About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2014
>>
[2014] ZAGPPHC 137
|
|
Afri Corporation Limited v Eloff and Another (39679/09) [2014] ZAGPPHC 137 (3 March 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG HIGH
COURT
PROVINCIAL
DIVISION
PRETORIA
Case
Number: 39679/09
DATE:
03 MARCH 2014
In the matter
between:
AFRI CORPORATION
LIMITED
.................................
PLAINTIFF
And
MATHYS IZAK
ELOFF
......................................
1ST
DEFENDANT
ELSABE
ELOFF
................................................
2ND
DEFENDANT
Coram: HUGHES J
JUDGMENT
Delivered on: 3
March 2014
Heard on: 15
August 2013
HUGHES J
1. The plaintiff
claims from the defendants jointly the following:
1.1 Payment of US $
920 844.59;
1.2 Interest on the
amount of US $ 920 844.59, the interest to be compounded monthly at
the following rates:
1.2.1 14% per annum
from 1 September 2007 to 18 February 2008;
1.2.2 13% per annum
from 19 February 2008 to 10 November 2008;
1.2.3 15% per annum
from 11 November 2008 to date of payment.
1.3 Costs of the
suit.
2. The parties have
settled the issue of quantum, the quantum amount having been agreed
upon. The only issue to be determined is
that of liability.
3. The plaintiff’s
claim arises from a document titled: “Acknowledgment of Debt,
Suretyship, Undertaking and Cession”
(“acknowledgment of
debt”).
4. The parties
signed the acknowledgment of debt on 26 December 2007 in Lusaka,
Zambia. The domicilium citandi et executandi chosen
by the parties
for the institution of any action by the plaintiff was, 76 Herman
Street, Ellisras, Limpopo Province, Republic of
South Africa.
5. The defendants
were shareholders of Dumela Farms. The first defendant signed the
acknowledgment of debt as a director of Dumela
Farms. The defendants
also signed the acknowledgement of debt in their personal capacity as
sureties and cedents. It was also
recorded that the defendants bound
themselves as sureties and co-principal debtors in solidum with
Dumela Farms, in respect of
the debt, in favour of the plaintiff.
6. The following are
common cause facts regarding the acknowledgment of debt agreement:
6.1 the defendants
as at 31 October 2007 acknowledged that they owed the plaintiff an
amount of US$920 844.59 in respect of goods
sold and delivered,
services rendered and credit facilities granted by the plaintiff at
the defendants instance;
6.2 interest on the
above amount from 1 November 2007 to date of payment, at rate equal
to the base rate charged from time to time
by Stanbic in Zambia plus
3% points, the interest to be compounded monthly;
6.3 it was recorded
that at signature, the base rate was 11.5% per annum and the interest
rate was 14.5% per annum;
6.4 the amount was
due and payable on 30 August 2007, however an extension was granted
to 31 July 2008;
6.5 in terms of
Zambian law an acknowledgement of debt, reduced to writing and signed
by the debtors constitutes a cause of action;
6.6 likewise a
suretyship reduced to writing and signed by the surety/guarantee, the
breach thereof, in Zambian law, gives rise
to a cause of action.
7. The plaintiff
alleges that it has established its cause of action in that the
acknowledgement of debt complies with the requirements
of Zambian Law
and it is now left to the defendant to prove their defence to the
plaintiff’s claim. The defence raised by
the defendants is that
the plaintiff has been paid in full alternatively the debt has been
reduced by virtue of the fact that the
plaintiff became the owner of
2 900 metric tons of maize which the defendants claim constituted
payment in terms of the mechanism
provided for in the acknowledgement
of debt.
8. The duty to begin
was imposed upon the defendants by an agreement by the parties which
arose as a result of a pre-trial held
prior to the commencement of
the trial. Documents were exchanged and handed into court and the
defendant called two witnesses,
whilst the plaintiff called none. The
plaintiff stated in its opening address that it sought judgment on
the strength of the acknowledgement
of debt which constituted a
novation and functioned independently from any other agreements which
arose.
9. It is important
to set out that after the evidence of the defendant’s first
witness, Mr Eloff, the defendant proceeded
to amend its plea and this
time it averred that the debt had been extinguished by performance or
payment. In that performance or
payment took place on 31 August 2007
when the debt was reduced by US $ 623 500.00 and finally on 31 July
2008 the debt was extinguished.
