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[2016] ZAKZPHC 2
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Firstrand Bank Limited v Macroton CC and Others (5541/2014) [2016] ZAKZPHC 2 (5 January 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU NATAL-
DIVISION, PIETERMARITZBURG
Case No: 5541/2014
DATE: 05 JANUARY 2016
In the matter between:
Firstrand Bank
Limited
............................................................................................................
Applicant
And
Macroton
CC
.................................................................................................................
First
Respondent
Jacobus Johannes Andreas van
Wyk
......................................................................
Second
Respondent
Martha van
Wyk
.........................................................................................................
Third
Respondent
Judgment
Lopes J
[1] The applicant, Firstrand Bank
Limited (‘the bank’) seeks judgment against the second
and third respondents for payments
of the sum of R864 493,84 and R627
398,09 together with interest on those amounts and costs.
[2] The following facts are common
cause between the parties :
(a) on the 7th February 2013 the bank
concluded three agreements with the first respondent. They were :
(i) a Short-term Direct Working Capital
Facility in the sum of R900 000, repayable on demand, with the terms
and conditions contained
in a Facility Letter.
I shall refer to this facility as ‘the
overdraft facility’;
(ii) a Long-term Direct Term Loan of
R890 000 repayable over a twelve month term, which was regulated by a
Loan Agreement as read
with the Facility Letter;
(iii) an Asset Finance Wesbank Facility
in the sum of R4.6M, subject to Wesbank documents and agreements.
This agreement forms
no part of this application.
(b) on the 23rd January 2003 the second
and third respondents concluded suretyship agreements with the bank
in terms of which the
second and third respondents bound themselves
as sureties for, and co-principal debtors with, the first respondent
for the due
payment by the first respondent of all monies which the
bank would from time to time be owed by the first respondent.
(c) The first respondent defaulted on
the Long-Term Direct Term loan and overdrew on the overdraft
facility, and on the 18th December
2013 the bank cancelled the
Long-term Direct Term Loan and terminated the overdraft facility.
(d)On the 11th November 2015 the first
respondent was placed into provisional liquidation.
[3] Despite a number of denials and
defences set up to defeat the main application, Mr Roelofse, who
appeared for the second and
third respondents, conceded at the
hearing of this application that on the agreements as they are set
out, the bank was entitled
to obtain judgment against the first
respondent on the 18th December of 2013 when the notices cancelling
the Long-term Direct Term
Loan and calling up the overdraft facility
were sent out by the bank.
[4] Mr Roelofse submitted that the
bank’s application fell to be determined on the basis of the
counter-claim which was brought
by the first, second and third
respondents. The relief sought in the counter-claim was for an order
:
(a) declaring the Facility Letter to be
invalid and unenforceable;
(b) declaring Clauses 2.4.a, 2.4.b,
4.2.1 and 4.2.7 of Annexure ‘A’ - the General Terms and
Conditions of the Facility
Agreement, invalid and unenforceable;
(c) alternatively, in the event that
the clauses referred to above are valid, the second and third
respondents seek an order declaring
that the facility and loan
agreements contained an implied term that the bank had a duty to act
reasonably in enforcing the terms
set out above, and that the bank
was in breach of that implied term;
(d) that the common law be extended to
include that reasonable notice to the respondents, where a bank
intends to take a decision
in terms of those clauses, is a
requirement prior to the enforcement of them by the bank;
(e) declaring that the notices directed
by the bank to the first, second and third applicants on the 18th
December 2013 constitute
a repudiation of both the agreements
concluded on the 7th February 2013;
(f) an order directing the bank to
reinstate the facilities under both the short and long-term loans;
(g) directing the bank to pay the costs
of the counter-application on an attorney and client scale.
[5] The principal submission of Mr
Roelofse was that the bank determined its own prestation by claiming
the right in the contracts
to call up the overdraft facilities on
demand.
[6] With regard to the clauses which
the second and third respondents wish to impugn :
(a) Clause 12 of the Facility Letter
gives the bank the right to review the overdraft facilities after
five months, including the
right to reduce the facility or terminate
it.
(b) Clause 2.4.a of the General Terms
and Conditions applicable to the facility provide that the facility
advanced is repayable
on demand.
(c) Clause 2.4.b provides that where a
facility is granted for a fixed term (as was the Long-term Direct
Term loan), the bank may,
in certain circumstances, extend the term
of the loan. The clause also provides for the appropriation of
payments received.
(d) Clause 2.4.1 provides that the bank
is entitled, consequent upon a breach to claim repayment of all
amounts outstanding under
the facility.
(e) Clause 2.4.7 provides that the bank
is entitled, consequent upon a breach to refuse to permit any further
drawings or utilisation
in terms of the facility..
