Brief Summary

Summary Judgment — Opposed application — Plaintiff sought summary judgment for loan repayment and return of vehicles following defendants' breach of loan and instalment sale agreements — Defendants disputed the amount owed, claiming lack of evidence regarding the validity of certificates of balance — Court held that the plaintiff had established its case through undisputed facts, and the defendants' failure to challenge the validity of the agreements or the plaintiff's compliance warranted the granting of summary judgment.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings concerned an opposed application for summary judgment brought in the High Court of South Africa, Free State Division, Bloemfontein. The applicant/plaintiff was Small Enterprise Finance Agency SOC Ltd and the respondents/defendants were Re-Yakgona Transport CC (first defendant) and Joseph Diheke Mphuthi (second defendant).

The procedural posture was that the plaintiff had instituted action on contractual claims arising from a developmental term loan agreement, two instalment sale agreements in respect of heavy load vehicles, and an unlimited deed of suretyship. After the defendants entered an appearance to defend, the plaintiff applied for summary judgment. The summary judgment application was argued on 28 June 2018 and judgment was delivered on 4 July 2018.

The general subject-matter of the dispute was the enforcement of alleged indebtedness under the loan and instalment sale agreements, the cancellation of the instalment sale agreements, the return of the financed vehicles, and the second defendant’s alleged liability as surety and co-principal debtor. The opposition to summary judgment narrowed to whether the plaintiff had adequately proved indebtedness for purposes of summary judgment, given the defendants’ challenge to the certificates of balance relied upon in the particulars of claim.

Material Facts

It was common cause (or effectively not disputed in the summary judgment proceedings) that the plaintiff and the first defendant concluded a written developmental term loan agreement in terms of which the plaintiff advanced funds to the first defendant. The loan amount advanced was alleged to be R 413 430.24, and the total loan amount (inclusive of interest) was payable by 31 May 2017. The plaintiff’s case was that it performed by advancing the monies and that the first defendant breached by failing to pay instalments as required and by failing to settle the loan and interest by the due date.

It was also not disputed that the plaintiff and the first defendant concluded two written instalment sale agreements relating to two Mercedes Benz Actros heavy load vehicles, each at a purchase price of approximately R 1 580 181.02, with a total collectable alleged to be R 2 217 931.78 per agreement. The payment structure alleged was monthly instalments over 57 months, with interest at a fixed rate of 13.50% per annum, calculated daily and debited monthly. The plaintiff alleged that the first defendant took possession of the vehicles and later breached the instalment sale agreements by failing to make regular payment of instalments and other amounts due.

On the same date as the instalment sale arrangements (as pleaded), the second defendant executed an unlimited suretyship, binding himself as surety and co-principal debtor in solidum for the first defendant’s indebtedness to the plaintiff in respect of past, present, and future debts. The terms relied upon included that the surety would, on demand, pay all liabilities due by the first defendant to the plaintiff, including interest and enforcement-related costs and charges.

A further material feature of the contractual framework relied upon by the plaintiff was that each of the agreements contained a clause providing that a certificate signed by a specified category of plaintiff representative (authorised signatory, or director/manager in the case of the suretyship) would constitute prima facie proof of the amount owing, the applicable interest rate, and related facts for purposes including provisional and summary judgment. The plaintiff attached certificates of balance to its particulars of claim, all signed by Fredie Botha (described as a management accountant).

The defendants’ opposition did not substantively dispute the existence of the agreements, their terms, the plaintiff’s performance in advancing funds/delivering the vehicles, the suretyship, the defendants’ obligations to make payments, or the delivery of demands. The opposition instead focused on a targeted challenge: the defendants contended that the certificates of balance were defective because the signatory did not allege (in the certificates or otherwise) that he was an authorised signatory (or, for the suretyship certificate, a director or manager) as required by the relevant contractual clauses. In their papers, the defendants also asserted that payments had been made and that they could not establish the extent of their indebtedness on the papers as they stood, but they did not set out a quantified counter-position or factual reconstruction of the account.

Legal Issues

The central legal issue was whether, on an application for summary judgment, the defendants had satisfied the requirements of Uniform Rule 32(3)(b) by disclosing fully, under oath, a bona fide defence and the material facts relied upon for that defence.

Within that overarching inquiry, the dispute primarily concerned the application of law to the pleaded and undisputed contractual facts, namely whether the defendants’ technical attack on the certificates of balance (based on the signatory’s alleged lack of stated authority/status) constituted a bona fide defence sufficient to defeat summary judgment. The court was also required to assess whether the defendants’ assertions amounted to a bare denial or speculative opposition, as opposed to a properly particularised defence supported by material facts.

Court’s Reasoning

The court approached the matter on the basis that the defendants had, in substance, left undisputed the foundational elements of the plaintiff’s cause of action: the conclusion of the loan agreement, the two instalment sale agreements, the suretyship, the relevant contractual obligations, the plaintiff’s performance, and the existence of breach in the form of non-payment after demand. The court noted that this narrowing of issues meant the opposition turned on the single point regarding the validity and sufficiency of the certificates of balance.

