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[2017] ZALMPPHC 18
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David NO and Others v Phakathi Properties (Pty) Ltd (1323/2016) [2017] ZALMPPHC 18 (11 August 2017)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
LIMPOPO
DIVISION, POLOKWANE
CASE
NO: 1323/2016
Reportable
Not
of interest to other judges
Revised
8/8/2017
In
the matter between:
BUTTON
NEIL DAVID N.O & THREE
OTHERS
PLAINTIFF
AND
PHAKATHI
PROPERTIES (PTY)
LTD
RESPONDENT
JUDGMENT
MULLER
J:
[1] The applicants, who
are the duly appointed liquidators of Leiru Commodities CC (in
liquidation), seek the recovery of an amount
of R 3 214 190. 64
together with interest and costs. They also seek an order that a
fixed property described as:
“
Portion
109 (a Portion of Portion 3) of the Farm Hamawasha 557, Registration
Division Limpopo Province and held under Deed of Title
T088856/2010”
(hereinafter
called “the property”) be declared specifically
executable.
[2]
The claim arose from a settlement agreement which was entered into on
10 June 2015 between Leiru Commodities CC (in liquidation),
as the
creditor duly presented by the liquidators) and Phakathi Milling
(Pty) Ltd, the debtor, duly represented by Pieter Andries
Gouws
(snr). The debtor in terms of the settlement agreement, acknowledged
that it was indebted to the creditor in the amount of
R3 211
997.03, consisting of the capital amount of R2 871 437.14 together
with interest of R540 559.89 in respect of
goods delivered to
the debtor by the creditor.
[3]
The settlement agreement makes provision for the indebtedness to be
satisfied by payment of the debt in several instalments.
Clause 4.1
contains an acceleration clause which provides that the debt becomes
immediately due and payable if the debtor defaults
in respect of any
of its obligations in terms of the settlement agreement. There is no
dispute that the debtor is in default of
its obligations in terms of
the settlement agreement.
[4]
I pause for a moment to observe that the debtor was first known as
Central High Trading CC which conducted business under the
name
Phakathi Milling. Central High Trading CC changed its name in
2012 to Phakathi Milling. The close corporation was later
converted
to a company with the name of Phakathi Milling (Pty) Ltd.
Phakathi Milling (Pty) Ltd is currently under business
rescue.
[1]
The applicants lodged an unsecured claim in the business rescue
proceedings based on the acknowledgment of debt embodied in the
settlement agreement.
[5]
The respondent, which was known as Smokey Mountain Trading 314 (Pty)
Ltd, changed its name to Phakathi Properties (Pty) Ltd
on 31 October
2011. It purchased the property on 15 December 2011 and caused a
mortgage bond to be registered over the property
on 10 February 2012
in favour of the fourth applicant, as the creditor of Phakathi
Milling (Pty) Ltd.
[2]
[6] The relevant
provisions of the mortgage bond read:
“
En
die genoemde Komparant verklaar dat haar genoemde Prinipaal, aan en
ten behoewe van
LEIRU COMMODITIES
TRADING CLOSE CORPORATION
Registrasienommer:
1999/032109/23
(hierinlater genoem
“die Verbandhouer”) waarlik en wettiglik verskuldig is,
en gebonde gehou is vir die som van R 3
000 000,00 (DRIE MILJOEN
RAND)
(hierinlater genoem
“die Hoofsom”); wat voortspruit en ontstaan uit lewering
van kommoditeite aan Central High Trading,
Regsitrasienommer:
2002/101780/23 handeldrywende as Phakathi Milling an betaalbaar in
geld.
