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[2018] ZAKZDHC 22
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Airports Company South Africa Limited v Masiphuze Trading (Pty) Limited and Others (9676/2014) [2018] ZAKZDHC 22 (15 June 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 9676/2014
In
the matter between:
AIRPORTS
COMPANY SOUTH AFRICA
LIMITED
Plaintiff
and
MASIPHUZE
TRADING (PTY)
LIMITED
First
Defendant
JOHN
RUSSEL
GOLDREICH
Second
Defendant
NTAVHANYENI
ALBERT
NEMUKULA
Third
Defendant
WILLIAM
PATRICK
O’DRISCOLL
Fourth
Defendant
Coram: Koen J
Heard:
7, 8 and 10 May 2018
Delivered: 15 June 2018
ORDER
1. The Plaintiff’s
claim against the Third Defendant is dismissed with costs.
2. The application for
default judgment against the Second and Fourth Defendants is
adjourned
sine die
with no order as to costs.
JUDGMENT
Koen
J
Introduction
[1]
This is an action in which the Plaintiff seeks to hold the Second,
Third and Fourth Defendants liable as sureties and co-principal
debtors for various amounts
[1]
alleged
to be owed to it by the First Defendant
[2]
as
principal debtor in respect of a written lease agreement concluded
between the Plaintiff and the First Defendant.
[2]
At the trial only the Third Defendant was present and represented.
The attorneys for the Second and Fourth Defendants withdrew
as their
attorneys of record on 2 May 2018, two court days before the action
was due to commence. The notice of withdrawal as attorneys
of record
for the Second and Fourth Defendants furthermore does not comply with
the provisions of rule 16(4). The late withdrawal
by attorneys as
attorneys of record for litigants, as in this case in respect of the
Second and Fourth Defendants, falls to be
deprecated as it leaves
them in an unenviable position where they might not receive the
notification to appoint alternative representatives
timeously, if at
all. The Plaintiff sought default judgment against the Second and
Fourth Defendants. I was not prepared to accede
to that request, as
much as the circumstance in which the Second and Fourth Defendants
find themselves is not of the Plaintiff’s
making. The claims
against the Second and Fourth Defendants must accordingly be
adjourned
sine die
for adjudication in due course after adequate notice to them.
[3]
The trial accordingly proceeded against only the Third Defendant.
[4]
It is trite law that t
he
onus rests on the Plaintiff to allege and prove a valid contract of
suretyship,
[3]
as well as the amount of the indebtedness of the principal debtor.
[4]
The
primary issue for determination in this trial was whether the Third
Defendant was bound by the suretyship which the Plaintiff
relies
upon. Some evidence was also adduced as to the amount of his
indebtedness if the suretyship was found to be enforceable
against
him. Various potential problems however exist in respect of that
issue. These include whether some of the charges sought
to be
recovered were due in terms of the lease, whether VAT claimed thereon
was in fact payable, the extent of the alleged damages
for holding
over, and the like, to mention a few. In view of the conclusion I
have reached it is not necessary to consider the
correct computation
of any alleged indebtedness. This judgment deals only with the
primary issue namely whether the Third Defendant
is legally bound as
surety to the Plaintiff.
The
Conclusion of the Lease Agreement and Deed of Suretyship
[5]
The suretyship which the Plaintiff seeks to enforce against the Third
Defendant was attached as an annexure
[5]
to
the written lease agreement concluded between the Plaintiff and the
First Defendant.
[6]
The relevant background to the dispute includes the following. The
First Defendant was awarded a tender to run a Wimpy outlet
at King
Shaka International Airport (‘the airport’). This
resulted in the lease agreement being concluded between it
and the
Plaintiff. Prior to this award the First Defendant had operated a
coffee shop in the old Durban International Airport (‘old
airport’) until the old airport was closed, similarly from
premises which it leased from the Plaintiff. No evidence was adduced
that the Third Defendant had bound himself as a surety in respect of
the lease at the old airport.
