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[2011] ZAECELLC 11
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Sign & Seal Trading 206 (Pty) Ltd v Black Ginger 327 (Pty) Ltd and Others (EL 1530/2011, ECD 2766/2011) [2011] ZAECELLC 11 (3 November 2011)
IN THE HIGH COURT OF
SOUTH AFRICA
(EAST LONDON CIRCUIT
LOCAL DIVISION)
CASE NO: EL 1530/2011
ECD 2766/2011
Date
Heard: 19 October 2011
Date
made available
:
3
November 2011
In the matter between:
SIGN & SEAL
TRADING 206 (PTY) LTD
…..................................................
PLAINTIFF
and
BLACK GINGER 327 (PTY)
LTD
…...............................................
FIRST
DEFENDANT
LAMAN (PTY) LTD
…................................................................
SECOND
DEFENDANT
MCEBISI RUDOLF MLONZI
…......................................................
THIRD
DEFENDANT
SIYASANGA MLONZI
…............................................................
FOURTH
DEFENDANT
___________________________________________________________________
SUMMARY JUDGMENT -
REASONS
___________________________________________________________________
MAGEZA AJ:
On the 19
th
October 2011 at East London Circuit Court, I heard argument herein
and made an order granting Summary Judgment in favour of Plaintiff
with costs on an attorney and client scale. These are my reasons for
the order.
Plaintiff issued
Summonses against the Defendants for monies lent and advanced
pursuant to an Agreement of Loan concluded between
Plaintiff and the
First and Second Defendant entities represented by Third Defendant.
Third and Fourth Defendants in turn are
married in community of
property. The material terms of the agreement as set out in
paragraph 6 of the Plaintiff’s particulars
of claim are that
Plaintiff:
lent and advanced to
First Defendant the capital sum of R3 000 000.00 based on
an Agreement of Loan;
First Defendant, a
juristic person, warranted that either its net asset value or annual
turnover exceeded R1 000 000.00
and that accordingly the
National Credit Act No. 34 of 2005
was not of application to the
transaction;
First Defendant
undertook to pay an administrative fee in the sum of R270 000.00;
First Defendant
undertook to pay a (legal) fee in the sum of R25 000.00;
the capital sum of the
loan would accrue interest at the rate of 2.25% per week calculated
and compounded monthly;
in the event of First
Defendant failing to make payment of any amount due in terms of the
Agreement of Loan, Plaintiff would be
entitled to charge interest on
the sum outstanding at the rate of .66% per day calculated daily and
compounded weekly;
the capital sum of the
loan and accrued interest would be repaid by First Defendant by it
making payment to Plaintiff of four
equal instalments of R190 000.00
to be paid on 23 April 2011, 23 May 2011, 23 June 2011 and 23 July
2011 and a final payment
of R3 645 404.67 on 3 August 2011;
in the event that First
Defendant failed, for any reason whatsoever, to make payment of any
amount due in terms of the Agreement
of Loan, the full sum
outstanding in terms of the Agreement of Loan, together with accrued
interest, would immediately fall due
and payable;
the indebtedness of the
First Defendant to Plaintiff would be determined and proved by way
of a Certificate signed by an authorised
signatory of Plaintiff and
which Certificate would serve as
prima facie
proof of First
Defendants indebtedness to Plaintiff;
in the event of
Plaintiff incurring legal costs in the enforcement of its rights
First Defendant undertook liability to Plaintiff
in respect of those
costs on a scale as between attorney and client;
First Defendant consented
to the jurisdiction of the Court having jurisdiction over Plaintiff’s
address;
(xi) Plaintiff complied
with its obligations in terms of the Agreement and, on the 23 March
2011 paid the sum of R3 000 000.00
less the administration
fee of R270 000.00 and the fee of R25 000.00 to Second
Defendant in accordance with an instruction
from First Defendant.
