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[2016] ZAGPPHC 33
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Natsure Steel (Pty) Ltd v Illing (68409/15) [2016] ZAGPPHC 33 (29 January 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(SOUTH
GAUTENG HIGH COURT DIVISION)
CASE
NO: 68409/15
29/1/16
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:-
NATSURE
STEEL (PTY)
LIMITED
APPLICANT/PLAINTIFF
and
JAMIE
KIM
ILLING
RESPONDENT/DEFENDANT
JUDGMENT
DELIVERED ON
29
JANUARY 2016
VILAKAZI
AJ:
[1]
This is an action by the plaintiff against the defendant for payment
of money allegedly lent and advanced to the defendant.
[2]
The plaintiff 's claim is based on a written agreement concluded on
31 January 2014, headed "Agreement in respect of the
relaxation
of the binding Restraint of Trade Agreement". Copies of these
documents are attached and marked as annexure "A".
[3]
In its particulars of claim, the plaintiff claims payment of a sum of
R 1, 134, 036.48 [one million, one hundred and thirty
four thousand,
thirty six rand and forty eight cents) and alleges that the
provisions of section 4 of the National Credit Act 34
of 2005 ("The
Act") does not apply to the agreement entered into by the
parties by virtue of the provisions of section
4 of the Act, the
agreement not being at arm's- length.
[4]
The payment terms of the loan agreement briefly are as follows:
a. The debt was repayable
by means of a combination of a once-off payment at least R 150,
000-00 [one hundred and fifty thousand
Rand) payable by no later than
28 February 2014.
b. No more than 22
[twenty two) equal payments of at least R53,174-44 [fifty three
thousand one hundred and seventy four Rand and
forty four Cents) each
at the end of each month [the 1st of these payments being made by no
later than 31 March 2014 and the last
of the payments being made by
no later than 31st December 2015), until the date of final payment of
any outstanding amounts together
with interest at 6,53 [annual
nominal) per annum. calculated daily on the outstanding main
debt, from 1 February 2014
and capitalised at the end of each
month, until the full main debt and interest owed to the creditor has
been repaid in full.
c. All payments received
from the debtor shall firstly be utilised to amortize legal costs (if
any) then interest, and capital only
thereafter.
d. The debtor renounced
the legal exceptions
non numeratae pecunia,
non
causa
debiti
and errori
calculi,
benefits of excussion,
division, cession of action, revision of accounts and no value
received.
e. In the event that the
debtor fails to make payment on any payment due date he acknowledges
that the full capital, together with
costs and interest, will become
due and payable without further notice to him and that the creditor's
rights against him
shall not be deemed to have been amended or
waived.
f. The debtor binds
himself for the due and punctual payment of all sums and the due and
proper performance of all obligation which
the debtor may in the past
or now in the future owe to the plaintiff or to the plaintiff 's
successors in title or assigns arising
out of or in connection with
any cause of indebtedness whatsoever whether now existing or which
may come into being in the future.
g. For the purpose of any
action instituted against the debtor whether for provisional sentence
or otherwise
a
certificate by a director or the secretary of
the plaintiff as to the amount owing and to the effect that the due
payment of such
amount has arrived shall be sufficient and
satisfactory proof of the facts herein until the contrary shall have
been proved.
[5]
The defendant opposes the application for summary judgement on the
following basis:
5.1. That the loan
agreement concluded between the parties on the aforesaid date was at
arm's-length and subject to the provisions
of section 129 of the Act
in that the plaintiff should have issued a statutory notice prior to
instituting legal action.
5.2. On 12 August 2013,
the defendant (an employee) entered into an employee loan agreement
with the plaintiff (the employer) .
5.3. The salient features
of the agreement was that the employee was to settle the loan as
follows:
i.
A monthly deduction from the employee's salary of R4, 750- 00 plus
interest rate calculated at 6.53 per annum;
ii. Any increase in
salary as a result of future salary increases;
iii. All refunds received
from SARS on an annual basis;
iv. All proceeds from the
current court case against a defaulting tenant;
v. All proceeds from the
potential sale of fixed property;
vi. All bonus payments
due under any current or future bonus scheme;
vii. All profit share
payments due under any current or future profit share scheme;
viii. The employee agreed
that upon resignation of termination of employment with the employer
any funds payable to the employee
as a final salary, retrenchment
payment, settlement payment or any funds available in the employees'
pension fund will first be
utilised in settling any outstanding
amount payable to the employer under this agreement.
