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[2015] ZAFSHC 216
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Standard Chartered Bank v Grobler (1076/2014) [2015] ZAFSHC 216 (12 November 2015)
IN
THE
HIGH COURT
OF SOUTH AFRICA
FREE
STATE
DIVISION,
BLOEMFONTEIN
Case
number: 1076/2014
In
the matter between:
STANDARD
CHARTERED
BANK
Applicant
and
BAREND
CHRISTIAAN GREYLING
GROBLER
Respondent
CORAM:
NAIDOO, J
HEARD
ON:
25 JUNE 2015
JUDGMENT
BY:
NAIDOO, J
DELIVERED
ON:
12 NOVEMBER
2015
[1]
The applicant seeks an order against the respondent for payment of
the sum of (Fifty Million Three Hundred and Forty Eight Thousand
and
Thirty Six Rand and Thirty Nine Cents (R50 348 036.39), together with
interest thereon, and costs. The applicant was represented
by Mr KW
Luderitz and the respondent was represented by Mr AJR Van Rhyn in
this court.
[2]
The applicant and an entity known as
Zesto Grondbone CC (Zesto) entered into a loan
facility
agreement on 11 September 2009, in order to fund Zesto's business
activities, which essentially involved the purchase
and disposal of
groundnuts. The loan facility enabled Zesto to draw loans from time
to time to purchase groundnuts and required
that Zesto repay each
such loan within 270 days. The intention was to allow Zesto
sufficient time to purchase and dispose of the
groundnuts so that the
loan could be repaid from the proceeds of the sale. Zesto drew loans
against the facility in 2009 and 2010,
but at some stage defaulted in
the repayments. Thereafter the parties entered into a further
agreement in January 2012, which has
been referred to in the papers
as a "term loan". For convenience, I will do the same. The
purpose of the term loan was
to reschedule the amounts that were due
by Zesto, but which were unpaid in terms of the loan facility
agreement. The term loan
was subject to a number of terms and
conditions. The applicant obtained additional security for Zesto's
debt by way of a personal
guarantee from the respondent, which was
signed by the respondent on 11 January 2012, which I will deal with
later.
[3]
Ultimately Zesto defaulted in repayments in respect of the term loan
as well and the applicant, by way of a written notice,
accelerated
the loan under the Facility Agreement as well as the Term Loan, and
declared the full amount in respect of both loans
immediately due and
payable. The total amount due to the applicant in respect of both
loans as at 31 August 2013 was Fifty Million
Three Hundred and Forty
Eight Thousand and Thirty Six Rand and Thirty Nine Cents (R50 348
036.39).The applicant at some stage also
brought an application for
the liquidation of Zesto, which was finally liquidated in April 2013.
[4]
After the respondent failed to respond to the applicant's written
demand for payment, the applicant launched this application.
The
respondent raised a number of defences in his answering affidavit,
upon which he based his assertion that the applicant was
not entitled
to the relief it seeks. He indicates that Zesto issued summons
against the applicant for damages it suffered as a
result of its
stock of groundnuts and maize being damaged by water. The allegation
is that there was an oral agreement between
Zesto and the applicant,
in terms of which the latter was to insure such stock against such
damage while the stock was stored at
Zesto's premises, which it
failed to do. The insurer repudiated the claim resulting in the
damages which Zesto suffered. The respondent
alleges that if the
amount of Zesto's damages and the penalty interest claimed by the
applicant are deducted from its claim, then
Zesto would only owe the
applicant an amount of Thirty Nine Million One Hundred and Ninety
Nine Thousand Four Hundred and Sixty
Seven Rand (R39 199
467. 00).
[5]
The respondent also alleges that Zesto entered into a collateral
management agreement with the applicant and Global Inspection
Collateral Control (GICC), an entity conducting business as an
independent warehouseman who provided collateral management services
in respect of stock/goods stored at Zesto's premises which
stock/goods were pledged to the applicant. The respondent alleges
that GICC failed to secure its
premises, contrary to instructions, resulting
in
a shortfall in its stock of groundnuts, destined for Zesto's
customers, and further financial loss to Zesto. There are
a number of
other aspects raised by the respondent, but I mention two of those.
Firstly the respondent asserts that Zesto was finally
liquidated on
25 April 2013 but ceased trading in July 2013. The applicant should
have lodged its claim against Zesto with the
liquidators and proved
its claim and, I understand him to say, that only thereafter proceed
against the respondent for those amounts
or, alternatively, for those
amounts which cannot be recovered from Zesto. The second aspect is
the respondent's assertion that
while a special notarial bond was
registered the applicant failed to register a second covering
mortgage bond for Twenty Million
Rand (R20 million) over a property
described as "Billersbekhoek" in the Facility Letter
relating to the Term Loan under
the heading "Limited Terms and
Conditions". If the applicant had done so, his liability as
guarantor would have been
diminished by that amount.
