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[2011] ZANCHC 35
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Land and Agricultural Development Bank of South Africa v Du Preez and Others (1373/04) [2011] ZANCHC 35 (25 November 2011)
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IN THE HIGH COURT OF SOUTH AFRICA
(NORTHERN CAPE HIGH COURT,
KIMBERLEY)
Case
No: 1373/04
Heard on: 02-08-2010; 03-08-20;
09-09-2010; 22-11-2010
Heads filed: 26-08-2010;
02-09-2010; 08-09-2010; 18-11-2010; 22-11-2010;
Supplementary heads filed:
21-07-2011; 01-08-2011 and 30-09-2011
Delivered on: 25-11-2011
In the matter between:
LAND AND AGRICULTURAL
DEVELOPMENT BANK OF
SOUTH
AFRICA
….............................................................
PLAINTIFF
AND
JAN ANDRIES DU PREEZ
…..............................
FIRST
DEFENDANT
DANIËL CHRISTIAAN CRONJE
…................
SECOND DEFENDANT
PETRUS JOHANNES JOUBERT
…...................
THIRD
DEFENDANT
FREDERICK RADEMAN DE WET
….............
FOURTH DEFENDANT
JUDGMENT
PHATSHOANE
J:
PRELIMINARY ISSUES
ON THE DELAY
This matter is
characterized by a drawn out history and on occasion became
stagnated. On 02 March 2009 the defendants sought leave
to amend
their plea which leave was granted by Lacock J on 03 March 2009 with
costs. The trial took off before me on 02 August
2010. Pursuant to
the hearing of the evidence the case was postponed to 09 September
2010 for argument. Following argument judgment
was reserved. On 27
September 2010 the defendants again sought leave to amend their plea
which the plaintiff opposed. This application
was heard on 22
November 2010. Subsequent to hearing argument I granted the
defendants leave to amend their plea. It follows
from this amendment
that the parties had to reconsider their respective positions and do
what was necessary in terms of the Rules
of Court. On 07 February
2011 I enquired from the parties why the matter had stagnated. As it
turned out they were unaware of
the order granting the defendants
leave to amend their plea as my order was inadvertently not
communicated to them.
Having been made aware
of the order the defendants filed their amended plea on 17 February
2011 whereas the plaintiff filed its
amended replication on 23
February 2011. The amended replication was only brought to my
attention on 01 June 2011 upon my further
enquiry to the parties on
the progress of the matter. The parties further brought to my
attention correspondence exchanged between
them dated 29 March and
05 May 2011 evincing that they could not reach an agreement on
whether the filing of further heads of
argument following the
amendments was necessary.
On 29 June 2011 having
once more carefully considered the amended papers filed I issued a
directive requesting the parties, in
the light of amendments made to
the pleadings to file supplementary heads as follows: 21 July 2011
(the plaintiff) and 01 August
2011 (the defendants) which they did.
The defendants filed further supplementary heads on 30 September
2011. I had the benefit
of hearing oral submissions following the
trial and in respect of the application for leave to amend.
It appears that Mr
Wessels SC, for the plaintiff, was not keen to deliver his final
heads of argument. Apparent from his heads
of argument is his
uninformed attack that the Court has “four months after the
hopefully final amendments, called for heads
of argument to be filed
by the parties”. His remarks are regrettable regard being had
to the background sketched above.
THE SHORT FACTUAL
BACKGROUND
On 02 December 2004 the
plaintiff, the Land and Agricultural Development Bank of South
Africa (Land Bank), instituted action against
Jan Andries du Preez,
Daniël Christiaan Cronje, Petrus Johannes Joubert, and
Frederick Rademan de Wet, the first to the
fourth defendants,
respectively, in their capacities as sureties and co-principal
debtors for the payment of arrears in the amounts
of R948 558.89 and
R2 569 083.51 together with interest thereon at the rate of 12.5%
per annum computed monthly from 30 September
2004.
