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[2016] ZAKZPHC 31
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Firstrand Bank v Consolidated Timber Exports Close Corporation and Others (2743/2015) [2016] ZAKZPHC 31 (5 April 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL DIVISION, PIETERMARITZBURG
CASE NO. 2743/2015
DATE: 05 APRIL 2016
REPORTABLE
In the matter between:
FIRST RAND
BANK
..........................................................................................................
APPLICANT
(REGISTRATION NUMBER 1929/001225/06)
And
CONSOLIDATED TIMBER EXPORTS
CLOSE CORPORATION AND 5
OTHERS
...................................................
FIRST
RESPONDENT
STEWART HAMISH
MACKENZIE
..........................................................
SECOND
RESPONDENT
KIM NANCY
CAMP
........................................................................................
THIRD
RESPONDENT
KATHRYN MARGARET MACKENZIE
N.O
..........................................
FOURTH
RESPONDENT
STEWART HAMISH MACKENZIE
N.O
......................................................
FIFTH
RESPONDENT
KIM NANCY CAMP
N.O
................................................................................
SIXTH
RESPONDENT
J U D G M E N T
MADONDO J
[1] In this application the applicant
seeks judgment sounding in money against the respondents jointly and
severally, the one paying
the other to be absolved, in the sum of R3
687 539.89 plus interest at the rate of 15.5% per annum, compounded
monthly in arrears,
from 16 February 2015 to date of final payment
and costs of suit.
[2] The applicant’s claim arises
from the acknowledgment of debt executed by the first respondent in
favour of the applicant
which, in turn, has its origin from what is
termed “factoring agreements” concluded between the
parties and the suretyship
agreements in terms of which the other
respondents bound themselves as sureties in solidum and as
co-principal debtors with the
first respondent for its debt to the
applicant
[3] However, at the commencement of
these proceedings it has been indicated on behalf of the applicant
that it only now proceeds
against the first and second respondents
and that the relief sought against the other respondents be adjourned
sine die.
Parties
[4] The applicant is First Rand Bank, a
company and financial institution incorporated in accordance with the
company and banking
laws of the Republic of South Africa, carrying on
business as a registered commercial bank and having its registered
office at
17th Floor, 1 Merchant Place, Corner Fredman and Rivonia
Roads, Sandston, Johannesburg.
[5] The first respondent is
Consolidated Timber Exports Close Corporation, a close corporation
duly registered according to the
close corporation and company laws
of South Africa with its registered address at 45 Esther Roberts
Road, Glenwood, Durban.
[6] The second respondent is Stewart
Hamish Mackenzie, a major male farmer, and third respondent is Kim
Nancy Camp, a major female,
both respondents are of Wild Acres Farm,
Highflats, cited herein as members of the first respondent and a
trustee of Stewart McKenzie
Family Trust (“the Trust”).
The fourth, fifth and sixth respondents herein are cited in their
capacities as the trustees
of the Trust.
Factual Background:
(i)Selective Invoice Financing
Agreement
[7] On 22 September 2008 the first
respondent and the applicant entered into selective invoice financing
agreement (sale and purchase
of debts, “SR1”) read with
revised facility letter (“SR2”) dated 22 June 2009 in
terms of which the first
respondent would select and sell debts to
the applicant. The aforesaid selective invoice financing agreement
is termed the “factoring
agreement” and the applicant
describes it as one of the many ways in which business entities
generate finance from lenders.
The lender advances money to the
borrower in return for the borrower’s claim against his debtor,
which the debtor is then
supposed to pay the lender directly. The
monies advanced are still required to be repaid, if the debtor
concerned fails to pay
his or her debt to the lender, the borrower
must on written notice repay the amount advanced plus discount fee
(repurchase price).
[8] In this case, Mr van Rooyen for the
applicant has argued that the applicant advanced funds to the first
respondent on the strength
of invoices generated to the customer.
Each invoice was a loan, repaid by the payment by the customer into
account. If not paid,
the advance remained outstanding and in which
event the applicant was in terms of the agreement entitled to recover
it from the
first respondent.
[9] The factoring agreement of 22
September 2008 entered into between the parties together with the
revised facility letter of 22
June 2009 was signed by the third
respondent in her capacity as the member of the first respondent. On
22 September 2008 both the
second and third respondents signed
suretyship agreements in their capacities as members of the first
respondent in terms of which
they stood sureties in solidum and as
co-principal debtors with the first respondent for its indebtedness
to the applicant (“SR4”,
“SR5”).