[7]
The Second, Third and Fourth Defendants were at the time of the
conclusion of the lease for the Wimpy outlet all directors
[6]
of
the First Defendant. The Third Defendant was aware of the tender put
forward on behalf of the First Defendant but did not have
sight of
it.
[8]
Upon the award of the tender, an administrative officer of the
Plaintiff delivered the proposed lease agreement with its annexures
to the Fourth Defendant, on behalf of the First Defendant. The date
upon which the draft unsigned lease agreement, following the
template
generally used by the Plaintiff, was delivered and the manner and
form in which it was delivered were not confirmed.by
any evidence.
[7]
It
appears however that the documents must have been delivered at some
stage before 10 July 2009, as the conclusion of the lease
was
referred to in a resolution of the board of directors of the First
Defendant reflecting that date. Mrs Horn, an employee of
the
Plaintiff, confirmed that, other than a standard covering letter
(which was not produced), neither the terms of the lease agreement
nor those of the suretyship are explained to potential tenants.
Further, there is no time period within which a lease agreement
is to
be signed by the tenant. The lease must however be signed prior to
the tenant commencing trading, in the present case, on
1 May 2010.
[9]
The agreement of lease document is a 36-page document comprising
various terms and conditions. Attached to it are seven annexures.
The
entire bundle comprising the agreement of lease with the annexures
thereto is headed ‘Agreement of Lease between Airports
Company
of South Africa Limited and Masiphuze Trading (Pty) Limited’.
The second page of the lease agreement consists of
a contents page
which refers to the various clauses of the lease agreement and
identifies the annexures thereto. Annexure
1 relates to
‘Further material terms of lease’, Annexure 2 makes
provision for a ‘Resolution of the Lessee’,
[8]
Annexure
3 refers to ‘a Plan of the leased premises’, Annexure 4
contains a ‘Draft payment guarantee in lieu of
payment’
which the evidence established would have to completed in that form
should security be required, Annexure 5 a blank
‘Deed of
Suretyship’, Annexure VII(4) which was not referred to in the
index comprises the ‘Abridged ACSA House
Rules’, Annexure
6, a ‘Service Standard Agreement’, and Annexure 7 a draft
‘Debit order instruction’.
Provision was made on page 36
of the lease agreement for signature by the lessee.
[10]
The schedule to the lease stipulates the minimum rentals payable and
also specified that security in the amount of R263 538
was required.
A payment guarantee for a security deposit in the amount of
R263,538.00, as required by the lease, was obtained in
the form of
annexure 4 to the lease agreement. When the First Defendant defaulted
with its obligations, that amount was released
to the Plaintiff on 10
October 2014 and allocated to some of the First Defendant’s
earliest arrears. Regarding the extent
of security required, the
evidence established that the Plaintiff did not specify that any
particular sureties bind themselves
to it in respect of the liability
of the First Defendant, but that the number of sureties and their
identities were to be inserted
at the discretion of the lessee, who
could insert the names of such sureties as it saw fit.
[9]
That
is unusual if not extraordinary.
[11]
None of the Plaintiff’s
employees and/or representatives was present at the time the lease
documents were signed.
The
Third Defendant’s unchallenged evidence was that the lease and
annexures thereto were presented to him as a non-executive
director
by the Second and Fourth Defendants, who are executive directors of
the First Defendant, at a board meeting of the First
Defendant held
at the Greyville Race Course in Durban. That meeting probably took
place on 20 July 2009. The Third Defendant was
told that the document
was the lease with the Plaintiff. According to his evidence,
the lease had already been signed and
initialled by the Second and
Fourth Defendants. He was advised that he also needed to sign and
initial the documents wherever they
had done so. He did so without
reading the documents as he trusted his fellow directors. He was
never told by them that he was
binding himself as surety on behalf of
the First Defendant. Although he did not read the documents
[10]
he
did notice that it did not contain the handwritten insertions now
appearing on the documents annexed to the particulars of claim,
which
reflect the names of the sureties and their
domicilia
citandi et executandi
in annexure 5 in manuscript.
