trustees admitted Silostrat’s claim. Judgment was accordingly
granted in favour of Silostrat
against the insolvent estate, in the
same amount as that claimed against the Bank in the conditional
counterclaim. This occurred
on the basis that: (i) the three sale
agreements were validly concluded; (ii) Kirsten breached the three
sale agreements by failing
to deliver the 35 000 tons of maize to
Silostrat; and (iii) Silostrat suffered damages because of Kirsten’s
breach of the
three sale agreements.
[52
] Moreover, aside from the agreement reached
between the trustees and Silostrat, the evidence of the witnesses
for
Silostrat established that: (i) the sale agreements were valid and
enforceable and Silostrat would not have been entitled to
terminate
them at any point prior to 31 July 2015, being the last day for
delivery by Kirsten; (ii) any assertion that Silostrat
could have
closed out its position early would have been premature because
Kirsten had a contractual right to make delivery up
until 31 July
2015. In any event, at all times Silostrat sought specific
performance under the three sale agreements and, even
after 31 July
2015, it continued to seek delivery, based on Kirsten’s
assurances. It follows that the high court cannot be
faulted in its
conclusion that the second condition had not been met.
[53]
Insofar as Silostrat’s counterclaim against Suidwes is
concerned: the appeal by Silostrat
against paragraph 3 of the High
Court’s order is conditional upon the success of Standard
Bank’s appeal. If Standard
Bank’s appeal fails, as I have
shown it must, Silostrat’s appeal must follow that result.
The
Suidwes Appeal
[54]
The issues that arose in the Suidwes appeal have been considered
above. I may only reiterate
that in the light of the conclusion that
the Standard Bank cession did not relate to the proceeds of Kirsten’s
produce, it
is unnecessary to determine the ranking thereof as
against the Suidwes cession.
[55]
With regard to the Suidwes and Technichem cessions it is indisputable
that the Technichem cession,
having been executed on 5 October 2014,
predated the Suidwes cession, which was executed on 24 October 2014.
It was in this context
that Suidwes maintained that its earlier
cessions, executed between 2009 and 2013, were evergreen. The finding
of the high court
that they were not evergreen was not contested.
Against
the costs order
[56]
The basis of the Suidwes appeal against the costs order awarded
against it was that the dispute
between itself and Technichem was
limited. Therefore, the order as to costs should have been limited to
the third party proceedings
only. Also the costs order should have
been made against Standard Bank as well, it was argued.
[57]
However, although the issues between Technichem and Suidwes were
limited to the ranking of the
respective cessions, Technichem had to
participate in all the proceedings in order to protect its interests.
The manner in which
the litigation unfolded was relevant to the
question of costs. The proceedings in the high court started with
Standard Bank’s
claim against the Trustees and Suidwes together
with the Land Bank. However, it became necessary for the court to
consider all
three cessions. It would appear that although the
contest for the primacy of each of the cessions was between the three
entities,
the fact that Standard Bank had only instituted a claim
against the Trustees and Suidwes/Land Bank, and not against
Technichem,
must have weighed heavily with the court when considering
the issue of costs. Hence there was no costs order against the bank.
[58]
It was Technichem that had instituted proceedings against Suidwes
insofar as the ranking of the
cessions was concerned. After Silostrat
had been joined by agreement between the two parties it (Silostrat)
counterclaimed against
the Trustees, Standard Bank and Suidwes. The
trial lasted 10 days. As stated, Techichem had to be present
throughout the proceedings
in the high court to protect its
interests. There is no valid basis on which this Court can interfere
with the exercise of the
high court’s discretion in awarding
costs against Suidwes in these circumstances.
[59]
In the result:
The
appeal in each instance by:
(i)
the first appellant, Silostrat (Pty)
Ltd, against paragraphs 2 and 3;
(ii)
the second appellant, Standard Bank,
against paragraph 1; and
(iii)
the third appellant, Suidwes Landbou (Pty) Ltd, against
paragraph 6;
of
the order of the court below is dismissed with costs, including those
of two counsel where so employed.
DAMBUZA N
JUDGE OF APPEAL
Appearances:
For the First
Appellant: J G Bergenthuin SC
with B Bergenthuin
Instructed by: Basson
Olivier & Coetzee Attorneys, Pretoria
Du
Plooy Attorneys, Bloemfontein
For the Second
Appellant: K W Lüderitz SC with G W Amm
Instructed by:
Norton Rose Fulbright South Africa Inc, Sandton
Webbers
Attorneys, Bloemfontein
For the Third Appellant:
J P Daniels SC with J Smit
Instructed by:
Cliffe Dekker Hofmeyr Inc, Sandton
Pieter
Skein Attorneys, Bloemfontein
For the First
Respondents: F H Terblanche SC with H Fourie SC and M G Mokwena
Instructed by:
Loubser & Loubser Attorneys, Pretoria
EG
Cooper Majiedt Inc, Bloemfontein
For the Second
Respondent: MP van der Merwe SC with N Komar
Instructed by:
Ningiza Horner Inc, Petoria
Matsepes
Inc, Bloemfontein
For the Third
Respondent: J J Pretorius
Instructed by:
Gerrit Coetzee Inc, Potchefstroom
Horn and Van Rensburg
Attorneys, Bloemfontein.
[1]
Three
loan agreements were concluded between Kirsten and the Bank on 7
November 2014, 10 November 2014 and 11 November 2014 for
R68 400 000.00, R4 985 500.00, and R9 244 900.00
respectively.
[2]
In
this regard it was recorded that Standard Bank held as collateral, a
cession of moneys ‘due and to become due’.
[3]
The
relevant proven claims against the estate were: Standard Bank in the
amount of R 73 072 098.93, Suidwes –
R 87 350.89,
Land Bank – R67 17 234. 02, Silostrat R35 288 000.00,
and Technichem – R7 665 946.44.
[4]
Standard
Bank was also party to that action.
[5]
Silostrat
employed the expression ‘duty of care’, which conduces
to confusion and in our legal setting is inherently
misleading (see
by way of example:
Home
Talk Developments (Pty) Ltd and Others v Ekurhuleni Metropolitan
Municipality
[2017] ZASCA 77
;
[2017] 3 All SA 382
(SCA);
2018 (1) SA 391
(SCA)
para 25).
[6]
These
claims were conditional upon any dividend that would be paid to
Silostrat by the Trustees.
[7]
KPMG
Chartered Accountants (SA) v Securefin Ltd
[2009]
ZASCA 7
;
[2009] 2 All SA 523
,
2009 (4) SA 399
(SCA) para 39;
Natal
Joint Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at 602-610;
City
of Tshwane Municipality v Blair Atholl Homeowners Association
fn
7 above.
[8]
Concise
Oxford English Dictionary, 2002.
[9]
Merriam
Webster Dictionary.