ABSA Bank Limited v Lecoko and Another (2521/2007) [2008] ZAFSHC 2 (31 January 2008)

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[2008] ZAFSHC 2
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ABSA Bank Limited v Lecoko and Another (2521/2007) [2008] ZAFSHC 2 (31 January 2008)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case
No. : 2521/2007
In
the matter between:-
ABSA
BANK LIMITED
Plaintiff
and
PULE
ISAAC LECOKO NO
1
st
Respondent
JACOBUS
JOHANNES VAN DER MERWE
2
nd
Respondent
______________________________________________________________
HEARD
ON:
20
SEPTEMBER 2007
_____________________________________________________
JUDGMENT
BY:
RAMPAI
J
_____________________________________________________
DELIVERED
ON:
31
JANUARY 2008
_____________________________________________________
[1] This
is an application for summary judgment. The plaintiff sues the
second defendant for payment the sum of R764 664.04 and ancillary
forms of relief. The claim is based on a suretyship contract which
the second defendant signed on behalf of a business entity called
“Die Goedgeleë Boerdery Trust” in favour of the plaintiff.
[2] The
plaintiff’s claim is fully set out in the summons which the
registrar issued on 12 June 2007 and the sheriff served upon
the
second defendant on 27 June 2007. On 13 July 2007 the second
defendant filed notice of his intention to defend the action.
On 3
August 2007 the plaintiff launched this application for summary
judgment.
[3] The
notice of application was accompanied by a supporting affidavit
signed by Ms Rozanne Niemann, the plaintiff’s manager responsible
for debt collection services. She confirmed the plaintiff’s cause
of objection, the quantum of the claim as well as the relief
sought
as set out in the summons from which this application for summary
judgment stemmed. She concluded by expressing the opinion
that,
although the second defendant had entered an appearance, he had no
bona
fide
defence to the plaintiff’s claim and that he had done so for the
sole purpose of delaying the action.
[4] The summary judgment
application is opposed. In his opposing affidavit the second
defendant stated that the aforesaid trust was
created during 2005
while the first defendant was still in his employ. On 13 September
2005 he took over the trust from the first
defendant. Since then he
was the only trustee. Subsequent to the take-over he called at the
plaintiff’s in connection with the
bond obligations of the trust
and the signing powers on its current account. He and the bank
agreed that he would assume responsibility
in connection with the
bond obligations of the trust and that he would also have the signing
powers on its current account. On the
first occasion he apparently
signed no documents.
[5] He once again visited
the plaintiff. On the second occasion he signed certain documents
relating to the two matters previously
agreed upon. At the request
of the plaintiff’s personnel, he signed documentation in respect of
the signing powers at the plaintiff’s
offices. However, as regards
the signing of the documentation pertaining to the transfer of the
bond obligations, the plaintiff’s
personnel sent him to the
plaintiff’s lawyers where he signed such documentation.
[6] During his second
visit he signed the documents which were presented to him without
reading them and under the mistaken but innocent
belief that such
documentation related to the mere assumption of the bond obligations
of the trust and the signing powers on its
current account only. He
concluded by stating that he would not have signed, as he did, if
only the plaintiff’s personnel or its
attorneys had drawn his
attention to the danger that by signing he was binding himself as
surety and co-principal debtor.
[7] A
cursory overview of the principles of law is necessary. The
plaintiff’s claim is backed up by four annexures to the summons,
namely:
Firstly,
the mortgage bond over the farm registered in favour of the plaintiff
– annexure “A”;
Secondly,
the certificate of balance in respect of the capital and interest as
on 3 July 2007 – annexure “B”;
Thirdly, the breakdown
of the rates of interest in accordance with the provisions of the
Usury Act, No. 73 of 1968, which rates had
been applied to the bond
loan – annexure “C”;
Fourthly,
the suretyship agreement – annexure “D”.
According
to all these documents the second defendant appears,
prima
facie
,
to be indebted to the plaintiff. It is trite that the onus of
proving otherwise rests on the second defendant.
[8] The
respondent is required to show that he has a
bona
fide
defence to the plaintiff’s claim and that he is not playing for
time at the expense of the plaintiff. In his opposing affidavit
he
must fully disclose the nature and the grounds of his defence and the
material facts upon which it is founded.
Vide
High Court Rule 32(3)(b).
[9] The
opposing affidavit must contain a sufficient exposition of the facts,
which if accepted as true, would constitute a good defence
in law.
