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[2021] ZAKZPHC 94
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Hei Way Supply (Pty) Ltd v Simons (6314/19P) [2021] ZAKZPHC 94 (16 November 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 6314/19P
In
the matter between:
HEI
WAY SUPPLY (PTY)
LTD PLAINTIFF
and
SIMONS,
EDWIN ARNOLD PATRICK
DEFENDANT
ORDER
Summary
judgment is granted against the defendant for:
(a) Payment
of the sum of R762,446.62;
(b) Payment
of interest on the aforesaid amount at the prescribed rate of 10.25
percent per annum from
1 November 2017 until date of final payment;
and
(c) Costs
of suit.
JUDGMENT
MOSSOP
AJ:
[1] This
is an opposed application for summary judgement. When the matter was
argued this morning, Ms Palmer appeared
for the plaintiff and Mr
Blomkamp SC appeared for the defendant. Both counsel are sincerely
thanked for their helpful submissions.
[2] The
plaintiff’s action against the defendant is based on a deed of
suretyship (‘the suretyship’).
The suretyship was
attached to, and formed part of, a credit application document (‘the
credit application’). The credit
application, which was
directed to the plaintiff, was that of an entity known as Brissimons
Steel Enterprises CC completed. The
plaintiff alleges that this
entity trades under the name of ‘BS Steel’. I shall refer
to this entity as ‘the
principal debtor.’
[3] The
credit application has two parts to it, a Part A in which the
particulars of the credit seeker are recorded
and a Part B, which
comprises a suretyship. Part A of the credit application was
completed by the principal debtor and signed by
the defendant. It was
completed in full, save for the amount of the credit that the
principal debtor required. That was left blank.
Part B was also
completed and bore a signature. Despite the denial recorded in the
defendant’s plea that he signed the suretyship,
in his
affidavit resisting summary judgement the defendant admits that the
signature that appears on Part B of the credit application
is his.
[4] Prior
to any transactions occurring, and by way of a separate instrument,
the plaintiff advised the principal
debtor in writing that the credit
facility it would provide it with was the amount of R400,000. There
was no indication that the
credit facility was restricted to that
amount or that it could not be increased or reduced.
[5] Thereafter,
the principal debtor placed orders for goods on the plaintiff, which
supplied the ordered goods
to the principal debtor and invoiced it.
The invoices are attached to the particulars of claim. Over the
period 6 April 2017 to
10 July 2017, according to the plaintiff, the
principal debtor placed orders on it for the supply of goods to the
value of R2,548,589.64,
which orders were fulfilled. The invoices
record these transactions and come to the total referred to above.
Over the period 5
June 2017 to 15 August 2017, again according to the
plaintiff, the principal debtor made payments to it in the total
amount of
R1,787,143.02, leaving a balance due to the plaintiff in
the amount of R761,446.62.
[6] The
amount of R761,446.62 is the amount in which the plaintiff seeks
summary judgement against the defendant.
The defendant disputes this
amount but there is no basis suggested by him as to why the invoices
and the payments made as narrated
by the plaintiff are incorrect.
[7] The
defendant has raised three defences to the plaintiff’s claim. I
shall deal with each of those defences.
[8] The
first defence relates to the fact that the limit of the credit
facility identified in Part A of the credit
application was not
completed when the suretyship was signed. The defendant appears to
suggest that the suretyship fell to be amended
once the limit of the
credit facility was determined, but was not, and that his liability
is accordingly limited to the amount
of the credit facility.
[9] This
is not a particularly stout defence. The wording of the suretyship
permits of no equivocation: the suretyship
was
‘
. . . for the due
performance by the customer of all its obligations existing and
arising in terms of this application.’
There
was no need therefore to insert the credit limit. The liability of
the defendant existed in respect of all the obligations
flowing from
the credit application, whatever the amount. That the principal
debtor placed orders in an amount that exceeded the
facility offered
does not permit the defendant to limit his liability, as he contends,
to the amount initially fixed by the plaintiff,
namely R400 000.
Whatever remained unpaid by the principal debtor on its account was
covered by the suretyship as it had arisen
from the provisions of the
credit agreement.
[10]
The
same defence was raised in the matter of
Flotek
Piping & Irrigation (Pty) Ltd v Grace and Another.
[1]
The defendant pleaded that his liability was restricted to the amount
of the credit limit. The credit limit in the credit application,
to
which the deed of suretyship was attached, was left blank. Unlike in
this matter, the credit limit was never determined. The
court found
that the deed of suretyship was of an unlimited nature by virtue of
the following wording
‘
. . . for all
amounts which may at any time be payable by the debtor to the
creditor from any cause of action whatsoever . . .’
[2]
The
wording is not that dissimilar to the wording in the deed of
suretyship in this matter. The court found that it was an unlimited
undertaking not connected to the credit limit and the defence failed.
