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[2018] ZAFSHC 188
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Land and Agricultural Bank of SA v Jandrea Boerdery CC and Others (3127/2018) [2018] ZAFSHC 188 (8 November 2018)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
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Policy
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 3127/2018
In
the matter between:
THE
LAND AND AGRICULTURAL BANK OF
SA
Applicant
and
JANDREA
BOERDERY CC
1
st
Respondent
(Reg
No. 2008/167252/23)
JAN
FREDERICK CRONJÉ
N.O.
2
nd
Respondent
(In
his capacity as duly authorised trustee of the
JAMANLÉ
FAMILIETRUST, IT 1088/1996)
ALFRED
SLABBERT
N.O.
3
rd
Respondent
(In
his capacity as duly authorised trustee of the
JAMANLÉ
FAMILIETRUST, IT 1088/1996)
JANICE
ANDREA ZENI
N.O.
4
th
Respondent
(In
her capacity as duly authorised trustee of the
JAMANLÉ
FAMILIETRUST, IT 1088/1996)
JANICE
ANDREA
ZENI
5
th
Respondent
(ID
No. […])
JAN
FREDERICK
CRONJÉ
6
th
Respondent
(
ID
No. […])
THE
COMPANIES AND INTELLECTUAL PROPERTY
COMMISSION
7
th
Respondent
HEARD
ON:
25
OCTOBER 2018
JUDGMENT
BY:
DAFFUE,
J
DELIVERED
ON:
08
NOVEMBER 2018
I
INTRODUCTION
[1]
The main dispute between the parties is about the applicant’s
right to claim payment of an amount of about R8m from the
principal
debtor, a close corporation that has been deregistered lately, and
its sureties, jointly and severally.
[2] In order to enforce
its monetary claim the applicant seeks revival of the close
corporation, or put otherwise, an order declaring
the dissolution
thereof void.
II
THE
PARTIES
[3]
Land and Agricultural Development Bank of South Africa, a statutory
body and bank established in terms of the
Land and Agricultural
Development Bank Act, 15 of 2002
and also a registered credit
provider, is the applicant. Adv LW de Koning SC appeared for
the applicant before me.
[4]
Jandrea Boerdery CC, (herein later referred to as “the CC””),
a close corporation, is cited as the first respondent.
The trustees of the Jamanlé Familietrust (“the Trust”)
are cited in their representative capacities as 2
nd
to 4
th
respondents respectively. They are Jan Frederick Cronjé
(“Cronjé”), Alfred Slabbert (“Slabbert”)
and Janice Andrea Zeni (“Zeni”). Zeni and Cronjé
are cited in their personal capacities as 5
th
and 6
th
respondents respectively. Adv A Sander appeared for 2
nd
to 6
th
respondents before me, but no doubt, they have in mind that 1
st
respondent who was not represented due to its deregistered status,
shall remain defunct, “
dead
and buried”
.
[5] The Companies and
Intellectual Property Commission is cited as 7
th
respondent, but it neither opposed the application, nor played any
role in the proceedings.
III
THE
RELIEF CLAIMED AND RULE
NISI
GRANTED
EX
PARTE
[6
]
On
5 July 2018 a rule
nis
i
was issued in respect of the relief sought in Part A of the notice of
motion which I quote
verbatim:
1.
A rule
nisi
is issued, returnable on
16
AUGUST 2018
calling upon
all interested persons to show cause why an order should not be made
in the following terms:
1.1 Declaring the dissolution of
Jandrea Boerdery CC, void in terms of
section 83(4)
of the
Companies
Act 71 of 2008
;
1.2 Directing the seventh respondent
to restore Jandrea Boerdery CC’s name to the register of
Companies;
1.3 The assets of Jandrea Boerdery CC
are declared to be no longer bona vacantia and are re-vested in the
close corporation;
1.4 The liabilities of Jandrea
Boerdery CC, immediately prior to its dissolution are declared to
re-vest in the corporation;
2.
This rule is to be serve on:
2.1 The companies and Intellectual
Property Commision;
2.2 The South Africa Revenue Services;
2.3 The Master of the High Court;
2.4 The Minister of Finance;
2.5 Any interested person who has been
identified as such.
3.
The rule is to be published one in:
3.1 The Government Gazette in English
and Afrikaans;
3.2 An English daily newspaper,
circulating in the Sasolburg area;
3.3 An Afrikaans daily newspapers,
circulating in the Sasolburg area;
4.
Costs are reserved for adjudication during the hearing of Part B of
the relief sought.
5.
Leave is granted to the applicant to approach the Honourable Court on
the same papers, duly amplified, for the relief set out
in Part B
hereof.
[7]
Part B of the notice of motion which applicant intended to move for
on 30 August 2018 reads as follows:
“
1.