[10] In terms of the agreement between
the parties in the event of the first respondent intending to sell a
debt to the applicant
it would complete and transmit an offer
schedule to the applicant regarding the intended sale. The applicant
might in its sole
discretion elect to purchase all debts or one debt
listed in the offer schedule. If the applicant elected to purchase a
debt it
would make payment of the purchase price of the debt
purchased to the first respondent, and this would be deemed to be
acceptance
of the offer to the applicant. The sale price less the
deferred payment amount in respect of each debt purchased (“the
advance
payment”) would be paid to the applicant within three
business days of the receipt of the offer schedule.
[11] The deferred payment amount would
only be paid to the first respondent on payment by the first
respondent of any fees including
penalty fees arising in respect
thereof. Until paid to the first respondent, the deferred payment
amount would constitute security
which the applicant would hold for
the payment of the debt by the debtor, the payment of the repurchase
price by the first respondent
under a claim of recourse by the
applicant in terms of the agreement and any amount due by the first
respondent to the applicant
arising out of any other cause of action.
[12] In, turn, the first respondent
would notify the applicable debtor of the sale of a debt and that all
payments in respect of
such debt were to be made to the applicant,
and use its best efforts to ensure payment by the debtor of the debt
to the applicant.
Should any payment made to the first respondent by
the debtor, such payment should immediately on receipt be forwarded
to the applicant.
[13] If a debt was not paid within the
payment period or a debt is disputed or for any other reason the debt
was not paid to the
applicant by the debtor concerned, the
applicant’s attorney or collection agent, acting on the
instruction of the applicant,
would collect payment of a debt from
the first respondent. The first respondent would then immediately, on
written notice from
the applicant, repurchase from the applicant the
debt in question at the repurchase price.
[14] On 22 June 2009 the first
respondent through the offer schedule sold the debt it had against
Sappi Forests for the sum of R3,
000,000-00. However, the applicant
reserved the right to recover the debt from the first respondent if
not paid by the due date
or earlier or should the debtor dispute its
liability to pay the debt. Sappi Forests failed to pay on invoice and
in which event
the applicant was in terms of the agreement entitled
to recover the unpaid debt from the first respondent.
[15] However, the relationship between
the parties continued until 2011 where it became clear that a large
amount of money remained
unpaid. The total outstanding amount due to
the applicant by the first respondent was then R2, 646, 310-98 plus
interest at the
rate of 15.5% per annum, and such amount had been
outstanding since 31 August 2011. The parties then entered into
settlement negotiations
with a view to liquidating the then existing
debt.
[16] Following such discussions, the
meeting was held between the parties on 11 January 2012. At such
meeting the second respondent,
representing the first respondent,
verified that the first respondent was indeed indebted to the
applicant in the aforesaid amount
and also confirmed that the amount
was then owed, due and payable. The first respondent then undertook
to liquidate the debt by
making monthly payment of R20, 000 for a
period of six months and the first payment was to be made on or
before 31 January 2012.
Thereafter, the monthly instalments would be
revised. The settlement terms were to be incorporated into the
acknowledgment of debt
agreement.
[17] On 13 January 2012 the applicant’s
attorneys addressed a letter (RA14) to the first respondent’s
attorneys re-stating
the terms of the agreements reached between the
parties and the undertakings made on behalf of the first respondent
at the meeting
of 11 January 2012. The letter elucidated that the
then outstanding amount of (R2646310-98) represented the first
respondent’s
indebtedness to the applicant as at 14 September
2011and that such amount was not in dispute that it was due, owing
and payable
to the applicant. The first respondent then signed an
acknowledgement of debt agreement confirming its indebtedness to the
applicant.
The applicant`s attorneys went on to state that the
acknowledgments of debt and suretyship agreements were then being
drafted for
signature before Friday, 20 January 2012. They then
concluded by calling upon the attorneys of the respondents to confirm
whether
what had been stated accorded with their instructions so to
enable the applicant`s attorneys to refer same to the applicant,
their
client, for its comment and reply.
[18] In a letter dated 19 January 2012
(“RA18”) the second respondent replied to the letter of
the applicant’s
attorneys dated 13 January 2012 and advised
that “the contents of the letter were duly noted and accepted,
with the exception
of the re-registration of Turnstone Trading CC,
which will take at least 60 days”.
[19] In a letter date 27 January 2012,
addressed to the first respondent’s attorneys, the attorneys of
the applicant said
that they were still attending to the drafting of
the acknowledgement of debt agreement, power of attorney, the
suretyship agreements
and the necessary resolutions to accompany same
and undertook to forward draft copies to them shortly for their
perusal and comment.