[6]
The applicant, in Reply, denied that it was liable for any damages
suffered by Zesto as a result of the water damage to its
stock. The
applicant agreed that there was a collateral management agreement
with GICC but asserts that Zesto retained control,
management and
disposal of stock. In addition to the collateral management
agreement, the applicant and Zesto concluded a custody
agreement
(which was attached to the Replying Affidavit) in terms of which
Zesto was required to procure the storage of the stock
(Relevant
Commodities) "without any damage to or loss of the Relevant
Commodity" The applicant also dealt with the valuation
of the
Zesto's peanut factory and equipment over which it held a notarial
bond as well as the disposition of stock by (presumably)
the
respondent, thus diminishing the applicant's security. With regard to
the second covering mortgage bond, the appellant asserts
that it was
thwarted in the registration of the bond by the non-co-operation of
the respondent in furnishing it with the relevant
information and
documentation for the registration of the bond. The applicant also
points out that the guarantee signed by the
respondent in any event
binds him as a principal debtor, and it is not open to him to contend
that the applicant must first prove
a claim and recover monies from
the insolvent estate of Zesto before proceeding against
him. It is common cause that
payments in respect of the two loans
continued until June 2013.
[7]
In his Heads of Argument, Mr Van Rhyn, on behalf of the respondent,
takes the point that the registration of a second covering
bond over
the farm Billersbekhoek was a condition precedent to the operation of
the contract. The non-registration of the bond
therefore meant that a
condition precedent was not fulfilled and had the consequence that no
agreement came into being between
Zesto and the applicant, thus
suspending the obligation of the surety. He further alleged that even
though the respondent bound
himself to a fixed amount, it is
necessary to ascertain the amount of the principal debtor's
indebtedness. The creditor bears the
onus to establish the debt he
claims and in this case the applicant has failed to do so. It was
also Mr Van Rhyn's argument that
the applicant ought to have issued
summons against the respondent and not have proceeded by way of
motion proceedings. There are
factual disputes in this matter which
call for the court to exercise its discretion and dismiss the
application with costs.
[8]
It is common cause that the respondent signed the Personal Guarantee
in which he bound himself, inter alia, as a co-principal
debtor with
Zesto. The respondent guaranteed, irrevocably and unconditionally, as
the principal obligor, the due and punctual performance
of the
Borrower's (Zesto's) obligations to the applicant as they fell due.
In terms of clause 2 of the Guarantee, the respondent's
obligation as
guarantor was a principal obligation and not an
accessory obligation only. In
order to
properly contexualise the matter it is useful at this stage to set
out the provisions of Clauses 3.3 and 3.4
of the Personal Guarantee:
"3.3
Waiver of defences
The
Guarantor's obligations and the Bank's rights under this Guarantee
will not be affected by an act or omission which, would reduce,
release or prejudice any of the Guarantor's obligations under this
Guarantee (whether or not known to the Guarantor or the Bank).
These
include:
(a)
the existence of any claim of set-off or other rights which the
Guarantor may
have against the Borrower, the Bank or any other person
or which the Borrower may have at any time against the Bank;
(b)
the Bank's grant to the Borrower of any other credit facilities or
the withdrawal
or the restriction by the Bank of any credit
facilities or the failure to notify the Guarantor of any such
granting, withdrawal
or restriction;
(c)
any time, waiver or consent granted to, or composition with, the
Borrower or any other person;
(d)
the taking, amendment, compromise, exchange, renewal or release of,
or
failure to perfect, take up or enforce any rights against or
security over assets of, the Borrower or any other person or any non
presentation or non-observance of any formality or other requirements
in respect of any instrument or any failure to realise the
full value
of any security;
(e)
any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of the Borrower or any
other person;
(f)
any amendment (however fundamental), increase in, waiver, release or
replacement of any agreement, document
or security;
(g)
any unenforceability, illegality or invalidity of any obligation of
any person under any agreement,
document or security;
(h)
any insolvency or reorganisation or similar proceedings of the
Borrower;
(i)
any variation, renewal, increase, extension, compromise, discharge,
dealing
with, exchange or renewal of any right or remedy which the
Bank may have now or after the date of this Guarantee against the
Borrower
or any other person; or
U)
any change in the constitution (whether by amalgamation, merger,
reconstruction or otherwise) or ownership
of the Borrower or the bank
or any other person.
