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[2008] ZAWCHC 110
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Kernsig 17 (Edms) Bpk v ABSA Bank Beperk (11492/2008) [2008] ZAWCHC 110 (30 October 2008)

IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO: 11492/2008
In
the matter between:
KERNSIG
17 (EDMS) BPK
Applicant
and
ABSA
BANK BEPERK
Respondent
JUDGMENT
DELIVERED ON THIS 30th DAY OF OCTOBER 2008
MEER,
J:
INTRODUCTION:
[1]
Applicant seeks, by way of a final interdict, the cancellation of a
mortgage bond registered by respondent over immovable property
owned
by applicant, being the farm Karoovlakte in the district of Klawer,
Western Cape, (hereinafter, "the property").
The bond was
registered against the property as security for a loan of
Rl,100,000.00 (ONE MILLION ONE HUNDRED THOUSAND RAND) on
8 December
2005. Applicant contends that it is not liable to repay the loan
amount for the purposes of the cancellation of the
bond, as
respondent approved the loan and registered the bond without the
necessary authority from applicant's directors to do
so.
BACKGROUND
FACTS:
[2]
The only directors and shareholders of the applicant are Petrus
Greyling and his father Johannes Greyling ("the Greylings").

They farmed on the property in a partnership known as Karoovlakte
Boerdery, ("the partnership"), which rented the property

from applicant for farming purposes. Between 1984 and 2001, six bonds
were registered against the property in favour of respondent,
ABSA
Bank, as security for a loan and overdraft facility granted to the
partnership by respondent. The accounts in respect of these

facilities were administered at the Vredendal Branch of ABSA.
[3]
On 30 November 2005, the Greylings entered into a sale of shares
agreement with Lionel and Christine Barnard for the sale of
their
shares in applicant. Paragraph 3 of the agreement below, which
specified how the purchase price would be payable, included
in the
purchase price at subparagraph 3.2 a provision that the buyer would
take over the debts of the company, as well as all bonds
registered
over the property in the name of the partnership totalling
Rl,137,750.00.
"KOOPPRYS
[3]
Die koopsom is die bedrag van R2 000 000-00 (TWEE MIJOEN RAND)
betaalbaar deur die Koper aan die Verkoper as volg;
3.1. 'n
Bedrag van R150 000-00 (EENHONDERD EN VYFTJG DUISEND RAND) reeds
betaal.
3.2. Die
oorname van alle skulde van die maatskappy insluitend die
Landboudkredietlening ten bedrae van R57 750-00, asook die verbande

wat oor die eiendom van die maatskappy geregistreer is in naam van
Karoovlakte Boerdery, in totaliteit die bedrag van Rl 137
750-00;
3.3
Die balans van die koopsom nl R712 250-00 word in 12 jaarlikse
paaiemente afbetaal waarvan die eerste betaling op 1 Augustus
2006
sal geskied en daarna jaarliks voor of op die einde van Julie.
3.3.1. Die
koper sal rente teen 7% per jaar op die uitstaande kapitaal gemeld in
3.2 betaal, welke rente jaarliks tesame met die
kapitaal delging
betaal baar sal wees.
3.3.2. As
sekuriteit vir die uitstaande balans van die koopsom soos verwys in
klousule 3.2 hierbo, asook vir die bedrag van R400
000-00 te wete die
koopsom van die roerende bates soos verkoop deur JA Greyling aan LP
Barnard en uiteengesit in klousule 3 van
die genoemde koopooreenkoms,
word 'n 2de verband van Rl 112 250.00 as sekuriteit ten gunste van JA
en PJ Greyling geregistreer
oor Erwe 350,351 en 366 Wilderness.
3.3.3. Die
koopprys is gebasseer as die veronderstelling dat die middel-en
agterskot vir 2005 aan die koper uitbetaal word."
[4]
On 8 December 2005, respondent approved a loan to applicant,
represented by Barnard, in the sum of Rl,100,000.00 (ONE MILLION
ONE
HUNDRED THOUSAND RAND, hereinafter "the contested loan")
and the bonds registered over the property served as security
for
this loan. The memorandum of loan agreement, dated 8 December 2005
12
,
reflects that the loan was given to Lionel Patrick Barnard,
representing applicant, in accordance with a director's resolution

taken on 22 September 2005, citing Barnard as follows:
"LIONEL
PATRICK BARNARD HANDELENDE NAMENS KERNSIG SEWENTIEN (EDMS) BPK REG
NR:2002/000115/07 KRAGTENS
TV
DIREKSIEBESLUIT
GENEEM OP 22 SEPTEMBER 2005"
4
The
last five words in the quote are handwritten. Whilst the loan
agreement was contained in the bundle of documents before Court,
the
director's resolution of 22 September 2005 was not. Applicant, as
appears below, argued that by failing to annex the director's

