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[2016] ZAGPPHC 35
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Stan Rio Pipe and Steel (Pty) Ltd v Esterhuizen (64166/2015) [2016] ZAGPPHC 35 (29 January 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
SOUTH
GAUTENG HIGH COURT DIVISION)
CASE
NO: 64166/ 2015
29/1/16
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:-
STAN
RIO PIPE AND STEEL (PTY)
LIMITED APPLICANT/PLAINTIFF
and
ANDRIES
J H
ESTERHUIZEN RESPONDENT/DEFENDANT
JUDGMENT DELIVERED ON
29 JANUARY 2016
VILAKAZI
AJ:
[1]
This is an application for summary judgment at the instance of the
Applicant. The Plaintiff has instituted action against the
Defendant
based on an application for credit facilities including a deed of
suretyship.
[2]
The plaintiff sued the defendant for payment of an amount of R503
393. 68 said to be due and payable to it by the defendant
as surety
and co- principal debtor in terms of the Application for credit
facilities including a deed of suretyship concluded on
6 May 2014,
attached herewith and marked as Annexure "A ". Annexed to
the summons is the detailed ledger account of the
principal debtor
marked as Annexure "B", which shows the claimed amount plus
interest at 93 per annum tempora morae and
costs on the scale of
attorney and own client scale.
[3]
In its founding affidavit, plaintiff alleges that the principal
debtor is Sansu Steel and that the defendant stood surety for
the due
and punctual performance of the principal debtor towards the
plaintiff.
[4]
The defendant resists the plaintiff application for summary judgment
on the basis that the contract of suretyship was invalid
for want of
compliance with the provisions of section 6 of the General Laws
Amendment Act 50 of 1956 in that the name of the principal
debtor is
not recorded in Annexure "A"
[5]
The defendant avers that the plaintiffs' action is mala fide and
premature due to the fact that the plaintiff has accepted the
business rescue plan in terms of which the plaintiff will be paid in
full over time. In the alternative he avers that he is excused
from
his suretyship obligation should the court find that a deed of
suretyship is valid, until such time that it has been determined
that
the principal debtor cannot meet its obligations to the plaintiff. He
submits that this would occur if the principal debtor
Does not meet
the terms of the business rescue plan or termination of same.
[6]
The defendant in the Answering affidavit admit that it signed an
application for credit on behalf of Nansu Steel ( " the
principal debtor") on 6 May 2014 in terms of which it applied
for trade credit facilities with the plaintiff.
[7]
Section 6 of Act 50 of 1956 provides:
"No contract of
suretyship entered into after the commencement of this Act, shall be
valid, unless the terms thereof are embodied
in a written document
signed by or on behalf of the surety; Provided that nothing in this
section contained therein shall affect
the liability of the signer of
an oval und the laws relating to negotiable instruments".
What
the section requires is that the terms of the contract of suretyship
are to embodied in a written document. Terms which are
essential for
the material validity of a contract of suretyship are the identity of
the creditor, the surety and the principal
debtor and the
identification of the principal debt. The requirement that the
contract must be embodied in a written document does
not however mean
that every particular must be meticulously spelled out in the
document. Although it may appear not to be the case,
the identity of
the principal debtor is undoubtedly a material term of a contract of
suretyship
(Fourlamel ( Pty) Ltd v Maddison
1977 (
1) SA 333
( A) at 344 H-345 E,
Unless, therefore the identity of
the principal debtor is embodied in the written document, the
contract of suretyship will be invalid.
[8]
It was contended on behalf of the plaintiff that Annexure 'A ' which
is part and parcel of the application form, page 2 thereof
which
reflects the terms and conditions of agreement of sale
and the deed of suretyship should be evaluated in
its entirety and
therefore constitutes one document. The principal debt is
identifiable, it mentions the credit limit required
is R 500 000.00.
It was plaintiff 's submission that accordingly there was compliance
with section 6 despite the blank space where
the name of the
principal debtor ought to have been inserted. In my view there is
merit in this submission.
8.1 In deciding this
matter, I am relying in the Supreme Court of Appeal decision in
Industrial Development Corporation of SA (Pty) Limited
and
Dale Clifford Sliver case
No
4 19/ 2001 .
The facts were remarkably similar to the present. The space
left for the insertion of the name of the principal debtor in the
deed
of suretyship had likewise been left blank. In the loan
agreement, the respondent signed both on his own behalf and on behalf
of
Engineplan and on the same day as the deed of suretyship was
signed. The loan agreement further provides that any advance in
pursuance
of its terms was conditional upon the respondent first
guaranteeing the obligations of Engineplan under the loan agreement
in the
form and subject to such terms as the appellant reasonably
required. The document specified the amount of the principal debtor's
indebtedness, that such indebtedness was in respect of money to be
lent and advanced
by Industrial Development Corporation of South
Africa LTD,
the appellant, to the principal debtor in terms of an
agreement (defined as the loan agreement) and the loan agreement was
to be
entered simultaneously with the deed of suretyship. It did not
reflect the name of the principal debtor, a space left for the
insertion
of the latter's name was left blank.
IDC
relied on
the reference in the deed of suretyship to the loan agreement which
in turn discloses the identity of the principal debtor.
It was
contended on behalf of
IDC
that the loan agreement was
incorporated by such reference into the deed of suretyship and that
there was accordingly compliance
with section 6 despite the blank
space where the name of the principal debtor ought to have been
inserted. The court said the deed
of surety makes it clear that the
debt secured is the loan in terms of the loan agreement sought to be
incorporated. The court
held that extrinsic evidence identifying the
loan agreement as the one to be all that would be required and is
therefore admissible".