Vide
ESTATE
POTGIETER v ELLIOTT
1948 (1) SA 1084
(C) on 1087;
WRIGHT
v VAN ZYL
1951 (3) SA 488
(C) at 492 C;
BREITENBACH
v FIAT SA (EDMS) BPK
1976 (2) SA 226
(T) at 227 F – H.
[10] If
the second defendant’s opposing affidavit raises an arguable case,
then he will have discharged the onus and the plaintiff’s
summary
judgment application will not succeed and leave to defend will have
to be granted to him.
Vide
EISENBERG'S
v OFS TEXTILE DISTRIBUTORS (PTY) LTD
1949 (3) SA 1047
(O) on 1055;
LOMBARD
v VAN DER WESTHUIZEN
1953 (4) SA 84
(C) at 89 A;
AREND
AND ANOTHER v ASTRA FURNISHERS (PTY) LTD
1974 (1) SA 298
(C) at 316 C.
[11] In
determining whether or not the second defendant has put up an
arguable case to justify letting him go on to have the main
action
tried, it is not expected of him to formulate his opposing affidavit
with the precision of a pleading -
HERBERT
v STEELE
1953 (3) SA 271
(T) at 276 C.
[12] Our
courts are reluctant to deprive a defendant of an opportunity of
having a full blown hearing of a dispute in a case where
he has a
prima
facie
arguable defence. Because summary judgment is a drastic procedure
with serious repercussions for the unsuccessful defendant, this
extra-ordinary relief is never granted where there is doubt cast on
the merits of the plaintiff’s case.
Vide
FIRST
NATIONAL BANK OF SA LTD v MYBURGH AND ANOTHER
2002 (4) SA 176
(C) at 180 E;
FOURLAMEL
(PTY) LTD v MADDISON
1977 (1) SA 333
(AD) at 347 H.
[13] Where,
as in this case, the defendant’s defence is based on
misrepresentation, trial is the preferred civil procedure for the
proper adjudication and substantive resolution of a dispute.
Vide
ESTATE
POTGIETER v ELLIOTT
1948 (1) SA 1084
(C) on 1087.
[14] Now
I proceed to examine the facts. The second defendant took the trust
over from the first defendant on 13 September 2005 and
became the
sole trustee thereof. He is now sued on the strength of what
purports to be a limitless suretyship agreement signed here
in
Bloemfontein on 21 September 2005. The trust owes the plaintiff the
sum of R764 664.04 plus interest thereon calculated at a
rate of
12,5% per annum from 4 May 2007. The second defendant’s signature
appears on one of the documents the plaintiff relies
upon.
Vide
p.
4 annexure “D”. The document in question is a suretyship
agreement. These facts are not in dispute.
[15] The
second defendant’s defence is that at the time he appended his
signature on the aforesaid annexure, he was unaware that
he was
signing as a surety. He was not warned that by so signing he was
contractually binding himself as a surety and co-principal
debtor
with the trust in respect of its debts in favour of the plaintiff.
On the day in question, documentation was merely placed
before him,
he then simply signed without first reading it. He signed in this
way because he was under the
bona
fide
belief that such documentation related to his assumption of the bond
obligations of the trust and the signing powers on its current
account. He averred further that his attention was not specifically
drawn to the fact that he was committing himself to an unlimited
extent in favour of the plaintiff for the repayment of all the debts
owing by the trust to the bank. He concludes on a lamentable
and
exculpatory note. If only his special attention was drawn to this
serious commitment, he certainly would not have signed the
document
now being used against him. This then is the sum total of the second
defendant’s defence.
[16] Mr.
Snellenburg, counsel for the plaintiff, forcefully argued that the
second defendant, on his own accord, approached the bank
with the
specific aim of taking over the obligations of the trust towards the
bank. Moreover, he argued, there was no indication
whatsoever, in
the opposing affidavit, that the manner in which the plaintiff agent
presented the documents to the second defendant
was misleading in any
way. Looking at the disputed document, he argued further, it was
definitely not in a category of documents
whose contents or form
could be typified as misleading to the unwary. He contended that, in
the circumstances, the plaintiff’s
agents did not misrepresent the
true nature of the document to the second defendant, did not mislead
him and were unaware at the
time of the signing that the second
defendant was labouring under any misapprehension or mistaken belief.
Finally, he submitted
that if the second defendant was mistaken, as
he alleged, his was unilateral mistake which could not be regarded as
justus
error
and that since it was not a reasonable mistake, it could not
constitute a
bona
fide
defence to offset an application for summary judgment.
[17] Mr.
Zietsman, counsel for the second defendant, vigorously argued and
urged me to turn the application for summary judgment down.