[7] Mr Roelofse relied upon the dicta
in NBS Boland Bank v One Berg River Drive and Others; Deeb and
Another v ABSA Bank Ltd; Friedman
v Standard Bank of South Africa Ltd
[1999] 4 All SA 183
(A) at paragraph 30 where van Heerden DCJ stated
:
‘One further point should be
made. It is conceivable, albeit unlikely, that a stipulation may be
so worded that an absolute
discretion to fix a prestation is
conferred on one of the parties. Here again it is unnecessary to
express a view as to whether
such a stipulation will be invalid, as
being in conflict with public policy, or whether the fixing of the
prestation may only be
assailed when it is done in bad faith.’
[8] Mr Roelofse also relied upon
Bredenkamp v Standard Bank of South Africa Ltd
2010 (4) SA 468
(SCA)
at paragraph 23. He submitted it was not just a question of the
right to terminate, but of the bona fides and reasonableness
of the
Bank. The circumstances of the termination are relevant because on
the 9th December 2013, and shortly prior to calling
up the loan, the
first respondent’s representatives had addressed the Bank
setting out, inter alia, the difficulties they
were having in
obtaining payment from others.
[9] Mr Roelofse drew attention to the
unequal bargaining power which existed between institutions such as
banks and ordinary businesses.
He submitted that reasonable notice
should be given where a facility was being called up by a bank, and
that this should be a
requirement of the common law which should be
extended accordingly. He conceded that reasonable notice will depend
on the circumstances
of each matter and referred to Everfresh Market
Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC)
at paragraph 48. This paragraph dealt with the fact that the common
law, like all other laws, needed to be viewed through
the prism of
the objective normative value system set by the Constitution. Where
the common law is found to fall short, it should
be re-shaped in
order to conform with the Constitution.
[10] Mr Roelofse submitted that the
bank could have made it clearer to the first respondent that it was
unhappy with the conduct
of its account. He submitted that public
policy considerations of fairness dictate that it was unfair to
behave as the bank had
done, by giving no prior notice of its
intention to call up the facilities prior to the letters delivered by
the bank on the 18th
December 2013. He referred to some of the
correspondence which had been exchanged between the parties during
December 2013 and
submitted that where one party has an absolute
discretion, as the bank in this case did in the facility letters,
reasonable notice
of the intention to terminate them is an implied
term.
[11] Mr Roelofse referred me to De
Lange v ABSA Makelaars (Edms) Bpk
[2010] 3 All SA 403
(SCA) where the
court was required to consider whether it was a tacit term of an
employment contract that the employee would be
afforded a hearing
prior to the employer seeking to recover damages from him. The court
set out the test for the existence of
a tacit term which was one
which could only be imported into a contract where a court is
satisfied that the parties would necessarily
have agreed upon that
term if it had been suggested to them at the time of contracting. In
doing so a court will have regard to
the express terms of the
contract and the surrounding circumstances under which the contract
was concluded. Mr Roelofse emphasised
the principle that a party
must be heard when a decision is to be made, and submitted that this
should be seen as a tacit term
of the agreement.
[12] Mr Roelofse also referred me to
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC). This case concerned a time
bar in an insurance policy and the Constitutional Court held that the
proper approach to a constitutional
challenge to a contractual term
was to determine whether the term was contrary to public policy as
evidenced by constitutional
values, and in particular as set out in
the Bill of Rights. Public policy was to be determined on
considerations of reasonableness
and fairness and the court held that
time limitation clauses in contract were permissible, and the right
to seek judicial redress
from them could be limited where the clause
was sanctioned by a law of general application and the limitation
reasonable and justifiable.
The court recognised that the doctrine
of pacta sunt servanda could influence the court to decline to
enforce a time limitation
clause, if its implementation would result
in unfairness or be unreasonable because it was contrary to public
policy.
[13] Mr van Rooyen, who appeared for
the bank, submitted that as the first respondent was in provisional
liquidation, the debt was
repayable by the second and third
respondents, and there was in the circumstances no need to consider
the reasonableness of the
demand made by the bank or whether it had
determined its own prestation.
[14] Mr van Rooyen also drew a
distinction between the overdraft facility and the Long-term Direct
Term loan, pointing out that
the long-term loan had fixed repayment
periods which had been breached by the first respondent.
[15] Mr van Rooyen referred to
Bredenkamp and pointed out that in that case the bank had cancelled a
contract on the grounds that
the client had posed a risk to the
bank’s reputation. The court held that the fairness of
exercising contractual rights
did not arise when no public policy
considerations or constitutional values were involved. In those
circumstances the cancellation
was not unfair, and the clause
enforceable.