That judgment be entered against the
First to Sixth Respondents, jointly and severally, the one to pay the
other to be absolved,
for the amount of R 7 859 024.86;
2.
Interest on the amount of R
7 859 024.86 at the rate of 11.5% per annum from 1 April
2018 to date of payment;
3.
Costs of suit on a scale as
between attorney and client;
4.
Further and/or alternative
relief.”
IV
POSTPONEMENT
AND EXTENTION OF RULE
NISI
ON 30 AUGUST 2018
[8] Proper service and
publication took place in accordance with the aforesaid order.
However, on the return date, to wit
30 August 2018, respondents’
counsel appeared and requested time to file answering affidavits.
The request was granted,
the rule
nisi
extended and the
application postponed to 25 October 2018, costs to stand over for
later adjudication.
V
THE
DISPUTES
[9]
It is still in dispute whether applicant is entitled to an order in
terms whereof the CC’s deregistration is set aside,
although Mr
Sander failed to make any submissions in this regard during oral
argument and in so many words left the decision in
the court’s
hands. He provided the court from the bar with an unreported
judgment which I shall deal with during my
evaluation of the
disputes.
[10]
The disputes relating to Part B of the main application will be dealt
with under separate headings below. These are the
following: 1)
the
National Credit Act, 34 of 2005
defence, and related thereto, the
fact that no notice of demand was given to the CC prior to
institution of the application, causing
the applicant’s claims
to be premature; 2) applicant’s alleged lack of
locus
standi
;
3) the alleged voidness of the credit agreement; 4) the validity of
the suretyship agreement between the Trust and applicant.
[11] In the
counter-application the trustees, 2
nd
, 3
rd
and
4
th
respondents, seek cancellation of the registered
mortgage bonds based on the alleged voidness of the suretyship
agreement.
Applicant disputes this entitlement, submitting that
insofar as respondents deny a valid cession between Suidwes and
applicant,
the relevant party, to wit Suidwes, is not before the
court and therefore no relief could be granted in its absence.
However,
it is also applicant’s case that a valid suretyship
agreement was entered into and that the mortgage bonds are valid and
should not be set aside.
VI
THE
UNDISPUTED MATERIAL FACTS
[12]
Several material facts are undisputed or are accepted to have been
proven. I refer to the following:
1)
Applicant’s status as a statutory body and bank established in
terms of the
Land and Agricultural Development Bank Act, 15 of 2002
.
2)
Suidwes Landbou (Pty) Ltd (“Suidwes”) is a registered
credit provider in accordance with the
National Credit Act, 34 of
2005
, an entity that
inter
alia
provides financial assistance to the farming community within the
area in which it operates.
3) The
CC was registered as such during 2008 and started with its farming
enterprise on 7 August 2008. Cronjé and Zeni,
the 6
th
and 5
th
respondents respectively, were appointed as the only members at
incorporation of the CC and they are still regarded as the only
members thereof according to a company report obtained by applicant.
4) On
18 June 1996 the Trust was established as an
inter
vivos
trust
and Cronjé and Petro Cronjé, were appointed the first
trustees thereof. On 22 April 2010 amended letters
of authority
were issued by the Master in terms whereof Cronjé, Zeni and an
auditor, Slabbert were certified to be the new
trustees of the Trust.
5) It
is important to point out at this stage that Slabbert’s
company, Opfin Chartered Accountants Inc, is also the accounting
officer of the CC.
6)
Cronjé’s parents were the donors of the Trust and
according to Deed of Transfer T21941/1998 the two properties relevant
to the relief sought herein, portions 2 and 3 of the farm Jeanette
216, district Parys, were transferred by his parents to the
trustees
of the Trust.
7) The
beneficiaries of the Trust are the lawful children of Cronjé
and Petro Cronjé and/or their children as more
fully described
in the Deed of Trust.
8)
Ex
facie
the
Deed of Trust, and having considered the context within which loans
were applied for
in
casu,
there
cannot be any doubt that Cronjé is and was at all relevant
times the farmer in
de
facto
control
of all farming activities on the Trust’s properties.
9) As
we have experienced over the last few decades in practice, farmers
often do not farm in their personal capacities anymore.
The
farms are usually bought by making use of especially trusts, or as in
this case a trust is created by family members, usually
the
grandfather, both for estate planning and tax purposes and to protect
the property from the farmer’s creditors. Then
farmers ensure
the incorporation of close corporations (when that was still
possible) or companies which are then conveniently
used as the
vehicles for conducting farming operations. The private
person/farmer is always a member of the close corporation
and often
the sole member thereof and simultaneously a trustee of the trust.
The kingpin of activities is the farmer who
runs the business as if
it is his/her own and will do his/her best never to incur personal
liability for any debt.
In
casu
Cronjé
is a prime example as the papers show, save insofar as he bound
himself as surety.