The applicant’s attorneys indicated to the
first respondent’s attorneys that the applicant intended to
have the documents
signed on or before Friday 3 February 2012. They
then requested the first respondent’s attorneys to advise on a
suitable
date and time to meet at the offices of the applicant’s
attorneys for the purpose of signing the document. In response
thereto,
in a letter dated 27 January 2012, addressed the applicant`s
attorneys, the first respondent said the following:
“We have spoken to our client Mr
Mackenzie who is willing to come to our offices to sign the necessary
documents. You may
liaise with him directly to arrange an
appointment. His call number is 0823279945.”
[20] The meeting of 11 January 2012 and
subsequent correspondence between the parties resulted in the
execution of the acknowledgment
of debt agreement on 29 March 2012
(“SR3”) by the first respondent in favour of the
applicant “and the signing
of the suretyship agreements by the
second and third respondents as well as limited guarantee and
indemnity in terms of which they
stood sureties for the first
respondent’s debt to the applicant. All the respondents were in
fact part of the acknowledgment
of debt signed by the second
respondent on behalf of the first respondent as its member.
[21] The second respondent also signed
an acknowledgment of debt agreement in his capacity as the trustee
for Stewart Mackenzie
Family Trust (“the trust”). The
second respondent had already signed suretyship agreement in his
capacity as the trustee
on 22 September 2008 (SR4”) and so as
the third respondent (“SR5”). On 3 February 2012 the
third respondent signed
Limited Guarantee and Indemnity (“SR6”)
on behalf of the trust.
(ii) Acknowledgement of Debt Agreement
and Suretyship Agreement
[22] On 29 March 2012 the first
respondent and the applicant concluded a written acknowledgment of
debt in terms of which the first
respondent acknowledged its facility
indebtedness to the applicant in the sum of R2799087-74 together with
interest thereon at
the rate of 15.5% per annum, compounded monthly
in arrears, calculated from 31 December 2011 to date of final payment
(both days
inclusive), which amount was then due, owing and payable.
The second to sixth respondents agreed and acknowledged that they
were
indebted, jointly and severally, and in solidus, and as
co-principal debtors with the first respondent in an amount equal to
the
facility indebtedness. The respondents also agreed and
acknowledged that the facility indebtedness was then due, owing and
payable
to the applicant.
[23] The first respondent undertook to
pay the amount then owing, due and payable to the applicant by
monthly instalments of R20,
000 per month for a period of six (6)
months commencing on the signature date. The first instalment was due
on 28 February 2012.
[24] Six months after the signature
date, by monthly instalments in an amount to be agreed between the
applicant and the first respondent
by no later than six (6) months
after the signature date provided that such monthly instalments
should not be less than R20,000
and that the indebtedness was paid in
full by 31 January 2014.
[25] If the first respondent failed to
make payment of the indebtedness in full by the final repayment date
(31 January 2014) or
if the first respondent failed to make any
payment in full on the day on which it became due, the applicant
would become entitled
without prejudice to claim immediately payment
of the full amount due.
[26] A certificate signed by any
manager of the applicant whose appointment need not be proved, as to
the amount owing to it should
constituted prima facie proof of the
indebtedness.
[27] The second and third respondents
bound themselves unto and in favour of the applicant as sureties for
and co-principal debtors
with the first respondent for all amounts
which the first respondent then owed or might from time to time
thereafter owe to the
applicant from whatsoever cause and howsoever
arising, the suretyships were unlimited.
[28] All legal costs on the attorney
and client scale incurred by the applicant in terms of the suretyship
would be payable by the
second and third respondents.
[29] The trust (being represented by
the second respondent) unconditionally and irrevocably guaranteed in
favour of the applicant,
as a principal obligation, the due and
punctual payment in accordance with the prescribed terms of all the
amounts payable to the
applicant by the first respondent, as well as
the due and punctual performance and discharge by the first
respondent of each of
its obligations to the applicant under or in
connection with the financing agreement.
[30] The second respondent also
unconditionally and irrevocably undertook that, should any amount not
be paid punctually by the
first respondent within 5 business days
after the receipt by the first respondent of a written notice from
the applicant requiring
payment, for any reason whatsoever and/or a
demand from the applicant in respect of any loss, expense liability
or lost, the first
respondent would be obliged to pay such amounts to
the applicant in cash without set-off,counter-claim or any other
deduction whatsoever,
immediately upon receipt of a first written
demand to that effect.