The aforesaid claims are
in respect of the two loans Land Bank advanced to Grapex (Pty) Ltd
in July 1999 in the amount of R500
000.00 (the first loan) and
R1 300 000.00 (the second loan) for the establishment and
cultivation of grapes on the
Grapex vineyards in the area of
Kakamas, South Settlement, Kenhardt Road, Northern Cape. On 13 July
1999 Land Bank agreed to
lend and advance to Grapex the aforesaid
sums. The terms and conditions of the loans are set out in annexures
LB1 and LB2 to
Land Bank’s declaration. In respect of the
first loan it is stipulated that the following documents were to be
completed,
signed and returned to the Bank: The acceptance of the
loan, payment request, suretyship and the certificate of completion
of
the program for the establishment of the vineyards. In addition
several conditions are set out. In clause 3(h) of LB1 the condition
central to the issues in respect of the first loan is captured as
follows:
“
U
verstrek aan die Bank
‘n onherroeplike magtiging om die volle opbrengs van u
sagtevrugte/druiwe en/of wyn en/of ander produkte van u
druiwe/sagtevrugte
van u koöperasie of ander kopers te vorder,
op sodanige basis as wat die bank van tyd tot tyd mag besluit.”
At the end of the loan
stipulation/offer there appears a nota bene with the following
inscription
:
“
Die
lening kan alleenlik uitbetaal word nadat aan al die voorwaardes
(uitgesluit voorwaarde (k) en (p) hierbo) en vereistes daaraan
verbonde, voldoen is.”
In respect of the second
loan the offer at LB2 likewise requires the completion, signing and
returning to the Bank of the following
documents: The acceptance of
the loan, request for payment, suretyship and
the cession
.
Similarly several conditions for the loan are also set out. One of
these conditions also pertinent to issues appearing at clause
3(i)
of the offer reads:
“
U
verstrek aan die Bank
onherroeplike magtiging om die volle opbrengs van u
sagtevrugte/druiwe en/of wyn en/of ander produkte van u
druiwe/sagtevrugte
van u koöperasie of van u koöperatiewe
wynkelder of van die KWV of van ander kopers te vorder, op sodanige
basis as wat
die bank van tyd tot tyd mag besluit.”
It is also stipulated in
the above offer that the loan can only be paid out once all the
conditions and requirements (save condition
(o)) are fulfilled or
met. These two clauses are very contentious.
The quantum of the
plaintiff’s claim was settled on the basis that as at 18
February 2009 the outstanding amount on the
loans was R3 147 009.51.
Grapex
initially purchased the farms in issue with a loan obtained from
Standard Bank, in whose favour the first mortgage bond
was
registered over the properties. When Land Bank advanced the two
loans to Grapex the defendants, shareholders in Grapex, bound
themselves jointly and severally as sureties and co-principal
debtors in favour of Land Bank for the repayment of the loans on
27
July 1999 and waived the exception
beneficia
ordinis seu excussionis et divisionis
.
Grapex was provisionally
liquidated in August 2003 and finally in September 2003. Land Bank
did not prove any claim against the
insolvent estate. There appeared
to have been a danger of contribution by the creditors.
On 29 August 2003 the
liquidators of Grapex (in liquidation) forwarded a circular to all
Grapex’s creditors. Amongst others
the following appears
therein:
“
Die
totale eis van Landbank in die boedel beloop die som van
R2 700 000.00. Die Landbank beskik egter oor hoegenaamd
geen sekuriteit van watter aard nie. Indien daar ‘n oes op die
land was, kon daar moontlik sprake gewees het van ‘n
statut
ȇ
re
pand ten gunste van Landbank wat betref die opbrengs van die oes
onder artikel 30 van die Landbankwet 15 van 2002. Aangesien
daar geen
oes op die land is nie is daar geen sprake van enige voordeel vir die
Landbank nie....
Die likwidateurs
sal dus op hierdie stadium konkurrente skuldeisers aanraai om nie hul
eise te bewys nie. Sou die likwidateurs egter
in die toekoms vir
welke rede ookal van siening verander dat daar wel ‘n moontlike
oorskot mag ontstaan, sal krediteure dienooreenkomstig
in kennis
gestel word.
Die likwidateurs is
dus van voorneme om alle bates so spoedig moontlik te gelde te maak
en wel op een van die ondergenoemde wyses,
naamlik:
(a) die verkoping
van alle bates per publieke veiling of privaat tender;
(b) die verkoping
van bates uit die hand in welke geval geen verkoping sal plaasvind
teen ‘n bedrag van minder as geswore
waardasie nie tensy die
betrokke versekerde skuldeiser daartoe toestem.