No
evidence was presented to gainsay his version that when he signed the
document, irrespective of his reasons for or belief in
signing it,
the documents were blank. Further, there is no evidence of (nor was
it put to him) that there was any agreement between
any of the
parties regarding the insertion of the identities of the alleged
sureties or any other of the manuscript variations
of the document.
The
Third Defendant did not recognize and could not say whose handwriting
now appeared on the documents.
Manuscript
insertions on a document amount to alterations to that document.
There was no proof or signature reflecting or confirming
that such
alterations were effected with the Third Defendant’s consent.
[12]
The lease documents annexed to the particulars of claim reflect what
was identified as the Fourth Defendant’s signature
at the end
thereof where provision is made for a signature ‘for and on
behalf of the LESSEE’. The Third Defendant signed
as the ‘first
witness’ and the Second Defendant as the ‘second
witness’. The lease reflects that this was
apparently done at
Durban on 20 July 2009. Every page of the lease and the annexures
thereto was initialled by the Second and Fourth
Defendants, as well
as by the Third Defendant (save that the copy annexed to the
particulars of claim on pages 59 to 65, which
include the draft
suretyship agreement, do not reflect initials of the Third
Defendant).
[11]
The
fourth page of the suretyship document ends with clause 17
approximately half way down the page. It is followed by a page making
provision for five signatures without any indication as to whether it
is part of the suretyship, or in which capacity any signatory
would
sign.
[12]
There
was furthermore no evidence as to where this page might have appeared
in the series of pages when it was signed, specifically
whether it
followed immediately at the end of the draft suretyship, or might
have appeared elsewhere. The Third Defendant simply
signed where his
two co-directors indicated he should sign.
[13]
As the signing of the documents which included the lease was not
supervised by the Plaintiff, the Plaintiff could not contradict
the
evidence of the Third Defendant on the above.
[14]
The documents were subsequently returned to the Plaintiff and
eventually only submitted to the Plaintiff’s authorised
signatory, Mr Govind, on or about 13 January 2010 (some 6 months
later). That date appears on an internal covering letter which
accompanied the lease documents when they were sent to Mr Govind to
sign for and on behalf of the Plaintiff.
[13]
Mr
Govind did not date the agreement when he signed it and it appears
that Mrs Horn had signed as sole witness before his signature
was
appended. Mr Govind says he checked that the document was
ex
facie
its contents complete. He noticed that the name of the principal
debtor had been inserted on the suretyship as a surety, which
would
be an error, but did nothing further about it as three further names
appeared thereon.
[15] The lease agreement
does not reflect in its heading that it is a Lease Agreement
incorporating a deed of suretyship. The deed
of suretyship is however
headed in bold font, ‘Deed of Suretyship. It provides that the
sureties:
‘
do
jointly and severally bind [themselves] to Airports Company South
Africa Limited “the Lessor” and its successors
and
assigns as surety for and co-principal debtors with [INSERT DETAILS]
(“the Lessee”) for the due and punctual fulfilment
and
performance by the Lessee of all its obligations to the Lessor in
terms of the lease agreement to which this suretyship is
attached
(“the lease agreement”) …’
[16]
The Third Defendant
evidence that the Deed of Suretyship was
blank at the time he signed the lease agreement (in that the
sureties’ details at
page 48 of Exhibit A and the details at
pages 50 and 51 thereof were left blank) could not be challenged,
which
prima facie
rendered the Deed of Suretyship invalid
and/or unenforceable. The plaintiff led no evidence whatsoever on
this aspect.
[17]
The Third Defendant further testified that had he realised or known
that the documents contained a Deed of Suretyship he would
not have
signed in the manner which he did at page 52.
Discussion
Section 6 of the
General Law Act No. 50 of 1956
[18] The deed of
suretyship does not record the name of the principal debtor but
simply records:
‘
[INSERT
DETAILS].
(“the Lessee”)’
Section
6 of the General Law Amendment Act
[14]
requires that the terms of the contract of suretyship must be
embodied in a written document, which terms include the identity
of
the creditor, the surety, and the principal debtor, and the nature
and amount of the principal debt.
[15]
If
a suretyship does not identify the surety it does not prima facie
comply with the statute.