An alternative claim,
applicable only in the event of a finding that Plaintiff’s
payment to Second Defendant was not authorised
by First Defendant,
is couched in the following terms, that:
“
Consequent
upon a bona fide mistake Plaintiff paid to Second Defendant the sum
of R3 000 000.00 less the administrative
fee of R270 000.00
and the legal fee of R25 000.00 on the 23
rd
March 2011, without any obligation to do so and in the absence of any
entitlement on the part of Second Defendant to such payment.
Second
Defendant has accordingly been unjustly enriched at Plaintiff’s
expense and Plaintiff has been impoverished in the
sum of
R3 000 000.00”.
In addition to the
aforegoing, on the same date of signature of the principal
agreement, the 23
rd
March 2011, Second Defendant
represented by one Robert Keith Ross and Third Defendant as
directors thereof, signed and executed
a written Deed of Suretyship
in favour of Plaintiff in terms of which it became bound as surety
and co-principal debtor with
First Defendant to Plaintiff for the
sum loaned together with the further obligations set out therein.
Third and Fourth Defendants
also on the same day, executed a written
Deed of Suretyship in favour of Plaintiff wherein they each bound
themselves as sureties
and co-principal debtors in respect of the
capital sum of R3 000 000.00 together with interest and
costs on an attorney
and client scale. The Defendants renounced the
benefits of the legal exceptions of no cause of debt, no value
received, revision
of accounts, errors of calculation and excussion.
Plaintiff furthermore
sets out in its particulars that on the 23 April 2011, First
Defendant made payment of the first instalment;
that First Defendant
failed to pay the instalments for the months of May and June 2011;
paid a sum of R380 000.00 on the
2 July 2011 and; thereafter
failed to make any further payments on due date or at all.
The affidavit in support
of the Application for Summary Judgment is deposed to by one Jacobus
Bernhadus Booyens as Managing Director
of the Plaintiff and the
Plaintiff’s representative with whom the Defendants negotiated
and concluded the Agreement of
Loan and Suretyships referred to
heretofore. A duly completed Certificate of Balance is annexed to
the Plaintiff’s papers.
Summons was served on
the 1
5th
September 2011, notice of appearance to defend
on the 26 September 2011 and the application for Summary Judgment
launched some
4 days after.
Defendants’
opposing affidavit is deposed to by Third Defendant who affirms that
he is a director of both the First and
Second Defendant entities and
is also authorised to do so on behalf of all Defendants including
the Fourth Defendant. The Defendants
oppose the Plaintiff’s
application for Summary Judgment on briefly the following grounds,
that:
7.1 whereas there are two
alternative causes of action outlined in Plaintiff’s
particulars of claim, Plaintiff in its founding
affidavit only swears
positively to “the cause of action”. Plaintiff does not
in Defendants’ view state which
of the two it seeks to verify
thus rendering the application for Summary Judgment defective.
7.2 Defendants admit that
Plaintiff and First Defendant concluded the Agreement of Loan as per
Plaintiff’s particulars of
claim but deny that Plaintiff
advanced any part of the capital sum under the Agreement of Loan
either to First or Second Defendant.
Defendant’s furthermore
deny that an instruction emanating from First Defendant was conveyed
to Plaintiff to pay the capital
sum loaned into the account of Second
Defendant.
7.3 an entity known as
Profit Partners advanced a sum of R2 705 000.00 to the
Second Respondent on the 24
th
March 2011. Defendants
attach bank statements of Second Respondent reflecting this deposit.
Defendants allude to this that Profit
Partners is an entity somehow
associated with Plaintiff although they do not know the nature of the
relationship. They further
detail and assert therein that Profit
Partners paid the sum to purchase building materials from the Second
Defendant, a manufacturer
of cement blocks.
7.4 Defendants deny that
they made the payment alleged by Plaintiff in paragraph 9.1 to 9.4 of
the particulars of claim.
7.5 the Plaintiff has
contravened the
in
duplum
rule in advancing the sum of
R2 705 000.00 and the alleged deductions from the
R3 000 000.00 and suing for R6 000 000.00.