resolution to the agreement or produce it, respondent had failed to
prove that the loan had been authorised by applicant.
[5]
Respondent contends that the applicant applied for the contested loan
at its Vredendal branch and it was granted on the basis
that the
bonds, which had been registered against the property, would serve as
security for the loan. In this regard the affidavit
of Petrus Truter,
the manager of the legal division of the southern district of Absa
Bank, refers to a copy of the relevant page
of the loan application
on which conditions for the loan are specified
3
.
One of the conditions is recorded as follows:
"Karoovlakte
se skuld moet uit opbrengs van hierdie lening afgelos word."
[6]
The opposing affidavit of Truter, on behalf of respondent, the
contents of which are confirmed by Johan Brand, a manager at

respondent's Vredendal branch at the time the contested loan was
granted, who was familiar with applicant's and the farming
partnership's
bank accounts, sets out the relevant background
circumstances to the granting of the loan, as contended by
respondent, as follows:
6.1
A few months before the loan was granted the Greylings' attorney, Ms
Hanlie Visser (who is also the daughter of Greyling senior
and
sibling of Greyling junior), informed Brand that her family intended
to sell the property to LP Barnard, a partner in her law
firm.
6.2. At
that stage the farming partnership had a cheque account with
overdraft facilities at respondent's Vredendal branch and a
loan
account which was administered at the branch, for which the bonds
registered against the property served as security.
6.3. Visser
was known to Brand because her legal firm also had a bank account
with respondent. Brand had not been satisfied with
the state of
applicant's bank accounts. The overdraft facility limit was regularly
exceeded and the instalments on the loan not
satisfactorily paid.
6.4. The
property was sold to Barnard on the basis that the Greylings sold
their shares in applicant to Barnard. From his discussions
with
Visser and the Greylings, Brand was aware that a term of the sale
transaction was that Barnard, in the name of applicant,
would take
over the existing obligations of Karoovlakte Boerdery, the farming
partnership as against the respondent. This, in effect,
meant that
the overdraft cheque account and the loan debt would be consolidated
and paid by applicant to a new facility which would
be granted to it.
6.5. Brand
was also made aware that, in terms of the sale between the Greylings
and the Barnards, Barnard was required to provide
payment for the
balance of the purchase price of the shares in applicant by
registering bonds over certain properties which Barnard
owned in the
Wilderness. The Greylings were not prepared to transfer the shares to
Barnard until such bonds were registered. It
was of great importance
to Brand that the shares had not been transferred to Barnard, and
from this fact Brand decided that the
applicant must apply for the
loan, and not Barnard in his personal capacity. Barnard would not
have qualified for the loan given
the position of his own assets and
liabilities.
6.6. Visser,
Greyling and Barnard had negotiated the granting of the contested
loan to applicant which was needed to repay the debts
of the farming
partnership to respondent. Barnard was authorised by the Greylings,
in their capacity as directors and shareholders,
to obtain the loan
on behalf of applicant. Visser had phoned Brand on the day the loan
was approved by respondent. She was anxious
to obtain the outcome of
the loan application given that Brand had expressed concern during
the negotiations about the manner in
which the applicant handled its
bank account.
6.7. Truter
added also that, because the shareholding in applicant had not been
transferred to Barnard at the time of the application
for the loan,
the Greylings as directors and shareholders of applicant had to
authorise Barnard to apply on behalf of applicant
for the loan. Such
authorisation was granted and made available to Brand on the strength
of which the loan was approved and granted
to applicant.
6.8. Truter
characterised these proceedings for the cancellation of the bonds as
opportunistic, unfounded and an attempt by applicant
to evade paying
its debt to respondent.
[7]
In contrast to the version of respondent, applicant, as per the
replying affidavit of Petrus Greyling, denied that applicant
had
authorised Barnard to apply for the loan of 8 December 2005.
[8]
Greyling said he had no knowledge of the loan application document
nor the conditions specified thereon. He emphasised that
at no stage
were LP and C Barnard, the names which appear on the loan application
document, directors of applicant. They had been
given neither express
nor implied authority by applicant to apply to respondent for the
contested loan. He emphasised that applicant's
shares had never been
transferred to Barnard. Referring to the sale of shares agreement, he
said it was intended that Barnard would
pay the purchase price from
his personal finances raised by registering security bonds over his
Wilderness property, whereafter
the shares would be transferred to
him. Barnard, he emphasised, would also take over the debts of
applicant and or the partnership.
Greyling added moreover, that in
terms of Section 38 of the Companies Act 61 of 1973, the applicant
was not legally permitted to
burden its own assets for the purpose of
financing the sale of its shares.
[9]
Greyling conceded that Visser contacted Brand at respondent's
Vredendal branch and informed him that the family intended to
sell
the property to Barnard. There was, however, no discussion that a
loan would be granted to the applicant for the purpose of
settling
the debts of the partnership.
[10]
Greyling emphasised also that the directors of applicant were not
contacted after September 2005 in connection either with
payments or
breach of payments on the loan. No documents substantiating
respondent's submission that applicant had authorised the
loan had
been produced by respondent. The director's resolution of 22
September was not at hand, and Greyling suggested no such
document
existed.
[11]
According to Greyling, respondent's opposition to these proceedings
was an attempt to cover up respondent's negligence and
its failure to
ensure that the requisite documents in support of an application for
finance were not in place. The granting of
a loan to Barnard in the
absence of the necessary authority from applicant or without
applicant being bound as surety was fatal
to respondent's defence and
applicant could not be held liable for Barnard's debt.
[12]
The chronology of events after the granting of the contested loan
continued as follows. By late November 2005 Barnard had taken

