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[2019] ZAFSHC 4
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Firstrand Bank Limited v Karis Boerdery and Others (2085/2018) [2019] ZAFSHC 4 (14 February 2019)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 2085/2018
In
the matter between:
FIRST
RAND BANK
LIMITED
Applicant
(Registration
number: 1929/001225/06)
and
KARIS
BOERDERY
1
St
Respondent
(Registration number:
2015/143248/07)
SAREL JACOBUS VAN
DER WALT N O
2
nd
Respondent
JACOBUS VAN DER
WALT N O
3
rd
Respondent
CORNELIUS MARIUS
COETZEE N O
4
rd
Respondent
(in their capacities as
the joint trustees of the
Saamwerk Trust IT
11521/96)
CLOETE MURRAY N
O
5
th
Respondent
ELRICH RUWAYNE
SMITH N O
6
th
Respondent
(in their capacity as the
provisional trustees of Sarel Van Der Walt)
CORAM:
DAFFUE, J
HEARD
ON:
31
JANUARY 2019
JUDGMENT
BY:
DAFFUE,
J
DELIVERED
ON:
14
FEBRUARY 2019
[1]
The applicant is FirstRand Bank Ltd, a commercial bank and registered
credit provider. Adv MA Badenhorst SC appeared for
applicant
before me as was the case in the sequestration application of
applicant against SRE Trust. The parties agreed that
both
applications be heard simultaneously and by the same presiding
officer.
[2]
First respondent is Karis Boerdery (Pty) Ltd (“Karis”), a
company with registered address situated at the farm,
Helpmekaar,
district Hoopstad.
[3]
The second, third and fourth respondents are the three trustees of
the Saamwerk Trust (“the Trust”), c/o the farm
Helpmekaar, district Hoopstad. Second respondent, Mr SJ van der Walt,
also known as Sarel, will be referred to by that name to
distinguish
him from the other Van der Walts featuring in this application.
He was at all relevant times the
de
facto
farmer and the person in charge of the Van der Walt empire consisting
of himself in personal capacity, Karis, Saamwerk Trust and
the SRE
Trust. He was at all relevant times the sole shareholder of
Karis and also the person who negotiated with applicant
to obtain
credit for himself, Karis and the SRE Trust. Fourth respondent,
Mr CM Coetzee, (“Coetzee”) deposed
to affidavits herein
and his role in the proceedings will be addressed when convenient.
Me Riëtte van der Walt was initially
cited as third
respondent, but she was substituted by Mr Jacobus van der Walt under
circumstances explained
infra
.
First to fourth respondents were represented by Adv DB du Preez SC.
[4]
The fifth and sixth respondents are the provisional trustees in the
insolvent estate of 2
nd
respondent. They do not oppose the application.
[5]
Applicant claims judgment against Karis and the Trust jointly and
severally, the Trust’s liability however limited to
R60m, for
payment of R84 741 317.39 plus interest calculated at the
rate of 10.25%
per
annum
,
calculated daily and compounded monthly in arrears from 23 March 2018
until date of payment, together with costs on an attorney
and own
client scale.
[6]
The principal claim is based on a written credit facility agreement
(“the credit facility agreement”) entered into
on 13
April 2017 between applicant and Karis in terms whereof working
capital in the amount of R80m was made available to Karis.
See
annexure CAV6. This credit facility provided for an increased
amount of working capital. On 16 November 2015 a
similar
agreement was entered into with a credit limit of R75m. See
annexure CAV7.
[7]
The claim against the
Trust is based on a Deed of Suretyship entered into on 18 October
2015, annexure CAV10.
[8]
The grant of the credit facility was subject to numerous collateral
security agreements being provided, including to mention
a few only,
the aforesaid Deed of Surety, registration of covering mortgage bonds
over several immovable properties of Sarel, cessions
by Sarel and
Karis of all rights in and to their crops from time to time dated 20
November 2015 and a Deed of Negative Pledge of
Assets dated 25 August
2014.