The same must occur in this matter in respect of this defence.
[11] The
second defence relates to whether part B of the credit application
is, in fact, a suretyship. The defendant
asserts that there has been
non-compliance with the provisions of the General Law Amendment Act
50 of 1956. What that non-compliance
amounts to is by no means
certain. In the defendant’s plea, he states that the suretyship
must fail because
‘
[t]he written
document relied upon fails to identify the principal debtor by name.’
However,
in paragraph 14 of the defendant’s affidavit resisting summary
judgment it is clearly stated that
‘
. . . it cannot be
a valid deed of suretyship because it does not state expressly who
the creditor is.’
These
are two conflicting assertions. Both will need to be considered.
[12]
Section
6 of Act 50 of 1956 provides:
‘
No
contract of suretyship entered into after the commencement of this
Act, shall be valid, unless the terms thereof are embodied
in a
written document signed by or on behalf of the surety: Provided that
nothing in this section contained shall affect the liability
of the
signer of an aval under the laws relating to negotiable instruments.
[13] The
proviso to the section has no relevance in this matter.
[14] A
reading of the suretyship reveals that the obligation was incurred in
respect of ‘BS Steel’.
In his affidavit resisting summary
judgment, the defendant admits that goods were supplied by the
plaintiff to Brissimons Steel
Enterprises CC and that he represented
the principal debtor in securing the credit facility with the
plaintiff. Part A of the credit
application identifies the applicant
seeking credit facilities as being Brissimons Steel Enterprises CC.
[15]
Dealing
with the allegation that the name of the principal debtor is not
specified, this allegation is incorrect. There is a name
mentioned in
the suretyship. The name referred to is sufficiently similar to the
name mentioned in Part A of the credit application.
If I am incorrect
in this conclusion, then the matter of
Industrial
Development Corporation of SA (Pty) Ltd v Silver
[3]
is of assistance. In that matter, the issue was the same: the name of
the principal debtor was omitted from the deed of suretyship.
A loan
agreement was attached to the particulars of claim and the principal
debtor was identified in that document. The court held
that the terms
of a suretyship may be supplemented to identify the principal debtor
by incorporation by reference. name omitted
is the name of the
creditor and not the name of the principal debtor.
[16] In
my view, the credit application, which is comprised of Part A and
Part B is a single document. The defendant
himself acknowledges that
Part A and Part B of the credit application must be read together and
the document construed as a whole.
I agree with this. If that is
done, it is obvious who the principal debtor is: it is the entity
seeking credit from the plaintiff,
namely Brissimons Steel
Enterprises CC.
[17] Considering
the allegation that what is missing is the name of the creditor, it
appears to me that this is
what was intended to constitute
non-compliance with the General Law Amendment Act. The name of the
creditor is not mentioned in
the suretyship. However, common sense
dictates that the creditor is the entity affording credit to the
principal debtor. The entire
credit application, comprising Part A
and Part B, is a document prepared by Hei Way Supply (Pty) Ltd, the
plaintiff. This appears
in Part A on the face of the first page of
the credit application. There can therefore be no uncertainty when
reading part B as
to who the creditor is.
[18] The
third defence is that there has been prejudicial conduct by the
plaintiff in its dealings with the principal
debtor. As a
consequence, so the defendant contends, he has been discharged from
his obligations as a surety. This defence is a
two legged defence.
The first leg of the defence is the complaint that the plaintiff
extended credit to the principal debtor in
excess of the disclosed
credit facility of R400,000. The second leg of the defence is that
the plaintiff has been dilatory in pursuing
payment from the
principal debtor.
[19]
As
a general principle, the South African law of suretyship does not
recognise a so-called 'prejudice principle', to the effect
that, if a
creditor should do anything in his dealings with the principal debtor
which has the effect of prejudicing the surety,
the latter is fully
released.
[4]
[20]
The
relevant legal principle on the question whether or not a surety has
been released as a result of prejudice caused by the applicant
to him
was formulated by Olivier JA in
Davidson
[5]
as follows:
‘
As a general
proposition prejudice caused to the surety can only release the
surety (whether totally or partially) if the prejudice
is the result
of a breach of some or other legal duty or obligation. The prime
sources of a creditor’s rights, duties and
obligations are the
principal agreement and the deed of suretyship. If, as is the case
here, the alleged prejudice was caused by
conduct falling within the
terms of the principal agreement or the deed of suretyship, the
prejudice suffered was one which the
surety undertook to suffer.‘
[21]
I
turn now to consider the specifics of the two legs of the third
defence. The first is that the defendant was prejudiced by credit
in
excess of R400,000 being gra
nted
to the principal debtor. In my view, there is no merit in this
contention. A similar argument was raised and rejected in
Stiff
v Q Data.