The defendant concluded that it had
performed and paid, in that the acknowledgement of debt made
provision for mechanism of payment
in clause 9.5, read with 9.3 and
9.4. Thus the delivery of the 2 900 metric tons of maize constituted
payment in terms of the mechanism
provided in the acknowledgement of
debt. In saying so the maize became the property of the plaintiff in
terms of the stipulations
contained in acknowledgement of debt.
10. Only two
witnesses gave evidence on behalf of the defendant and the plaintiff
closed its case thereafter. Thus the plaintiff
places reliance on the
acknowledgement of debt in seeking judgment against the defendants,
the said acknowledgment being a novation
of previous agreement.
11. Mr Eloff
testified that 2005/2006 season was particularly a good season in
that Dumela produce in excess of 10 000 metric tons
of maize. In the
next season 2006/2007 Dumela produced 7 500 metric tons of maize.
Financing was obtained from three institutions
inclusive of the
plaintiff.
12. Mr Eloff
testified that input finance for the next season was obtained from
the plaintiff on the basis that Dumela indicate
the number of hectors
it intended to plant for that season. Calculations were done
according to a formula, application forms were
completed and a credit
application was completed. The terms upon which the plaintiff was
prepared to advance the finance was set
out in this later application
form. Thereafter purchase and sales agreements were entered into for
the sale of the maize to be
produced and moneys were advanced by the
plaintiff for said production. In the circumstances Agricultural
charges were to be granted
and registered.
13. Due to the good
relationship between the parties it often happened that money was
advanced before the formal documents were
completed and registered.
In 2008 Dumela was placed under receivership and at that time there
was 2 900 metric tons of maize stored
at the plaintiff’s depot.
Eloff testified that records were kept but when the receiver took
control, all documents were confiscated
by the receiver. Eloff’s
testimony is that the maize mentioned in the acknowledgment is that
maize kept at the depot of the
plaintiff.
14. Eloff further
testified and read into the record part of an affidavit deposed to
by the plaintiff’s Mr Ian Mitchell Lindsay
which reads as
follows: “It is true that plaintiff advanced the moneys to
Dumela to finance the input of crops to the be
planted and produced
in terms of annexure MIE2 to the defendants answering affidavit. As
appears from the said annexure, repayment
of the loan was to be made
by means of delivery to the plaintiff of the maize to be produced
with the input finance. In terms of
clause 3.2 the loan had to be
repaid, either by delivery of the grain, or by payment of the loan
before 30 September 2007…”
.
15. Eloff also made
reference to a letter by Mr Kiran Naik, one of the joint receivers,
addressed to the plaintiff’s attorneys
in Lusaka, wherein Naik
referred to a letter by the plaintiff’s attorney in which the
plaintiff claimed to be the owner of
the 2 570 metric tons of maize
stored at Dumela Farms Ltd (in receivership) which is confirmed by
Lindsay in his replying affidavit
to the provisional sentence
proceedings. This factor of the plaintiff claiming ownership of the
maize is further compounded by
the terms of the credit application
that was read into the record by Eloff.
16. I set out the
portion that relevant from the document read into the record by Eloff
“ …This paid out will not be
cash flow item, as the
value of the transaction will be credited against the summer and
winter 2006 debt and asset finance instalments.
This value will be
settled against his debt as soon as all securities and documentation
are in place. The client has already signed
the sale contract for the
wheat and the purchase and sale agreement for the maize…
Ownership of each consignment of maize
will not pass to the client
until the client has paid the maize in full, including interest and
inspection charges. The ownership
of the grain whilst in storage vest
with Afgri Corporation. ” .
17. Eloff also
testified that the plaintiff and Dumela entered into a number of
purchase and repurchase agreements. In all such
agreements ownership
of the maize was to be retained with the plaintiff. He pointed out
that the repurchase agreement for the tune
of US$647 520.00, being
the credit application in question, is clearly evident in the letter
of offer that forms part of the agricultural
charge. He emphasised
that the plaintiff has not discovered this specific sales contract,
which was clearly mentioned as forming
part of the agricultural
charge.
18. It is relevant
to point out that the plaintiff did not dispute the existence of such
agreements and did not call any witnesses
as regards the
particularity of such agreements and the whereabouts of the last
repurchase agreement mentioned above.