[16]
[19]
The Third Defendant argued that no evidence was led by the Plaintiff
to identify the principal debtor or to rectify the Deed
of Suretyship
by identifying the principal debtor in circumstances where extrinsic
evidence would be admissible to establish such
identity. He
referred to the decision in
Fourlamel
(Pty) Limited v Maddison
[17]
where the Court found the Deed of Suretyship to be invalid as it did
not contain the name of the principal debtor, and it was concluded
that the plaintiff was estopped from relying on extrinsic evidence in
order to cure such a material defect. The facts in
that matter
however were that it was not apparent
ex
facie
the
Deed of Suretyship that the deed of lease sought to be incorporated
was the document giving rise to the indebtedness secured
by the
suretyship. That is not the case in this matter. In
Industrial
Development Corporation of SA (Pty) Ltd
v
Silver
[18]
the
Supreme Court of Appeal held that the terms of a suretyship may be
supplemented to identify the principal debtor by incorporation
by
reference.
[19]
That
principle would apply in the present dispute. The alleged suretyship
is an annexure to the lease agreement which in its terms
describes
inter alia the identity of the lessee. There can therefore be
no uncertainty when reading the lease agreement with
its annexures in
their entirety as to which lease agreement and hence which principal
debtor annexure 5 intended to refer to.
[20] However, there was
no evidence that the Deed of suretyship reflected the name of the
Third Defendant at the time the documents
were signed by the Third
Defendant. There was also no evidence that he had authorised anyone
to insert his name in the suretyship
document after his signature was
appended to the documents. That is fatal to the Plaintiff’s
claim.
[21]
The documents must further be read as a whole, and not only those
parts which benefit the Plaintiff. Although the Third Defendant
did
not read the document, to the extent that he might have signed the
suretyship, he would by fiction of law be deemed to be bound
to the
terms thereof as if he had read same.
[20]
All
the terms of the lease incorporated by reference and establishing
that the principal debtor is the First Defendant as ‘lessee’,
must apply. As
A
J Kerr states, ‘It is a sound principle of law that a man, when
he signs a contract, is taken to be bound by the ordinary
meaning and
effect of the words which appear over his signature.’
[21]
In this matter the heading to the lease documents did not
indicate that it contained a suretyship in respect of those who
may
append their signatures thereto. In
Brink
v Humphries & Jewell
[22]
the Court held that it was misleading if the prominent heading of the
document in question did not state that it was also a personal
suretyship. The Third Defendant’s version must prevail in this
regard.
[22]
The terms of the lease documents delivered by the Plaintiff, did not
specify that any named sureties had to commit themselves,
and
specifically did not expressly require the Third Defendant to commit
himself as surety. He signed the documents at a time when
his name
was not inserted as surety. There was no evidence to contradict that.
Whatever cynical view one might take of his evidence
that he had not
read the terms of the lease, the terms of the lease only required
that security be provided in the form of cash
or a payment guarantee,
which had to be in the form of Annexure 4. The security amount
expressly required was indeed provided in
the form of Annexure 4 to
the lease agreement.
[23] Clause 9.6 of the
lease went further to provide:
‘
9.6 Furthermore
and where the Lessor so requires, the shareholders or members of the
Lessee (as the case may be) as listed in Annexure
“5”
(deed of suretyship) shall, on written request by the Lessor, execute
the deed of suretyship as further security
for the due and punctual
payment by the Lessee of all moneys which are due and owing by the
Lessee to the Lessor from time to time
in terms hereof.’
No
‘written request by the Lessor’ to the Third Respondent
to execute a deed of suretyship in the form of Annexure 5
to the
lease as further security was produced.
[24]
Finally, it was submitted that the Third Defendant was at pains to
point out how many lease agreements he had concluded with
the
Plaintiff and therefore that he would be no stranger to the
requirement of a personal surety, or the standard terms contained
therein.