Derhalwe doen sy, die
komparant, namens haar voornoemde prinsipaal hiermee afstand van alle
voordele wat voortspruit uit die wetlike
eksepsie/s non causa debiti,
errore calculi, hersiening van van rekening, geen waarde ontvang met
die krag en betekenis waarvan
sy verklaar dat haar prinsipaal ten
volle bekend is; en alle ander eksepsies wat geneem mag word teen
betaling van die Hoofsom,
en beloof en onderneem die komparant
hiermee, namens haar voornoemde prinsipaal om die Verbandhouer of
ander wettige houer/s van
hierdie verband, sy order, efgename,
administrateurs of regsverkrygendes te betaal of te laat betaal die
Hoofsom, welke betaling
hy toegelaat sal word en ook verplig sal wees
om te maak as volg:
Die totale bedrag van
R3 000 000,00 (DRIE MILJOEN RAND) 18 (AGTIEN) maande vanaf
datum van registrasie van hierdie verband
oor gemelde eiendom ten
gunste van die verbandhouer.
EN as sekuriteit vir
die behoorlike en stiptelike betaling van die Hoofsom of enige deel
daarvan, en alle ander geldbedrae wat te
eniger tyd aan die
Verbandhouer/s of ander wettige houer/s van hierdie verband
verskuldig en betaalbaar mag word, uit enige oorsaak
hoe ookal in
terme hiervan, en vir die behoorlike nakoming deur haar prinsipaal
van almal en ieder van die terme en voorwaardes
van hierdie verband,
bind die komparament hiermee onder EERSTE verband naamlik:
…
.
VII
Indien haar prinsipaal in gebreke bly of versuim om enige som of
somme verskuldig en betaalbaar onder hierdie verband stiptlik
te
betaal op die respektiewe vervaldae, of om enige van die ander
voorwaardes en stipulasies van hierdie verband na te kom sal
die
Hoofsom en alle ander bedrae hieronder verskuldig onmiddelik
verskuldig en betaalbaar word sonder enige kennisgewing
(nieteenstaande
enige teenstrydige voorwaarde hierin vervat).”
[3]
[7]
It is the case of applicants that the respondent bound itself, in
terms of the provisions of the mortgage bond, as surety and
co-principal debtor in respect of the debt due to the fourth
applicant by Phakathi Milling (Pty) Ltd, as reflected in the
settlement
agreement.
[8]
Counsel for the respondent contended, on the one hand, that the
applicants have failed to prove that the registration of the
mortgage
bond was authorised by the respondent or that the respondent entered
into a suretyship agreement. And on the other, it
asserted that the
applicants, as a creditor, had taken part in the development of a
business rescue plan in respect of Phakathi
Milling (Pty) (Ltd) after
the commencement of business rescue proceedings and proved a claim
based on the acknowledgment of debt
per the settlement agreement.
That fact, so the argument went, precluded the applicants from
recovering the principal debt from
the respondent.
[9]
I indicated to both counsel during argument that I have reservations
whether the mortgage bond embodies a suretyship and afforded
counsel
the opportunity to file supplementary heads of argument. I am
indebted to both counsel who availed themselves of the opportunity
to
do so.
[10]
I will deal first with the principal debt and then with the wording
adopted in the mortgage bond. The purpose of the settlement
agreement
was to consolidate and acknowledge the original indebtedness of the
debtor (Phakathi Milling (Pty) Ltd) towards the creditor
(Leiru
Commodities CC (in liquidation)). The parties, furthermore, agreed
that the acknowledged debt which was due and owing to
the fourth
respondent for goods sold and delivered, will be paid in specific
instalments. The acknowledgment of debt contains an
express
undertaking to pay. It created a new obligation to pay the original
indebtedness by means of instalments. In
Adams
v SA Motor Industry Employers Association
[4]
it
was held that:
“
There
can be little doubt that a new obligation arose in accordance with
the intention of the parties. And it is equally plain that
they
intended the rights under the deed of sale (the settlement agreement)
to remain alive and thus the original obligation to
pay the purchase
price. Once it is accepted that there is no legal obstacle to two
obligations co-existing in respect of the same
performance or common
debt, it follows that in this respect also effect must be given to
the intention of the parties.”
[5]
[10]
A proper construction of the mortgage bond is to be undertaken which
must be interpreted in accordance with the established
principles of
interpretation.
