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[2011] ZAFSHC 182
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Umsobomvu Youth Fund v E2BA LE2 and Others (111/2011) [2011] ZAFSHC 182 (10 November 2011)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 111/2011
In
the matter between:-
UMSOBOMVU
YOUTH FUND
…...............................................
Applicant
and
E2BA
LE2 (PTY) LTD
…...............................................
First
Respondent
(Registration No.
2007/031364/07)
SAMUEL MORENA
LEHLOKA
…...........................
Second
Respondent
THABISO LIVINSTONE
MAY
…..................................
Third
Respondent
THABO MAY
…..........................................................
Fourth
Respondent
LERATO MSIBI
….........................................................
Fifth
Respondent
OGANNE SHYLOCK PULE
….....................................
Sixth
Respondent
MOJAU RAMATHE
….............................................
Seventh
Respondent
_____________________________________________________
JUDGMENT
BY:
KRUGER, J
_____________________________________________________
HEARD
ON:
3 NOVEMBER 2011
_____________________________________________________
DELIVERED
ON:
10 NOVEMBER 2011
_____________________________________________________
(i)
INTRODUCTION
1. The applicant seeks
repayment of a loan it made to the first respondent. The liability of
the second to seventh respondents,
directors of the first respondent,
flows from a deed of suretyship. The applicant also seeks
confirmation of a rule perfecting
a Notarial Bond over first
respondent’s movable assets.
(ii)
THE PARTIES
1. The applicant
describes itself in the founding affidavit as the ‘UMSOBOMVU
YOUTH FUND a section 21 company”. The
National Youth
Development Agency Act 54 of 2008
, which came into operation on 6
February 2009 provides in
section 21(2)
for the transfer of the
assets, rights, obligations and liabilities of UMSOBOMVU Youth Fund
and The National Youth Fund to the
National Youth Development Agency
established under
section 2
of Act 54 of 2008 (“The Agency”).
The Agency is a national public entity as defined in
section 1
of the
Public Finance Management Act 1 of 1999
, being something established
in terms of national legislation (Act 54 of 2008), funded by the
State and accountable to parliament
(definition of “national
public entity” in
section 1
of Act 1 of 1999).
The letter of demand of
10 November 2010 is in the name of the Agency. It is not apparent
from the papers why this application was
not launched in the name of
The Agency. The notice of motion was signed by applicant’s
attorney on 13 December 2010, apparently
signed by the Registrar on
11 January 2011, and service on the respondents took place on 19 May
2011 by means of attachment to
the main entrance at Plot 155,
Roodewal, Bloemfontein.
2. The first respondent
is the company that was the beneficiary of the loan agreement, and
whose property, wherever situate, is
the subject of the Notarial
Bond. The second to seventh respondents are the directors of the
first respondent and its sureties.
3. The fourth respondent,
in person, presented argument on behalf of all the respondents in
court. The third, fourth and sixth respondents
were the only
respondents present in court during argument before me.
(iii)
RELIEF
1. On 4 August 2011 a
rule
nisi
was issued by agreement authorising the applicant to
perfect its security in terms of its Notarial Bond. The sheriff was
authorised
to immediately attach all the first respondent’s
movable property at 95A Kellner Street, Bloemfontein.
2. Prayer 3 of the notice
of motion seeking judgment against the first and second respondents
for payment of R2 929 325.00, interest
and costs was in terms of the
court order of 4 August 2011 postponed to the return day of the rule
nisi
“subject to any amendment thereof”. No
amendment was effected in writing. At the close of his argument Mr.
Harrison,
for the applicant, sought to amend prayer 3 of the notice
of motion by replacing “First and Second Respondents”
with
“First to Seventh Respondents”. The respondents who
were in court, objected to this amendment on the basis of prejudice.
Mr. Harrison said that if the amendment was disallowed, the relief
against the third to seventh respondents should be postponed
sine
die
.
(iv)
APPLICANT’S
CASE
The applicant, says Mr.
Harrison, has a straightforward case: it advanced money to the first
respondent, no payments were made,
repayment is due.
(v)
THE
RESPONDENTS’ CASE
The defences can be
tabulated as follows:
Failure of applicant
to pay timeously.
As illustration of this
contention the respondent says that applicant did not pay the
landlord on time resulting in lockouts and
disruption of the
respondents’ business.