10) In
order to apply for credit from Suidwes the CC (actually Cronjé)
had to supply the credit provider with the CC’s
financial
statements. These would have been prepared by Slabbert as the
auditor.
11) In
March 2014 the CC applied for a long term credit facility as well as
a production facility for the 2015 season. The
two applications
for R1.8m and R6m respectively were successful.
12) On
11 April 2014 Cronjé signed a consent for a mortgage bond of
R8m to be registered over the Trust’s property.
He
warranted his authority in the document.
13) On
23 April 2014 several documents were signed relating to the credit
agreements. Personal suretyships by 5
th
and 6
th
respondents on behalf of the CC were signed as well. An alleged
suretyship by the Trust and the trustees’ alleged resolution
to
bind the Trust form part of the documents signed on 23 April 2014.
On applicant’s own admission, patent errors are
apparent from
the trustees’ resolution on p 150 of the papers. I shall
deal with this soon.
14) On
5 May several further documents were signed. The resolution by
the trustees to register a mortgage bond over the Trust’s
property shall be scrutinised later in more detail. The other
documents will be addressed as well.
15) On
15 and 16 May 2014 there was email correspondence between Suidwes and
Slabbert’s office whereupon Slabbert signed the
resolution of
trustees, which he did not do previously.
16) On
17 July 2014 a surety covering mortgage bond in the amount of R8m was
registered in favour of Suidwes over three properties
of the Trust.
Simultaneously the mortgage bond was ceded to applicant as the
endorsement on a copy of the registered mortgage
bond indicates.
17)
During September 2014 a restructuring of the CC’s debt was
agreed upon. On 12 September 2014 restructured credit
was
granted for R6.5m. Again further suretyships were given by 5
th
and 6
th
respondents personally and the Trust, based on a resolution passed by
all three trustees. Although more than one credit agreement
came into existence, applicant relies on the restructuring agreement
which restructured the CC’s debt and all further reference
herein to a single credit agreement is a reference to this agreement.
18)
During February 2015 consent was given for a second surety covering
mortgage bond to be registered over the properties of the
Trust.
Slabbert also signed the resolution like the other two trustees.
Again, Cronjé signed the power of attorney
for the mortgage
bond to be registered This second mortgage bond in the amount
of R3m in favour of Suidwes was also ceded
to applicant upon
registration.
19)
During July 2015 the one property was released from the mortgage
bonds and the trustees were allowed to transfer that property
to the
Tharina Trust.
20) It
appears from the records of 7
th
respondent that the CC was deregistered in October 2010, which
deregistration was cancelled the next month. The CC failed to file
its annual returns for 2016 and 2017 and was again deregistered on 14
June 2017.
21) It
is admitted that the CC has fallen in arrears in respect of the
restructured credit agreement. On applicant’s
version and
based on the customary acceleration clause in the agreement, the full
outstanding amount became due and payable.
On 26 February 2018,
and apparently unaware of the CC’s deregistration, Suidwes as
applicant’s agent sent letters of
demand, ostensibly in terms
of
s 129
of the NCA to the CC, the trustees and to 5
th
and 6
th
respondents. All letters were sent to the same postal address,
to wit the address indicated in the credit agreement.
22) On
25 June 2018 this application was issued whereupon the rule
nisi
of 5 July 2018 was issued.
[13] Having set out the
uncontested issues as well as the aspects in dispute, I shall now
deal with the disputes, the parties’
submissions and relevant
authorities
seriatim
.
VII
APPLICANT’S
LOCUS
STANDI
[14]
Applicant instituted these proceedings as cessionary in terms of a
written sale agreement pertaining to the sale, cession and
delegation
of Suidwes’ right, title and interest in and to its existing
and future debtors’ book. The objective
facts serve as
proof that Suidwes’ rights, title and interests in the credit
agreement, Deeds of Suretyship and two mortgage
bonds relevant
in
casu
have
been ceded to applicant. The ceded mortgage bonds must be
considered together with the sale and service level agreements
filed
by applicant in response to respondents’
rule 35(12)
notice.
It is respondents’ case that applicant has not proven that it
has taken cession of Suidwes’ rights as
stated under oath and
indicated in the various documents presented to the court.
Notwithstanding respondents’ denial
of these facts, I am
satisfied that they failed to present any facts in support of such
bare denial. The facts stated by
applicant are supported by
documentary evidence and it is not open to respondents to challenge
that on the basis it did in an unsustainable
manner. Mr Sander
did not try to convince me of this defence, either in his written
heads of argument, or during oral argument
and I do not have to say
much more than that I am satisfied a proper cession has taken place.
The facts deposed to on behalf
of applicant are accepted as correct.
This defence falls to be rejected.