[9]
The main point of attack levelled at applicant’s claim is the
manner in which the credit facility agreement is structured
and
whether Karis can be held liable for breach of contract when Sarel in
his personal capacity obtained external credit in excess
of R1m
without applicant’s knowledge and consent. The terms of
the agreement and clause 4, especially clauses 4.7 and
4.8, are under
attack. Mr Du Preez submitted that clause 4.7 is ambiguous,
obscure and void for vagueness. Ultimately
Karis denies that it
breached the agreement and therefore, the credit facility could not
be called up. According to Karis
it, represented by Sarel, was
the only party to the agreement with applicant and a breach cannot be
committed by an individual
who is not a party thereto.
Furthermore, Mr Du Preez submitted that applicant faces the
insurmountable hurdle that the agreement
between Sarel and Cargill
RSA (Pty) Ltd (“Cargill”) is unenforceable. In
order to consider the arguments it is
deemed apposite to refer to
some authorities.
[10]
In an oft-quoted judgment Wallis JA summarised the current state of
our law regarding the interpretation of documents, including
contracts, as follows in
Natal
Joint Municipal and Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at para [18]:
“
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into
existence. Whatever the nature of the document, consideration
must be
given to the language used in the light of the ordinary rules of
grammar and syntax; the context in which the provision
appears; the
apparent purpose to which it is directed; and the material known to
those responsible for its production. Where more
than one meaning is
possible, each possibility must be weighed in the light of all these
factors. The process is objective, not
subjective. A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent
purpose of the document.”
Thus,
the matter must be approached holistically and context and language
must be considered together with neither predominating
over the
other.
See
also
Bothma-Batho
Transport (Edms) Bpk v S Bothma en Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) at paras [10]-[12].
[11]
In
BP
Southern Africa (Pty) Ltd v Mahmood Investments (Pty) Ltd
[2010]
2 All SA 295
(SCA) Lewis JA stated the following in a unanimous
judgment at para [11]:
“
It
is settled law that the contractual provision must be interpreted in
its context, having regard to the relevant circumstances
known to the
parties at the time of entering into the contract …. It is
also clear that the position must be given a commercially
sensible
meaning …”
[12]
In
Novartis
v Maphil
[2015]
ZASCA 111
, 3 September 2015, the same learned judge of appeal stated
the following at para [28]:
“
[28] The passage
cited from the judgment of Wallis JA in
Endumeni
summarizes the state of the law as it was in 2012……..
A court
must examine all the facts - the context - in order to determine what
the parties intended. And it must do that whether
or not the words of
the contract are ambiguous or lack clarity. Words without context
mean nothing.”
(emphasis
added)
[13]
I repeat what Lewis, JA said in
Novartis
supra.
In
order to establish what the parties intended, all the facts –
the context – must be examined in order to determine
what the
parties intended. In the words of Wallis, JA in
Endumeni
supra
,
a
“
sensible
meaning is to be preferred to one that leads to insensible or
unbusinesslike results or undermines the apparent purpose
of the
document.”
[14]
I accept that clause 4.7 under the heading “monitoring
conditions” of the credit facility agreement, annexure CAV6,
is
vague and ambiguous as Mr Du Preez submitted. However, if the
context and relevant circumstances are considered, I am
satisfied
that the clause must be interpreted on the basis that Karis undertook
to ensure that the Van der Walt empire consisting
of Karis, Sarel,
and the two trusts (Saamwerk and SRE) shall not obtain financial
assistance from third parties without applicant’s
prior written
consent. So interpreted, the clause provides a commercially
sound and sensible meaning. The context is
clear. Sarel
owned valuable immovable properties in his own name, but he elected
to conduct his farming operations by also
making use of several
vehicles such as Karis and the two trusts. Karis was apparently
the main vehicle used. It needed
working capital and applicant
was willing to assist, but knew that Karis could not offer sufficient
security. Collateral
cover was required from Sarel and the
Trust to secure its position. Applicant was certainly aware of
the risk if Sarel and
his other entities, the trusts, decide to apply
for finance from third parties once the credit limit agreed upon was
reached.
It had to safe-guard its position as commercial
banker. The various clauses in the credit facility agreement
must be considered
in this context.
[15]
It might be argued that applicant should have ensured that Sarel and
the two trusts become parties to the agreement with Karis.