[6]
It is common cause that the defendants ' contract of employment was
terminated and consequently the parties entered into an
exit
agreement inter alia a restraint of trade agreement. It is also
apparent that on 31st January 2014, parties entered
into
an agreement wherein the terms and conditions of the restraint of
trade agreement were relaxed.
LEGAL
POSITION
[7]
The term arm's-length is circumscribed for purposes of greater
certainty, in sec tion 4(2)(b) for
present purposes, the aforementioned provision and
section 4(2) (b)(iii) and (iv) are relevant. It reads as follows:
"(2) For greater
certainty in applying subsection (1)
-
(b)
In any of the following arrangements, the parties are not dealing at
arm's length:
(iii) a credit
arrangement between natural persons who are In a famillal
relationship and
-
(iv) any other
arrangement
-
(aa)
in which each party Is not Independent of the other and consequently
does not necessarily strive to obtain the utmost possible
advantage
out of the transaction; or
(bb)
that Is of a type that has been held In law to be between parties who
are not dealing at arm's length."
[8]
Counsel for the plaintiff argued that this was not an arm's length
transaction and referred the court to the negotiations that
the
parties entered into prior to the conclusion of the exit agreement.
Developing this argument further he submitted that the
parties were
dependant on each other in that the plaintiff knew that the defendant
did not have the means to pay him and at the
same time the plaintiff
relaxed the terms of the restraint of trade agreement thus enabling
the defendant affordability to repay
the loan. It was contended on
behalf of the plaintiff that the defendant makes no allegation that
the 6.53 interest rate is some
form of outmost advantage to the
plaintiff.
[9]
I am of the
view
that no co-dependence or dependence can be
inferred from the transaction itself. It is very clear that the loan
agreement entered
into during 201 3 changed its character when the
contract of employment was terminated. In January 2014, the parties
renegotiated
the loan agreement, wherein the defendant agreed to
repay this loan within a short space of time. The loan was to be
settled in
full on 31'' December 2015. Had the plaintiff not relaxed
the restraint or trade terms, the loan would not have been settled.
Comparing
the 2 agreements the parties hereto strived to achieve the
utmost advantage from each other.
[10]
The
dictum
of Trolllp JA, In
Hicklin
v Secretary for Inland
Revenue
[1]
described the arm's length criterion as follows:
"It connotes that
each party is Independent of the other and,
In so
dealing,
will strive to get the utmost possible advantage out of the
transaction for himself."
[11]
In a tax
appeal relating to the taxation of forsaken interest on the unpaid
price of shares sold to trust,
Froneman
AJA held In
Commissioner,
South
African
Revenue Services v Woulidge
[2]
that:
"A notional
commercial arm's length transaction on Interest would assume a lender
who Insist on payment of the Interest he
charges and a borrower able
to pay that Interest"
[12]
I am inclined to conclude that the parties were factually and legally
independent of each other, the fact that there was an
employer and
employee relationship does not degenerate this transaction to fall
outside the ambit of the Act. The parties strove
to gain the maximum
from the transaction for themselves. Interest rate was payable, it
further provided an acceleration clause,
failure by the defendant to
pay timeously entitled the plaintiff to obtain judgement in terms of
section 57 and 58 of the Magistrate
Court Act 32 of 1944 and payment
of legal costs on a punitive scale of attorney and own client for the
recovery of any amount payable.
I am satisfied that the defendant has
raised a bona fide defence and consequently an application of summary
judgement is refused.
[13]
In the premises I find that:
13.1. The credit
agreement was an arm's length transaction to which the Act applies
13.2. The plaintiff's
action is fatally defective as it failed to comply with sections 129
and 130 of the Act.
13.3. The plaintiff is
ordered in terms of section 130(4) to issue a section 129 statutory
notice within 10 days of this order.
[14]
That leaves the question of costs. Costs will stand over for
determination at trial.
__________________________________________
T
D VILAKAZI
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
APPEARANCES:
FOR
PLAINTIFF: ADV PA VENTER
INSTRUCTED
BY: KLAGSBRUN EDELSTEIN BOSMAN DE VRIES INC
FOR
DEFENDANT: ATTORNEY J VAN HEERDEN
INSTRUCTED
BY: J VAN HEERDEN INC
DATE
HEARD: 4 NOVEMBER 2015
[1]
1980 (1) SA 481
(A) at 495 A-B
[2]
2002 (1) SA 68
(SCA) at para 12