occupation of the property. On about 28 November 2005, the Greylings
signed a resolution giving permission for the registration
of a
further bond on the property for the sum of R200 000.00 (TWO HUNDRED
THOUSAND RAND) on condition that the respondent released
applicant
from any responsibility in the event of the sale agreement not being
honoured by Barnard. This condition was unacceptable
to respondent,
who was also aware that a dispute had developed between the Greylings
and Barnard over the sale of shares agreement.
Respondent contends
its failure to accept this condition supports its version that it
would not have authorised the contested loan.
[13]
It is common cause that applicant fully settled the loan and
overdraft facilities for which the bonds served as security by
25
January 2006. Applicant, however, did not cancel the bonds at that
stage. Respondent contends that attorney Visser and the Greylings
did
not insist that the bonds be cancelled after the payment of
applicant's debts, because they knew that the bonds also served
as
security for applicant's loan of R1,1,000,000.00 (ONE POINT ONE
MILLION RAND).
[14]
It is common cause that the shares in applicant were never
transferred to the Barnards, and that in February 2008 the Barnards

left the property and returned the keys. The Greylings accepted that
the sale agreement had been repudiated. The agreement was
accordingly
cancelled and the property repossessed by the Greylings.
[15]
In May 2008, applicant received a written offer to purchase the
property, which it accepted. Attorney Visser, on behalf of
applicant,
wrote to respondent seeking the formal cancellation of its bonds
which were still registered against the property. The
letter dated 5
May 2008, records that as part of the purchase price of the shares in
applicant, Barnard took over applicant's outstanding
debt to
respondent of Rl,100,000.00. It records also that in September 2005,
Brand of ABSA's Vredendal branch informed the offices
of Hanlie
Visser Inc. that Barnard's application for the taking over of the
debt in that amount was successful, and on the grounds
of such
confirmation occupation and possession of the farm was given to
Barnard. The letter emphasised that Barnard's repudiation
of the
contract did not free Barnard from his obligations to ABSA. It
requests an undertaking from Absa Bank that the bond be cancelled
on
the date of registration without any liability to applicant.
[16]
On 27 June 2008, respondent requested payment of the sum of
Rl,254,597.18 owing by applicant before the bonds could be cancelled.

This was followed by a request by applicant in June 2008 for
information about this amount, the Greylings conveying that they were

