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[2021] ZAKZPHC 80
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Fellner-Feldegg v Skema Holdings (Pty) Ltd and Others (2082/2021) [2021] ZAKZPHC 80 (23 September 2021)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: 2082/2021
In
the matter between:
R
FELLNER-
FELDEGG
APPLICANT
and
SKEMA
HOLDINGS (PTY) LTD & ANOTHER
FIRST
RESPONDENT
FRIEDRICH
WILHELM GERHARD WORNER SECOND
RESPONDENT
ORDER
1.
Judgment is granted against the First and Second Respondents jointly
and severally, the one paying the
other to be absolved in favour of
the Applicant for payment of the sum of €1 500 000.00(one
million five hundred thousand
euros).
2.
The First and Second Respondents are directed to pay interest on the
sum of €1 500 000.00 (one million
five hundred thousand euros)
at the rate of 5% per annum capitalized annually in arrears from 24
January 2017 to the date of payment,
both days inclusive.
3.
The immovable properties contained in Covering Mortgage Bond No […]
which is annexure
A
to this order, are declared executable.
4.
The First and Second Respondents are directed to pay the costs of
this Application jointly and severally,
the one paying the other to
be absolved on an attorney and client scale, such to include the
costs occasioned by the employment
of senior counsel.
JUDGMENT
Bedderson
J
Introduction
[1] The
applicant, a business man who is resident in South Africa at Saxon
Estate, Pietermaritzburg and who is
also a resident of Germany,
applies for judgment against both the first and second respondents
for payment of the sum of €1
500 000.00 (one million five
hundred thousand euros) together with interest and costs. He further
seeks an order declaring executable
a number of immovable properties
which have been put up as security for the loan that he had advanced
to the first respondent and
which are subject to a covering mortgage
bond registered in his favour. The amount claimed is a portion of a
total loan amount
of €2 500 000.00 (two million five hundred
thousand euros) which he advanced to the first respondent in terms of
a written
loan agreement. The first respondent is the registered
owner of the immovable properties that are subject to the covering
mortgage
bond (annexure ‘A’ to this order).
[2] The
second respondent, who is the managing director of the first
respondent, bound himself as surety and co-principal
debtor to the
applicant in respect of the first respondents’ obligations to
repay the loan amount advanced by the applicant
to the first
respondent.
[3] The
application is opposed by the first and second respondent.
[4] The
first and second respondents in a counter application seek an order
in the following terms:
‘
The
Applicant is ordered to comply with clause 6.2.2 of the loan
agreement a copy of which annexure “RF1” to the founding
affidavit by releasing his security on each property sold as
contemplated in that clause on payment of the net proceeds of that
sale until the full amount of the loan amount and lawful interest
thereon is paid to him on the basis that:
(a)
each such property may be sold for not less than R2 million (or such
lesser amount as may be agreed to in
writing by the Applicant);
(b) an
amount equivalent to Euro 75 0000 of each such sale shall be
allocated to the initial loan referred to
therein until payment in
full thereof together with any lawful interest, and the balance of
the said proceeds up to the amount
of Euro 1250 00 shall be allocated
to any loan balance owing to the Applicant until payment is full
thereof together with any lawful
interest.’
[5] The
first and second respondents also seek to strike out certain
paragraphs of the applicant’s replying
affidavits on the basis
that it contains direct and extraneous evidence of the intentions of
the parties and prior negotiations,
which is inadmissible.
THE
ISSUE FOR DETERMINATION
[5] The
central issue for determination in this application is whether on a
proper interpretation of the loan agreement
as amended, the amount
claimed is due.
[6] On
the applicant’s interpretation, repayment of the amount claimed
fell due on 21 March 2021.
[7] On
the respondents’ interpretation repayment in terms of the loan
agreement sued upon by the applicant
would only fall due from the
proceeds of sales of the immovable properties that were put up as
security for the loan and which
are subject to the covering mortgage
bond referred to in paragraph 1 above. If there were no sales,
notwithstanding the best efforts
of the first respondent, then no
payments would accrue to the applicant.
[8] It
follows that if the interpretation as contended for by the applicant
is correct, then the applicant is entitled
to the relief sought.
However, if the interpretation as contended for by the respondents is
correct, then the respondents are entitled
to the relief sought in
their counter application.
BACKGROUND
FACTS
[6] The
undisputed background facts, which are material to the determination
of the dispute between the parties,
set out in paragraph 8.1 to 8.17
of the applicant’s heads of argument. For ease of reference,
these are set out hereunder:
‘
8.1
On 18 January 2017 the Applicant on the one hand and the Respondent
on the other hand concluded
the written loan agreement in terms of
which the Applicant agreed to lend the First Respondent an amount of
up to €2 500 000.