Indien u enige
beswaar het teen die tegeldemaking van bates op enige van bogemelde
voorgestelde wyses, wens ons u te versoek om
sodanige beswaar binne
tien(10) dae vanaf datum van hierdie skrywe skriftelik by ons kantore
in te dien by gebreke waarvan aanvaar
sal word dat u goedkeuring
verleen tot die voorgestelde wyse van verkoping......
Dit mag onder
bepaalde omstandighede vir die likwidateurs nodig wees om die
boederybedrywighede voort te sit tot en met sodanige
datum as wat die
oes afgehaal kan word en produkte daarvan van die hand gesit en/of
uitgevoer kan word.
Die geskatte koste om
laasgenoemde tot stand te bring sal ongeveer R1 miljoen - R
1 200 000.00 beloop. ‘n Geskatte
suksesvolle oes
opbrengs behoort R2,5 miljoen – R3 miljoen te beloop.”
In the aforesaid
circular creditors were also invited to lodge objections if so
advised, against the cultivation of the crop.
In the event they did
not object the cultivation would be proceeded with. The liquidators
contracted Du Preez, the first defendant,
to cultivate the crop with
a view to selling the produce.
Following the
auction arranged at the behest of the liquidators the Grapex
vineyards and the movable assets on them were sold
to a certain Mr
Van Rensburg on 28 October 2003 for R3 700 000.00.
On 29 October 2003 Land
Bank forwarded to the liquidators a document headed “authorization
to sell in terms of
s 30(1)(b)
of the
Land and Agricultural
Development Bank Act, 15 of 2002
”. Therein Land Bank
authorized the liquidators to sell the assets in accordance with the
conditions of sale on an auction.
Further, the Bank relinquished any
rights whatsoever to the proceeds in respect of the grape harvest.
The purchaser would have
unqualified ownership in the event of the
successful sale on the said auction. This authorization, according
to the defendants,
amounted to a waiver by the Land Bank which they
strongly took issue with as will become apparent.
The defendants bore the
onus and the duty to begin. They called no less than six witnesses
in support of their case. The plaintiff
did not lead any evidence in
rebuttal. Issues flowing from the pleading and evidence are by and
large questions of law and most
facts are common course.
Mr Jacobus Andries van
Lill, a commercial manager in fresh produce since 1995, visited the
Grapex farms twice before the auction
to assess the harvest. He
testified that the net value of the crop was R2 952 433.33
for the 2003/2004 season. His
evidence was supported by Mr Barend
Johannes Hendrick Jacobs, a farmer in grapes for the past 10 years.
Mr Johannes Gerhard Terblanche,
a candidate valuator, determined the
value of the farms as at 28 October 2003 to be R3 800.000.00
excluding the value of
the crop thereon. His valuation report was
co-signed by Mr George JD Du plessis, a professional valuator since
1985.
THE APPLICATION FOR
FURTHER LEAVE TO AMEND AND REASONS FOR THE ORDER GRANTING THE
DEFENDANTS FURTHER LEAVE TO AMEND THEIR PLEA ON
22 NOVEMBER 2010
At the commencement of
the trial on 02 August 2010 the defendants abandoned paragraphs 7.4
- 7.6 of their plea. As already alluded
to, following argument on
the merits and before judgment could be delivered the defendants
brought an application in terms of
Rule 28(10) seeking further leave
to amend the plea by introducing a further defence (the second
alternative defence) couched
as follows:
“
8.In
die alternatief tot paragraaf 7 hierbo, pleit verweerders soos volg:
Verweerders het die
borgaktes, synde bylae A en B tot die davaarding op 27 Julie 1999
onderteken:
8.1.1Terwyl eiser se
vorderingsreg teen die maatskappy vir terugbetaling van die lenings
vermeld in paragrawe 5 en 16 van die deklarasie,
versekureer was
ingevolge Artikels 34(3)(b) tot (7), (9) en (10), sowel as 55(2)(b)
tot (d) van die Landbank Wet, 13 van 1944;
en
8.1.2Terwyl eiser
verplig was of sou wees om sy vorderings (of aksies) sowel as
sekuriteite aan verweerders (as borge vir die maatskappy
se
verskuldigdheid), te sedeer teen betaling deur verweerders aan eiser
van die maatskappy se verskuldigheid voortspruitend uit
die
leningsooreenkomste;
Artikels 34(3)(b)