[31] The liability of the second
respondent to the applicant under or in terms of the guarantee would
be limited to the amount of
R2 799 087.74 plus interest thereon at
the rate of 15.5% per annum, compounded monthly in arrear, commencing
from 31 December 2011
to date of final payment (both days inclusive).
[32] The second respondent also agreed
that the guarantee would constitute continuing covering security and
its obligations under
guarantee would not constitute a suretyship but
would be constituted as a primary undertaking, giving rise to
principal (and not
accessory) obligations of the second respondent.
[33] A certificate signed by any
manager of the applicant setting out the amount of the second
respondent’s liability to the
applicant in terms of the
guarantee and any other matters relevant to the guarantee would, in
the absence of manifest error, be
prima facie proof of matters stated
therein and such proof may be tendered and used for all purposes,
including for the purposes
of pleadings and of obtaining provisional
sentence in default, summary or other judgment thereon.
[34] On 31 January 2014 the first
respondent failed to pay the R20 000.00 instalments in full.
Pursuant to the breach the applicant
caused demands to be delivered
to the first respondent by its attorneys. Prior to this, by a letter
dated 19 May 2012 the applicant
had advised the first respondent that
it was in breach and drew its attention to the applicant’s
entitlement to claim immediately
repayment of the full amount of the
indebtedness. The second letter dated 12 June 2012 reiterated that
the first respondent was
in breach and advised it that the full
amount was then due, owing and payable.
[35] Following the demands the
applicant received from the first respondent the amount of R105
000.00. R100 000.00 being five months
instalments of R20 000.00
each, plus R5 000.00 received by the applicant on the winding-up of
Turnstone CC on 12 December 2014.
[36] The applicant avers that,
accordingly, the respondents are indebted to the applicant jointly
and severally, the one paying
the other to be absolved, in the amount
of R3 687 539.89 plus interest thereon at the rate of 15.5% per annum
from 16 February
2015 to date of final payment and costs of suit.
[37] The respondents aver that the
agreement annexure “SR1” entered into between the
applicant and the first respondent
on 22 September was an agreement
in 2008 in terms of which the applicant would purchase debts from the
first respondent at discounted
prices. Payments by the applicant to
first respondent in consequence of the purchase of debts did not
constitute loans.
[38] An offer “SR2” made by
the applicant specifies that the debts offered by the first
respondent for purchase to the
applicant would be invoices to Sappi
Forests. Clause 12 of annexure “SR1” read with annexure
“SR2” provided
recourse to the applicant in certain
circumstances including the failure by Sappi Forests to the first
respondent’s invoices.
[39] In such circumstances the first
respondent was required immediately on written notice from the
applicant to repurchase from
the applicant such debts at the
repurchase price. The respondents aver that at no stage did the
applicant give such written notice
to the first respondent to
repurchase any debts from the applicant. Accordingly, the applicant
was not entitled to claim from
the first respondent repurchase price
of any debts.
[40] The respondents further aver that
at the time of signing the acknowledgement of debt the second
respondent was labouring under
a mistaken bona fide belief that the
first respondent was indeed indebted to the applicant. Matthys
Gerhardus Scheepers, the applicant’s
attorney, told the second
respondent that the first respondent owed the money claimed. He then
threatened him with criminal prosecution,
in the event of him not
signing the acknowledgment of debt for signing as surety in September
2008 whilst he was under a provisional
sequestration order.
[41] In reply thereto, the applicant
avers that the defences by the respondents are afterthoughts since
the respondents have throughout
admitted the debt and their liability
to repay it. In the letter to respondents’ attorneys addressed
to the applicant dated
15 September 2012 (“RA1”) they
committed themselves to continue paying monthly instalments of R20
000.00 per month.
Prior to that the applicant wrote the first
respondent a letter on 12 June 2012 advising it of its breach of the
acknowledgment
of debt agreement entered into between the parties, on
29 March 2012.
[42] With regard to the allegations of
mistake and duress in terms of the second respondents answering
affidavit deposed to in the
proceedings of sequestration of its
estate (“RA2”) no mention of duress or mistake is made.
The second and third respondents
averred that the debt was not due,
owing and payable because the applicant’s notice of breach did
not describe the trusts’
breach (second respondents) of the
acknowledgment of debt as to the duress the applicant denies
threatening Mackenzie, representative
of the first respondent, with
criminal prosecution and states that at the time Mackenzie’s
estate had not known that the
second respondent had been
provisionally sequestrated.
Issues
[43] Issues for determination are:
(a) whether the first respondent became
indebted to the applicant as a consequence of selective invoice
financing agreement (factoring
agreement) read with the revised
facility letter.