19. It was argued on
behalf of the defendants that Eloff’s testimony established
that the plaintiff was the owner of the 2
900 metric tons of maize
referred to in the acknowledgement of debt and the plaintiff failed
to credit Dumela with the purchase
considerations contained in the
sale and repurchase agreements. It was submitted that this
establishes the defendant’s plea.
20. Mr Moonga, an
assistant farm manager based at Mukonchi farm testified on behalf of
the defendant that during January 2008 there
were 109 000 bags of
maize stored at Mukonchi farm. Thus there was 5 450 metric tons of
maize at this farm when the receiver took
over during January 2008.
21. The storage of
the bags was as follows: Afgri depot had 58 000 bags; B2 had 20 000
bags; B1 had 1 000 bags and C1 had 30 000
bags. If one converted the
bags at Afgri depot by the applicable formula then it would amount to
2 900 metric tons of maize. He
also testified that he kept a record
of the amount of bags because his bonus was dependant on the yield of
crop produced.
22. In 2007 one
Moses arrived at the Mukonchi farm to guard the maize on behalf of
the plaintiff. When the receiver took over the
records he had were
confiscated. He was adamant that the 2 900 metric tons of maize
stored at the plaintiff’s depot comprised
of 10% of 2005/2006
harvest and 90% of 2006/2007 harvest. He remained in the employ of
the landowner of Mukonchi farm until 2011
and as such he together
with Moses witnessed the maize being removed from the plaintiff’s
depot.
23. The plaintiff
argued that the delivery of the 2 900 metric tons before 31 August
2007 did not constitute payment or performance
of the debt in terms
of the acknowledgement of debt. As it was signed for an amount of US$
920 844.59 on 26 December 2007. Thus
the debt only arose on 26
December 2007 and delivery of the maize before the cause of action
could not constitute payment of the
debt.
24. As at 16
November 2006 the plaintiff confirmed in a credit application on
behalf of Dumela farm that the plaintiff had “purchase(d)
from
Dumela Farms 2 500 t of maize at $152/t ($190 x 80%) on a purchase
and sale agreement ($380 000)...” The plaintiff was
to lease
space from Dumela farms to store the maize and ownership was to pass
as soon as 100% of the purchase price of the value
of the grain was
paid. The plaintiff was to resell the maize to Dumela at the price of
$152/t plus costs (interest plus inspection
fees).
25. Could the
plaintiff under the circumstance become the owner of the maize so
purchased?
The receivership
that the defendants were placed under was in respect of a debenture
that the Zambian National Commercial Bank(“
Zanaco”) had
received from Dumela on 10 October 1994 over all Dumela’s
property whatsoever both present and future.
Two further
supplementary debentures that included floating charges were issued
in favour of Zanaco on 30 September 1999 and on
10 April 2000
respectively. The floating charge covered all the property, assets
and rights whatsoever and wheresoever of Dumela.
A floating charge in
terms of the Zambian Agricultural Credit Act (“the act”)
operated as security over the assets described
in the charging
document. Now a floating charge “floats” over the assets
until crystallization takes place. This occurs
at such time that an
event of default by the borrower or the appointment of a receiver
over the borrower’s assets takes place.
When the charge
crystallises it then attaches to the charged assets. In this instance
Dumela defaulted which resulted in Zananco
placing the defendants
under receivership on 6 February 2008, thereby crystallising the
floating charge over all property, assets,
and rights whatsoever and
wheresoever of Dumela.
Bearing in mind that
a borrower can only charge assets he owns, if one creates a charge
over assets that one did not own, it amounts
to fraud. According to
the Zambian Agricultural Credit Act priority is given to the rights
of the first holder of the agricultural
charge, in respect of the
time that they were registered. This is in terms of section 7(2) of
the said act , agricultural charges
shall, in relation to one
another, have priority in accordance with the time that they were
respectively registered under the act,
and an earlier charge will
enjoy priority over a later charge.
Section 7(2) reads
as follows “Agricultural charges shall, in relation to another,
have priority in accordance with the times
at which they are
respectively registered under this Act: Provided that any
agricultural charge created solely to secure the payment
of insurance
premiums upon farming stock shall have priority over any other
agricultural charge not created for such purpose.”