The written terms of the loan agreement are
common cause.
[1]
8.2
The loan would bear simple interest at
a rate of 5% per annum;
[2]
8.3
The loan was subject to and conditional upon the First Respondent
providing the Applicant
with written proof that the loan had been
approved by the South African Reserve Bank on conditions acceptable
to the parties and
the registration of a first covering mortgage bond
in the Applicant’s favour over the First Respondent’s
immovable
properties.
[3]
Such
proof was provided and the mortgage bond was registered;
[4]
8.4
The loan world be drawn down in two tranches of €1,5 million
(“the Initial Loan”)
and €1 million (“the Loan
Balance”) respectively;
[5]
8.5
Clause 5.1 and 5.2 of the loan agreement provided for the repayment
of the Initial Loan
and the Loan Balance in specified instalments on
specific dates;
[6]
8.6
The Second Respondent bound himself jointly and severally as surety
and co-principal debtor
in favour of the Applicant for the First
Respondent’s obligations in terms of the loan agreement and the
security provided
for in clause 6 of the loan agreement;
[7]
8.7
The loan agreement contained an acceleration clause in that clause
5.3 provided that in
the event of the First Respondent defaulting on
any of the instalments payable and should such payment not be made
within fourteen
days of receipt of written notice, the Applicant
could declare the entire loan plus interest repayable forthwith;
[8]
8.8
In terms of the clause 9.1 of the loan agreement, the parties agreed
that the written loan
agreement was the whole agreement between the
parties containing all of the express provisions agreed on with
regard to the subject
matter of the loan agreement;
[9]
8.9
Clause 9.3 of the loan agreement provided that:
“
No
agreement varying, adding to, deleting from or cancelling this
Agreement and no waiver of nay right under this Agreement shall
be
effective unless in writing and signed by or on behalf of the
parties.”
[10]
8.10
On 24 January 2017 the First Respondent drew and was paid the Initial
Loan of €1,5 million and
on 27 March 2017 the First Respondent
drew and was paid the Loan Balance of €1 million;
[11]
8.11
On 12 February 2018 the Applicant and the Respondents concluded the
first addendum to the loan agreement.
The written terms of the first
addendum are common cause;
[12]
8.12
On 12 May 2019 the Applicant and the Respondent concluded the second
addendum to the loan agreement.
The written terms of the second
addendum are common cause;
[13]
8.13
On 29 October 2018 one of the immovable properties subject to the
mortgage bond was released from the
mortgage bond with the
Applicant’s consent. No portion of the proceeds of the sale of
the immovable property was used towards
payment of the Respondents’
liability to the Applicant;
[14]
8.14
On 02 March 2021 the Applicant addressed written demands for
repayment of the Initial Loan of €1
5000 000 together with
interest thereon to the Respondents;
8.15
All the immovable properties subject to the mortgage bond are
unimproved and uninhabited properties;
[15]
8.16
The provisions of the
National Credit Act No. 34 of 2005
are not
applicable to the matter;
[16]
8.17
To date the Respondents have not made any payment towards settlement
of their admitted liability in
the sum of €2 5, million to the
Application.’
[7] It
is the applicant’s case that in terms of the loan agreement and
in particular the second addendum
to the loan agreement, that was
concluded between the applicant and the first respondent on 12 May
2019, the parties agreed that
the initial loan (€1.5 million),
together with interest would be repayable on or before 1 March 2021,
and similarly the loan
balance (€1 million), plus interest would
be repayable on or before 1 July 2022. The first respondent has
failed to pay the
initial loan and as a result, the applicant is
entitled to payment of that amount.
[8] In
support of the foregoing, the applicant sets out in paragraphs 6.5.4
to 6.5.12 of the replying affidavit
the circumstances, which gave
rise to the conclusion of the addendum referred to in paragraph 7
above. It is these paragraphs that
the respondents seek to have
struck out.
[9] The
respondents on the other hand contend that the replacing of clauses
5.1, 5.2 and 5.3 of the loan agreement
with the second addendum must
be read together with clause 6 of the agreement and, in context.
[10] Counsel
for the respondent, Mr Harpur SC, submitted that the effect of
extending the time period for the repayment
of the loan was to allow
sufficient time to enable the sale of the immovable properties to
take place, because it was clear from
a proper reading and
interpretation of the agreement that the loan would be repaid from
the proceeds generated from the sale of
the properties. He submits
that this is supported by the contents of the two (2) e-mails dated
31 July 2020 and 22 October 2020
that were exchanged between the
parties. Further, these e-mails constitute a variation of the
agreement, as contemplated by the
non-variation clause of the
agreement, read together with section 13(3) of the Electronic
Communications and Transactions Act 25
of 2002 (the ECT Act).