tot (7), (9) en (10), sowel as 55 (2)(b) tot (d) van die Landbank
Wet, 13 van 1944 is op of ongeveer 16 Mei
2000, alternatiewelik 30
Junie 2000 deur die Konstitusionele Hof nietig verklaar, welke
nietigverklaring opgeskort is vir 2
jaar tot 16 Mei 2002,
alternatiewelik 30 Junie 2002, toe eiser se versekureerde
vorderingsreg, alternatiewelik sekuriteit,
teen die maatskappy,
verval het;
Die maatskappy is
gelikwideer op 21 Augustus 2003;
Eiser was, as gevolg
van die nietigverklaring van Artikels 34(3)(b) tot (7), (9) en
(10), sowel as 55(2)(b) tot (d), slegs ‘n
konkurrente
skuldeiser van die maatskappy (in likwidasie) en het , weens die
feit dat daar ‘n tekort in die insovente
boedel was nadat
voorsiening gemaak is vir betaling van versekerde skuldeisers, geen
eis teen die insolvente boedel bewys nie;
Eiser was gevolglik
nie in staat om sy vorderings (of aksies) sowel as sekuriteit teen
die maatskappy (in likwidasie) teen betaling
daarvan aan eiser, aan
verweerders te sedeer nie, alternatiewelik sou so ‘n sessie
vrugteloos wees;
Gevolglik het
prestasie deur eiser, synde sessie aan verweerders van eiser se
vorderings (of aksies) en sekuriteit teen die
maatskappy (in
likwidasie), teen betaling deur die borge, onmoontlik geword en was
verweerders nie geregtig om deel te neem
of ingereken te word as
skuldeisers ten opsigte van die likwidasie en distribusierekening
van die maatskappy (in likwidasie)
nie;
In die
vooropstelling is verweerders se nie-betaling van eiser se
vorderings teen hulle geregverdig, en is die borgaktes as
kontrakte
ontbind, alternatiewelik is die verweerders bevry van
aanspreeklikheid ingevolge die borgaktes.”
The plaintiff, the
respondent in the interlocutory application, opposed the
application. Fourteen days after the filing of the
answering
affidavit the defendants (applicants) filed their replying
affidavit. Mr Wessels contended that the defendants ought
to have
filed their replying affidavit within ten Court days and had failed
to bring an application for condonation of the late
filing of the
replying affidavit. The following passage appears in Erasmus
et
al
Superior Court Practice
at B1-55:
“
The
provisions of the Rules relating to time for filing answering and
replying affidavits do not apply to interlocutory applications.
Further affidavits in interlocutory applications must be filed within
a reasonable time; prima facie in the absence of special
circumstances, this would not be longer than the times prescribed in
terms of Rule 6(5).”
I am of the view that
the filing of the replying affidavit was made within a reasonable
time. The four days beyond the prescribed
ten days is quite
negligible and condonable. This is a case of the Rules for the Court
and not the Court for the Rules.
Mr Arnoldi SC, for the
defendants, argued that the nub of the amendment is that at the time
the defendants signed the suretyships
Land Bank was a preferent
creditor of the principal debtor, Grapex, in terms of Land Bank Act,
13 of 1944, and was entitled to
attach the debtor’s assets and
sell them in reduction of the principal debt. He contended that it
was an implied term of
the suretyship agreements that the defendants
as sureties would have enjoyed the benefit of cession of actions had
they effected
payment of the principal debt. This is so, the
argument went, because they would have been entitled to obtain
cession of Land
Bank’s claim against Grapex (in liquidation)
together with the Banks’ security in terms of s 34 of Act 13
of 1944.
In his view the fact that the Land Bank’s rights in
terms of s 34 and 55 were declared invalid prior to the liquidation
of Grapex following the decision of the Constitutional Court in
First National Bank of South Africa Ltd v Land and
Agricultural Bank of South Africa and Others; Sheard v Land and
Agricultural
Bank of South Africa and Another
[2000] ZACC 9
;
2000 (3) SA
626
(CC)
(2000 (8) BCLR 876)
, meant that the Bank’s
contractual obligation to effect the cession to the sureties became
impossible. The corollary of
this, counsel argued, makes the
suretyship agreements unenforceable and the sureties should
naturally be discharged.
