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[2011] ZAKZDHC 7
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Rodel Financial Services (Pty) Ltd v Naidoo and Another (13335/2009) [2011] ZAKZDHC 7; 2013 (3) SA 151 (KZD) (18 February 2011)
Reportable
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF SOUTH AFRICA
Case: 13335/2009
In the matter between:
RODEL
FINANCIAL SERVICE (PTY) LTD
…........................................................
Applicant
vs
YOGANANDA
DHANAPAL NAIDOO
….......................................................
First
Respondent
NIRVANA
NAIDOO
…..................................................................................
Second
Respondent
J U D G M E N T
SEEGOBIN J
INTRODUCTION
[1] In its amended notice of motion the applicant, Rodel
Financial Services (Proprietary) Limited, seeks an order against the
first
and second respondents (“the respondents”) in the
following terms:
‘1. That judgment is granted in favour of the applicant against
the respondents, jointly, for payment of the sum of R1 162
988, 28,
together with discounting fees thereon at the rate of 0.125% per day
on the sum of R500 000.00 from 22 June 2009 to date.
1a Alternatively that judgment be granted in favour of the applicant
against the respondents jointly for payment of the sum of
R500 000,00
plus interest thereon for the period and at the rates set forth in
annexure “A” hereto.’
1
[2] First, it should be noted that in view of the fact
that the respondents have repaid R50 000.00 towards their
indebtedness, any
order granted against them would be in respect of
R450 000.00 and not R500 000.00 as reflected in the orders above, and
secondly,
the rates of interest set out in annexure “A”
are the rates which are permissible in terms of the National Credit
Act
34 of 2005 (the NCA) if it is found that the acknowledgement of
debt (AOD) in question is subject to the NCA.
[3] The case made out by the applicant in its founding
papers can briefly be summarized as follows:
3.1 On 15 June 2006, the applicant advanced the sum of
R300 000.00 to the respondents;
3.2 On 5 July 2006, the applicant advanced the sum of
R200 000.00 to the respondents;
3.3 These amounts were advanced pursuant to a written
discounting agreement (‘the discount agreement’) in terms
of which
the applicant had purchased certain amounts payable to the
respondents at a discounted fee;
3.4 The respondents did not comply with their repayment
obligations in terms of the discounting agreement; and
On 28 February 2007, both respondents, acting
personally signed an AOD in terms whereof they,
inter alia
:
acknowledged that they were truly and lawfully
indebted to the applicant in the sum of R300 000.00 and R200
000.00 respectively;
acknowledged themselves to be truly and lawfully
indebted to the applicant for discount fees calculated at 4% of
the capital
sums for the first thirty (30) days from the date the
capital sums were advanced and thereafter at 0.125% per day on the
capital sums until payment of the entire amount; and
undertook to repay the capital together with the
aforesaid discounting fees by no later than 30 June 2007.
[4] The applicant further averred that in an action
previously instituted by it against the respondents under Case no.
12463/2007
for payment of the capital sums and interest at the
legally prescribed rate, the respondents had, in their plea,
admitted:
4.1 signing the AOD;
the terms of the written AOD;
that they failed to discharge their indebtedness under
the AOD by 30 June 2007; and
that the sum of R500 000.00 was the capital amount
repayable in terms of the AOD.
[5] The only defences raised by the respondents in the
said action were that: (a) they were not jointly and severally liable
for
the debt, but only jointly, (b) the applicant had not complied
with the provisions of s 129 of the NCA, and (c) they had tendered
to
pay the applicant their indebtedness under the AOD and taxed costs on
an attorney and client scale to date of the tender, all
of which is
said to have taken place on 10 September 2008.
[6] It is common cause that the above action was
withdrawn by the applicant on 21 October 2009. It is further common
cause that
the applicant did not accept the tender by the
respondents, hence the institution of the present application.
[7] In opposing the application the respondents
first
disputed that the applicant had properly complied with the provisions
of 129 of the NCA,
second
they averred that the applicants
were seeking to impose a rate of interest which was in excess of the
maximum rate prescribed in
terms of the NCA, and
third
, they
disputed that they were jointly and severally liable to the applicant
inasmuch as the AOD only provides for “joint
liability”.
In my view, and in light of the applicant’s claim for joint
liability in its amended notice of motion,
the third contention
raised by the respondents falls away.
[8] On the merits of the matter, the case advanced by
the respondents is that the payment of interest as provided for in
clause
1.4
2
of the AOD is made under the guise of being a
“
discounting fee
”
.
