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[2014] ZAGPPHC 117
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South African Securitisation Programme (Pty) Limited and Others v Bula Technologies (Pty) Limited and Others (45327/11) [2014] ZAGPPHC 117 (28 February 2014)
IN THE
GAUTENG DIVISION OF THE HIGH COURT PRETORIA,
REPUBLIC
OF SOUTH AFRICA
CASE
NO: 45327/11
DATE:
28 FEBRUARY 2014
In
the matter between:
SOUTH
AFRICAN SECURITISATION PROGRAMME (PTY)
LIMITED
.....................
First
Plaintiff
SASFIN
BANK
LIMITED
..............................................................................................
Second
Plaintiff
SUNLYN
(PTY)
LIMITED
.................................................................................................
Third
Plaintif
And
BULA
TECHNOLOGIES (PTY)
LIMITED
..............................................................
First
Defendant
RICHARD
ISAACS
.................................................................................................
Second
Defendant
LEOCARDO
FORBAY
...............................................................................................
Third
Defendant
JUDGMENT
Tuchten
J:
1
The
plaintiffs are associated companies. I shall refer to the first
plaintiff as SAS and the second and third plaintiffs as Sunlyn
and
Sasfin respectively. Sunlyn and Sasfin operate in the financial
services
industry. Sunlyn acts as the marketing arm of Sasfin. It looks for
credit agreements,
1
such as rental and instalment sale agreements, in the market. When it
finds a potential customer (to which I shall refer as a dealer”)
which has made its goods available to a lessee or purchaser under a
written credit agreement, it procures an offer from the dealer
to
cede the agreement to Sunlyn. Sunlyn then simultaneously offers to
cede the agreement to Sasfin. If Sasfin approves the transaction,
it
proceeds to pay the user the agreed price on behalf of Sunfyn. The
relevant written cession agreements make provision for the
cessions,
both to and away from Sunlyn, to take place upon payment of the
agreed price.
2
SAS
operates in the derivatives market. Under a written agreement between
SAS, Sasfin and others, Sasfin must from time to time
cede such
credit agreements as may be agreed between them to SAS for
incorporation into its derivative instruments.
3
The
first defendant (“Bula”) entered into a written agreement
of hire (the first rental agreement) with Dream Weaver
Trading 134
(Pty) Limited (“DW”) on 17 March 2008 in terms of which
it rented from DW a switchboard and certain peripheral
hardware at a
monthly rental of R7 255,97. Buia concluded a second agreement of
hire (the second
In this judgment use the expression credit
agreement in the wide sense, not the narrow sense in which that
expression is used in
the
National Credit Act, 34 of 2005
.
rental
agreement) with DW on 5 November 2008 at a monthly rental of R3
674,11. The terms of both these agreements appear from the
written
terms of business between Bula and DW, upon which the parties agreed
generally to do business, and schedules specific to
the first and
second agreements. The schedules identify the goods to be hired and
fix the monthly rental. I shall refer to the
first and second rental
agreements collectively as the two credit agreements.
4
The
second and third defendants stood surety for the debts of Bula. Both
the second and the third defendants signed a deed of suretyship
in
favour of DW on 5 March 2008. Clause 1 of the suretyship reads:
Subject to
the terms and conditions set out below, the undersigned are hereby
bound jointly and severally as sureties and co-principal
debtor/s
with the User (as defined in the Agreement of Hire)
2
for all amounts which are now or
might in the future become payable
by
the User to [DW] or our cessionary/ies in the event of a cession
in
terms of the agreement of hire or arising out of or incidental to any
other cause howsoever arising,
[my
emphasis]
5
Clause
10 of the suretyship obliges the sureties to pay any legal costs that
may be awarded against them as between attorney and
own client.
The
User is defined as Bula.
6
It
is not in dispute that the goods which were the subject of the two
credit agreements were delivered to Bula, were free of defects
and
were used by Bula.
7
DW
was a customer of Sunlyn and Sasfin. DW offered to cede the two
credit agreements to Sunlyn in terms of a written agreement between
them described as their main cession agreement. Sunlyn in turn
offered to cede them to Sasfin which decided to accept the cessions.
Sasfin offered the two credit agreements to SAS.
8
Bula
defaulted on its obligations under the two credit agreements. The
effect of this default was that all the rentals then outstanding,
plus interest calculated from day to day at 15% per annum on the
unpaid amounts, became due for payment by Bula. R282 217,25 and
R138
888,58 respectively, together with interest and costs as between
attorney and own client.