Mr Wessels argued that
the defence which the defendants are seeking belatedly to introduce
should have been raised as a special
plea. Had such a defence been
sustainable, little or no evidence would have been required and it
would have stopped the plaintiff’s
claim in its tracks and
avoided concomitant costs. He contended further that the plaintiff
would have been able to place evidence
before Court to the effect
that the defendants had not been prejudiced because no securities
existed or same were worthless.
In any event, he went on, the
proposed amendments do not constitute a triable issue in that only
Land Bank and no one else could
exercise the rights conferred on it
in terms of s 34 and 55 of Act 13 of 1944.
In
Caxton Ltd and
Others v Reeva Forman (Pty) Ltd and Another
[1990] ZASCA 47
;
1990 (3) SA 547
(A)
at 565G-J Corbett CJ, for the Court, made the following
pronouncement:
“
Although
the decision whether to grant or refuse an application to amend a
pleading rests in the discretion of the Court, this discretion
must
be exercised with due regard to certain basic principles. These
principles are well summed up in the judgment of Caney J in
Trans-Drakensberg Bank Ltd (Under Judicial Management) v Combined
Engineering (Pty) Ltd and Another
1967 (3) SA 632
(D) at 640H - 641C.
In the portion of the passage referred to, Caney J states (at 641A):
'Having already made
his case in his pleading, if he wishes to change or add to this, he
must explain the reason and show prima
facie that he has something
deserving of consideration, a triable issue; he cannot be allowed to
harass his opponent by an amendment
which has no foundation. He
cannot place on the record an issue for which he has no supporting
evidence, where evidence is required,
or, save perhaps in exceptional
circumstances, introduce an amendment which would make the pleading
excipiable.'
With this should be
read the remarks of De Villiers JP in Krogman v Van Reenen
1926 OPD
191
at 195:
'... (H)e must show,
for instance, that the matter involved in the amendment is of
sufficient importance to justify him in putting
the Court and the
other party to the manifold inconveniences of a postponement....'
It should further
be noted that in the Trans-Drakensberg Bank case supra it was held
that mere delay in bringing forward an amendment
is no ground for
refusing it (see at 642H).”
In
Moolman v
Estate Moolman
1927 CPD 27
at 29, Watermeyer J held:
“
.
. . The practical rule adopted seems to be that the amendments will
always be allowed unless the application to amend is mala
fide or
unless such amendment would cause an injustice to the other side
which cannot be compensated by cost. In other words, unless
the
parties cannot be put back for the purpose of justice in the same
position as they were when the pleadings which it is sought
to amend
were filed.'
The proposed amendment
to the plea is a purely legal issue. By the plaintiff’s own
admission the facts and circumstances
upon which the defendants seek
to rely on in its belatedly introduced defence have since the
inception of the action been present.
The consequential
defence introduced by this amendment, in my view, raised a serious
issue to be tried. I was of a view that any
likely prejudice to be
caused to the plaintiff could be mitigated with an appropriate costs
order.
Consequently I granted
an order affording the defendants leave to amend their plea.
THE DEFENDANTS’
SECOND ALTERNATIVE DEFENCE
The substance of this
defence is captured in the preceding paragraphs. To recapitulate, Mr
Arnoldi contended that the suretyship
agreements are void and
therefore the sureties should be released from their obligations. In
amplifying his argument he contended
that it is an implied term of
the suretyship agreement that if the sureties effected payment of
the principal debt the Bank would
cede its rights and security which
it held against Grapex to them. In
First National Bank v Lynn
No
[1995] ZASCA 158
;
1996 (2) SA 339
(SCA)
at 350 Van Heerden JA states:
“
The
subject-matter of cession is a right, often referred to as a claim
and less felicitously as the cession of a debt. The expression
"cession of a right of action" is also used but there is
little advantage in doing so since the right of action (to enforce
performance) is a power which is inherent in the right (to
performance) and cannot be detached from it as a separate cedable
entity.