They contended that the AOD had in fact novated the original
discounting agreement and was subject to the NCA. According to them
the AOD was nothing more but a money lending agreement and as such
the interest rate prescribed therein was impermissible in terms
of
the NCA. They further contended that while they were always prepared
to pay the capital amount to the applicant and are still
willing to
do so, they will only pay interest at the rate of 15.5% per annum
from date of service of summons. A tender to this
effect was made by
them to the applicant on 10 September 2008.
[9] The following issues arise from the contentions
advanced by the respondents, viz:
(a) Has the AOD novated the original discounting
agreement?
(b) Is the AOD subject to the NCA? The answer to this
question is dependent on whether a discounting fee can be considered
to be
an interest charge.
(c) If the discounting fees are in fact interest charges
and the AOD is subject to the NCA, then the question which arises is
whether
the rates of interest charged are excessive and therefore
impermissible in the terms of the NCA? While the respondents were
initially
of the view that the entire AOD would be invalid and
unenforceable, it was conceded in oral argument on their behalf that
only
the impermissible interest rates would be invalid.
(d) Did the respondent make a proper tender on 10
September 2008?
These issues are dealt with hereunder.
[10]
Issue 1 –
Novation
[10.1] The applicant argued that the respondents had
failed to discharge their onus of proving that novation was intended.
Relying
on clause 1.5 of the AOD which defines the cause of
indebtedness as being the discounting agreement entered into between
the applicant
and the respondents, it was argued on behalf of the
applicant that the parties had intended the AOD to merely confirm the
existing
obligation. Furthermore, the applicant’s averment in
paragraph 11 of its founding affidavit was never disputed by the
respondents
in their answering affidavit. Paragraph 11 reads as
follows:
‘Both of these payments were made pursuant to a written
discounting agreement whereby the applicants purchased certain
amounts
payable to the respondents at a discounted fee. The
respondents did not comply with their repayment obligations in terms
thereof
and accordingly agreed to sign the attached acknowledgement
of debt
.
’
[10.2] According to the respondents the AOD created an
entirely new obligation that novated the discounting agreement in its
entirety.
They argued that the applicant put up the AOD only and not
the discounting agreement. This was a further indicator, so it was
submitted,
that the applicants cause of action was based on the AOD
and not on the discounting agreement. Reference was made to the
matter
of
Adams v SA Motor Industry Employers
Association
3
where the court held, per Jansen JA, that there can be
no objection in principle to a second obligation arising in respect
of an
existing debt. The learned Judge held that the pivotal question
was whether the acknowledgement of debt contained an express or
implied undertaking to pay. The intention of the parties was
important in this regard [1198 D-E]. On the facts it was found that
the acknowledgement of debt contained an express undertaking to pay.
The parties had clearly intended to create a new obligation
in
respect of payment of the balance of the purchase price under the
deed of sale [1199A]. The court held that there is a presumption
against novation and that where novation was not intended it was
possible for two obligations to co-exist. These obligations would
be
interdependent. It was noted that the creditor does not have a free
election to enforce the original obligation [1199 H].
[10.3] An acknowledgement of debt, sometimes referred to
as an IOU, is evidence of a debt which is due but differs from a
promissory
note as it does not contain an express promise to pay.
4
Where, however, the acknowledgement of debt is coupled
with an undertaking to pay, it will give rise to an obligation in
terms of
that undertaking.
5
Malan
6
comments that this new obligation will seldom replace
the existing debt and would not amount to a novation of the old
obligation.
Christie
7
defines novation as the replacing of an existing
obligation by a new one where the existing obligation becomes
discharged. With
voluntary novation where the existing contract is
between the same parties, the issue is essentially a matter of
intention and
consensus.
8
Since it involves a waiver of right, there is a
presumption against novation and the onus to show it has occurred
lies with the
party asserting this.
9
Thus where a creditor enters into a second contract
there must be a clear, cogent and unequivocal proof of novation
10
as he or she is more likely to have intended to
strengthen and confirm their existing right with the new contract
than to destroy
them through novation.
11
Our courts have often said that the giving of a
promissory note does not necessarily mean that parties intended to
substitute a
debt for the note, but rather that the creditor merely
obtain liquid proof of his claim.
12
Furthermore, the mere giving of the acknowledgement of
debt coupled with an express undertaking to pay the debt, means that
the
creditor may sue either on the acknowledgement or on the original
debt.
13
[10.4] In light of the above legal principles and the
undisputed allegation contained in paragraph 11 of the applicants
founding
affidavit, I’m of the view that the parties intended
the AOD to merely confirm an existing obligation viz. the prior
discounting
agreement.