Rule 32 of the Uniform
Rules provides for relief by way of Summary Judgment on
inter
alia,
a liquidated amount in money. A Defendant who wishes to
resist an application for Summary Judgment must, unless he or she
furnishes
security,
“
satisfy
the Court by affidavit … that he or she has a
bona
fide
defence to the action, and such affidavit … shall disclose
fully the nature and grounds of the defence and the material
facts
relied upon therefor.”
What is clearly required
of a Defendant in terms of Rule 32 (3) (b) is that he must set out in
his affidavit, facts which if proved
at the trial, will constitute an
answer to the Plaintiff’s claim. If he does not do so, he can
hardly satisfy the Court that
he has a defence.
The purpose of the Rule
is well known. It is a procedure aimed at the Defendant who, although
he has no
bona fide
defence to the action brought against him,
gives notice of intention to defend solely in order to delay the
grant of judgment in
favour of Plaintiff. In a case where that is
what the Defendant has done, the Summary Judgment procedure serves a
socially and
commercially useful purpose. The relevant Rule should,
therefore, not be interpreted with such liberality to defendants that
the
purpose is defeated. See
Breitenbach v Fiat SA (Edms) Bpk
1976 (2) SA 226
(TPD) at 227C.
In this decision, the
Court went on to state that it is equally important to guard against
the injustice that may be occasioned
a Defendant called upon at short
notice and without discovery or cross examination, to satisfy the
Court in terms of sub-rule (3)
(b).
At 228B the Court
commented that:
“
It
will suffice… if the Defendant swears to a defence, valid in
law, in a manner which is not inherently and seriously unconvincing.”
In
Joob Joob
Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture
2009
(5) SA 1
(SCA), the Court observed that:
“
The
rationale for summary judgment proceedings is impeccable. The
procedure is not intended to deprive a defendant with a triable
issue
or a sustainable defence of his/her day in court … In the
Maharaj case at 425G-426E, Corbett JA, was keen to ensure
first, an
examination of whether there has been sufficient disclosure by a
defendant of the nature of the grounds of his defence
and the facts
upon which it is founded. The second consideration is that the
defence so disclosed must be both
bona
fide
and good in law. A court which is satisfied that this threshold has
been crossed is then bound to refuse summary judgment. Corbett
JA
also warned against requiring of a defendant the precision apposite
to pleadings. However, the learned judge was equally astute
to ensure
that recalcitrant debtors pay what is due to a creditor.”
Whether or not a case is
made out for Summary Judgment is a matter that must be determined on
the basis of the papers before Court.
In this regard it has been
held that:
“…
a
decision as to whether a plaintiff’s case is unanswerable or
not must be founded on information before the Court dealing
with the
application. This information is derived from the plaintiff’s
statement of case, the defendant’s affidavit
or oral evidence
and any documents that might properly be before the Court.”
Per
Van Winsen J in Gilinsky v Superb Launderers and Dry Cleaners (Pty)
Ltd
1978
(3) SA 807
(C) at 811 E-G; See also
Soil
Fumigation Services v Chemfit Technical Products
2004(6) SA 29 (SCA) at p35 para 11.
It goes without saying
that where Plaintiff places before Court evidence detrimental to the
Defendant’s denial of liability,
these allegations by
Plaintiff must be fully dealt with by a Defendant in its opposing
papers. Where these are avoided and are
not dealt with
seriatim
,
then a Court hearing the application is entitled to regard these as
being without an answer and thus of necessity true.