Therefore the charge
that was registered on behalf of the plaintiff, which one calls a
fixed charge, as it’s attached to specific
assets, which is
pertinent to this dispute, could not have been registered legally in
terms of section 7(3) of the act, as there
was already a floating
agricultural charge in existence, in favour of Zanaco. Dumela was no
longer the owner of the assets that
it put up in favour of the
agricultural charge of the plaintiff. The assets were not Dumela’s
to assign to the charge in
favour of the plaintiff as they belonged,
in terms of priority, to Zanaco. In addition the assets were subject
to a floating charge
of Zanaco.
Section 7(3) reads
as follows “When an agricultural charge creating a floating
charge has been created, an agricultural charge
purporting to create
a fixed charge on any of the property comprised in the floating
charge shall, as respects the property subject
to such floating
charge, be of no effect so long as the floating charge remains in
force.”
In short the
plaintiff therefore could not become the owner of assets that Dumela
did not possess as they were already subject to
an agricultural
charge in favour of Zanaco.
26. That being said
the defendant cannot under the circumstances prove that ownership of
the 2 900 metric tons of maize had passed
to the plaintiff, when they
concluded the credit agreement, all the purchase and repurchase
agreements and the acknowledgment of
debt.
27. The defence
raised by the defendants is that the plaintiff has been paid in full
alternatively the debt has been reduced by
virtue of the fact that
the plaintiff became the owner of 2 900 metric tons of maize which
the defendants claim constituted payment
in terms of the mechanism
provided for in the acknowledgement of debt. This defence of the
defendant cannot stand in the face of
what I have concluded above
with regards to the agricultural charge that the plaintiff was under
impression it had over Dumela.
28. Does a valid
contract exist in the form of the acknowledgement of debt relied upon
by the plaintiff?
It has been
established by the experts in Zambian Law employed by both parties,
Mr George Chisannga and Mr Arshad Dudhia (“the
experts”)
who compiled a joint minute which was handed into court by consent,
that an acknowledgement of debt, in Zambian
Law, constitutes a cause
of action. The plaintiff places reliance on this acknowledgment of
debt to assert its course of action.
Having established
that the defendants did not have the right to contract the assets
that they did, does this not make the said
acknowledgment of debt
invalid? According to section 21(1) of the Sale of Goods Act 1893,
applicable in Zambian Law, the sale of
goods not that of the owner of
those goods amounts to the buyer thereof acquiring no better right
than the seller of those goods,
if the sale thereof is done without
the authority and consent of the owner.
Section 21(1) reads
“ Subject to the provisions of the Act, where goods are sold by
a person who is not the owner thereof,
and who does not sell them
under the authority or with the consent of the owner, the buyer
acquires no better title to the goods
than the seller had, unless the
owner of the goods is by his conduct precluded from denying the
seller’s authority to sell”.
The owner is Zanaco
and from the documentation and the fact that receivership was
enforced by Zanaco it is clear that Dumela did
not have authority or
consent of Zanaco to enter into the agreement that it did with the
plaintiff as regards the goods that were
not owned by the defendants
in the first place.
29. In terms of
section 23 of the Sale of Goods Act, “when the seller of goods
has a voidable title thereto, but his title
has not been avoided at
the time of the sale, the buyer acquires a good title to the goods,
provided he buys them in good faith
and without notice of the
seller’s defect of title.” In this instance it cannot be
said that the title of the Dumela
in the assets had not been avoided
as a floating charge had been affected over the said assets. This to
my mind reinforced Zanaco’s
ownership over the assets.
30. Therefore from
my understanding no valid contract could have come into existence in
the form of the acknowledgement of debt
relied upon by the plaintiff.
31. Having
established the above it is my conclusion that the document relied
upon by the plaintiff to prove its claim against the
defendants is
neither a valid document nor agreement and as such the plaintiff
cannot rely on same as proof of its claim against
the defendants. The
claim of the plaintiff falls to be dismissed on the premise that no
reliance can be placed upon an invalid
document, that being the
acknowledgement of debt.
32. Accordingly I
make the following order;
29.1 The plaintiff’s
claim is dismissed with costs.
W. Hughes Judge
of the High Court
Delivered on: 3
March 2014
Heard on: 15
August 2013