(Per P M Nienaber,
dealing with 'Cession' in Joubert (ed) The Law of South Africa (First
Re-issue) vol 2 para 241.) See, too, the
discussion of the judgment
in Trust Bank of Africa Ltd v Muller NO and Another
1979 (2) SA 368
(D) by Scott in 1982 De Jure 183 at 186.)”
When Land Bank advanced
the two loans to Grapex in 1999, it had remedies set out in s 34 and
55 of the Land Bank Act 13 of 1944
against its defaulting debtors.
The Bank could attach and sell movable and immovable property in
execution on its own, without
judicial recourse. It could in cases
of winding up of a debtor require the sheriff to attach and sell by
public auction so much
of the movable property to liquidate the
amount owing to it (s34(3)(b)). If the amount was still owing it
could attached the
immovable property and cause it to be sold by
public action(s 34(3)(c). The proceeds of the sale would after the
payment of the
amount owing in terms of any bond or other real right
over the property be utilized towards reduction of the debt. Section
34
applied in this case as the loan to Grapex was in respect of the
cultivation of the vine crop. Section 34(5) grants the Land Bank
a
preferent claim to the proceeds drawn out of the attachments and
sales executed in terms of s 34(3)(b).
The Constitutional Court
held that the provisions of ss 34(3)(b) - (7), (9) and (10),
together with s 55(2)(b) - (d) of the Land
Bank Act 13 of 1944 were
unconstitutional and ordered that their invalidity be suspended for
a period of two years, provided
that, as on the date of the order
(09 June 2000), no attachment and sale in execution in terms of s
34(3)(b) of the Land Bank
Act 13 of 1944, not yet completed, was to
take place without recourse to a Court of law. Se
e
First National Bank of South Africa Ltd v Land and Agricultural Bank
of South Africa and Others; Sheard v Land and Agricultural
Bank of
South Africa and Another
supra
at
633D-634B
paras 17 – 18.
It is common cause that
Land Bank waived its rights to the proceeds of the sale of the
grapes in terms of
s 30(1)(b)
of The
Land and Agricultural
Development Bank Act, 15 of 2002
, which provides:
“
Statutory
pledges
While any person
owes the Bank any money by virtue of an advance in terms of this
Act-
(a) ..........
(b) any
agricultural produce purchased by that person with money so advanced
to him or her,
which is in the
possession of or in transit to that person or an agent of that
person, is deemed to have been pledged to the Bank
as effectually as
if it had been expressly pledged and delivered to the Bank, and any
disposal thereof by or on behalf of that
person, without the consent
in writing of the Bank, is void.”
In my view Land Bank
could not have held the statutory rights it purportedly waived
because Grapex’s indebtedness arose
in terms of an advance
made prior to the commencement of The
Land and Agricultural
Development Bank Act, 15 of 2002
. In the unreported decision of the
SCA
Land & Agricultural Development Bank of SA t/a
LANDBANK v The Master and others Case No: 352/05 delivered on 30 May
2006
at para 67 the Court held:
“
The
thrust of
s 30
is, as it states unequivocally, directed to protecting
debts arising from advances made ‘in terms of the Act’
not to
advances made under any repealed legislation. In addition, of
course, the pledge provided a new form of security for the Bank. The
effect of applying it to advances made prior to the Act would be to
impose ex post facto a burden on the recipient of the advance
after
the contractual terms have been negotiated. I find no indication in
the Act to suggest that the legislature intended such
a consequence.”
It is also axiomatic
that Land Bank did not prove its claim against Grapex (in
liquidation). Mr Arnoldi argued that this meant
that it had lost its
claim against Grapex. Therefore its inability to cede its lost claim
against Grapex rendered performance
in terms of the suretyship
agreement impossible. Likewise the declaration of invalidity of s 34
of the Land Bank Act 13 of 1944
rendered Land Bank, through no fault
on its part, unable to cede its claim and security to the sureties.
Therefore Land Bank’s
contractual obligation towards the
sureties became impossible thus the suretyship agreements became
void and this released them
from their suretyship obligations.