[11] In
his heads of arguments, he submits that it is not the respondents
case that should none of the properties
be sold that there would be
no repayment of the loan at all. Clause 6.2 of the loan agreement, Mr
Harpur submits, provides that
the first respondent ‘must use
its best endeavours to sell the properties’. The only reason he
submits why this wording
is used is because it was envisaged that the
proceeds from the sale of the properties would be used to repay the
loan which, once
again is supported by the contents of the emails
referred to in paragraph 10 above. Further, the counter application
is in effect
designed to achieve this purpose.
[12] It
is important, in my view, to set out clause 6 of the agreement in its
entirety to understand the respondents
defense to the claim. It reads
as follows:
“
SECURITY
6.1 As
security of the loan, Skema must at its cost cause a first covering
mortgage bond to be registered by its attorneys,
Shepstone &
Wylie, in favour of the Lender over Skema’s 48 freehold
immovable properties, described as Portions 2 to
50(but excluding
Portion 14) of the Farm Saxony New No. 18520 (
the Properties
),
for an amount of Euro 2 500 000.
6.2 Skema
must use its best endeavours to sell the Properties and, as and when
a sale takes place:
6.2.1
if only the Initial Loan has been drawn down, Euro 75 000 of the net
proceeds of every sale must be paid
to the Lender in return for the
Lender releasing the security of the Property:
6.2.2
if the Loan Balance has also been drawn down, Euro 125 000 of the net
proceeds of every sale must be paid
to the Lender in return for the
Lender releasing the security on that Property on the basis that Euro
75 000 is allocated to the
Initial Loan AND Euro 50 000 to the Loan
Balance”.
[13] It
is clear from a reading of the heading and from the content of clause
6 that it deals with the security
that the first respondent is
obliged to furnish to the applicant in respect of the loan amount. It
also deals with the manner in
which that security is to be released
in respect of both the initial loan (€1.5 million) and the loan
balance (€1million).
[14] In
my view clause 6.2 merely provides a mechanism to reduce the first
respondents exposure to the applicant.
In other words as and when a
particular property (depending upon whether it relates to the initial
loan or the loan balance) is
sold, a particular amount from the
proceeds of the sale is to be paid over to the applicant. The clause
does not oblige the first
respondent to pay over the entire proceeds
of the sale to the applicant.
[15] Based
upon the foregoing, I am not persuaded that repayment of the loan
amount is dependent upon the sales
of the immovable properties that
were furnished as security.
[16] The
e-mails referred to in paragraph 10 above, in my view have to be read
in conjunction with paragraphs 6.5.4
to 6.5.12 of the applicant’s
replying affidavit in order to give context to the agreement as a
whole. The e-mails also in
my view do not constitute a variation of
the agreement as contemplated in the non variation clause because in
order to rely on
the provisions of section 13 of the ECT Act, the
respondents would have to show that the parties have agreed that
variations can
take place electronically and that the mere type
written names of the authors at the foot of those e-mails will
satisfy the signature
requirement of section 13(3) of the ECT Act.
For ease of reference section 13(3) of the ECT Act reads as follows:
‘
Where
an electronic signature is required by the parties to an electronic
transaction and the parties have not agreed on the type
of electronic
signature to be used, that requirement is met in relation to a data
message if—
(a) a method
is used to identify the person and to indicate the person’s
approval of the information communicated:
and
(b) having
regard to all the relevant circumstances at the time the method was
used, the method was as reliable as
was appropriate for the purposes
for which the information was communicated.’
[17] The
respondents have failed to demonstrate on these papers that
variations of the agreement could take place
in this fashion. The two
addenda which are annexures “RF7” and “RF8”
to the applicant’s founding
affidavit militates against this
finding and further that clause 9.3 of the agreement requires
variations or cancellation to be
reduced to writing and signed by
both the parties. The reliance on section 13(3) of the ECT Act by the
respondents is misplaced
and is not supported by the judgement of
Mojapelo AJA in
Global
& Local Investments Advisors (Pty) Ltd v Fouché
.
[17]
[18] I
agree with the submissions made by counsel for the applicant, Mr Lotz
SC, that to strike out these paragraphs
would have the results that
this court would be compelled to interpret the agreements (which in
my view must also include the contents
of the e-mails referred to
above) in a vacuum and as such will offend the principles of
interpretation as set out by Wallis JA
in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
.
[18]
[19] I
also agree with the submissions in the applicant’s heads of
arguments that the interpretations of
the agreements relating to
repayments of the loan as contended for by the respondents is flawed
in fact and logic, and that the
interpretation of the respondents
results in an insensible and unbusinesslike construction of the terms
of the loan agreement relating
to repayment of the loan. Such
construction offends the principles of interpretation.
[19]
[20] In
conclusion and for the reasons set forth above, I find that the
applicant is entitled to the relief sought.