(b) whether the respondents are bound
by the terms of the acknowledgement of debt signed in favour of the
applicant:
(i) whether the second respondent
signed an acknowledgment of debt in error or
(ii) under duress.
[44] The applicant’s claim
against the first respondent has its origin in banking facilities
provided by the conclusion of
written agreements on 22 September 2008
and 22 June 2009 respectively. The second and third respondents
concluded written suretyship
agreements on 22 August 2008.
[45] The respondents admit the
conclusion of the aforesaid agreement between the applicant and the
first respondent as well as the
suretyship agreements by the second
and third respondents. On 22 June 2009 a “Revised Facility
Letter” (SR2) was signed
by the third respondent on behalf of
the first respondent which reads thus:
“Basic Terms of the Facility
1. The facility will continue on a
fully disclosed basis and Debtor to acknowledge the facility in
writing.
2. The invoices offered to ourselves
for purchase will be for payment by the following companies and
invoices will be purchased
up to the following credit limits for each
company;
- Sappi Forest R3000 000.00
A discount fee of 3.25% of the invoice
amount will apply for 30 days period (calculated from date of our
pay out).
3. Should invoices not be paid within
the 30 day period, thereafter, an additional interest rate of Prime
+5% will apply on a daily
basis until payment is received by FNB.
4. We will withhold from the purchase
price payable an amount equal to 20% of the invoice value. This
amount will be paid to you,
less penalty fee and any other allowable
deduction, when the debtor pays the invoice.
5. A deposit account is opened with FNB
which payment details must be noted on all invoices and the details
thereof given to all
debtors for payment purposes.
….
8. This facility may be availed subject
to the terms and conditions of and as set forth in the selective
Invoice Finance agreement
made and entered into by and between the
Bank and Client on the 22nd September 2008 ….”
[46] In terms of Selective Invoice
Financing Agreement:
“4.2 If the Seller wishes to sell
a Debt to the Bank, the Seller must complete an Offer Schedule and
transmit it to the Bank
in hard copy or electronic format.
4.3 The offer schedule must be
accompanied by the invoices and if applicable signed and properly
authorised delivery notes in respect
of goods sold and delivered and/
or written acceptance of services rendered in respect of each Debts
in question.
4.4 The Offer Schedule shall constitute
an irrevocable offer by the Seller to the Bank to purchase any or all
of the Debts set out
on Offer Scheduled and such offer shall be open
for acceptance for the offer period.
4.5 The Bank shall be entitled to make
whatever enquires it deems appropriate regarding a Debt offered for
sale, which may include
approaching the Debtor for confirmation as to
the debt and payment terms.”
[47] The terms of the agreements are
not in issue save that according to the respondents for the first
respondent to become indebted
to the applicant, the latter had in
terms of clause 12 of the agreement to require the first respondent,
on written notice, to
repurchase the debt at the purchase price in
the event of any invoice (debt) not paid. The respondents aver that
no such notice
was given to the first respondent by the applicant
that Sappi Forests had failed to pay on invoices and it should
therefore repurchase
such debt. In the respondents’ submission,
in the premises, no indebtedness arose. Mr White for the respondents
argued that
until such notice was given the first respondent did not
owe the applicant any money.
[48] It is the applicant’s
contention that the acknowledgment itself amounts to written notice
of the amount which the first
respondent and the sureties must pay
and the manner in which such amounts must be paid. So as the issue
and service of this application
amounts to a notice to the first
respondent to repay its debt. Further, that the applicant has on
numerous occasions provided the
respondents with notices in writing
to pay the debt owed to it, with no avail.
[49] It is not in dispute that the
respondents’ attorneys were in a letter dated 13 January 2012
advised of the outstanding
amount of R2 646 310.98 plus interest at
the legal rate of 15.5% per annum, compounded in monthly arrears,
from 31 August 2011
(“RA14”). The second respondent
verified that the aforesaid amount did indeed represent the total
indebtedness of the
first respondent to the applicant and further
confirmed that the outstanding amount was due, owing and payable to
the applicant.
[50] Further, pursuance to the
agreement between the parties the first respondent was in letter
dated 12 January 2012, 13 January
2012, 10 May 2012, 12 June 2012 and
4 September 2012 notified of its debt and that it was required to pay
it.In response to the
last notice, on 5 September 2012, Singh and
Gharbaharan (the respondent’s attorneys) in the letter
addressed to the applicant’s
attorneys reiterated the
respondent’s commitment to meeting their obligations in terms
of the acknowledgment of debt. Lastly,
on receipt of advanced award
the applicant’s attorneys on 26 February 2015 wrote to the
respondents calling for a meeting
to discuss repayment of the
balance. On all occasions referred to above, the first respondent has
been apprised of its breach but
it took no steps to remedy such
breach, by repurchasing the aforesaid debt. I, therefore, conclude
that all such letters constitute
a required written notice that such
debt remained outstanding and that the first respondent should
repurchase it.