VIII
THE
REVIVAL APPLICATION
[15]
Deregistration of a close corporation was initially dealt with in
terms of
s 26
of the
Close Corporations Act, 69 of 1984
before its
amendment. That section now stipulates that
ss 81(1)(f)
,
81
(3),
82
(3) to (4) and
83
of the
Companies Act, 71 of 2008
, each read with
the changes required by the context, apply to the deregistration of a
close corporation. Deregistration may
cause tremendous hardship
to creditors. Although the liabilities are not extinguished by
deregistration, creditors’
claims are unenforceable during
deregistration. Creditors are not able to claim from a
deregistered close corporation as
it is not existing anymore and its
assets have become
bona
vacantia
.
See:
Missouri
Trading v Absa Bank
2014 (4) SA 55
(KZD) at para [25]. When a close corporation is
liquidated, there is at least a chance of dividends being payable to
creditors
who have filed claims. Sureties are not discharged
from their liabilities as a result of deregistration. See:
Traub
v Barclays National Bank Ltd
1983
(3) SA 619
(A) at 633-634 and
s 83(2)
and (3) of the
Companies Act.
[16
]
The 7
th
respondent has over the years increasingly adopted the approach to
deregister close corporations and companies by removing them
from its
register for failing to file their annual returns for two or more
years in succession. This is allowed by
s 82(3)(a)(i)
and(ii)
of the
Companies Act. The
only manner in which a creditor can try and
claim what is due to him is to apply for restoration of the close
corporation’s
registration, or put otherwise, to obtain an
order declaring its dissolution void and then to proceed with legal
action.
Therefore, in order for applicant to be able to claim
from the CC the approximately R8m due to it, it has no option than to
seek
an order declaring the dissolution of the CC void in order for
it to revive as a body corporate. It is not surprising that
members of close corporations intentionally fail to ensure proper
compliance by close corporations and thereby effectively see
to the
demise thereof in a cheap fashion without having to pay to have the
close corporation liquidated.
[17]
Applicant has followed a proper procedure as outlined in
Insamcor
(Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd
2007
(4) SA 467
(SCA) and I am satisfied that proper service and
advertisement have taken place. There is no substantial
objection to the
relief claimed, save for a reliance on applicant’s
alleged lack of
locus
standi
which I already considered
supra
and a further faint objection by the 2
nd
to 6
th
respondents. Mr Sander failed to make any oral submissions to
me, although he referred to
an
unreported judgment, to wit
Amelia
Morgenrood v The Companies and Intellectual Property Commission
delivered on 12 March 2015, a judgment of the Gauteng Division,
Pretoria, which is to the effect as stated in para [21] that the
“…
mere
existence of a debt or a claim cannot be the sole ground that
justifies the nullification of deregistration.”
See
also the examples provided as reasons for relief in para [25].
[18]
I differ with respect from the reasons contained in
Morgenrood
.
A creditor who advanced a long term loan to a close corporation
conducting a business such as a farming operation should
not be
prevented from seeking a declaratory order in terms of
s 83(4)
whilst
millions of Rands as
in
casu
are still due and payable. Such an approach would make it
extremely difficult for creditors to claim relief. They would
not normally know what caused the close corporation to close its
doors, whether it was still conducting a banking account at
deregistration
stage or thereafter, whether one of the members merely
stepped into the shoes of the close corporation, or whether the close
corporation
has sold its business and its members decided to have it
deregistered without settling its debts.
[19]
The application is brought in terms of
s 83(4)
of the
Companies Act,
allowing
a court to declare the dissolution of the CC void and to
make any further order that is just and equitable in the
circumstances.
I am satisfied that a proper case has been made
out for the relief claimed in Part A of the notice of motion.
The rule
nisi
should be confirmed.
IX
THE
NATIONAL CREDIT ACT
(“NCA”) DEFENCE
[20]
It should be reiterated that it is admitted that the CC fell in
arrears with its payments in terms of the credit agreement.
In
fact, a proper reading of the answering affidavit leaves no doubt
that the correctness of the outstanding amount and interest
claimed
as set out in paragraphs 67, 68 and 70.6 of the founding affidavit is
not in dispute. No evidence was provided to
contest the
evidence in this regard. An issue is raised about the unsigned
certificate of balance (which was supposed to
be signed by Mr RM
Nagel in his capacity as Manager: Collections of Suidwes) attached to
Mr Nagel’s founding affidavit, but
he confirmed the amount and
interest under oath. In fact he appended an updated and signed
certificate as annexure “R8”
to the replying affidavit.
Therefore, save for the particular defences raised by respondents
with which I deal herein, the
outstanding amount and interest are
found to be admitted by necessary implication. I shall now
consider the defence relating
to failure to serve a demand in terms
of
s 129
of the NCA.