That
might have been ideal, but it does not mean that the entities within
the Van der Walt empire, Sarel and Karis included, can
escape
liability when Sarel secretly obtained finance of close to R60m from
an entity such as Cargill and simultaneously allowed
the passing of a
notarial bond to the obvious detriment of applicant.
[16]
In motion proceedings the affidavits constitute both the pleadings
and the evidence and the issues and averments in support
of the
parties’ cases should appear clearly therefrom. See
Minister
of Land Affairs and Agricultural v D & F Wevell Trust
2008 (2) SA
184
(SCA) at 200D
.
It is trite that the applicant in application proceedings must make
out his or her case in the founding affidavit.
That affidavit
must contain sufficient facts in itself upon which a court may find
in the applicant’s favour. An applicant
must stand or
fall by his or her founding affidavit. See
Director
of Hospital Services v Mistry
1979 (1) SA 626
(AD) at 635H
–
636D.
[17]
It is necessary to consider the requirements enunciated in
Plascon-Evans
in
adjudicating the disputes, but in that regard the following
dicta
by Heher, JA in
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA)
are
applicable
.
I quote from paragraph [13]:
“
[13] A real, genuine and
bona fide dispute of fact can exist only where the court is satisfied
that the party who purports
to raise the dispute has in his affidavit
seriously and unambiguously addressed the fact said to be disputed.
There will of course
be instances where a bare denial meets the
requirement because there is no other way open to the disputing party
and nothing more
can therefore be expected of him. But even that
may
not be sufficient if the fact averred lies purely within the
knowledge of the averring party and no basis is laid for disputing
the veracity or accuracy of the averment. When the facts averred are
such that the disputing party must necessarily possess knowledge
of
them and be able to provide an answer (or countervailing evidence) if
they be not true or accurate but, instead of doing so,
rests his case
on a bare or ambiguous denial the court will generally have
difficulty in finding that the test is satisfied.
I say ‘generally’ because factual averments seldom stand
apart from a broader matrix of circumstances all of which
needs to be
borne in mind when arriving at a decision. A litigant may not
necessarily recognise or understand the nuances of a
bare or general
denial as against a real attempt to grapple with all relevant factual
allegations made by the other party.
But
when he signs the answering affidavit, he commits himself to its
contents, inadequate as they may be, and will only in exceptional
circumstances be permitted to disavow them. There is thus a serious
duty imposed upon a legal adviser who settles an answering
affidavit
to ascertain and engage with facts which his client disputes and to
reflect such disputes fully and accurately in the
answering
affidavit.
If that does not
happen it should come as no surprise that the court takes a robust
view of the matter.”
(emphasis
added.)
[18]
The essence of Mr Du Preez’s argument in respect of the credit
facility agreement is that the claim is not due and payable.
I
do not agree for the reasons set out in this paragraph as well as the
next paragraphs. A banker-client relationship
is
contractual in nature and therefore, a decision to terminate the
agreement is governed by the rules of contract. A bank
does not
have to give reasons for terminating the relationship. In
Bredenkamp
and others v Standard Bank of South Africa
2010 (4) SA 468
(SCA) the court held at paragraph [57]
“…
.it
is difficult to see how someone can insist on opening a bank account
with a particular bank and, if there is an account, to
insist that
relationship should endure against the will, bona-fide formed, of the
bank.”
See
also:
Annex
Distribution v Bank of Baroda
2018 (1) SA 562
(GP) paragraphs [21] – [22].
[19]
The credit facility agreement is contained in a letter by applicant
dated 13 April 2017, annexure CAV6, which must be read
with the terms
and conditions thereto as set forth in annexure A. It is true that
applicant advanced a reason for terminating this
agreement in its
letter of demand dated 11 September 2017, that reason being the
alleged breach when Sarel obtained finance from
Cargill over the
previous two production seasons in an amount far in excess of R1m
without applicant’s knowledge and consent.
The question
to be answered is whether Sarel’s actions could be relied upon
by applicant in order to terminate the credit
facility agreement with
Karis.