Having read the
Defendants opposing affidavit and heard argument, there is in my
view, firstly no merit in the Defendants’
assertion that
Plaintiff has failed to verify the claim in the alternative. This it
argues is so only by dint of the fact that
the verification is in
respect of a “cause of action” and not “causes of
action”. Such a requirement
is only strictly speaking
necessary where there are two claims based on allegations which are
mutually destructive. In
Diesel Power Plant Hire CC v Master
Diggers (Pty) Ltd
1992 (2) SA 295
(W) at 297C, Zulman J found
that:
“
It
is apparent to me from a reading of the
Threeball
case, as also of the judgment of Booysens AJ (as he then was) in the
Barclays
National Bank
case which is referred to by Stegman J, that emphasis is placed on
the proposition that the summons contains not only alternative
claims
but alternative claims which are based on mutually destructive
alternative versions of the cause of action. It follows from
this,
the way I read the cases, that it is perfectly in order to verify a
cause of action based on alternative claims. What is
objectionable is
verifying a cause of action based on two mutually destructive
alternative versions of the cause of action.”
See also
Visser v
Incorporated General Insurances Ltd
1994 (1) SA 472
(T).
Plaintiff’s case
is set out comprehensively in its papers and is supported by the
necessary documentary material setting
out all the terms on which
Plaintiff relies. When one has regard to the terms of this Agreement
of Loan, it is very evident that
the terms are weighty and punitive.
Financing entities assess clients on the basis of their risk
profile. There are many privately
owned finance companies who offer
high risk clients funding at substantial cost to mitigate risk. In
many instances, such borrowers
are business entities with certain
constraints and these at times resort to such loans out of a lack of
alternatives occasioned,
at times by a need to conclude an imminent
transaction or because of their own unattractive credit profiles. In
this transaction
it is very evident that the Defendants were
prepared to go the proverbial extra mile to access the capital
admittedly borrowed.
Not only did the Defendants bind themselves as
Sureties as outlined but they ceded the shares held in both First
and Second Defendant
as well as an interest in immovable property
owned by First Defendant to Plaintiff. The Defendants are business
owners who knew
fully well what they were binding themselves to.
They are not ordinary individuals, they are building material
suppliers and
the Court must accept that all the implications of the
transaction and consequences of default were at all material times
within
their contemplation.
Their opposing affidavit
is also inadequate in that Defendants’ seek to confess and
avoid by acknowledging the agreement
relied upon by Plaintiff whilst
denying that Plaintiff advanced the monies or capital sum set out in
the agreement. Plaintiff
contends that it paid the relevant sum into
the Second Defendant’s banking account at the instance of
Third Defendant’s
(duly authorised) instructions. Defendants
contend that the said amount was paid into such account for reasons
other than those
alleged by Plaintiff. Curiously, Defendants allege
the existence of an unrelated transaction for the supply by Second
Defendant
of bricks to Plaintiff but does not support this by
availing this Court any supporting material. It does not say whether
same
was pursuant to an oral or written agreement; how the order was
placed; whether the bricks were delivered and does not attach
delivery note or vouchers, if any. It does not say what invoices
were issued by it for the consignment. Of even more curiosity
is the
fact that the bricks are alleged to have been paid for into the same
account Plaintiff says it paid the capital sum into.
This, by some
unusual coincidence, on the very day the capital was to be paid and
in the exact amount alleged by Plaintiff to
have been borrowed by
First Defendant and paid into Second Defendant’s account.
Defendants also do not
even make an attempt to explain why they saw fit to make payment of
some instalments, erratic as they may
have been, if they never had
benefit of the capital sum. These payments point to an effort to
stave off a liability it knew was
extant and based on a perfected
agreement. On its own version, the ‘Profit Partners’
entity through which the payment
was made and reflecting on its bank
account is an entity belonging to Plaintiff. The funds were paid
into its account and reflected
the very next day of signature of the
agreement. The amount paid therein is precisely the amount which
accords with the agreement
as set out in Plaintiff’s papers
and annexed hereto. The prospect of an innocent coincidence between
the Loan arrangements
and the alleged simultaneous purchase of
cement blocks by Plaintiff’s company in one and the same
period is far-fetched
and preposterous and has to be dismissed as
bogus and contrived.