14
Bearing in mind the presumption against novation, I am
of the opinion that the respondents have failed to discharge the onus
resting
on them of proving that they had intended a novation of the
discounting agreement.
I accordingly find that the AOD did not novate the prior
discounting agreement.
[11]
Issue 2 –
Is the AOD subject to
the NCA?
[11.1] The determination of this issue depends on
whether or not a discounting fee is different from an interest
charge. On behalf
of the respondents it was argued that the AOD is a
credit agreement by virtue of subsection 8(4)(f) of the NCA. The
relevant subsection
reads:
‘(f) any other agreement, other than a credit facility credit
guarantee, in terms which payment of an amount owed by one
person to
another is deferred and any charge, fee or interest is payable to the
credit provider in respect of
(i) the agreement or
(ii) the amount that has been deferred’
In paragraph 6 of their answering affidavit, the
respondents averred that the provision for the payment of interest is
provided
for in clause 1.4 of the AOD of debt under the guise of a
discounting fee. They accordingly submitted that the AOD both
deferred
payment from February 2007 to June 2007 and charged
interest. This being the case they submitted that the AOD is a credit
agreement
and subject to the NCA.
[11.2] The applicant submitted that there is a marked
difference between a discounting agreement and a money lending
transaction.
A discounting agreement is not a credit agreement.
Reliance was placed on the matter of
Bridgeway
Ltd v Markham
15
in which it was held that the agreement in question was
a discount sale and was different from a money-lending transaction or
credit
transaction. The reason for this is that in a money-lending
transaction the borrower undertakes to pay an equal amount to the
amount
lent in instalments or periodically and the lender is
compensated by levying interest [para 21]. Mathopo J held that the
undisputed
facts revealed that the money was paid upfront when the
agreement was concluded between the applicant and the respondent
[para
22]. The learned judge held further that the breach clause
contained in the agreement, which provided for the deferred payment
of interest, could not detract from the fact that the applicant had
made an immediate payment to the respondent. He accordingly
found
that a discounting sale is clearly distinguishable from a credit
facility under the NCA.
[11.3] In
Zimbabwe Development
Bank v Naga Salons and Others,
16
the bank stood to benefit from the loan advanced to the
defendant by charging an ‘invoice discounting fee’ and a
processing
fee on the total amount advanced. The fees were levied at
a certain rate. The court was of the opinion that a discount rate is
not interest but rather a fee levied for advancing the sum in
question. It stated that although the discounting rate and interest
were calculated in a similar manner, they were still different.
[11.4] In this case,
the respondents
have not provided any authority to support their contention that a
discounting fee is an interest charge. In my
view the matter of
Bridgeway
read
together with the
Naga Salons
matter,
supra
,
resolves this issue in favour of the applicant. I accordingly
conclude that the discounting fee under the AOD is not on interest
charge and falls short of the requirements set out in subsection
8(4)(f) of the NCA.
[11.5] The above finding disposes of this issue in
favour of the applicant but for the sake of completeness I turn to
briefly consider
the finding made in the matter of
Carter
Trading (Pty) Ltd v Blignaut
17
which was referred to in argument. Here the court held
that the acknowledgement of debt amounted to a credit agreement and
as such
fell within the ambit of the NCA. The facts were briefly the
following: the defendant had on 23 December 2008 signed an
acknowledgement
of debt in respect of goods purchased from the
plaintiff, undertaking to pay the outstanding amount on 24 December
2008 by 16h00.
The defendant also undertook to pay interest on the
amount owed and the cost of negotiating and preparing the
acknowledgement of
debt and collection commission calculated
according to the Rules of the Law Society of the Cape of Good Hope.
The defendant failed
to pay the amount owed to the plaintiff. The
plaintiff instituted action in the High Court for the amount
outstanding and the defendant
entered appearance to defend. The
plaintiff thereupon filed an application for summary judgment. The
application was opposed, the
defended averring (a) that the
acknowledgement of debt in question was a credit agreement described
in s 8(4)(f) of the NCA and
(b) that the plaintiff had failed to
comply with the provisions of ss 129 and 130 of the NCA. It was held
that since the agreement
had deferred payment, a fee or charge was
payable in respect of the cost of the acknowledgement of debt and
interest and legal
fees were payable in the event of the defendant’s
failure to pay timeously, the acknowledgement of debt constituted a
credit
agreement as envisaged in the NCA.
[11.6] The applicant submitted that the
Carter
case was distinguishable from the present application. I agree. I
have already concluded that a discounting agreement is not a
credit
agreement in terms of the NCA. I also found that the present AOD had
merely confirmed a prior indebtedness contained in
the discounting
agreement. Additionally, I concluded that the discounting fee under
the AOD was not an interest charge. Based on
these conclusions, it
therefore follows as a matter of logic that the AOD in question
cannot be a credit agreement.