9
SAS took out a summons in this court against Bula and the two
sureties as
first, second and third defendants respectively. The
summons was later amended to include Sasfin and Sunlyn as second and
third
plaintiffs respectively. The plaintiffs claimed that the three
defendants were jointly and severally liable to SAS alternatively
Sasfin alternatively Sunlyn for the rentals due under the two credit
agreements, which the plaintiffs calculated, as at 26 July
2011, at
10
Bula
and the second defendant did not defend the action and I was told
that applications for default judgment are pending against
them. The
third defendant did defend. The case before me relates to the issue
of the third defendant’s liability to the plaintiffs
as
described in paragraph 9 above.
11
in
the third defendant’s plea to the claim of SAS before amendment
to include the other two plaintiffs, the third defendant
admitted the
two credit agreements and the deed of suretyship to which the third
defendant was a party. But in the amended plea,
these admissions are
controverted by assertions that the third defendant bore no knowledge
of the terms of the two credit agreements
and “denies the
suretyship and submits that the agreement does not comply with
Section 6 of the General Laws Amendment Act
The two credit agreements
and the suretyship were proved. Counsel for the third defendant did
not argue that the suretyship did
not comply with the statute.
Counsel for the third defendant conceded during argument that the
plaintiffs had established the quantum
of their claims.
12
The
first issue remaining for decision, as identified by counsel for the
third defendant, is whether the plaintiffs have established
the
cessions upon which they rely. Counsel for the parties agreed that
the crucial cession was the cession alleged to have taken
place away
from DW and to Sunlyn. It was agreed between counsel that if this
cession were established, the cessions away from Sunlyn
to Sasfin and
away from Sasfin to SAS would be accepted as having been established;
so that subject to the third defendant’s
other defences. SAS,
rather than any one of the other plaintiffs, would in principle be
the plaintiff entitled to judgment,
13
The
second issue remaining for decision is whether the third defendant
should be held liable, on the suretyship, for the amount
owed by Bula
in respect of the claim on the second rental agreement.
14
Two
submissions were made by counsel for the third defendant in relation
to the cessions, alleged by the plaintiffs to have been
made by DW to
Sunlyn, of DW’s rights under the two credit agreements. The
first is that the cessions were dependent on payment
having been made
by Sunlyn to DW of the agreed consideration for the cessions and that
payment had not been proved.
15
Evidence
which comprehensively covered this point was given by Mr Gray, a
representative of DW, and MrVorster, the payment manager
of Sasfin.
The context is that the business of Sasfin and Sunlyn is to provide
financing. Bula needed the finance because it could
not pay cash for
its switchboard apparatus. DW wanted its cash up front, rather than
wait each month for its rental.
16
Gray
gave evidence that the amounts in question were indeed paid into DW’s
bank account. This evidence was not attacked or
even addressed in
cross-examination. Vorster identified Sasfin’s payment
requisitions and explained that Sasfin paid the
cession
considerations to DW on Sunlyn’s behalf. Although this evidence
of Vorster was touched upon in cross-examination,
it was not
contradicted.
17
Vorster
explained that it was of the essence of the transactions that DW
should be paid for the cessions. It could hardly be otherwise.
DW had
bought the goods, needed to pay for them and otherwise needed cash
for its business. That was why it offered the cessions
to Sunlyn.
Vorster said, and the probabilities overwhelmingly support him, that
if payment to DW had not been made, his telephone
would never have
stopped ringing as DW tried to find out what was holding up its
money. But this never happened, Vorster said.
So the documents, the
uncontradicted testimony and the probabilities all favour the
plaintiff.
I hold
that Sasfin indeed paid DW the agreed considerations for the cessions
on behalf of Sunlyn.
18
The
second ground upon which the cession away from DW to Sunlyn was
attacked was on a reading of clause 8 of the main cession agreement
between DW and Sunlyn. This main cession agreement created a
framework under which cessions from DW to Suniyn would take place.
It
is to that extent an obligationary agreement, preceding potential
transfer agreements between DW and Sunlyn under which rights
would
actually pass from the one to the other.
19
Two
types of cessions are provided for in the main cession agreement: out
and out cessions pursuant to clauses 1 to 4 and a security
cession
pursuant to clause 8.