[23]
The difficulty
with that submission is firstly that it seeks to rely on similar fact
evidence which is generally inadmissible because
it requires the
investigation of collateral issues in respect of each such prior
instance. There was no evidence on that. Indeed,
the reference to the
CNA lease, being the only other lease produced demonstrated that
where a suretyship was required from the
Third Defendant he was
required to sign the suretyship where his signature was clearly
indicated to be as ‘surety’.
[25]
The facts in the present case are not similar to those in
Tesoriero
v Bhyjo Investments Share Block (Pty) Ltd
[24]
where the deed of suretyship was also an annexure to a lease
agreement, was headed as such and the signatory did not read but was
prepared to sign the lease and the deed of suretyship without
requiring an explanation.
[25]
In casu the uncontroverted evidence of the Third Defendant was that
the documents which he signed, although he had not read same,
did not
contain any manuscript insertions and hence his name as surety when
he signed it.
Conclusion
[26]
The Plaintiff’s claim based on the alleged suretyship therefore
cannot succeed.
[27]
The following order is accordingly granted:
1. The Plaintiff’s
claim against the Third Defendant is dismissed with costs.
2. The application for
default judgment against the Second and Fourth Defendants is
adjourned sine die with no order as to costs.
_______________________
APPEARANCES
For
Plaintiff: MS J F NICHOLSON
Instructed
by: Garlicke & Bousfield Inc.
Tel.:
031 570 5572
Ref.:
Phila Magwaza
For
Defendant: Mrs Z PLOOS VAN AMSTEL
Instructed
by: Barkers Attorneys
Tel.:
031 580 7400
Ref.:
T Chiocchetti/fk//MAS13/0001
[1]
The
Plaintiff’s claims extend to: (a) arrear minimum rental,
turnover rental, water and electricity charges, utilities and
fines
and other charges allegedly due in terms of the lease agreement; (b)
Interest thereon at 3% above the prime rate of Nedbank
Limited in
terms of the lease agreement; (c) Confirmation of the cancellation of
the lease, the Plaintiff’s attorneys having
cancelled the lease
due to the First Defendant’s default in payment on 14 August
2014; (d) Holding over damages from the
date of cancellation of the
lease until the First Defendant vacates the property; (e) Interest on
such damages also at 3% above
Nedbank’s prime rate; and (f)
Costs on the attorney and client scale.
[2]
The
First Defendant has been placed under business rescue. In terms of
s
133
of the
Companies Act 71 of 2008
, the Plaintiff was accordingly
precluded from proceeding against it. That is however no bar to
proceeding against the sureties.
Clause 11 and 11.1 of the
suretyship sought to be enforced expressly provides that ‘
the
Lessor shall without in any way affecting its rights against us or
diminishing or otherwise affecting our obligations to it,
be
entitled to … give time to or compound to make any other
arrangements with the Lessee …’ In
Cape
Produce Co (PE) (Pty) Ltd v Dal Maso NNO
2002
(3) SA 752
(SCA) paras 11 – 12 at 762 – 763 the
Supreme Court of Appeal held that a similar clause in the suretyship
permitted
the creditor to give time to the principal debtor and to
release it from liability, without prejudice to its rights to seek
repayment
from the sureties. In
New
Port Finance Co (Pty) Ltd v Nedbank Ltd
2016 (5) SA 503
(SCA) para 10, the Supreme Court of Appeal
considered the liability of sureties where the debt with the
principal debtor was
compromised in the form of a business rescue
plan and held that these provisions in the suretyship were drafted
to cater for
this every eventuality and were a bar to a claim by a
surety, that their liability was equally compromised.
[3]
Di
Giulio v First National Bank of SA Ltd
2002
(6) SA 281
(C) para 26.
[4]
Millman
and another NNO v Masterbond Participation Bond Trust Managers (Pty)
Ltd (under curatorship) and others
1997
(1) SA 113 (C).
[5]
It
was
annexure
5 to the lease.
[6]
The
Third Defendant was a non-executive director and the Second and
Fourth Defendants were executive directors. The Third Defendant
has
subsequently resigned as a director of the First Defendant. His
resignation is however irrelevant to this judgment.