[21]
Coupled with the NCA defence, Mr Sander submitted that applicant
failed to comply with a peremptory term of the credit agreement
which
states in clause 19.3 that notice must be given to the CC prior to
the institution of steps for cancellation or enforcement
of the
contract due to the CC’s non-compliance. In response to
Mr De Koning’s oral arguments, Mr Sander stated
immediately
when he got on his feet that
“…
we
miss one point; the requisite notice was not given…”
and
this failure
“…
serves
as a bar to claim for money.”
[22]
The facts speak for themselves. Notice was in fact given to the
CC and its members as stated above. It is accepted
that the
notice does not comply with the requirements of
s 129
of the NCA and
that the CC was already non-existent when it was sent. I shall
deal with both issues
seriatim
.
[23]
The credit agreement and accompanying documents are clearly
“
copy
and paste jobs”
that
one does not expect from a major credit provider such as Suidwes.
Although it appears from the answering affidavit that
respondents
contend that the credit agreement is void for non-compliance with the
NCA, Mr Sander did not make any submissions in
this regard as he
probably acknowledged that he could not make any submissions with
conviction. See the definition of
“
juristic
person”
in
s 1
as well as
ss 4
and
7
of the NCA.
Section 129
’s purpose is
to inform a debtor in default of his/her rights to resolve a dispute
or to agree on a plan to make payments
in future. Although the
credit agreement specifically mention
s 129
, it is apparent that none
of the rights contained therein could be utilised by the CC in the
present instance.
[24]
The members of the CC made it impossible for Suidwes to comply with
the notice requirement, either in terms of
s 129
, or at all. I
accept that their action or lack thereof caused deregistration of the
CC. In my view it must be accepted
that there was a fictional
fulfilment of the notice requirement, it being a term of the credit
agreement. See:
Du
Plessis NO v Goldco Motor & Cycle Supplies (Pty) Ltd
2009 (6) SA 617
(SCA) at paras [22] to [29]. It would be non-sensical
to restore the CC’s registration and then force the applicant
to give
notice thereafter before it is allowed to claim what is due
to it. Mr De Koning submitted that respondents’ attitude in
resisting
revival of the CC and simultaneously claim lack of proper
notice is akin to a child who has murdered his parents and then argue
during mitigation that he is an orphan. There is merit in this
argument.
[25]
Section 129
must be
read with
s 130
as well. The CC has no assets and the applicant
seeks enforcement of the remaining obligations under the credit
agreement.
There is no reason why the application against the
CC should be dismissed or deferred for notice to be given after an
order for
the revival of the CC has been made, specifically in light
of what I found
supra.
This defence is without merit.
X
ALLEGED
VOIDNESS OF THE CREDIT AGREEMENT
[26]
This is quite an astonishing defence, particularly based on the
de
facto
situation
in
casu
set
out above and
s 54
of the
Close Corporations Act. Cronj
é
is the kingpin of the farming activities and the driving force behind
the operations of the Trust as is apparent from the
Deed of Trust,
the CC’s records, the applications for credit and completion of
all documents in that regard. He was
also the person consulting
with and instructing lawyers in respect of the opposition of the
application. These factors serve
as proof that the CC was his
alter
ego.
However,
it is not even necessary to come to such a conclusion as
s 54
is
clear.
Every
member of a close corporation is regarded as an agent of the close
corporation in relation to outsiders dealing with it.
It is
stated as follows in
Northview
Shopping Centre v Revelas Properties Johannesburg CC
[2010]
3 All SA 422
(SCA) at para [17]:
“
Section
54(2)
does no more than express the usual rules relating to
ostensible authority. And
section 54(1)
simply confers on a
member authority to act for a close corporation, as the common law
confers on a partner the power to bind the
partnership.”
[27] No one in his right
mind with information as to how the CC conducted its business would
have thought that Cronjé had
no power to bind the CC.
The employees of Suidwes cannot be blamed, save for the blunders they
made as mentioned and discussed
infra,
for acting in the
manner they did pertaining to the granting of credit to the CC.
This defence is also without merit.
XI
NO
VALID RESOLUTION TO BIND THE TRUST
[28]
This
is somewhat more problematic than the previous disputes.
Suidwes and their attorneys really made a mockery of the standards
expected of a reputable financial institution and the attorneys’
profession. The issue is whether the obvious hurdles
can be
overcome in order to grant the relief claimed. Mr De Koning
submitted that in the worst case scenario,
i.e.
in the event of the court being unable to find in favour of applicant
that the Trust is bound as surety, the particular dispute
should be
referred to oral evidence, alternatively that the claim against the
Trust and the counter-application be referred to
trial.
[29]
It is apposite to now deal with the documentation before the court
relating to the alleged suretyship agreement entered into
on behalf
of the Trust. I conveniently start off with the documents which
were ultimately registered in the Deeds Registry.