[51] It is the respondents’
argument that there has never been an agreement between the parties.
It is not in dispute that
it was one of the essential terms of the
agreement that in the event of the debtor failing to pay for the sold
debt, the applicant
would have recourse to the first respondent. The
reason being, that by that time the applicant would have made advance
payments
in favour of the first respondent.
[52] It appears from the Revised Debt
Letter dated 22 June 2009 and it is common cause between the parties
that the first respondent
sold the debt of Sappi Forests to the
applicant to the tune of R3 000 000.00. Sappi Forests failed to pay
such amount to the applicant
and it, therefore, remained unpaid.
Sappi Forests’ failure to pay its debt in terms of the
agreement entitled the applicant
to have recourse to the first
respondent for such debt. In the final analysis there was a debt owed
to the applicant by the first
respondent arising from Sappi Forests’
failure to pay the debt, the first respondent had sold to the
applicant. The inevitable
conclusion, therefore, is that though there
was no direct loan agreement between the parties, the situation and
the nature of the
agreement entered into between the parties created
a debt for the first respondent, which it also admitted. This is
evident from
the fact that according to the agreement the applicant
was entitled to hold deferred payment as security for the payment of
the
debt by the debtor or payment of repurchase price by the first
respondent. It was also against that background the first respondent
in terms of the agreement had a duty to use its efforts to ensure
payment by the debtor. Accordingly, at all times relevant
hereto
the first respondent has been aware of its indebtedness to the
applicant and that the indebtedness amount has been owing,
due and
payable.
Are the respondents bound by the terms
of the acknowledgment of debt agreement?
[53] The applicant in this case
proceeds against the first and second respondents on the basis of the
acknowledgment of debt admittedly
executed by the first respondent in
favour of the applicant and the suretyship agreement signed by the
second respondent dated
22 September 2008 in terms which he stood
surety for the first respondent’s indebtedness to the applicant
(“SR4”).
This court is, accordingly, obligated to decide
the matter on the acknowledgment of debt and a suretyship agreement
in question.
[54] The respondents contend that as
the acknowledgment of debt was for “facility indebtedness”,
being the indebtedness
in terms of selective invoice financing
agreement since the applicant has failed to comply with the
provisions of clause 12, no
such debt arose.
[55] The applicant avers that the
applicant provided the first respondent with bank facility as an
advance payment on the invoice.
Each advance was a loan. If the
customer did not pay such debt it remained outstanding. The total
amount outstanding then was R2
646 310.98 plus interest at 15.5% per
annum and such amount had been so outstanding since 31 August 2011.
[56] Sappi Forests had failed to pay on
invoice. The second respondent verified that the aforesaid amount did
indeed represent the
total indebtedness of the first respondent to
the applicant and confirmed that the outstanding amount was due,
owing and payable
to the applicant. This led to the execution of the
acknowledgment of debt by the first respondent and in respect to
which the second
respondent stood surety for the applicant’s
indebtedness to the applicant.
[57] In executing the acknowledgment of
debt the first respondent admitted that it was indebted to the
applicant in the agreed amount
of R2 799 087.74 plus interest thereon
at the rate of 15.5% per annum, compounded monthly in arrears,
calculated from 31 December
2011 to date of final payment, which
amount was then due, owing and payable.
[58] In terms of the acknowledgment of
debt agreement the first respondent only paid six months instalment,
totalling R120 000.00
and R5.000 on liquidation of Turnstone CC. The
question arises is whether the applicant was required to give the
first respondent
notice in writing to pay its debt. In a letter dated
4 September 2012 the first respondent was duly notified that it had
not honoured
the terms of the acknowledgement of debt. In reply
thereto, the respondents` attorneys reiterated the respondents`
commitment to
meeting their obligations in terms of the
acknowledgment of debt. The first respondent had also been given
prior notices on 19
May 2012 and 12 June respectively.
[59] In the letter dated 12 June 2012
(“SR8”) the respondents were pertinently advised of their
breach of clause 6 of
the acknowledgment of debt agreement concluded
between the parties on 3 February 2012. The attention of the
respondents was even
drawn to clause 5.3 of the agreement which, in
the event of breach of the acknowledgment of debt agreement, entitled
the applicant
to claim immediate repayment of the full amount of the
facility indebtedness, which was then outstanding. In the
circumstances,
I do not find any merit in the respondents` contention
that since no written notice was given no debt arose.