As for the Defendants’
professed distress founded on the
in duplum
rule, the amount
borrowed is R3 000 000.00. Plaintiff’s claim is for
R6 000 000.00. I fail to see how
such is objectionable as
the rule, simply stated, is that interest stops once unpaid interest
is equal to the ‘capital’.
The interest contemplated by
the rule is “the price of making money available or the
penalty for not paying what is owing
on the date the payment is due”
See
Sanlam Life Insurance Ltd. v South African Breweries Ltd
2000 (2) SA 647
(W) at 655B.
The ‘interest’
charged herein is compound interest and not ordinary interest. In the
aforegoing decision the Court pointed
out that the rule is based on
public policy and fashioned to protect ordinary debtors being
endlessly consumed by charges. Where
however the transaction itself
is informed by considerations other than ordinary interest, but an
agreement based on compounded
interest, the application of the rule
might depend on what was intended to be achieved by the parties in
the first place. At 655D
and having considered other decisions
dealing with the genesis of the rule, the Court went on to say:
“
In
my view the 10% compound interest referred to in clause 2.1 of the
SAB agreement is not ‘interest’ in the sense referred
to
in the
in
duplum
rule… There is therefore no question of any party being unduly
disadvantaged which requires public policy principles to
be resorted
to, as in the cases where the
in
duplum
rule is applicable. From all the cases quoted and all the authorities
referred to in such cases, the
in
duplum
rule
is confined to arrear interest and to arrear interest alone. In my
judgment the reason for this is plain: it is to protect
debtors from
having to pay more than double the capital owed by them at the date
on which the debt is claimed. It is not to punish
investors who are
entitled to more than double their investment because the addition of
interest to their capital investment would
produce such a result.”
and at 655J
“
Bearing
in mind the commercial and economic exigencies which apply in a
modern business world, it seems to me that the effect of
the
in
duplum
rule
should be confined rather than be extended. The opprobrium which
attaches to money-lending transactions in Roman Law and Roman-Dutch
law to a large measure no longer applies. In modern commerce the
moneylender is now normally a bank or similar financial institution
whose honesty and integrity is not in question. Money lending as a
means of affording financial assistance constitutes the very
lifeblood of modern commerce, enabling parties with initially
insufficient capital to build up profitable and successful business
ventures which they would not have been able to do without the
assistance of the loans granted to them. In modern societies, as
opposed to that which prevailed in ancient and medieval times,
maximum interest rates are normally controlled by central banks
established by the State. In the business world of today the rate of
interest charged on any transaction depends on principles
of supply
and demand rather than the so-called ‘moral’
considerations which applied in the past. It could be argued
with
some force that the effect of the
in
duplum
rule
in modern commerce is to provide a legal means for the dishonest
debtor to escape his obligations to comply with what he has
agreed to
pay rather than to alleviate the plight of overburdened debtors.”
[17] I align myself with
the aforegoing observations and in any event, the interest herein at
worst, is the equivalent and not in
excess of the capital advanced.
In the result my view is that the opposing papers do not establish a
bona fide defence or defences
to the claim and the suggested defences
do not collectively constitute an answer to Plaintiff’s claim
and are not defences
with a prospect to succeed were the matter to
proceed to trial. Plaintiff is entitled to the relief sought.
[18] Summary Judgment is
granted as against the First, Second, Third and Fourth Defendants in
favour of Plaintiff for:
Payment of the sum of
R6 000 000.00 together with interest thereon calculated at
the rate of .66% per day, calculated
and compounded weekly, from 11
September 2011 to date of payment;
The Defendants are
ordered to pay Plaintiff’s costs of suit on a scale as between
attorney and client; jointly and severally
the one paying the others
to be absolved.
_________________________________
PT MAGEZA
ACTING JUDGE OF THE
HIGH COURT
APPEARANCES
:
FOR PLAINTIFF
: Mr
D de la Harpe, instructed by
Drake Flemmer &
Orsmond
FOR DEFENDANTS
: Mr
Swartbooi, instructed by
V Gwebindlala &
Associates
15