[21] I
accordingly grant an order in the following terms:
1.
Judgment is granted against the First and Second Respondents jointly
and severally, the one paying the
other to be absolved in favour of
the Applicant for payment of the sum of €1 500 000.00(one
million five hundred thousand
euros).
2.
The First and Second Respondents are directed to pay interest on the
sum of €1 500 000.00 (one million
five hundred thousand euros)
at the rate of 5% per annum capitalized annually in arrears from 24
January 2017 to the date of payment,
both days inclusive.
3.
The immovable properties contained in Covering Mortgage Bond No […]
which is annexure A to this
order, are declared executable.
4.
The First and Second Respondents are directed to pay the costs of
this Application jointly and severally,
the one paying the other to
be absolved on an attorney and client scale, such to include the
costs occasioned by the employment
of senior counsel.
BEDDERSON
J
APPEARANCES
Dates
of hearing: 18
August 2021
Date of
judgment: 23
September 2021
For
Applicant Mr
E Lotz SC
Instructed
by Hay
and Scott Attorneys
Top
Floor, 3 Highgate Drive
1
George MacFarlane, Redlands Estate
Wembley
Pietermaritzburg
Telephone
number 033
342 4800
Email paul@hayandscott.co.za
For
1
st
&
2
nd
Respondents Mr
Harpur SC
Instructed
by Shepstone
&Wylie
24
Richefond Circle
Ridgeside
Office Park
Umhlanga
Rocks
Telephone
number 031
575 7000
Email vonklemperer@wylie.co.za
Shepstone
&Wylie
1
st
Floor, ABSA House
15
Chatterton Road
Pietermaritzburg
Telephone
number 033
355 1797
Email jmanuel@wylie.co.za
[1]
The
application papers vol. 1, applicant’s affidavit, at 28-33,
paras 6, 7 and 8, and at 48-55, annexure “RF1”’;
the application papers vol. 2, respondents’ affidavit, at 110,
paras 38, 39 and 40, and at 48-55, annexure “RF1”.
[2]
The
application papers vol. 1 at 50, clause 4 of annexure “RF1”.
[3]
The
application papers vol. 1, at 49, clause 2.1 of annexure “RF1”.
[4]
The
application papers vol. 1, applicant’s affidavit, at 33,
paragraph 9; and at 56-57, annexure “RF2”; the
application papers vol. 2, respondents’ affidavit, at 110,
para 41; the application papers vol. 1, applicant’s affidavit,
at 34-38, para 10, and at 58-76, annexure “RF3”; the
application papers vol. 2, respondents’ affidavit, at
111,
para 48.
[5]
The
application papers vol. 1, at 49, clause 3 of annexure “RF1”.
[6]
The
exact terms of clause 5.1 and 5.2 are dealt with in paragraph 10
herein.
[7]
The
application papers, vol. 1, at 51, clause 7 of annexure “RF1”.
[8]
The
application papers, vol. 1, at 50, annexure “RF3”.
[9]
The
application papers, vol. 1, at 53, annexure “RF1”.
[10]
The
application papers
vol.
1, at 53,
annexure
“RF1”.
[11]
The
application papers
vol
1, applicant’s affidavit, at 38- 39, para 11, and at 77- 80,
annexures “RF4”, “RF5” & “RF6”;
The
application papers
vol.
2, respondents’ affidavit, at 112, para 49.
[12]
The
application papers vol. 1, applicant’s affidavit, at 39- 40,
para 12, and at 82-84, annexure “RF7”; the
application
papers vol. 2, respondents’ affidavit, at 112, para 50.
[13]
The
application papers
vol.1,applicant’s
affidavit , at 41-42, para 13, and at 85-87, annexure “RF8”.
The
application papers,
vol.2, respondents’
affidavit, at 112, para 51.
[14]
The
application papers
vol.
1, applicant’s affidavit, at 44, para 15; t
he
application papers
vol.2,
applicant’s affidavit, at 161, para 6.5.13, and at 191,
annexure “RF11”.
[15]
The
application papers
vol.1,
applicant’s affidavit, at 45, para 18, at 88- 91, annexures
“RF9” and RF10”; t
he
application papers
vol.2,
respondent’s affidavit, at 113, para 58.
[16]
The
application papers
vol.1,
applicant’s affidavit, at 47, para 21, t
he
application papers
vol.2,
respondents’ affidavit, at 114, para 62.
[17]
Global
& Local Investments Advisors (Pty) Ltd v Fouché
[2019] ZASCA 8, 2021 (1) SA 371 (SCA).
[18]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
,
2012 (4) SA 593
(SCA),
[2012] 2 All SA 262
(SCA)
para 18.
[19]
Ibid,
see generally para 18.