[6]
The
respondent, who is not a party to the settlement agreement, undertook
the obligation in the mortgage bond to pay the debt of
R3 000 000,
00 in respect of commodities delivered to the debtor Phakathi Milling
(Pty) Ltd by the creditor. There is
little doubt that the debt for
commodities delivered has reference to the principal debt referred to
in the settlement agreement.
The obligation embodied in the mortgage
bond is not in the nature of a suretyship. I say this for the
following reason:
“
the
undertaking of the surety is accessory to the main contract, the
liability under which he does not disturb, but it is an undertaking
that the obligation of the principal debtor will be discharged, and,
if not that the creditor will be indemnified.”
[7]
[11]
The mortgage bond does not say, nor is it suggested, that the
respondent will perform the obligation of Phakathi Milling (Pty)
Ltd
towards the creditor if it fails to pay its indebtedness towards the
creditor. The accessory undertaking to discharge the debt
if the
debtors fails to do so, or failing that, to indemnify the creditor,
is a core ingredient for a valid suretyship.
[8]
It is accessory in the sense that there must be in existence a
principal obligation between the debtor and creditor. That meaning
cannot simply be implied from the words used in the mortgage bond.
[9]
The respondent acknowledged that it is indebted to the creditor in
the amount of R3 000 000,00 and undertook to pay the
stipulated amount within eighteen months of the registration of the
bond.
[12]
In my view the respondent took it upon itself, as principal debtor,
an obligation to pay the debt of Phakathi Milling (Pty)
Ltd to the
creditor. The respondent acknowledged its indebteness to the creditor
in the amount of R3 000 000,00 (in respect
of commodities
delivered to Phakathi Milling (Pty) Ltd), and undertook the
obligation to satisfy the indebtedness within
eighteen months after
registration of the bond (clause VII). The amount became due and
payable on 10 February 2012.
[11]
The respondent is, therefore, a principal debtor upon the document in
that it promised to pay the amount of R3000 000.00 within
eighteen
months of the registration of the bond.
[12]
In
Schoeman
v Moller
[10]
the debtor, Moller Snr, undertook certain obligations. The defendant
interposed and bound himself as surety for the fulfilment
of all the
terms and conditions of the agreement between Moller Snr and the
creditor. He, in addition, undertook to furnish the
creditor with
additional security for his claim against Moller Snr in the form of a
second collateral mortgage bond over certain
property and cession of
certain deeds of sale. He, however, in an additional yet different
written undertaking undertook to pay
the creditor in reduction of the
second mortgage bond for £2000 an amount of £50 per month
which shall be applied firstly
towards payment of the interest due
and then in reduction of any capital sum of the bond for £2000
to be passed by Moller
Snr.
[11]
It was held that the latter undertaking is a solidary undertaking
(
pactum
constitutum debiti alieni
)
which “
would
constitute a covenant by defendant to pay a sum of money to plaintiff
on certain days with an obligation on plaintiff to apply
the
instalments so received in a particular manner. It differs from
suretyship, stricto sensu in that the liability to pay does
not
depend upon any prior default on the part of the principal
debtor……and inasmuch as defendant’s obligation
to
pay is operative when, as yet, no immediate right of recourse against
Moller Snr is available, defendant’s undertaking
may be said to
be more onerous than that Moller Snr. On the other hand the
undertaking necessarily falls to be described as an
intercessio
because the defendant took upon himself the obligation to liquidate
in part a debt which originally was not due or
payable by him but
which was exclusively a debt of his father, Moller Snr.
”
[12]
[13]
The undertaking by the respondent in the mortgage bond to pay is an
act of
intercessio
discussed in
Schoeman
v Moller supra.
[13]
A
pactum
constitutum debiti alieni
in the Roman law is an accessory pact in terms whereof the
obligation of another is undertaken, but the principal debtor,
notwithstanding, continues to be obligated.
[14]
The court accepted Pothier’s exposition that a
pactum
constitutum
is not simply accessory to the principal obligation, like a
surertyship, but that it is an obligation which exists by virtue of
its own merits and sometimes even continues after the principal
obligation has ceased to exist. A payment of what is owed either
under the principal obligation or under the
pactum
extinguishes the other also, and that this applies not only in
respect of an actual payment but also in respect of set off, novation
and even waiver.