The high
watermark of his argument was this:
“Dit
is nooit deur Eiser se regsverteenwoordigers verduidelik of onder
Tweede Verweerder se aandag gebring dat hy ‘n onbeperkte
borgstelling onderteken in terme waarvan hy homself in persoonlike
hoedanigheid as borg en mede-hoofskuldenaar ten opsigte die
verskuldigheid
van die trust verbind nie.”
Vide
par. 4.8 of the second defendant’s heads of argument on p. 7
thereof.
He
submitted, that the second defendant had disclosed a
bona
fide
defence grounded on the unilateral misrepresentation of the
plaintiff. In support if this submission he cited several
authorities,
namely,
KHAN
v NAIDOO
1989 (3) SA 724
(N);
SHEPHERD
v FERREL’S ESTATE AGENCY
1921 TPD 62
;
TROLLIP
v JORDAAN
1961 (1) SA 238
(A) at 256 D;
SISSONS
v LLOYD
1960 (1) SA 307
(SR) at 370;
PRINS
v ABSA BANK LTD
1998 (3) SA 904
(C);
DOLE
SOUTH AFRICA (PTY) LTD v PIETER BEUKES (PTY) LTD
2007 (4) SA 577
(C);
DU
TOIT v ATKINSON’S MOTORS BPK
1985 (2) SA 893
(A);
The
Law of Contract
,
4
th
Edition, by R.H. Christie, p. 371 – 374 under the article
“Unilateral mistake caused by the other party.”
[18] The crucial question
in the case is whether the second defendant’s mistake in signing
the suretyship agreement without reading
it, amounted to a deliberate
misrepresentation or unilateral mistake caused by the plaintiff.
[19] In
NATIONAL
AND OVERSEAS DISTRIBUTORS CORPORATION (PTY) LTD v POTATO BOARD
1958 (2) SA 473
(AD) at 479 G – H Schreiner JA had this to say
about a mistake in a contract:
“Our
law allows a party to set up his own mistake in certain circumstances
in order to escape liability under a contract into which
he has
entered. But where the other party has not made any misrepresentation
and has not appreciated at the time of acceptance that
his offer was
being accepted under a misapprehension, the scope for a defence of
unilateral mistake is very narrow, if it exists
at all. At least the
mistake (error) would have to be reasonable (
justus
)
and it would have to be pleaded.”
[20] The
second defendant approached the bank to sign certain documents. From
there he was sent to the plaintiff’s attorneys.
It seems he did
not enquire why he had to go there. On his arrival there certain
documents were merely presented to him. Again
it seems he did not
enquire what documents he was signing or required to sign. He simply
signed. He did not read. He honestly
believed he was signing a
document pertaining to the obligations of the trust to repay the bond
loan. This he was prepared to do
in his representative capacity as
the sole trustee of the trust entity. It was never his intention to
go beyond that by binding
himself in his personal capacity as surety
for the payment of the business debts of the trust. It later turned
out that he signed
a document he did not really intend signing. He
was not warned about or alerted to the true nature of the document he
actually signed.
He was misled, he alleged. The plaintiff falsely
represented to him that he was signing a document in one capacity
whereas, in
truth and in reality, he was made to sign a document in
another capacity completely different from what was previously agreed
upon.
Therefore he contended that no valid and binding suretyship
contract was concluded between him, in his personal capacity, and the
plaintiff.
[21] The second
defendant’s contention failed to persuade me. I hold the firm view
that a valid and binding contract was concluded
between the parties
on the terms and conditions contained in the relative document. The
second defendant cannot be heard to say
that the failure of the
plaintiff’s agents to warn him about or to alert him to the true
nature of the document was an act of misrepresentation
or unilateral
mistake caused by the plaintiff. Equally fallacious is his averment
that on the first occasion he and the plaintiff
had agreed that he
should come back to sign documentation in his representative capacity
only.
[22] I browsed the
opposing affidavit. Nowhere could I find an averment that he was
blind and therefore could not read the document
on his own. It is
not his case that there was a legal duty which made it incumbent upon
the plaintiff to warn him or to draw his
attention to the fact that
he was signing a suretyship agreement. There is no suggestion, let
alone an averment, in his opposing
affidavit, to the effect that he
wanted to read the document but that he was deceptively discouraged
or prevented from doing so by
the plaintiff’s agent who, for
instance, told him that he was in a hurry to go somewhere or that
reading the document was unnecessary.
There is virtually no averment
from which I can infer the existence of such a primary duty on the
part of the plaintiff or its attorneys
to help the second defendant
to read. It was his primary duty to read the document he was
required to sign. He was able to read.
He chose not to read. He
only has himself to blame.