[7]
The
evidence by Mrs Winnie Horn of the Plaintiff was that lease
agreements are usually accompanied by a covering letter which
calls
upon the tenant to sign and initial the lease agreement and to fill
out and sign the deed of suretyship. No such covering
letter was
discovered by the Plaintiff and Horn testified that she would have
to search through the documents at the office to
see whether such a
letter had in fact been sent. She had not done this exercise at the
time she gave evidence.
[8]
An
extract of the minutes of the Board of the First Defendant signed by
the Second, Third and Fourth Defendants purporting to
reflect a
decision which on the uncontroverted evidence of the Third Defendant
was obtained by round robin resolution, dated
10 July 2009 is
annexed to the cover page providing for this annexure.
[9]
The
evidence given by Mahesh Govind on behalf of the Plaintiff was that
this lease agreement and the suretyship are standard documents
which
are prepared by the Plaintiff’s legal department in
conjunction with the retail department. This standard lease is
concluded with all retail outlets in the ACSA airports throughout
the country. The details of the individual tenants, rental
and the
terms of the lease are inserted into the template which is then
delivered to the tenant for consideration and signature.
The details
of the sureties are not completed by the Plaintiff when the lease is
delivered to the proposed tenant as the Plaintiff
is unaware who the
individual sureties will be. Those details are to be inserted by the
tenant or the proposed sureties.
[10]
The
Third Defendant testified that he has signed many lease agreements
with the Plaintiff in the past as he is involved in a number
of
businesses which operate from various airports throughout the
country. He could not recall how many leases he had signed but
estimated that there were over ten such agreements, as leases must
be periodically renewed. He did not read any of these lease
agreements before he signed and initialled them. When it was put to
him that if he did not read them, there was a possibility
that he
may have signed a suretyship he conceded that he may have. He
maintained however, that he would not have signed a suretyship
and
never had.
[11]
Nothing
seems to turn on that as the Third Defendant in his plea admitted
that he signed the annexure containing the suretyship
document, and
simply denied that it had been completed in manuscript at that stage
to reflect any names or any chosen
domicilia
citandi et executandi
,
which now appear for the Second, Third and Fourth Defendants in
manuscript.
[12]
This
position must be contrasted to an earlier suretyship which the Third
Defendant admitted he had signed on 23 April 2007 in
favour of the
Plaintiff in respect of any indebtedness of Airport Retail
Concession (Pty) Ltd t/a CAN (Duty Free) at O.R. Tambo
International
Airport. That suretyship was signed by the Third Defendant and above
his signature the printed form indicted that
he was signing as
‘Surety’.
[13]
Neither
Mr Govind nor Mrs Horn could independently recollect when exactly
they signed the agreement of lease. Mr Govind recalled
that he
signed it in 2009 and Mrs Horn testified that it would have been
signed soon after it was received, but the letter dated
in January
2010 suggested that the lease agreement had only been sent to Mr
Govind to sign in January 2010.
[14]
Act 50 of 1956.
[15]
Sapirstein
and others v Anglo African Shipping Co (SA) Ltd
[1978] 4 All SA 474; 1978 (4) SA 1 (A).
[16]
Van
Wyk v Rottcher’s Saw Mills (Pty) Ltd
1948
(1) SA 983
(A) at 989. See generally Forsyth and Pretorius
Caney’s
The Law of Suretyship
6 ed at 75.
[17]
1977 (1) SA 333
(A).
[18]
2003
(1) SA 365 (SCA).
[19]
Silver
n18 para 9. See also
Trust
Bank of Africa Ltd v Cotton
1976
(4) SA 325
(N) at 329E-H, and
F
J Mitrie (Pty) Ltd v Madgwick and another
1979
(1) SA 232
(D) at 235B-E.
[20]
The maxim
caveat
subscriptor
- a person who signs must be careful remains valid.
[21]
AJ
Kerr
The
Principles of the Law of Contract
(2002) 6 ed at 102.
[22]
2005 (2) SA 419 (SCA).
[23]
Langeveld
n28.
[24]
2000 (1) SA 167 (W).
[25]
Tesoriero
n31 see the description of the facts at 176C-G.