In addressing that point, the court considered the defendants’ reliance on the proposition that the certificates did not comply with the contractual requirements because the signatory (Fredie Botha) did not state that he was an authorised signatory (and, in relation to the suretyship, did not state he was a director or manager). The court treated this as insufficient to constitute a substantive defence in summary judgment proceedings, particularly where the defendants did not advance a factual basis showing that the amounts claimed were incorrect.

The court applied Uniform Rule 32(3)(b), emphasising that a defendant resisting summary judgment must satisfy the court, by affidavit (or with leave by oral evidence), that a bona fide defence exists, and must disclose fully the nature and grounds of the defence and the material facts relied upon. The court characterised the defendants’ statement that payments were made and that they could not establish the extent of indebtedness as amounting to a bare denial, which did not meet the rule’s threshold because it did not set out material facts demonstrating a triable defence.

The court also had regard to the contractual provisions (including clause 22.2 of the loan agreement and clause 18.2 of the instalment sale agreements) contemplated in the defendants’ own argument, which expressly required a borrower disputing a certificate to adduce evidence in rebuttal. The court held that, notwithstanding those provisions, the defendants did not provide rebuttal evidence challenging the correctness or accuracy of the amounts reflected in the certificates. Instead, they relied on the contention that the certificates were formally defective due to the signatory’s alleged failure to assert authority.

In addition, the court relied on the reasoning in Nedperm Bank Ltd v Verbri Projects CC 1993 (3) All SA 215 (W) to reject an approach in which a defendant merely claims uncertainty about indebtedness and seeks to avoid summary judgment on the basis that something might emerge at trial. The court accepted the principle that a defendant cannot “sit back” and oppose summary judgment on speculative grounds without setting out facts supporting a genuine defence.

Finally, the court reiterated the policy basis of summary judgment, with reference to Maharaj v Barkley’s National Bank Ltd 1976 (1) SA 418 (A) and Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture 2009 (5) SA 1 (SCA), namely that summary judgment is aimed at preventing sham defences that delay a plaintiff’s enforcement of clear rights. Applying those principles, the court concluded that the defendants’ objections were “devoid of substance” and did not comply with the requirements of Rule 32(3)(b), and that no plausible and bona fide defence had been established to resist summary judgment.

Outcome and Relief

The court granted summary judgment in favour of the plaintiff in terms of prayers 1, 2, 3, 4, 5 and 6 of the notice of application.

The relief granted included judgment against the defendants in solidum (the one paying the other to be absolved) for payment of R 366 182.12 together with interest at 13.50% per annum, calculated daily and compounded monthly in arrears from 1 April to date of payment. The court also granted relief against the first defendant confirming cancellation of the instalment sale agreements and ordering the return of the two Mercedes Benz Actros vehicles identified by chassis and engine numbers.

In addition, the order provided that judgment for any further amount to which the plaintiff might ultimately be entitled (as contemplated in prayer 5 of the particulars of claim) was postponed sine die pending the return of the assets, their subsequent disposal, and the calculation of the amount to which the plaintiff would be entitled.

The court ordered costs to follow the result, granting costs on an attorney and client scale.

Cases Cited

Nedperm Bank Ltd v Verbri Projects CC 1993 (3) All SA 215 (W).

Maharaj v Barkley’s National Bank Ltd 1976 (1) SA 418 (A).

Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture 2009 (5) SA 1 (SCA).

Legislation Cited

No specific legislation was cited in the judgment.

Rules of Court Cited

Uniform Rule 32(3)(b).

Held

The court held that the defendants failed to satisfy the requirements of Uniform Rule 32(3)(b) because their opposing affidavit did not fully disclose the nature and grounds of a bona fide defence and the material facts relied upon. The challenge directed at the certificates of balance, based on the signatory’s alleged failure to allege authority or status, was not accompanied by rebuttal evidence disputing the correctness or accuracy of the indebtedness reflected in those certificates.

The court further held that the defendants’ stance amounted to an impermissible bare denial/speculative opposition to summary judgment, and that the plaintiff was therefore entitled to summary judgment, with costs following the event on the attorney-and-client scale.

LEGAL PRINCIPLES

The judgment applied the principle that summary judgment is available to a plaintiff with an apparently unimpeachable claim where the defendant fails to demonstrate a genuine triable issue. The mechanism is directed at preventing sham defences that serve only to delay enforcement of contractual rights.

The judgment reaffirmed that under Uniform Rule 32(3)(b) a defendant must place before the court, on affidavit (or permitted oral evidence), a defence that is bona fide, and must fully disclose the defence’s nature and grounds as well as the material facts underpinning it. A defendant’s mere assertion of uncertainty about indebtedness, or a generalized statement that payments were made without factual particularisation, is insufficient.

The judgment further applied the principle that where contractual clauses provide for certificates of balance to serve as prima facie proof, a defendant who disputes a certificate’s contents must do more than raise a technical objection; the defendant is required to adduce rebuttal evidence challenging the correctness or accuracy of the claimed indebtedness if it is to establish a bona fide defence in summary judgment proceedings.

Small Enterprise Finance Agency SOC Ltd v Re-Yakgona Transport CC and Another (5579/2017) [2018] ZAFSHC 115 (4 July 2018)