[60] The second question arises is
whether there was a valid causa debiti underlying the acknowledgement
of debt. For an acknowledgment
of debt to avail a creditor, it must
not exist in vacuo. In Peter Brett Featonby–Smith and Brett
Waberski case no 3624/2011
and 3623/2011 (D) Steyn J said:
“There needs to be a real and
demonstrable debt owed by the debtor to the creditor. The mere fact
that an AOD exists does
not mean that the document would grant
enforceable rights without an existing debt between the parties. If
there is no underlying
cause then the claim would be unenforceable.”
In the present case the causa debiti
was the sum of R2 799 087.74 plus interest, being the repurchase
price of Sappi Forests` debt
in respect of which the respondents had
not only admitted liability but also that it was then due, owing and
payable.
(i) Error
[61] The respondent aver that the
second respondent signed the acknowledgment of debt on behalf of the
first respondent in a mistaken
belief that the first respondent
indeed owed the applicant the aforesaid amount. He only subsequently
learned that this debt could
only arise on written notice by the
applicant to the first respondent to repurchase it.
[62] For the respondents to succeed on
a defence of a mistaken belief, such mistake must be iustus. In
determining whether the mistake
is iustus the court in George v
Fairmed (Pty) Ltd 1958(2) SA 465(A) at 471 A-D posed the following
question:
“ Has the first party – the
one who is trying to resile – been to blame in the sense that
by his conduct he has
led the other party, as a reasonable man, to
believe that he was binding himself? … If his mistake is due
to a misrepresentation,
whether innocent or fraudulent, by the other
party, then, of course, it is the second party who is to blame and
the first party
is not bound.”
[63] The second respondent vouched that
he had verified the first respondent in debtedness to the applicant.
He must have the necessary
records in terms of the agreement as to
the existence of such debt, as the offer schedule should be
accompanied by a duly signed
invoice and properly authorised delivery
note in respect of goods sold and delivered or written acceptance of
services rendered
in respect of each debt. He must have verified it
with Sappi Forests that it had not paid the debt the applicant had
purchased
from the first respondent. In which event, in terms of the
offer schedule, the first respondent was obliged to repay the
purchase
price. On 5 September 2012 the respondents’ attorneys
confirmed the respondents` “commitment to meeting their
obligations
in terms of the acknowledgment of Debt….”
[64] The agreement to conclude the
acknowledgment of debt agreement was reached on 11 January 2012. The
respondents, through their
attorney, confirmed in writing on 27
January 2012 that the second respondent was willing to come to the
offices of the applicant`s
attorneys to sign “the necessary
documents”. This led to the conclusion of the acknowledgment of
debt and suretyship
agreement. No misrepresentation was made by the
applicant to the second respondent which induced or could have
induced the respondents
to sign the agreement. The respondents knew
at the time that the first respondent owed the applicant, money
arising from the first
respondent`s failure to repurchase Sappi
Forests` debt. In his affidavit the second respondent admits that the
first respondent
sold Sappi Forests` debt to the applicant for R3 178
940.09 which amount remains outstanding. The existence of such debt
is confirmed
by the schedule annexed to the respondents` answering
affidavit, marked “SHM7”.
[65] If there had been a mistake on the
part of the second respondent, it could be a unilateral mistake. In
this regard the Appellate
Division said the following:
“The decisive question in a case
where unilateral mistakes is in issue is whether the party whose
actual intention did not
conform with the common intention expressed
(the offeror) led other party (the offeree) as a reasonable man, to
believe that his
declared intention represented his actual intention.
To answer that question a three-fold enquiry is necessary; firstly,
was there
a misrepresentation as to the offeror`s intention,
secondly, who made the misrepresentation, and, thirdly, was the
offeror actually
misled, and would a reasonable man have been
misled?”
[66] In the present case, the second
respondent being the custodian of all the records and documentation
relating to the first respondent’s
agreement with the applicant
as well as the details of the debts purchased by the applicant from
the first respondent, could not
have been and was not misled by the
intention of the applicant when executing the acknowledgment of debt
agreement. In the circumstances,
no would a reasonable man have been
misled. The respondents could, therefore, not have signed the
acknowledgment of debt agreement
and sureties in a bona fide error or
belief.
(ii) Duress
[67] Further, the second respondent
alleges that he signed the acknowledgment of debt under duress.