[16] Mr van Rooyen submitted that no
public policy issues were relevant in this application, and if they
were, the first, second
and third respondents could have previously
brought applications to deal with that alleged unfairness. Mr van
Rooyen also referred
to Erasmus and Others v Senwes Ltd and Others
[2005] ZAGPHC 5
;
2006 (3) SA 529
(T) for the proposition that a stipulation conferring
on a contractual party the right to determine its own prestation was
not
of itself objectionable, provided that it was subject to an
objective standard, and thus fettered. Where the discretionary power
was completely unfettered, the exercise of its discretion had to be
made arbitrio boni viri, which obliged the party exercising
the
discretion to act reasonably. Once an obligation to act reasonably
was established, the discretion was one which was fettered.
[17] In my view it certainly seems
reasonable to suggest that the bank should not have called up the
overdraft facility and long-term
loan without an adequate reason.
The problem for the respondents in this application, however, is that
the bank cancelled the
facilities because it became clear that the
first respondent had breached its obligations and that the first
respondent was in
some financial difficulty. This is amply
demonstrated by the correspondence, from which it appears that
various options were suggested,
and that the first respondent was not
conducting its financial affairs in a manner with which the bank was
comfortable.
[18] In the circumstances of this
matter the bank acted reasonably in calling up the loan facilities,
and did so inevitably to limit
its own losses, in circumstances where
it was becoming apparent that the first respondent would be unable to
meet its financial
obligations. The bank did, on a number of
occasions, make it clear to the first respondent that it was unhappy,
not only with
regard to the first respondent’s conduct of the
facilities extended to it, but also its failing financial situation.
There
can be no suggestion, in this matter, that the bank’s
termination of the credit facilities afforded to the first respondent
was unreasonable.
[19] In my view it was entirely
reasonable of the bank to have refused to advance more monies to the
first respondent after the
notice which it sent to the respondent on
the 18th December 2013.
[20] None of the clauses which are
sought to be impugned may be viewed as commercially unusual or
unfair, and it has not been suggested
that any of them are in breach
of any constitutional provision. Nor do I believe that it can be
suggested that any of them have
been unfairly implemented against the
first, second and third respondents.
[21] What seems unclear from the
respondents’ affidavits is what they expected to occur when
the first respondent had breached
the Long-term Direct Term loan and
had exceeded the overdraft limit on the overdraft facility. It was
surely not unreasonable
for the bank to cease providing finance after
the first respondent’s breaches. Should the first respondent
have been entitled
to carry on drawing against the overdraft bank
account in excess of the overdraft facility? Clearly not. Was the
bank expected
to give a month’s notice during November, and to
be able to anticipate what the first respondent’s expenditure
would
be, and when it would begin to overdraw the overdraft facility?
Again, I think not! Notice was given by the bank on the 18th
December 2013 to the first respondent that it was required to pay
back the overdraft facility by the 7th day of January 2014. This
notice was reasonable in the circumstances, and the bank did not
require payment forthwith.
[22] The effect of the overdraft
facility which was afforded to the first respondent by the bank, was
that the bank allowed the
first respondent to draw monies from the
bank at will, but subject to the pre-arranged conditions, one of
which was that if the
first respondent exceeded the overdraft
facility, then the bank could terminate the arrangement. This is
exactly what happened,
and in my view there was no manifest
unfairness in the agreement, and it could not be said to be contrary
to public policy that
the bank could call up the overdraft once the
limit had been exceeded, and because it correctly viewed the first
respondent to
be in financial difficulties with the probability that
it would be unable to repay its debts to the bank.
[23] In setting out my views in this
matter I do not wish to be understood to be suggesting that the
clauses sought to be impugned
could never be regarded as
unreasonable. Each case depends on its merits. Given the warnings
and requests made by the bank in
its communications with the first
respondent, it is surprising, in my view, that the second and third
respondents have resisted
the relief sought on the grounds which they
have done. Their approach warrants a punitive order for costs.
[24] In all the circumstances I am
satisfied that the defence and counter-claim have no merit. I make
the following order :
(a) Judgment is granted in favour of
the applicant against the second and third respondents, jointly and
severally, the one paying
the other to be absolved in the terms set
out in paragraphs 1 and 2 of the Notice of Motion dated the 15th
April 2014;
(b) The second and third respondents’
counter-claim is dismissed with costs, such costs to be calculated on
the scale as between
attorney and client.
Date of hearing : 7th December 2015
Date of judgment : 5th January 2015
For the Applicant : Mr R van Rooyen
(Instructed by Edward Nathan
Sonnenberg)
For the Second and Third Respondents
: Mr J H Roelofse
(Instructed by Van Wyk and
Associates).