[15]
[14]
The applicants are entitled to recover the indebtedness of
R3 000 000.00 in terms of the obligation undertaken by
the
respondent as principal debtor in terms of the mortgage bond, if the
debt is due and payable. “
If,
therefore, the principal debt has not been terminated by payment or
satisfaction of the creditor in the sense that the original
debt has
ceased to subsist, then it must follow that the accessory pactum has
not been discharged.”
[16]
[15]
The undertaking by the respondent, as indicated, is accessory in the
sense that there has to be in existence, a principal obligation
due
to the creditor by the debtor. Counsel for the respondent argued with
reliance on
Tuning
Fork (Pty) Ltd t/a Balanced Audio v Greeff and Another
[17]
and
New
Port Finance Company (Pty) Ltd v Nedbank Ltd
[18]
that the debt which is reflected in the mortgage bond emanated from
the settlement agreement and because the applicants lodged
a
unsecured claim in the business rescue proceedings based on the
settlement agreement, any compromise in terms of the adopted
rescue
plan would impact on the indebtedness of the respondent.
[16]
Reliance on those cases is misplaced. Those cases are
distinguishable. Firstly, the respondent, in my judgment, is not a
surety.
Secondly, there is no evidence, on the papers, that the
principal debt has been satisfied or compromised in terms of the
rescue
plan or has ceased to exist. The debt of the debtor is still
unsatisfied. The mere acceptance of the business plan did not
satisfy or extinguish the debt. I pause here to add that the
respondent filed a progress report on affidavit by the business
rescue
practitioner.
[19]
There
is certainly no evidence to be gleaned from that report that the
indebtedness of the debtor has been extinguished by payment
or even
that the debt has been compromised in terms of the rescue plan.
[17]
Section 154 of the Companies Act
[20]
finds no application. I am of the view that section 154(1) deals with
the enforceability of claims against a company under business
rescue
and not with the existence of a debt.
[21]
The applicants, in any event, are not seeking to enforce a claim
against Phakathi Milling (Pty) Ltd nor do they seek a judgment
against the company under business rescue. They seek a judgment
against the respondent in terms of an undertaking embodied in the
mortgage bond.
[18]
I now turn to determine the important question whether the mortgage
bond was properly authorised and duly registered. Counsel
for the
respondent reiterated in his supplementary heads of argument that the
respondent is not bound by the mortgage bond.
[19]
The respondent averred in the opposing affidavit that registration of
the mortgage bond (annexure FA 21) attached to
the founding
affidavit had not been authorised and that the respondent is not a
surety and co-principal debtor as alleged. The
denial is based on the
purported failure by the applicants to produce a deed of suretyship.
Consequently, the validity of the mortgage
bond was put in
issue. It is contended that the property secured in terms of the
mortgage bond is earmarked to be sold and that
the proceeds of the
sale will be utilized in the implementation of the business plan.
[20]
The applicants successfully applied to supplement their papers. In a
supplementary affidavit the applicants explained that
a copy of the
relevant power of attorney signed by the deponent to the opposing
affidavit was obtained.
[22]
The conveyancer responsible for the drafting and signing of the power
of attorney confirmed that the registration of the mortgage
bond
(annexure FA21) was duly authorised in terms of the power of attorney
given to her by the Respondent.
[21] The draft mortgage
bond (of which page 5, 6 and 7 are missing) is attached to the power
of attorney (annexure RA2) and are
attached to the replying
affidavit. The draft reads:
“
(hierinlater
genoem “die Verbandhouer”) waarlik en wetting verskuldig
is, en gebonde gehou is vir die som van R3 000,000,
00
(hiereinlater genoem “die Hoofsom”) wat voortspruit en
onstaan uit lewering van kommoditeite aan Smokey Mountain
Trading 314
(Edms) Bpk”
The
registered mortgage bond reads:
(hierinlater
genoem “die Verbandhouer”) waarlik en wettig verskuldig
is, en gebonde gehou is vir die som van R 3000
000,00 (DRIE MILJOEN
RAND) hierinlater genoem “die Hoofsom”; wat voortspruit
en ontstaan uit lewering van kommoditeite
aan Central High Trading,
Regsitrasienommer: 2002/101780/23 handeldrywende as Phakathi Milling
en betaalbaar in geld.”