[20]
I shall now mention some of the clauses which were discussed during
argument in order to adjudicate applicant’s claim
that it was
entitled to terminate the credit facility agreement. Firstly,
in paragraph 1 the following is stated pertaining
to the term of the
agreement:
“
Repayment
on demand and subject to annual review.”
Clause
2.4 of annexure A (the
applicable general terms and conditions) stipulates that
“
(I)n
terms of normal banking practice, any facility availed of is
repayable: 2.4.1 on demand by the Bank to this effect,…”
[21]
Secondly, the right of
the applicant under the heading “monitoring conditions”
includes the right (a) to have Sarel’s
immovable properties
revalued every four years (clause 4.4), (b) to insist that the assets
of Sarel and the two trusts (Saamwerk
and SRE) as indicated in their
balance sheets be preserved (clause 4.5); (c) to insist that Karis
provide applicant with the signed
final financial statements of Sarel
and both trusts annually (clause 4.6); (d) to insist that neither
Karis, nor Sarel and the
two trusts incur any further external
debt in excess of R1m without applicant’s prior written consent
(clause 4.7)
and (e) that neither Karis, nor Sarel and the two trusts
sign surety in favour of any third party (clause 4.8).
[22]
Thirdly, clause 7 records Karis’ acknowledgement that the
credit facility was provided based on the financial position
and
circumstances of Karis as well as the sureties, which we know are
Sarel and the trusts.
[23]
Clause 4 of annexure A deals with breach of the agreement and
applicant’s rights in that regard. The parties expressly
agreed that a breach shall occur even when the debt of a guarantor or
surety become due and payable by reason of default or if
the debt is
not paid when due (clause 4.11), or when a warranty or representation
by the guarantor or surety was taken into consideration
and
materially relied upon when the credit facility was offered which was
found to be untrue or incorrect in any material aspect
(clause
4.12). It must be recorded that annexures CAV6 and CAV7 contain
similar terms and conditions. CAV7, the 2015
agreement with the
overdraft facility of R75m, was entered into between applicant and
Karis on 18 November 2015.
[24]
Sarel entered into two credit agreements with Cargill, firstly for
the 2016 season and secondly for the 2017 season.
The
agreements were entered into during September 2015 and September
2016. The September 2016 agreement was entered into
after the
conclusion of CAV7, but prior to CAV6. Applicant was unaware of
this until 6 September 2017. Although respondents
attack the
validity of these agreements and the second one in particular, it is
without substance. Sarel not only obtained
finance from Cargill
without applicant’s consent, but he allowed the registration of
a notarial bond over his movables in
favour of Cargill. That
bond was registered on 15 September 2016. See annexure CAV22.
In terms of the agreement
with Cargill, the maize harvested
became Cargill’s property. Sarel admitted in writing on
23 August 2017 that the Cargill
agreement was valid and enforceable,
that he owed an amount in excess of R26m at that stage and he also
undertook not to carry
on delivering maize to third parties.
The documents mentioned in this paragraph are attached to the
replying affidavit.
In my view this is acceptable and not
contrary to the authorities quoted insofar as respondents’
version that the Cargill
agreement is unenforceable necessitated a
reply. Consequently, Sarel (and Karis in effect) is also in breach of
the undertakings
provided to applicant in that he acted contrary to
the Cession of Crop Agreements between him and Karis on the one hand
and applicant
on the other. I refer to annexures CAV14 and CAV15.
He also breached the Deed of Negative Pledge of Assets in favour of
applicant,
annexure CAV16.
[25]
Sarel, in his capacity as sole director of Karis at the time, signed
and authorised in that capacity the involvement of Karis
in entering
into the credit facility agreement. The breaches of the credit
facility agreement were committed by Karis as
principal debtor and
Sarel as guarantor and surety. Applicant was entitled to
terminate the credit facility agreement as
it did and to claim the
amount due to it.
[26]
Clause 11 of the Deed of Suretyship renders the surety liable in
respect of each breach or default in respect of the principal
debtor’s obligations. See annexure CAV10.
[27]
Applicant relies on a certificate of balance as it was entitled to do
in terms of the credit facility agreement. The
amount of
R84 741 317.39 plus interest certified as due and payable
is not in dispute on the basis as set out in
Wightmann
supra
.