The heading
of the two mortgage bonds, annexures “RMN7” and “RMN8”
to the founding affidavit reads: “Borg
Dekkingsverband”
(in English: Surety Covering mortgage bond). The R8m mortgage
bond was registered on 14 July 2014
and the R3m mortgage bond on 17
March 2015. On 23 April 2014 Cronjé signed a separate
suretyship agreement in his
capacity as trustee of the Trust in
favour of Suidwes for the CC’s debt. He and Zeni also
signed suretyship agreements
in their personal capacities for the
debts of the CC and the Trust.
[30]
When the validity of the suretyship by the Trust was attacked in the
answering affidavit, applicant responded with a voluminous
replying
affidavit. Several documents were attached thereto.
Cronjé signed a written consent on 11 April 2014
for the
registration of the R8m surety mortgage bond and confirmed that he
was duly mandated by the Trust. See annexure “RA2”.
The farms are identified in the document, but it is disturbing to
note that the reference is to “my” – Cronje’s
properties -instead of the Trust’s properties. The
document, as most of the others, was drafted by Suidwes.
Annexures “R2B”, “R2C”, “R2D” and
“R2E” were clearly drafted by Suidwes’ attorneys.
These are respectively an affidavit by Cronjé, an extract of
minutes of a meeting of trustees relating to a resolution by
the
trustees, signed by Cronjé and Zeni and a power of attorney to
pass a mortgage bond together with the draft bond, signed
by Cronjé.
In the affidavit Cronjé again confirmed his authority to act
on behalf of the Trust. However,
reference is made to a loan
having been granted to the Trust in the amount of R8m which is
clearly wrong. The extract of
the minutes indicates that Cronjé
was authorised to sign all documents required to pass the mortgage
bond over the Trust’s
properties. However, again the
ratio
for the mortgage bond is incorrectly stated to serve as security for
a loan of R8m having been granted to the Trust. The
power of
attorney dated 5 May 2014, read together with the draft bond, is
indicative of the true intention of the parties,
i.e.
to
register a surety covering mortgage bond.
[31]
During May 2014 Suidwes’ attorneys had email correspondence
with Slabbert’s office and as a consequence he not
only signed
the required certificate as auditor of the Trust, but co-signed the
extract of the minutes of a trustees’ meeting
ostensibly held
on 5 May 2014, confirming that the Trust had borrowed R8m from
Suidwes and that Cronjé was authorised to
sign all required
documents to
inter
alia
see to registration of mortgage bonds over the Trust’s
properties. I refer to page 583. Again, a mistake has
been made pertaining to the
ratio
for registration of the mortgage bond. Hereafter the surety
mortgage bond for R8m was registered.
[32]
A second surety mortgage bond for R3m was registered in 2015 as
mentioned. At that stage Cronjé again negotiated
with
Suidwes. He again signed the power of attorney to pass the bond
and stated that he was duly authorised to act on behalf
of the
Trust. An extract of the minutes of a trustees’ meeting
of 18 February 2015 was relied upon. Initially
this document
was signed by Cronjé and Zeni only, but Slabbert’s
signature was obtained on the same basis as previously.
This
occurred prior to registration of the second mortgage bond. See
page 605. The same mistakes occur in these documents
as pointed
out earlier.
[33]
Reference should also be made to two documents identically worded,
the one dated 23 April 2014 signed by Cronjé and
Zeni only,
and the other dated 15 September 2014 signed by all three trustees.
I refer to pages 150 and 606 (annexure “R3”)
respectively. In terms hereof the trustees resolved to
authorise Cronjé to, in his discretion, enter into
negotiations
with Suidwes for credit facilities and to sign all
documents on behalf of the Trust, including documents to mortgage the
Trust’s
properties. After registration of the mortgage
bonds the Trust sought consent for one of its mortgaged properties to
be released
from the mortgage bonds as this property had been sold.
Such consent was given and the property was sold and transferred free
of the mortgage bonds.
[34]
I shall firstly deal with Mr Sander’s submissions. He
submitted that when applicant felt the shoe pinching, it
tried to
rectify the situation in a 50 page replying affidavit and several
annexures, but failed to prove its case. When
I asked Mr Sander
why respondents did not apply for striking out of the alleged new
matter in the replying affidavit, he conceded
that applicant merely
responded to allegations in the answering affidavit and that a
striking out application was not called for.
It should be
mentioned that I also allowed a further affidavit by applicant with
the consent of respondents. Mr Sander relied
on
Nieuwoudt
and another NNO v Vrystaat Mielies (Edms) Bpk
2004 (3) SA 486
(SCA) and
Land
and Agricultural Bank of SA v Parker and others
2005 (2) SA 77
(SCA) for the well-known principle that trustees must
act jointly unless the Deed of Trust provides otherwise. He
submitted
that an agreement is invalid and unenforceable if signed by
a single trustee purporting to enter into the agreement on behalf of
a trust as occurred
in
casu
.