[22]
It is explained that the power of attorney and the draft mortgage
bond documents were forwarded to the respondent for signature
by the
conveyancer who handed the documents in at the Deeds office for the
registration after she received them back from the respondent.
However, the deponent to the opposing affidavit (P.A. Gouws) phoned
the conveyancer prior to registration of the bond and advised
her
that the terms of the bond needed to be amended. The relevant page
was removed from the draft bond. It was amended and the
amended page
was inserted in its place. The “amended” bond (annexure
FA21) was duly registered in accordance with the
power of attorney.
[23] The applicant also
attached to the supplementary affidavit the draft financial
statements of Phakathi Milling (Pty) Ltd submitted
by email from the
deponent dated 14 March 2014. At page 11 the following note
appears under the heading:
“
Verbande
en Lenings
Lening: Leiru
Commodities R2 871 437, 14.
Die
lening aan Leiru Commodities is terugbetaalbaar in maandelikse
paaiement van R150, 000, 00 teen heersende verbandkoerse. Die
lening
is verseker deur ‘n eerste verband oor die vaste eiendom van
Phakathi Properties (Pty) Ltd.”
[24]
On 30 July 2014 the Respondent in an email addressed to Stowell
attorneys referred to the mortgage over the property of Phakathi
Properties (Pty) Ltd which has been put up as security in favour of
Leiru Commodities CC and in which respondent requested a meeting
with
the attorneys to discuss the way forward.
[25]
The indebtedness of the debtor to the creditor was also confirmed in
the amount of R3 778 839, 71 in an email received by the
attorneys of
the applicants from the bookkeepers of the respondent.
[26]
These factual allegations were met by bare denials from the
Respondent. The
dictum
in
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[23]
is applicable with regard to the bare denials on the papers. The
emails and the financial statements are clear evidence that the
Respondent was well aware of the registration, purpose and the
contents of the bond. A real and bona fide dispute of fact can only
arise if the party who purports to raise the dispute has seriously
and unambiguously addressed the fact which is disputed.
[24]
[27]
Counsel who appeared on behalf of the respondent when asked during
argument whether the bare denials are sufficient to establish
a
bona
fide
dispute on the papers in the light
of those documents merely stated that the allegations are denied.
[28]
In my judgment the reason for the discrepancy with regard to the
difference in the wording between annexure FA 21 and annexure
RA 2 is
fully explained by the applicants. There is no suggestion by the
respondent that the registration of the bond in respect
of the debt
of Smokey Mountain 314 (Pty) Ltd was indeed authorised, but that the
mortgage bond in respect of the indebtedness of
Central High Trading
CC was not. Nor is it said that no authorisation was given at all to
the conveyancer to register any of them
at the time. It is therefore
strange that reference is made to the registered bond in the
documents attached to the papers without
demur, if that was the case.
These facts are within the knowledge of the deponent, Gouws. He is
eminently in the position to provide
an answer instead of a bare
denial.
[29]
It seems to me rather that the denial put up by the respondent is an
attempt to capitalize on an error in the documentation
attached to
the papers, of which the respondent is well aware that the documents
had been duly rectified as explained. It is evident
that the bare
denials in the face of the emails and financial statements cannot be
sustained nor can they be taken seriously. To
my mind these documents
clearly show that the respondent was well aware of the correct
position. I therefore reject as false, the
denial that registration
of the mortgage bond in its current form was not authorized by the
respondent.
[30]
The question whether the mortgage bond is a liquid document
[25]
embodying an unconditional promise to pay a specific amount has been
raised in the heads of argument of the respondent on the basis
that
extrinsic evidence was needed to prove the amount of the principal
debt referred to in the settlement agreement. As I have
mentioned,
that is not what is being sought by the applicants.