The applicant’s
response is that it was not a party to the lease agreement; it had no
contractual duties towards the landlord.
If the landlord acted
illegally by spoliating the respondent, the respondent had remedies.
It was not applicant’s fault that
first respondent was
spoliated, if that did happen.
2.
Applicant did not
assist the respondent in solving the problems it had in developing
its business.
Respondent says that
applicant did a Due Diligence study, as well as an Aftercare Report,
which both indicated that the respondent
had a feasible business if
assisted by the applicant, as was the applicant’s duty.
The
applicant’s response is that the respondents’ business is
in the hands of its management team as is set out at page
415. The
aftercare report of December 2009 demonstrated that the respondent
was not operating and in dire financial straits. The
aftercare report
was a rescue plan, not a variation. The loan agreement contains a
non-variation clause (page 47, clause 22). No
amendment is binding
unless recorded in a written document signed by the parties. See
SA
SENTRALE KO-OP GRAANMAATSKAPPY BPK v SHIFREN EN ANDERE
1964
(4) SA 760
(A) at 766 G - H;
BRISLEY v DROTSKY
2002 (4)
SA 1
(SCA).
3.
It is the
applicant’s duty to guide and assist entities like the
respondent so as to promote the interests of the youth in
participation in the economy (section 3 of Act 54 of 2008).
The respondents say the
applicant should help it, not sue it.
In answer Mr. Harrison
refers to
section 51(1)(b)(i)
of the
Public Finance Management Act 1
of 1999
which imposes a duty on applicant to collect all revenue due
to it.
(vi)
ARGUMENT BY
MR. MAY
The fourth respondent,
Mr. May, one of the directors of the first respondent, pointed out
that applicant took a shareholding in
the first respondent for R500
000.00. Applicant also had a nominee on the board of directors,
namely Mr. Dumisa Gumede, who was
the partnerships manager of the
applicant. According to Mr. May Mr. Gumede attended all board
meetings of the first respondent.
Mr. May said the applicant, through
Mr. Gumede, was involved in all decisions taken by the first
respondent. As to the failure
by the applicant to pay the first
respondent and its creditors on time, Mr. May referred expressly to
the webmail provider, Actaris,
who pulled out, as a result whereof
respondent could do no business. With reference to the 2009 meeting
at which the situation
of the respondent was discussed, Mr. May
pointed out that this meeting was followed by the aftercare report.
Mr. May also referred
to the entity MoPay, run by one Cobus
Potgieter, who failed to deliver what he had promised the respondent,
to the detriment of
respondent. Mr. May contended that applicant
should have been aware of these pitfalls and should have assisted the
respondent.
(vii)
CONCLUSION
The crux of the defence
is that the applicant failed to mentor and guide the respondent. As
is pointed out by the applicant in its
papers, applicant fulfils its
function by giving loans to people who would not qualify to get money
from banks and financial institutions,
at favourable interest rates
(1% below prime rate). Applicant is not part of the business. The
fact that it has some shares (for
which it paid) makes applicant
share in the loss. The fact that it has a nominee on the board of
directors means that it can talk
to the other directors. Applicant’s
nominee director is not part of the management team. He cannot tell
first respondent
what to do or to decide.
The respondents have no
defence to the money claim, or the claim to confirm the rule relating
to perfecting of the Notarial Bond.
(viii)
THE
AMENDMENT
The respondents were not
legally represented at the hearing, when the amendment of prayer 3 of
the notice of motion was sought.
The respondents are entitled to have
the benefit of the opportunity to consider that proposed amendment
and to possibly discuss
it with a legal representative. Mr.
Harrison’s suggestion that relief against the third to seventh
respondents in respect
of the money claim be postponed
sine die
should be followed.
(ix)
ORDER
The rule
nisi
granted on 4 August 2011 is confirmed.
The first and second
respondents are ordered jointly and severally to pay the applicant:
R2 929 325.00
Interest on that amount
at 1% below the prime overdraft rate from 1 September 2010 to date
of payment.
Costs on the scale as
between attorney and client.
__________
KRUGER
On
behalf of applicant: Mr. G.M. Harrison
Instructed
by:
Hutchinson
Attorneys
BLOEMFONTEIN
On behalf of the
respondents: Fourth respondent - In person
/sp