A trust must be administered in terms of the Deed of Trust and the
trustees can only act as specified therein. Consequently,
so he
argued, the suretyship agreement and surety mortgage bonds are null
and void as Cronjé only, he being one of three
trustees,
signed these purportedly on behalf of the Trust. Mr Sander
argued in conclusion in this regard that the belated
signing by all
three trustees authorising Cronjé cannot be countenanced, the
reason being that ratification of an unlawful
act is not allowed.
I disagree. Any alleged unauthorised act was merely such and
not unlawful.
[35]
Clause 11.4 of the Deed of Trust stipulates that all contracts,
deeds or other documents to be signed on behalf of the
Trust may be
signed in the manner that the trustees prescribe in writing from time
to time. In my view the documentation
referred to indicate
clearly that the trustees authorised Cronjé in writing to sign
all documents required by Suidwes for
purposes of the Trust’s
liability as surety. The following
dictum
by Harms JA in
Nieuwoudt at para [23] is apposite:
“
However,
as mentioned by Farlam JA, the fact that trustees have to act jointly
does not mean that the ordinary principles of the
law of agency do
not apply. The trustees may expressly or impliedly authorise
someone to act on their behalf and that person
may be one of the
trustees. There is no reason why a third party may not act on
the ostensible authority of one of the trustees,
but whether a
particular trustee has the ostensible authority to act on behalf of
the other trustees is a matter of fact
and not one of law.”
[36]
Mr Sander also submitted that the patently wrong documents referred
to
supra
should
not be rectified as Suidwes, the party to those documents, is not a
party to the present proceedings. This entity,
and not
respondents, must be blamed for the mistakes and live thereby
according to him.
[37]
I am satisfied that, if the totality of the documentation is
considered objectively and having regard to the context and
surrounding
circumstances, there can be no doubt that all three
trustees knew that credit would be and was in fact provided to the CC
on certain
conditions only,
inter
alia
suretyships by 5
th
and 6
th
respondents personally and by the Trust, the property owner with
valuable immovable assets and that surety mortgage bonds would
have
to be registered. They could not authorise Cronjé to
sign powers of attorney to pass the mortgage bonds on the
assumption
that the Trust was the principal debtor that borrowed money from
Suidwes. In that regard the resolutions are incorrectly
worded. However, they expressly authorised Cronjé to
sign all documentation on behalf of the Trust in respect of the
transactions with Suidwes and in particular, to pass mortgage bonds
to mortgage the Trust’s properties as security in favour
of
Suidwes. The errors in the documents are patent, but a
“
mistake
must (always) yield to the truth.
”
See:
Kathmer
Investments Ltd v Woolworths (Pty) Ltd
1970 (2) SA 498
(AD) at 503B-D, citing with approval a
dictum
of De Villiers JA, and
Tesven
CC and another v SA Bank of Athens
2000
(1) SA 268
(SCA) at para [18]. Mr De Koning relied on
rectification and submitted that applicant, who was not a party to
the original
documents, could apply for rectification in the absence
of prejudice to the contracting parties. I agree, but point out
that
there was no formal application for rectification. In my
view the documentation, context, surrounding circumstances and
evidence
are sufficient proof of what the parties intended.
Therefore a formal application for rectification is not required.
[38]
At worst for applicant the trustees granted ostensible authority (as
mentioned by Harms JA in
Vrystaat
Mielies)
to Cronjé to act on their behalf as the authorised
representative of the Trust. As Harms JA said, it is a question of
fact
and not law. Respondents had to prove lack of authority.
See:
Moraitis
Investments (Pty) Ltd and others v Montic Dairy (Pty) Ltd
2017
(5) SA 508
(SCA) at paras [21] and [34]. I am satisfied that
the dispute should be adjudicated in favour of the applicant based on
the
evidence presented to the court. The defence of lack of
authority is rejected. A referral of the dispute for oral
evidence
or to trial is unnecessary.
[39]
In amplification of my finding in the previous paragraph I need to
emphasise that it is apparent from the evidence that the
trustees of
the Trust ratified the signing of the Deed of Suretyship, either
expressly, or through acquiescence. All three
trustees signed
the documents referred to as resolutions prior to the passing of the
mortgage bonds and all three must have been
aware of the sale of the
one property and the negotiations to release it from the mortgage
bonds. No one cried foul at any
stage prior to institution of
the litigation. In the final instance I also agree with Mr De
Koning that, based on the admitted
and common cause facts, the Trust
is estopped from denying Cronjé’s authority to have
represented the Trust.
See:
Amler’s Precedents of
Pleadings,
9
th
ed at 188 and authorities quoted.