[8]
Turning to the facts of this matter before me, Annexure A, indicates
Stan Rio Pipe and Steel (Pty) Ltd, as the seller and Sansu
Steel as
the purchaser. The defendant signed on this Annexure, and reflects
his capacity as "suretyship and principal debtor."
Clause 6
provides that a party that has appended his signature on behalf of
the purchaser binds himself as surety and co- principal
debtor in
solidum unto and in favour of the seller in respect of all the
obligations of the purchaser, past, present and future
and
furthermore hereby agree and undertake to be bound by the terms and
conditions of this agreement mutatis mutandis. Thereafter
it makes
provision for the name of the Seller and Purchaser. The defendant in
compliance with clause 6 of the agreement has appended
his signature
binding himself as co- principal debtor and surety and has inserted
his identity number. His capacity is disclosed
as director. I am
satisfied that the suretyship and the agreement comply with section 6
of the General Laws Amendment Act.
[9]
In respect of the second ground of contention it is common cause that
the principal debtor is under business rescue and the
principal debt
is the subject of a business rescue plan. In the Heads of Argument on
behalf of the defendant alluded to the fact
that the business rescue
plan does not secure the plaintiff's rights against sureties. Counsel
on behalf of the Defendant submits
that once the business rescue plan
has been approved it provides a defence in rem by the surety. He
fortified these contention
by reference to the judgment of Rogers J
in
Tuning
Fork (Pty) Ltd t/ a Balance Audio v
Greeff and Another
2014 (4) SA
521
(WCC).
The
defendant admits that this amount claimed by the plaintiff in this
court proceeding will be paid in full.
[10]
It was submitted by counsel for the plaintiff that the liability of
the surety is unaffected by the business rescue plan. For
this
submission he relied in the case of
New Port Finance
Company Pty Ltd v
Nedbank
Ltd
[2015]
2 ALL SA 1
SCA. Wallis J mentioned that Rogers J in Tuning Fork based
his reasoning on his reading of the decision in
Moti and
Co
v Cassims
Trustees
1924 AD 720
and disagrees
with his reasoning . He further explained that" Mali's case
supra was decided on the basis of the court's interpretation
of
section 126 (2) (b) of the Insolvency Act 32 of 1916 that has no
direct counterpart in the
Companies Act 71 of 2008
. The key provision
in that regard is
section 154
, which in subsection 2 says the company
may enforce a debt in accordance with and to the extent permitted by
the terms of the business
rescue plan. That section is capable of the
construction that it deals only with the ability to sue the principal
debtor and not
the existence of the debt itself. If that is the case
then the liability of the surety would be unaffected by the business
rescue
plan unless the plan itself made specific provision for the
situation of sureties.
[Para 14 E-G]
[11]
I am of the view that reliance on the Tuning Fork's case is
misplaced.
The New Port Finance
case is a case on point. In
this matter before me, the plaintiff 's right to sue the surety under
the deed of suretyship remains
unaffected by the business rescue
plan.
Section 133
of the
Companies Act, No. 71 of 2008
as amended
(the "Act") places a general moratorium on legal
proceedings against a company in business rescue. The moratorium
granted by this section is designed to provide the company with a
breathing space while the business rescue practitioner attempts
to
rescue the company by designing and implementing a business rescue
plan. The general rule relating to sureties is that
a surety
may rely on any defence which is open to the principal debtor,
provided such defence arises upon the obligation
( one in rem) and
not from some personal privilege granted to the debtor (a defence in
personam)
(Ideal Finance Corporation v Coetzee
1970
(3) SA 1
(A) at 11G-12F).
It was held in
Standard Bank v SA
Fire Equipment (Pty) Ltd
1984 (2) SA
693
(C}
that a statutory moratorium being a purely personal defence would
not be an impediment to the creditor proceeding against the surety.
Equally so, this case was referred to with approval in
Cape
Produce Company (PE) (Pty) Ltd v Dal Maso and Another
2002
(3) SA 752
(SCA).
[12]
The defendant in his opposing affidavit avers that it was never the
intention of the parties that he would be personally liable
for the
principal debtor's liabilities until such time that it had become due
and payable. This argument is entirely without merit.
The language of
the sale agreement and the deed of suretyship is very clear. I could
not find any contextual material relevant
to the interpretation of
the suretyship.
[13]
I am of the view that the critical consideration is whether the
defendant has raised a bona fide defence to frustrate the plaintiff
's application for summary judgment.
[14]
The defendant admits that it has signed an application for a credit
on behalf of the principal debtor on 6 May 2014 in terms
of which it
applied for trade credit facilities with the plaintiff. The defendant
has renounced a defence of excussion. It follows
that the defendant
has failed to set up a bona fide defence to the plaintiff's claim so
as to avoid summary judgment.
[15]
In the result the following order is made:
1.
Summary judgment is granted in favour of the
plaintiff in the amount of R 503 393.68
2.
Interest at 93 per annum tempore morae on R 503
393.68 until the full debt is extinguished.
3.
Costs on the scale of attorney and own client
_________________________________________
T D VILAKAZI
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
APPEARANCES:
FOR
PLAINTIFF: STOOP SC
INSTRUCTED
BY: COETZER & PA RTNERS
FOR
DEFENDANT: ADV R RAUBENHAUMER
INSTRUCTED
BY: HACK STUPEL & ROSS
DATE
HEARD: 2 NOVEMBER 2015