20
But
the plaintiffs do not rely on clause 8. They rely on clauses 1 to 4.
So the argument is stillborn. But the content of the argument
is in
my view also quite without substance. The argument is that there is
no evidence of any endorsements in relation to either
of the two
credit agreements. Clause 8 reads:
As
security for the discharge of [DWJ’s obligations hereunder as
well as all other obligations which it may now or in the
future
incurto Sunlyn from whatsoever cause and howsoever arising [DW]
hereby irrevocably cedes to Sunlyn all claims, rights of
action and
receivables which are now and which may hereafter become due to it by
all person/s (“the debtors”) from
any cause of
indebtedness whatsoever and/or any money standing to its account with
any bank, hereby undertaking on demand by Sunlyn
to take all such
steps as may be necessary to enable Sunlyn to enforce the rights
granted to Sunlyn herein and to deliver to Sunlyn
on demand all
documents (duly endorsed and/or completed where appropriate)
evidencing and/or embodying and/or relating to any such
claims,
rights of action and receivables.
21
It
is perfectly clear that while the provisions of clauses 1 to 4 are
merely obligationary, clause 8 constitutes a transfer agreement.
The
security cessions took place on signature of the main cession
agreement. The obligation to endorse arises only after the security
cession takes place. So a failure to endorse, whatever that may mean,
cannot affect the validity of the security cession. Moreover,
the
obligation to endorse only arises “where appropriate”. It
was never pleaded that an endorsement was appropriate.
Counsel for
the third defendant could not tell me what should have been endorsed,
what the content of the endorsement should have
been or why
endorsements were appropriate in the present case.
22
The
cession away from DW to Sunlyn has thus been proved.
23
The
final argument advanced by counsel for the third defendant was based
on the fact that the third defendant had been in the employ
of Bula
when he stood surety under the deed of suretyship but that he had
left Bula’s employ before the conclusion of the
second credit
agreement. Although it was never pleaded or even put to any of the
witnesses called by the plaintiff, the argument
was that it would be
contrary to the interests of justice to hold the third defendant
liable on a suretyship signed when he was
an employee of the
principal debtor in relation to debts which arose after he had left
the principal debtor’s employ. The
third defendant testified
that he had never intended that the deed of suretyship would be used
to hold the third defendant liable
for debts of Bula arising after
the third defendant left Bula’s employ.
24
This
argument is entirely without merit. The language of the suretyship
does not restrict its ambit to debts arising while the third
defendant was in the employ of Bula. It is not suggested that DW, let
alone Sunlyn, knew, when the suretyship was signed, that
the third
defendant did not intend it to cover debts of Bula arising after he
left Bula’s employ. It is not suggested that
any other
contextual material is relevant to the interpretation of the
suretyship.
25
A
contention similar to that advanced on behalf of the third defendant
found favour in Rand Bank v Rubenstein
3
But
the proposition was firmly rejected by the Appellate Division in Bank
of Lisbon and South Africa Udvde Ornelas and Another
4
And
in Rubenstein,
the
defence was pleaded, so giving the plaintiff a chance to deal with
it.
26
The
first plaintiff is therefore entitled to judgment. As I have said,
quantum was conceded by counsel for the third defendant.
Quantum was
however proved through certificates of a manager of Sunlyn under
clause 9 of the terms of business which governed the
dealings between
Bula and DW and clause 11 of the deed of suretyship.
27
Costs
on the scale as between attorney and own client are provided for in
clause 10 of the deed of suretyship.
28
I
make the following order:
1
There
will be judgment for the first plaintiff against the third defendant
for:
1.1
payment
of the sum of R282 217,25;
1.2
payment
of the sum of R138 888,58;
1.3
interest
on both judgment debts at the rate of 15% per annum calculated from
day to day from 26 July 2011 to date of payment.
2
The
third defendant must pay the plaintiffs’ costs on the scale as
between attorney and own client.
3
Thisjudgmentwillbejointand
several with anyjudgmentwhich may in due course be granted against
the first or second defendants arising
from the claims in the
plaintiffs’ particulars of claim as amended.
NB
Tuchten
Judge
of the High Court
1
In
this judgment use the expression credit agreement in the wide sense,
not the narrow sense in which that expression is used
in the
National Credit Act, 34 of 2005
.
2
The
User is defined as Bula.
3
1981
2 SA 207
W 215B'D
4
1988
3 SA 580
A 607B