3.4
Immediate Recourse
The
Guarantor waives any right it may have of first requiring the Bank
(or any trustee or agent on its behalf) to:
(a)
proceed against any person;
(b)
enforce any other rights or security; or
(c)
claim any payment from any person,
before
claiming from the Guarantor under this Guarantee"
[9]
The respondent admits in his answering affidavit that Zesto is
indebted to the applicant, in an amount, according to him, of
R47 667
723. Apart from asserting that if the applicant had registered the
second covering mortgage bond referred to earlier, his
liability to
the applicant would have been reduced by R20 000 000.00, the
respondent does not attack, in the papers, the
validity of the
agreements entered into between the applicant and Zesto. This attack
comes rather belatedly in the respondent's
Heads of Argument, and was
not part of the case to which the applicant had to reply. It is
instructive to note that the First Schedule
to the Facility Letter
(in respect of the term loan) is headed "Conditions Precedent"
and lists a number of conditions
therein but makes no mention of the
second covering mortgage bond. The Second Schedule to the Facility
Letter is headed "Approved
Security" and therein is listed
the registration of the second covering mortgage bond over the farm
Billersbekhoek. The Fifth
Schedule, under the heading "Limit
Terms and Conditions", item 4 (there is no item 2 under this
heading) also lists the
second covering mortgage bond mentioned in
Second Schedule. Neither the Second nor the Fifth Schedule specifies
a time by which
the said bond was to be registered nor is
registration of the bond listed as a condition precedent, given that
the First Schedule
specifically provides for conditions precedent.
[10]
Neither counsel indicated how the listing in the Fifth Schedule is to
be interpreted. Mr Luderitz did however deal, in his
Supplementary
Heads of Argument, with Mr Van Rhyn's contention that registration of
the second covering mortgage bond is a condition
precedent, the
failure to register which prevented the coming into operation of the
contract between the applicant and Zesto. I
agree with Mr Luderitz's
submission that a proper reading of clause 3.1 of the Facility letter
in respect of the term loan does
not lend itself to the
interpretation that registration of the second covering bond is a
condition precedent to the operation of
the agreement. In my view, it
could very well be interpreted to be a term of the agreement, which
should have been complied with,
but non compliance of which did
not affect the validity of the contract. I am unable, therefore, to
agree with the respondent's
reasoning that the registration of the
covering bond was a condition precedent. This argument appears to be
an afterthought and
cannot be sustained. At best, the applicant may
be said to have been remiss in not pursuing the registration of its
security with
a little more vigour, after it was faced with the
dilatory conduct, on the respondent's part, that it complains of. In
my view,
this does not create a factual dispute which affects the
liability of the respondent to pay the debt, as undertaken by him.
[11]
The respondent also raises, only in his Heads of Argument, the issue
of the late filing of the
Replying
Affidavit, leaving the applicant with no case, on the papers,
to respond to in this regard. The applicant's
attorney, therefore,
saw fit to file an affidavit regarding the acceptance by the
respondent's attorney of the replying affidavit,
without any
challenge to the fact that it was filed out of the time allowed in
the Rules of Court. This is a most unsatisfactory
way to conduct
litigation and is akin to litigation by ambush. In any event, to the
extent necessary, I condone such late filing
of the Replying
Affidavit.
[12]
As alluded to, the respondent bound himself as a "principal
obligor", in other words as a surety and co-principal
debtor for
the performance of Zesto's obligations to the applicant. A person who
has bound himself as surety and co-principal debtor
incurs equal
obligations to that of the principal debtor and is liable with him
jointly and severally. The obligation of the surety
and co-principal
debtor is enforceable at the same time as that of the principal
debtor. In
Neon
and
Cold
Cathode
Illuminations
(Pty)
Ltd
v Ephron 1978(1)
SA
463 (A),
the Appellate Division held that
generally the only consequence that flows from the surety also
undertaking liability as a co-principal
debtor is that vis-a-vis the
creditor he thereby tacitly renounces the ordinary benefits
available to a surety, such as those
of excussion and division. (See
also
Caney's
"The
Law
of
Suretyship
p56-57).
Clauses 3.3 and
3.4 of the Personal Guarantee, which I have set out above exclude
each of the defences that the respondent now seeks
to raise. In my
view such aspects as he purports to raise as factual disputes are not
material to the claim of the applicant.
[12]
In addition, the respondent agreed to be bound by the production of a
certificate of balance as prima facie proof of the amount
owed by
him. The applicant did in fact furnish such a certificate of balance,
signed by a functionary of the applicant who was
authorised to do so.
The argument that the applicant must prove its claim and show how the
amount of its claim is made up will
not avail the respondent.
ORDER
[13]
In the circumstances, I make the following order:
13.1
The respondent is ordered to pay to the applicant the amount of Fifty
Million Three Hundred and Forty Eight
Thousand and Thirty Six Rand
and Thirty Nine Cents (R50 348 036,39);
13.2
Interest thereon from 31 August 2013 to date of payment;
13.3
Costs of suit, such costs to include the costs of Senior Counsel.
____________________
NAIDOO,
J
On
behalf of Applicant:
Adv KW Luderitz SC
Instructed
by:
Norton Rose Fullbright
C/O Webbers Attorneys
96 Charles Street
BLOEMFONTEIN
(Ref: Mr Koller)
On
behalf of Defendant : Adv Van Rhyn SC
Instructed
by:
Matsepes Incorporated
26/28 Aliwal Street
BLOEMFONTEIN
(Ref:
Senekal/ja/GR080/0001)