XII
5
th
RESPONDENT’S DEFENCE
[40]
Zeni, the 5
th
respondent, half-heartedly tried to avoid
personal liability as surety. She was at all relevant times in
a relationship with
Cronjé and used to stay on the Trust’s
farm, Jeanette, but apparently not anymore. She denied that she
was informed
by either Cronjé or Suidwes that she was to bind
herself as surety upon signing several documents handed to her for
signature.
Her former lover’s representation, if that
could be found to be the case, can never relieve her from liability
towards applicant.
Mr EJ Kleynhans dealt with Zeni’s
allegations. He made it clear that he acted as Suidwes’
Manager: Relations
at the time and that Zeni signed three Deeds of
Suretyship, two on 23 April 2014 and one on 15 September 2014, all
three in his
and Cronjé’s presence and after he had
explained the contents to them. She initialled each page
alongside the
inscription “borg” and signed in full on
the last page. The heading of the documents, “Borgakte”,
is typed in upper case and bold. The
caveat subscriptor
principle is applicable. This cannot be a case of
iustus
error
and no reliance is placed on misrepresentation by any of
Suidwes’ personnel. The matter is clearly distinguishable
from
the facts and result in
Brink v Humphries & Jewell (Pty)
Ltd
2005 (2) SA 419
(SCA) at paras [2]-[4] and [11].
XIII
THE
COUNTER-APPLICATION
[41]
In the counter-application 2
nd
to 4
th
respondents seek an order in terms whereof the aforesaid two mortgage
bonds be declared null and void and set aside.
[42]
I agree with Mr De Koning that the counter-application is still-born
based on the respondents’ approach to the litigation.
They deny
the sale and cession agreement between Suidwes and applicant. Suidwes
is not a party to the litigation and no relief
can be granted against
it.
[43]
Mr Sander did not make any further submissions, save those already
considered
supra
. Thus, even if it is accepted that
these respondents could possibly obtain relief as prayed for, I am
satisfied that no case
has been made out on the merits for any relief
in terms of the counter-application. The trustees duly bound
the Trust as
surety for the CC’s debts and lawfully passed the
two surety mortgage bonds against its properties.
XIV
CONCLUSION
[44]
I conclude in stating that applicant has proved its monetary claim
against the CC, that the Trust, 5
th
and 6
th
respondents have bound themselves as sureties and that they are
jointly and severally liable for payment of the outstanding debt
and
interest. Although Mr Nagel has provided the court with an
updated certificate of balance dated 27 September 2018, I
intend to
make an order in terms of the notice of motion. There can be no
prejudice to anyone.
[45]
Applicant did not initially seek an order declaring the Trust’s
properties especially executable. However, it without
objection
applied for amendment of the notice of motion, which application was
granted. There is no reason why the properties
shall not be
declared especially executable. The properties are in essence
utilised in the business of farming operations
and although Cronjé,
already 60 years old, apparently still live in the homestead on the
farms, no reasons have been advanced
to persuade the court not to
grant the particular orders. I accept that Cronjé is an
elderly gentleman and that the
farms are family assets for many
decades. Applicant is a financial institution that has to
account to its shareholders and
other stakeholders, whilst Cronjé
and his entities entered into at arms’ length business
transactions, well-knowing
the risky business that farming has become
in this country.
[46] The credit
agreement, Deeds of Suretyship and mortgage bonds provide for costs
on an attorney and client scale in the event
of default and
consequent institution of legal steps. Applicant seeks costs on
such scale. There is no reason to grant
costs on any other
scale.
XV
ORDERS
[47] The following orders
are issued:
1) The
rule
nisi
of 5 July 2018 is confirmed.
2) Judgment is entered
for the amount of R7 859 024.86 against 1
st
to
6
th
respondents, jointly and severally, the one to pay the
other to be absolved.
3)
Interest shall be payable on the amount of R7 859 024.86 at
the rate of 11.5%
per
annum
from 1 April 2018 to date of payment.
4) As
against 2
nd
,
3
rd
and 4
th
respondents, it is declared that the following properties are
especially executable:
4.1 Portion 2 of the farm
Jeanette 216, district Parys, Free State Province, in extent 176,8739
hectares and held by Deed of Transfer
T21941/1998;
4.2
Portion 3 of the farm Jeanette 216, district Parys, Free State
Province, in extent 171,3064 hectares and held by Deed
of Transfer
T21941/1998.
5) Costs of the
application, including the costs of 5 July 2018 and 30 August 2018,
against 1
st
to 6
th
respondents on the scale as
between attorney and client.
____________
J
P DAFFUE, J
On
behalf of applicant: Adv L W De Koning SC
Instructed
by: Mcintyre & Van Der Post
BLOEMFONTEIN
On
behalf of 2
nd
– 6
th
respondents: Adv A
Sander
Instructed
by: Blair Attorneys
BLOEMFONTEIN