[31] The applicants moved
for judgment on the basis of the undertaking in the mortgage bond for
the amount of R3 000 000. 00
together with interest from 1
November 2015.
In
the result there is judgment for the applicants for:
(1) The amount of R3 000
000.00;
(2) Interest
a tempore
morae
on the abovementioned amount at a rate of 9,5% per
annum from 1 November 2015;
(3) The property known
as: Portion 109 (a portion of portion 3) of the farm Hamawasha 557
Registration Division Limpopo Province
held under deed of transfer
T088856/2010 is declared specifically executable.
(4) The costs of the
application.
____________________
MULLER
J
JUDGE
OF THE HIGH COURT POLOKWANE
APPEARANCES
For
Applicants: Adv W B Pye
For
Respondent: Adv L K Van der Merwe
Attorneys
for Applicants: Pratt Luyt & De Lange Attorneys
Attorneys
for Respondent: Smith & Maree Attorneys
Date
to be heard:27 June 2017
Date
of judgment:11 August 2017
[1]
Business rescue proceedings commenced on 26 October 2016. The
business rescue plan was finally adopted on 12 August 2016.
[2]
The
property was transferred into the name of the respondent on 15
December 2011under its previous name despite the name change.
The
mortgage bond is also registered in the name of Smokey Mountain
Trading 314 (Pty) Ltd.
[3]
The mortgage bond comprises of the three parts. See
Zietsman
v Allied Building Society
1989 (3) SA 166
(O) at 168E-F;
Thienhaus
V Metje & Ziegler
Ltd
1965 (3) SA 25
(AD) at 31D.
[4]
1981 (3) SA 1189 (A).
[5]
At 1199B-C.
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) par 18;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) par 12.
[7]
Corrans
and Another v Transvaal Government and Coull’s Trustee 1
909
TS 605
at 612;
Trust
Bank of Africa v Frysch
1977 (3) SA 562
(A) at 584F;
Saperstein
and Others v Anglo Shipping Co (SA) Ltd
1978 (4) SA 1
(A) at 11A
;
Nedbank Ltd v Van Zyl
[1990] ZASCA 12
;
1990 (2) SA 469
(A) at 473I;
Hutchingson
v Hylton Holdings and Another
1993
(2) SA 405
(T) at 410G-I.
[8]
Union
Government v van der Merwe
1921
TPD 318
at 321; Forsyth C.F. & Pretorius J.T.
Caney’s
The Law of Suretyship
6
th
Ed Juta Claremont (2010) at 27-30.
[9]
There is no mention made in the mortgage bond that respondent is a
surety nor is there any reference to the word “borg”
or
“skadeloosstel”. See also Nel H.S.
Jones
Conveyancing in South Africa
4
th
Ed Juta Claremont (2010) 461.
[10]
1951
(1) SA 456 (OFS).
[11]
At 466C-G.
[12]
At
466H-467B.
[13]
At 470E-472G.
[14]
At 470G-H.
[15]
At
471H.
[16]
At 472A.
[17]
2014 (4) SA 521 (WCC).
[18]
2016 (5) SA 503
(SCA). At par 14 doubt is expressed as to the
correctness of the conclusions reached in
Tuning
Fork (Pty) Ltd t/a Balanced Audio v Greeff and Another
supra
.
[19]
The progress report was filed with the supplementary heads of
argument.
[20]
Act 71 0f 2008.
[21]
Newport
Finance Company (Pty) Ltd v Nedbank Ltd supra
par 14.
[22]
Confirmatory affidavits were filed by the conveyancer and the
attorney acting on behalf of the applicants.
[23]
2008
(3) SA 371 (SCA).
[24]
At
para 12-13.
[25]
Edgcombe
v Maunsell
1911
CPD 521
at 524;
Inglestone
v Pereira
1939 WLD at 64-5;
Union
Share Agency
Investment
Ltd v Spain
1928 AD 74
at 79;
Rich
and Others v Lagerwey
1974 (4) SA 748
(A) at 754H.