[6]
At paragraph 17 of the judgment, Mthiyane JA said:
'The
suggestion that because credit was given in excess of R100 000, other
than on a COD basis, the plaintiff was precluded from
claiming the
full amount, is misconceived ... The plaintiff is not compelled to
grant an increase in credit by way of written consent
only. If he
chooses to allow the defendant to exceed the initial limit without
paying cash on delivery, it is entitled to do so.’
[22] In
any event, as I have already found, the liability of the defendant
was an unlimited one. Moreover, the
principal debtor, represented by
the defendant, in writing acknowledged the debt in the exact amount
claimed by the plaintiff in
these summary judgment proceedings on 21
January 2018 in the following terms:
‘
We acknowledge our
debt of R762,446.62 (seven hundred and sixty two thousand four
hundred forty six rand and sixty two cents only),
and hereby arrange
to pay at least R20,000 (twenty thousand rands) a month starting from
the month of May 2018 until the debt is
settled.’
[23]
The
use of the words ‘we’
[7]
and ‘our’
[8]
may
refer only to the principal debtor’s admission of the quantum
of the indebtedness but it could also refer to both the
principal
debtor and the defendant’s admission of that amount. The effect
is the same, however, irrespective of what the
intention was. If it
was intended to include both the principal debtor and the defendant
then he has admitted the extent of the
indebtedness. If it was only
intended to refer to the principal debtor, then the defendant is
still bound by the admission as in
terms of the suretyship the
defendant agreed that
‘
. . . all
acknowledgements and admissions by the customer shall be binding upon
me/us . . .’
[24] The
second leg of the defence is that the plaintiff has delayed in
pursuing the principal debtor for payment.
As previously stated, the
invoices that were issued by the plaintiff cover the period April to
July 2017. What was not disclosed
by the defendant at any stage, and
he must have had personal knowledge thereof, alternatively derived
knowledge from his son who
took over the principal debtor’s
business from him, was that the principal debtor went into business
rescue in March 2018.
That state of affairs prevailed, according to a
Windeed report put up, until 20 November 2019 when those proceedings
became a nullity.
Section 133
of the
Companies Act 71 of 2008
imposes
a moratorium on legal proceedings against entities in business rescue
proceedings. The plaintiff did not delay in proceeding
against the
principal debtor: it was precluded from doing so. Summons was issued
against the defendant on 23 August 2019.
[25] Before
the moratorium against the institution of legal proceedings against
the principal debtor ended, the
plaintiff commenced proceedings
against the defendant. The claim against the principal debtor has not
prescribed and there is no
evidence that the plaintiff has breached
any of the terms of the credit application or the terms of the
suretyship.
[26] The
defendant agreed to stand as surety and co-principal debtor. He
signed the suretyship and Part A of the
credit application. Having
agreed to the terms in that document, it does not lie in the
defendant’s mouth to plead prejudice
in respect of something
that the plaintiff could legally do.
[24] I
am accordingly unable to find any vestiges of prejudice in the
defendant’s version that constitute
real and substantial
prejudice which has the effect of unduly increasing his contractual
burden.
[27] In
the circumstances, I am satisfied that the defendant has not
established that he has a bona fide defence
to the plaintiff’s
action and summary judgment must consequently follow.
[28] I
accordingly grant summary judgment against the defendant for:
(a) Payment
of the sum of R762,446.62;
(b) Interest
on the aforesaid amount at the prescribed rate of 10.25 percent per
annum from 1 November 2017
until date of final payment; and
(c) Costs
of suit.
MOSSOP
AJ
APPEARANCES
Counsel
for the applicant: Ms
T. Palmer
Instructed
by:
Allan
Levin and Associates
Care
of
Viv
Greene Attorneys
132
Roberts Road
Pietermaritzburg
Counsel
for the respondent: Mr
P. J. Blomkamp SC
Instructed
by:
WHA
Compton Attorneys
176
Boom Street
Pietermaritzburg
Date
of Hearing: 16
November 2021
Date
of Judgment: 16
November 2021
[1]
Flotek
Piping & Irrigation (Pty) Ltd v Grace and Another
(12260/2021) [2021] ZAGPPHC 739 (3 November 2021).
[2]
Flotek
Piping & Irrigation (Pty) Ltd v Grace and Another
,
supra, para 12.
[3]
[2002] 4 All SA 316 (SCA).
[4]
ABSA
Bank Ltd v Davidson
2000 (1) SA 1117
, para 14.
[5]
ABSA
Bank Ltd v Davidson
2000 (1) SA 1117
, para 19.
[6]
Stiff
v
Q
Data
Distribution (Ply) Ltd
2003
(2) SA 336
(SCA).
[7]
‘
We’
is the nominative plural of ‘I’ and is used to denote
oneself and another or others.
[8]
‘
Our’
is a form of the possessive case of ‘we’ used as an
attributive adjective.