Mathys Gerhardus Scheepers (the
applicant`s attorney) told him (the
second respondent) that the first respondent owed the money claimed.
He then threatened that
should the second respondent not sign, he
(Mathys Gerhardus Scheepers) would have the second respondent
criminally prosecuted for
signing as surety in September 2008 whilst
he was under a provisional sequestration order.
[68] Mr Van Rooyen for the applicant
has argued that even if the threat was made, it was not unlawful or
contra bonos mores since
an insolvent, who incurs credit, whilst
being an insolvent commits an offence in terms of
section 137
of the
Insolvency Act 1936
.
[69] In Boe Bank v Van Zyl 1999(3) SA
813 (c) at 829G/H –T, it was stated that the mere fact that the
defendant had been under
pressure when he signed the agreement does
not entitle him to impugn the transaction. He has to show that the
conduct of the officials
of the plaintiff constituted a threat or
intimidation that was unlawful or contra bonos mores. See also Astra
Furniture’s
(Pty) Ltd v Arend 1973(1) SA 446(C) at 449B.
[70] In Shepstone v Shepstone 1974(1)
SA 41(D) at 413H, it was stated that a threat to take a lawful action
in the courts cannot
be regarded as contra bonos mores. In Ilanga
Wholesalers v Ebrahim and others 1974(2) SA291 (D) at 297H-298A
Milnes J said:-
“… where the sum which the
debtor agrees to pay in fear of arrest is in fact the sum which is
due the creditor does
not act contra bonos mores in using that threat
of criminal sanction to induce him to acknowledge his true liability.
In these
circumstances he is doing no more than to exercise his legal
rights. Where, however, the creditor does not know and probably
cannot
establish (and a fortiori where he knows that he cannot
establish) the amount of the debtor`s indebtedness it seems to me an
improper
use of his rights to threaten to prosecute the debtor unless
the debtor undertakes to pay an amount which the creditor more or
less arbitrarily estimates to be due…”
[71] In Jans Rautenbach Produksies
(EDMS) Bpk v Wijma 1970(4) SA 31 (T) at p 33 an acknowledgment of
debt allegedly signed under
threat of criminal proceedings was held
not to constitute contra bonos mores and binding on the defendant
since the probabilities
favoured the view that the defendant had
misappropriated the money which he undertook in the acknowledgment of
debt to pay to the
plaintiff. What is, however clear from the
authorities is that the party relying on duress bears the onus of
showing that he was
indeed thereby to conclude the agreement. Put
another way, the party bearing the onus must show that he would not
have concluded
the agreement had it not been for the duress. See
Paragon Business Forms (Pty) Ltd v Du Preez 1994(1) SA 434(SE) at
439E/F.
[72] The undisputed evidence shows that
at the time of signing the acknowledgment of debt agreement Mr
Scheepers (the applicant`s
attorney) did not know that the second
respondent had been placed under provisional sequestration order at
all. In the premises,
I am not satisfied that the second respondent
has succeeded to show on the balance of probabilities that the
alleged threat of
criminal prosecution induced him to sign the
acknowledgment of debt, let alone to prove that had it not been for
the threat of
criminal prosecution, he would not have signed the
acknowledgment of debt in question. The decided authorities show that
even if
the threat of criminal prosecution had been made, such threat
in the circumstances of this case could not have been lawful or
contra
bonos mores. What also worth noticing in this case, is that
the defence of duress has not been the prime one but it has been
pleaded
in the alternative. This shows that the respondents have been
fishing for a defence which they thought could be a formidable one.
Moreso, in my view, the defence of duress is inimical to that of
bonafide mistake as it presupposes that the second respondent
was
fully aware of the true position but due to fear he signed the
agreement.
[73] Accordingly, the respondent
defences that the acknowledgment of debt was signed in bona fide
mistake that the first respondent
was indeed indebted to the
applicant and under duress fall to be rejected as false on all
probabilities. The applicants claim against
the respondents should
therefore succeed.
Order
[74] In the result I make the following
order;
(a) The first and second respondents
are jointly and severally ordered to pay to the applicant the sum of
R3 687 539. 89 plus interest
at the rate of 15.5% per annum from 16
February 2015 to the date of final payment, the one paying the other
to be absolved,
(b) Costs of suit on the attorney and
client scale.
Date reserved on: 4th March 2016
Date delivered on: 5 April 2016
Counsel for the Applicant: Adv Van
Rooyen
Instructed by: Austen Smith
Attorneys
Ref: L Login
Counsel for the Respondent: Mr White
Instructed by: Mornet Attorneys