Mr Wessels contended
that the rights which the defendants suggest should have been ceded
are statutory rights, personal to or
vested in the Bank and could
not have been ceded to the defendants. However, Mr Arnoldi submits
that the rights provided for
in s 34 and 55 are not so personal as
to render them incapable of cession. In any event he submitted that
it is not necessary
to decide the issue. What should be decided is
whether a claim which Land Bank may have proved against Grapex could
have been
ceded, he argued. The question whether the rights
conferred on the Bank in terms of s 34 and 55 are capable of being
ceded is
important to the determination of the sureties’
liability and cannot be left open. The dictum set out in
Unicorn
Lines (Pty) Ltd v Commissioner of Customs and Excise And Another
1997 (1) SA 369
(D)
at 374D-H is apposite:
“
The
general rule in regard to the transmission of rights by way of
cession is stated in Joubert (ed) The Law of South Africa vol
2 (1st
re-issue) para 253 as follows:
'As a general rule
rights which are capable of transmission by mere agreement may be
disposed of freely and without restraint. .
. . It is incumbent on
the party who challenges the cedent's autonomy to cede, to show that
an exception applies and not the rule.'
(See cases quoted
in support of the aforesaid passage and Scott Law of Cession 2nd ed
at 167 et seq.)
One of the
exceptions to this rule is where a cession of rights is prohibited by
statute. Certain statutes expressly prohibit cession
.
See s 2(1) and (2) of the Statutory Pensions Protection Act 21 of
1962; s 3(2) of the Matrimonial Properties Act 88 of 1984 and
s 27 of
the Public Service Act 111 of 1984.
In others
the wording indicates that the Legislature intended that there be no
transmission of rights by way of cession or otherwise.
In the case
of
South African Board of Executors and Trust Co Ltd (In Liquidation) v
Gluckman
1967 (1) SA 534
(A)
it was held that
the rights afforded a trustee or a creditor suing qua creditor in the
name of the trustee to set aside a disposition
of property not for
value in terms of the
Companies Act 46 of
1926
read with
s 32
of
the
Insolvency Act 24 of 1936
could not be
ceded. In
Clifford Harris (Pty) Ltd v SGB
Building Equipment (Pty) Ltd
1980 (2) SA 141
(T)
at
150 and 151 it was held that the right to bring an infringement
action in terms of ss 53 and 54 of the Patents Act 37 of 1952
were
not capable of being ceded.
To determine
whether a right is capable of cession the Court must look at the
provisions of the statute and in particular the section
conferring
the right and determine whether on a proper interpretation it was the
intention of the Legislature to prohibit transmissibility.
(
See
Clifford Harris (supra at 150A and 151H
).”
The sureties did not
renounce the benefit in respect of cession of actions. Even if they
did this would not disqualify them from
having a cession of actions
on or after payment of the debt as renunciation operates only to
prevent the surety from delaying
payment to the creditor. See CF
Forsyth & JT Pretorius,
Caney’s The Law of Suretyship
,
fifth edition, at 156. As cessionary the surety may acquire rights
and benefits (which it does not possess by being a surety)
such as
securities held by the creditor, claims against third parties who
are liable to the creditor for payment of the principal
debt, or the
preference which the creditor’s claim may enjoy in the case of
the principal debtor’s insolvency. This
accord with the dictum
i
n
African
Guarantee & Indemnity Co Ltd v Thorpe
1933 AD 330
at
338:
“
(I)t
seems difficult to see why a surety should not be in a better
position and be entitled, when paying the full amount to the
creditor, to get from him a cession of all the rights which flowed to
the creditor from the transaction in respect of which the
surety
became obliged.
The only obstacle
in the way is the principle that when a debt has once been paid the
creditor has no longer any rights to cede.
This obstacle, however,
does not exist in the case of suretyship, as has been pointed out
above, for if it did exist the surety
could have no recourse against
co-sureties and third parties.”
See also
Law of South
Africa (First reissue) 26
at 213 para 210) and
Caney’s
The Law of Suretyship
, supra at 150.
In
Gerber v Wolson
1955 (1) SA 158
(A)
at 167 Van Den Heever JA, dissenting made
the following valid remarks:
“
If
a surety pays in order to discharge the principal debtor's debt, the
debt is extinguished; if however he pays in order to discharge
his
own accessory debt, he may demand cession of action from the creditor
even if he does so after payment.”
See also the article by
EM Burchell:
South African Law Journal 1957,
Vol 74
at 17’;
The
Law of South Africa(first reissue) 26
at 209
para 205.