[23] The document was
plain and simple. It was not ambiguous at all. Its heading was
printed in bold letters right at the top and
on the vertical
imaginary middle line. It is printed in black letters on a white
sheet. The descriptive word “Borgstelling”
appears on page 1 of
a four page document. It is an Afrikaans word for the English word
“suretyship”. It also appears that
the second defendant is
Afrikaans speaking, because his opposing affidavit is, like the
suretyship document, written in the same
language. The first page of
the document, like the rest of the pages, was initialled by three
persons, the second defendant and
the two witnesses. The word
“Borgstelling” on page 1 is so conspicuous that anyone who has
anything to do with this particular
page, even if he or she does not
read it, cannot easily miss it, even if no-one draws his or her
attention to it.
[24] If
the second defendant, as a businessman, had taken the trouble on his
own accord, to read the relative document, he would have
become aware
of the true fact that he was required to sign a suretyship for an
unlimited amount of money. But even if he genuinely
did not read the
entire document, the aforesaid peculiar features of the document,
particularly page 1 thereof, strongly suggest
or show that the
heading of the document is so strikingly visible that it catches the
eye of anyone who fleetingly glances at it
without actually reading
its contents. Compare the facts as well as the defence in this case
with those in
STANDARD
BANK OF SA LTD v EL-NADDAF AND ANOTHER
1999 (4) SA 779
(W). I am persuaded by Mr. Snellenburg’s argument.
There is nothing to indicate that the manner in which the document
was presented
to the second defendant was misleading. I am not
convinced that the second defendant’s opposing affidavit discloses
a
bona
fide
defence. In my view the defendant has failed to discharge the onus.
[25] On page one of the
relative document the following sound advice appears on the second
line from the top:
“Ons
beveel aan dat u onafhanklike regsadvies inwin om seker te maak dat u
u verbintenis en die potensiële gevolge van hierdie
borgskap
verstaan.
Deur hierdie borgstelling te verskaf
kan u afsonderlik en gesamentlik met die skuldenaar aanspreeklik
gehou word vir die verpligtinge
van die skuldenaar.”
[26] On
page four of the same annexure the following confirmations are
recorded:
“
Ek
................................ die ondergetekende, bevestig hierdie
borgstelling.
22.1 ten
tye van ondertekening behoorlik voltooi was veral met verwysing na
die naam van die skuldenaar en klousule 21; en
22.2 vir
sover geen bedrag ter beperking van my/..... aanspreeklikheid
ingevolge hierdie borgakte in klousule 21 ingevul is nie,
my/.....
aanspreeklikheid hierkragtens vir ‘n onbeperkte bedrag sal wees; en
22.3
in
alle opsigte in ooreenstemming is met die ooreenkoms tussen my/.....
en die Bank en nie as gevolg van een of ander gemeenskaplike
fout
tussen my/..... en die Bank, nie ons ware bedoeling weergee nie.
”
The second defendant’s
signature follows shortly below this final clause of the suretyship
document.
[27] The
legal effects of one’s signature on legal documents were
encapsulated in the following
caveat
subscriptur
principle:
“The
starting point is as referred to by Harms JA in
Sonap
Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v
Pappadogianis
[1992] ZASCA 56
;
1992 (3) SA 234
(A), at 239 H - I * quoting from the statement by
Blackman J in
Smith
v Hughes
(1871) LR 6 QB 597
at 607, namely:
‘If whatever a man’s real
intention may be, he so conducts himself that a reasonable man would
believe that he was assenting
to the terms proposed by the other
party, and that other party upon the belief enters into the contract
with him, the man thus conducting
himself would be equally bound as
if he had intended to agree to the other party’s terms.’
As long ago as 1903 it was our law
and it remains our law that when a party signs a contract it is taken
to be bound by the ordinary
meaning and effect of the words which
appear over his signature. For the defendant to succeed it needed to
convince the Court that
it was misled as to the purport of the words
to which he signified his assent by appending his signature.”
DOLE
SOUTH AFRICA (PTY) LTD v PIETER BEUKES (PTY) LTD
2007 (4) SA 577
(CPD) at 590 C – E per Dlodlo J
[27] I
am not convinced that the second defendant was misled as to the true
purport of the words which he signified his contractual
ascent by
appending his signature on a document from which he now desperately
seeks to extricate himself. To suggest, as the second
defendant
does, that the bank and the trust agreed, that the trust itself must
be its own surety or furnish no sound security, is
ridiculous. That
is what his contention boils down to.