Karis made certain allegations in paragraph 4.12 of the answering
affidavit in order to show that applicant relied on different
amounts
in three separate applications, to wit this application and the
sequestration applications against Sarel and SRE Trust.
It
incorrectly alleges that the certificate relied upon in this
application is dated September 2017. That is untrue.
The
certificate sets out the balance due and payable as on 23 March 2018
together with interest from that date. Mr Verster,
who issued
the certificate, deposed to the founding affidavit on behalf of
applicant and confirms the correctness of this amount
under oath.
In response to the answering affidavit and annexures thereto he
clearly demonstrates the fallacy of the respondent’s
defence.
I need to refer only to paragraph 18.11. The claim against
Karis amounted to R80 602 544.45 on 20
September 2017 and
not R92m as alleged by respondents. It is rather unfortunate
that Mr Du Preez adopted the incorrect allegations
and insisted in
his argument by referring to alleged discrepancies, whilst the true
facts are clear as daylight.
[28]
I referred to
Wightmann
supra
and reiterate that if respondents wanted to attack the certificate,
confirmed under oath, they should have presented cogent evidence.
The certificate attached to the founding affidavit, annexure CAV24,
is
prima
facie
evidence of the outstanding amount and
in
casu
it
has been confirmed under oath to be correct. This certificate,
confirmed under oath, has not been attacked as such.
The
respondents and their legal representatives had a duty to engage with
the facts they wish to dispute and set out those disputes
fully and
accurately. This court is entitled to follow a robust
approach. I emphasise that the two credit facility
agreements
in
casu
are not in dispute. It is also not disputed that money was
advanced to Karis and that the Trust stood surety for Karis’
liability towards applicant, limited to R60m.
[29]
The only outstanding issue to be considered is the wasted costs of 29
November 2018. Coetzee and Sarel must be blamed
for the
unnecessary postponement and consequent delay. On 20 September 2018
Coetzee deposed to an answering affidavit, confirmed
by Sarel.
The court and applicant heard for the first time that Me Riëtte
van der Walt had resigned as trustee of the
trust on 6 March 2018 and
that the vacancy had not been filled. These two trustees did
nothing to fill the vacancy.
The matter was postponed to 29
November 2018 on which date leave was granted to Coetzee and Sarel to
intervene in their personal
capacities. The court also ordered
them to nominate a new trustee for an appointment to be made before 4
January 2019.
It transpired later that the Master of the High
Court, Pretoria had already appointed Mr Jacobus van der Walt as the
third trustee
on 24 October 2018. The trustees failed to do the
substitution in terms of rule 15 immediately; it was only done in
January
2019. An explanation has been provided by Coetzee, and
although extremely flimsy, I do not believe that a punitive costs
order should be made against him and Sarel
de
bonis propriis
.
However, there is no reason why the unsuccessful respondents shall
not be ordered to pay such wasted costs, notwithstanding
Mr Du
Preez’s argument that applicant should pay those costs.
Applicant and the court were deceived, although perhaps
not
intentionally.
[30]
Consequently the following orders are made:
Judgment
is granted against Karis Boerdery (Pty) Ltd and the Saamwerk Trust,
first and second respondents respectively, jointly
and severally, the
one to pay the other to be absolved, the Saamwerk Trust’s
liability limited to the amount of R60 million,
as follows:
(1)
Payment of
the amount of R84 741 317.39 together with interest
calculated at the rate of prime at 10.25%
per
annum
,
calculated daily and compounded monthly in arrears from 23 March 2018
until date of payment;
(2)
Costs of
the application, including the wasted costs of 29 November 2018 on
the scale as between attorney and own client, such costs
to include
the fees and expenses of senior counsel
______________
J
P DAFFUE, J
On
behalf of Applicant: Adv MA Badenhorst SC
Instructed
by: Symington & De Kok
BLOEMFONTEIN
On
behalf of Respondents: Adv DB Du Preez SC
Instructed
by: MJ Lombard Inc
c/o
Hugett Retief Inc
BLOEMFONTEIN