When
suspending the order of invalidity in
First
National Bank of South Africa Ltd v Land and Agricultural Bank of
South Africa and Others; Sheard v Land and Agricultural
Bank of
South Africa and Another
supra at 631-2
the Constitutional Court notes that s 34(3)(b) and (5) of Act 13 of
1944,
comprise an important form of security in
the absence of contractual security between the Land Bank and its
debtor clients and
that the instant removal of such security would
prejudice the Bank. It is reasonable to believe that, if the
statutory security
were removed without any interim remedial
measures, the Land Bank would incur monetary loss. The Bank may then
be forced either
to raise interest rates or decline future s 34
advances. Even if it is only a perceived risk the Land Bank may be
compelled to
protect itself from projected losses and transfer the
burden onto its clients. This would undermine the intended role of
the
Land Bank to provide commercially viable financial services.
Because there exists the potential to impede the work of the Land
Bank and the advantages it provides to struggling farmers and the
national agricultural sector, it is not unreasonable in the
interests of sound public policy to preserve its current form of
security under s 34 by suspending the order of invalidity, the
CC
held.
There is no express
provision in the Land Bank Act, 13 of 1944 prohibiting cession of
rights or security held by the Bank in terms
of s 34 and 55 of the
said Act. Nevertheless regard being had to the language in the
sections conferring the right and the structure
of the relevant
sections I am not swayed that the legislature intended the rights
and security held by the Land Bank in terms
of these sections to be
transmissible. In my view the reference to the “Bank” in
the section was designed to exclude
any other person or entity from
exercising the rights.
The effect of placing
a construction to the contrary would be untenable. This finding,
however, cannot put this matter to rest.
Caney’s The Law
of Suretyship
supra at 154-5 states that the
situation in relation to the creditor’s inability to give
fully effective cession of action
because of the release or
abandonment of securities for the payment of the debt, or their loss
by reason of his acts or another
person is by no means clearly
defined. The learned authors proceeds at 155:
“
If
the security is lost by operation of the law, for example, if it is
set aside under the provisions of the insolvency law, the
surety has
no relief.”
Mr Arnoldi contended
that if it was impossible to cede the claim from the inception, the
contract of suretyship would be a nullity
as a result of
impossibility of performance. Solomon ACJ enunciated the following
principle in
Peters, Flamman and Co v Kokstad Municipality
1919 AD 427
at 434 – 435
“
By
the Civil Law a contract is void if at the time of its inception its
performance is impossible: impossibilium nulla obligatio
(D.
50.17.185). So also where a contract has become impossible of
performance after it had been entered into the general
rule was that
the position is then the same as if it had been impossible from the
beginning.....
For
the authorities are clear that if a person is prevented from
performing his contract by vis major or casus fortuitus, under
which
would be included such an Act of State as we are concerned with in
this appeal, he is discharged from liability.”
It should be implied or
folded in the suretyship agreement as a
naturalia
thereof
that Land Bank would be able to cede its rights or security or claim
upon payment of the debt. If cession of action cannot
follow as a
matter of course it stand to reason that the performance in terms of
the suretyship agreement would be impossible
thus rendering the
agreement void
ab origine
and thereby releasing the sureties.
The second alternative
defence by the defendants is accordingly upheld.
In view of the
conclusion reached it is unnecessary to deal with further issues
raised in the pleadings.
What therefore remains
is the question of costs. Insofar as the amendment to the plea is
concerned, Mr Arnoldi argued that in
the event that the Court grants
the defendant leave to amend, they would tender the costs incurred
up to the filing of the replying
affidavit. I am of the view that
the defendants brought the application for the amendment late and
they should bear the costs
consequent upon the amendment. In
relation to other costs, needless to say, they should follow the
result.
In the premises I make
the following order.
Order:
The plaintiff’s
claim is dismissed with costs save the costs in respect of the
application for the amendment which the defendants
should bear
jointly and severally.
_________________
MV PHATSHOANE
JUDGE
NORTHERN CAPE HIGH
COURT
On
behalf of the plaintiff
Adv MH
Wessels SC
Instructed
by
Duncan
& Rothman
On behalf of the
Defendants
Adv AF
Arnoldi SC
Instructed
by
Engelsman
Magabane Inc