[28] In
determining whether the second defendant has a plausible case which
justifies letting the dispute to go on trial, his defence
has to be
considered against the backdrop that:
“[30]
By
its very nature a contract of suretyship is burdensome.
The surety undertakes responsibility for the fulfilment of another's
obligation. No doubt for this reason the law affords protection
to a
surety in a number of different ways. At common law, for example, a
surety will be released if the creditor does something in
his
dealings with the principal debtor which has the effect of
prejudicing the surety (Caney's The Law of Suretyship 5th ed at 205).
In order to be valid, contracts of suretyship must now also be
embodied in a written document signed by or on behalf of the surety
(s 6 of the General Law Amendment Act 50 of 1956).
But
a balance must be struck.
Sureties do not assume the obligations of others against their wills,
but with their free consent. Once having done so they cannot
expect
to be entitled simply to disabuse their minds of the fortunes of the
principal debtor's liability and then require the law
to protect
them.... The typical surety in modern society is one who binds him-
or herself as co-principal debtor and guarantees the
debts of a
company or close corporation which has little in the way of share
capital or assets but is dependent on credit in order
to conduct its
business. More often than not the business is that of the surety or a
spouse who for various reasons chooses to conduct
it through the
medium of a company or close corporation with limited liability.
A
creditor will ordinarily refuse to afford credit to such a legal
persona in the absence of a personal suretyship and few businesses
can operate successfully without credit.
The very existence of the debt is therefore dependent upon the
existence of the suretyship while the object and function of the
latter
is, of course, to ensure proper payment of the former.”
JANS
v NEDCOR BANK LTD
2003 (6) SA 646
(SCA) at par. 30 per Scott JA. I am in agreement.
Generally sureties have themselves to blame. To grant leave to
defend in these
circumstances would almost be subversive of the whole
law of suretyship contract.
[28] In
the business world of today it must be something of an exceptionally
rare banking practice to come across a situation where
a financial
institution grants a mortgage bond to a trust which cannot provide
adequate security for the loan, without requiring
the trustee thereof
to stand the borrowing trust surety in his personal capacity for the
repayment of the loan. If the second defendant
had declined to
conclude a suretyship agreement with the plaintiff, the plaintiff
would not have released the funds needed to inject
life into the
trust to become a trading business entity. The trust would not have
come into existence or would have remained dormant.
A surety is a
potential debtor and, as such, should not be easily allowed to walk
away when chickens come home to roast. He must
not be readily
allowed to duck and dive from the contractual obligation he freely
assumed by simply making a bold statement: “I
did not read” when
he should have.
[29] In
the circumstances I have come to the conclusion that the plaintiff’s
case is unanswerable.
TESVEN
CC AND ANOTHER v SOUTH AFRICAN BANK OF ATHENS
2000 (1) SA 268
(SCA) at p. 277. The second defendant has made out
no arguable case. In the instant case no
justus
error
could be attributed to the plaintiff’s agents. If there was any
mistake, I have some reservation as to whether there really was,
then
it was a unilateral and unreasonable mistake caused, not by the
plaintiff but rather, by the second defendant himself.
NATIONAL
AND OVERSEAS DISTRIBUTORS CORPORATION (PTY) LTD v POTATO BOARD
1958 (2) SA 473
(AD) at 479 G – H. Since the plaintiff was not to
blame for any mistake or misrepresentation, the second defendant
cannot be heard
to say his signature does not correctly symbolise or
signify his intention to be bound by the terms and conditions of the
suretyship.
He cannot now be released from the bonds of the ordinary
meaning and effect of the words which appear over his signature -
DOLE
SOUTH AFRICA (PTY) LTD v PIETER BEUKES (PTY) LTD
2007 (4) SA 577
(CPD) at par. 29. To suggest, as the second
defendant’s contention does, that there was no mutual assent as
regards the import
of the relative document, is untenable. I would,
therefore, grant summary judgment in favour of the plaintiff. To do
otherwise
would not be compatible with proper exercise of judicial
discretion.
[30] No reason exists why
the general rule of costs should not apply. The plaintiff has been
successful with its action. Therefore
the fruits of success must be
awarded to the plaintiff.
[31] In the result, the
following order is made:
31.1 The
application for summary judgment is granted.
31.2 The costs shall be
borne and paid by the second defendant.
______________
M.H. RAMPAI, J
On
behalf of the plaintiff: Adv. N. Snellenburg
Instructed
by:
Naudes
BLOEMFONTEIN
On
behalf of the second
defendant: Adv.
P.J.J. Zietsman
Instructed
by:
Kramer
Weihmann Joubert Inc
BLOEMFONTEIN
/sp