not aware of any further credit given to applicant. Respondent
replied that the outstanding amount flowed from the loan of
Rl,100,000.00
which, as per respondent's version, was granted to
applicant represented by Barnard, the respondent's stance being it
will not
cancel the bond unless the contested loan is settled.
[17]
Applicant has in the meanwhile instructed its attorney to arrange for
the transfer of the property to the new purchaser who
has already
taken occupation of the property and pays occupational rent of R12
000.00 per month. Applicant is adamant that respondent
cannot rely on
the authority it alleges applicant granted to Barnard to secure the
contested loan, as respondent has not proved
the authority, an onus
which it bears.
[18]
In view of the apparent disputes of facts, I raised with Counsel the
question of oral evidence. Whilst respondent was amenable
to oral
evidence being heard, applicant elected to argue the application on
the papers. The general test as formulated in
Plascon-Evans
Paints v Van Riebeek Paints
[1984] ZASCA 51
;
1984
(3) SA 623
(AD) at 634H for the granting of a final interdict in
motion proceedings where there are disputes of fact, as is well
known, is
that an interdict may be granted if those facts averred in
the applicant's affidavits, which have been admitted by the
respondent,
together with the facts alleged by the respondent,
justify such an order.
[19]
Referring to the general rule, Mr Du Preez, for applicant,
emphasised, as was also stated in the
Plascon
Evans
case
at 634I, that the power of a court to give such final relief on the
papers is, however, not confined to such a situation. A
final
interdict could be granted over and above the general rule where a
denial by a respondent of a fact alleged by the applicant
does not
raise a real, genuine or bona fide dispute of fact. It could also be
granted, he submitted, where the allegations or denials
of the
respondent are so farfetched or clearly untenable that the court is
justified in rejecting them merely on the papers.
[20]
Mr Du Preez submitted that, applying the exception to the general
rule to the evidence of respondent as emphasised by him,
respondent
had not proved Barnard was authorised to represent the applicant and
there was no supporting evidence that the loan
had been granted to
the applicant. Respondent had not satisfied the onus to prove
authorisation of the loan. In the circumstances,
there could be no
material disputes of fact between the applicant and the respondent
and a final interdict should be granted against
the respondent.
[21]
I do not accept this proposition. The version of respondent as to how
the contested loan came about, Greyling and Visser's
involvement in
negotiating the loan to Barnard, and the reason for which it was
obtained juxtaposed against applicant's version,
does, in my view,
give rise to factual disputes which are material. The failure to
annex a resolution of directors to the memorandum
of loan agreement
as proof that the loan was given to Barnard, representing applicant,
in terms of a resolution of directors taken
on 22 September 2005,
does not, in my view, negate these factual disputes.
[22]
Nor, I believe, can it be said in the light of all the evidence that
respondent's allegations pertaining to Barnard's authority
to
represent applicant, are so farfetched or clearly untenable that they
stand to be rejected merely on the papers. In this regard
it is worth
noting that Greyling, on behalf of applicant, makes no attempt to
explain what enquiries were made upon discovery of
the loan as to
precisely where the money went to or, what it had been used for as
perhaps would have been expected of company directors
in the
Greylings' position.
[23]
One is also left somewhat puzzled as to how directors of a company
could remain in the dark for over two years, between December
2005
and March 2008, about a significant loan of Rl, 100,000.00 to the
company. On applicant's version to, as per the letter of
Visser of
May 2008, this was the amount of the partnership debt which Barnard
was to take over, albeit its denial that the financing
thereof was to
come from a loan to applicant. It is to be noted also that in March
2008, applicant received a statement from respondent
dated 17 March
2008, in respect of the contested loan
4
,
and notwithstanding that the statement is clearly addressed to
applicant, the affidavit of Greyling states it appeared this was
a
new loan taken by the buyer, a reference to Barnard. It is not
explained how applicant could not have known about the contested
loan
when it sought cancellation of the bond in June 2008, Greyling having
received this statement in March.
[24]
In
Ngqumba/Damons
NO/Jooste v Staatspresident
1988
(4) SA 224
, Rabie WnHR, at 260 I to 262 H, commented on the general
rule as formulated in the
Plascon-Evans
case
in relation to onus, the risk to an applicant who elects to proceed
by way of motion proceedings when faced with a defence
by respondent
in answering papers, and the Court's discretion to grant an order in
the absence of oral evidence. The principles
relevant to the instant
case, distilled from his discussion, are as follows:
[24.1]
It does not follow from the general rule that an applicant in motion
proceedings bears the onus and is accordingly obliged,
where there
are factual disputes, to accept the version of the respondent if he
seeks a final order. The underlying principle of
the general rule
appears to be that a party, who decides to make use of motion
proceedings, knows there is a danger that his factual
submissions can
be opposed, and that he can then be compelled to accept the
respondent's submissions if he wants a final order
on the papers.
[24.2]
The general rule also applies to submissions that the respondent
makes against the applicant in his answering affidavit.
If the
respondent's submissions disclose a defence, then the applicant
cannot succeed on the papers, even if he denies these submissions
in
reply, and even if the onus in respect of the defence according to
the ordinary rules rests on the respondent.
[24.3]
Where the onus is on the respondent and he does not discharge it on
the papers, he does not have to give oral evidence if
he wants to
prevent the application from being granted. In this regard, where an
applicant must expect that his version will be
disputed, he is not
entitled to an order if respondent does not ask for oral evidence.
The court can in its discretion dismiss
the application. As Greenberg
J stated in
Meyers
V Braude
1927
TPD 393
at 396:
"And
as the applicant claims a decision on the matter and does not ask
for
evidence to be heard, I do not think I am justified in ordering the
hearing
of evidence."
[24.4]
These principles apply full square in the instant matter. There are
factual disputes. The respondent's version, in my view,
can be said
to disclose a
defence
and the applicant did not ask for oral evidence. It was in fact the
respondent who asked for oral evidence in the alternative.
[25]
Applying the general rule as formulated in
Plascon-Evans
to
the factual disputes, I find that the facts, as stated by the
respondent,
inter
alia,
that
the loan was granted to applicant as represented by Barnard, together
with those facts in applicant's affidavit admitted by
respondent,
which,
inter
alia,
are
that the loan agreement refers to a loan to applicant as so
represented, do not justify the order sought.
[26]
I order as follows:
The
application is dismissed with costs.
MEER,
J