[12]
Issue 3
-
Permissible Rates of
Interest
Since the NCA has no application because the AOD in
question has not been shown to be a credit agreement as defined in
the Act,
the permissibility of the rates of interest charged have no
application.
[13]
Issue 4
-
Was the tender by the
respondent on 10 September 2008 a valid tender?
[13.1] It is common cause that the respondents tendered
in writing to pay the applicant the sum of R500 000,00, interest
thereon
at the rate of 15.5% per annum from date of service of
summons to date of payment as well as the applicants costs on an
attorney
and client scale. This tender was rejected out of hand by
the applicant.
[13.2] In argument before me, the applicant attacked the
tender on two grounds. First, it argued that there was no basis for
the
respondents to tender
mora
interest. Second, it contended that the respondents had
to actually make payment or in some other manner satisfy the creditor
that
payment would be received. It submitted that a mere offer to pay
was insufficient. It relied in this regard on the case of
B
& R Investments (Pty) Ltd v Laubscher
18
in which the court held that the tender in question was
an offer of compromise and that if the plaintiff accepted the offer
it would
be precluded from suing for the balance in excess of the
defendant’s tender.
[13.3] Save for repeating the tender before me, the
respondents made no further identifiable submissions on this issue.
In my view,
the applicant’s reliance on the
Laubscher
case is misplaced. In
Unit
Inspection Co of SA (Pty) Ltd v Hall Langmore & Co (Pty) Ltd,
19
Grosskopf JA stated the following:
‘Rule 34 was substantially amended in 1987 and the practice of
actual payment into court was abolished.’
The Appellate Division was critical of the
Laubscher
judgment [at 802J – 803 A]. However, in view of my
findings that a discounting fee is not interest and that the AOD is
not
subject to the NCA, there can be no basis for a tender which
includes
mora
interest
only.
[14] In the result, I make the following order:
(a) Judgment is granted in favour of the applicant
against the respondents, jointly, for payment of the sum of R1162
988,28 together
with discounting fee thereon at the rate of 0.125%
per day on the sum of R450 000,00 from 22 June 2009 to date.
Costs of suit on the attorney and client scale.
_______________________
SEEGOBIN J
For the Applicant : Adv. A. Stokes S.C
Instructed by : Johnston & Partners
For the Respondent : Adv. P. Quinlan
Instructed
by : Cox Yeats Attorneys
Date of
hearing : 02 September 2010
Date of
Judgment : 18 February 2011
1
Amended
Notice of Motion, pages 74-76 of the indexed papers
2
Clause
1.4 reads as follows: “The discounting fee is calculated as 4%
if the capital sums of the first 30 days from the
date the capital
sums were advanced and thereafter 0.125% per day of the capital sums
until settlement of the whole amount.
3
1981
(3) SA 1189
(A).
4
19
LAWSA 17.
5
Adams
at 1192.
6
Malan
et al ‘Malan on Bills of Exchange, Cheques and Promissory
Notes in South African Law’ 4 Ed p. 198.
7
Christie
‘Law of Contract in South Africa’ (2006) 5 Ed, p 449.
8
Swadif
(Pty) Ltd v Dyke N.O.
1978 (1) SA 928
(A).
9
Note
7 above at 452
.
The author refers to
Marendez
v Marendez
1953 (4) SA 218
(C)
where
the court found that the applicant, who had allaged novation, bore
the onus and had failed to prove it. See also
Woolfsons
Credit (Pty) Ltd v Holdt
1977 (3) SA 720
(N)
at 724E which reinforces the view that when novation is raised as a
defence, the onus lies with the defendant.
10
Marendez
at 226-227
; Wolfsons
1953 (4) SA 218
(C) at 724.
11
Wolfsons
at 724.
12
Milner
v Webster
1938 TPD 598
at 601.
13
Somah
Sachs (Wholesale) Ltd v Muller & Phipps SA (Pty) Ltd
1945
TPD 284.
14
Bridgeway
Ltd v Markam
[2008] ZAGPHC 251
;
2008 (6) SA 123
(W).
15
[2008] ZAGPHC 251
;
2008
(6) SA 123
(W).
16
[2006]
JOL 18488
(ZH).
17
2010
(2) SA 46
(ECP).
18
1951
(2) SA 567
(T) at 570B.
19
[1995] ZASCA 3
;
1995
(2) SA 795
(A) at 801I.