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[2008] ZAWCHC 69
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Land and Agricultural Development Bank of South Africa t/a The Land Bank v SA Eels (Pty) Ltd and Others (1587/2006) [2008] ZAWCHC 69 (3 December 2008)
Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
CASE
No: 1587/2006
In the matter
between:
THE LAND
AND AGRICULTURAL DEVELOPMENT
BANK OF
SOUTH AFRICA t/a The Land Bank Plaintiff
and
S
A EELS (PTY) LTD
First
Defendant
(Registration
No: 2002/01225/07)
JOHN
ANDREW MATHEWS Second Defendant
UNAGI
INTERNATIONAL Pic Third Defendant
(Registration
No: 4668108)
EEL AFRICA
INTERNATIONAL INVESTMENTS (PTY) LTD Fourth Defendant
_____________________________________________________________________
JUDGMENT DELIVERED :
3 DECEMBER 2008
________________________________________________________________________
MOOSA,
J:
Introduction
The plaintiff instituted an action against the defendants in terms
of which it claimed against them payment of certain monies
arising
from certain financial advances made by it in terms of the Land and
Agricultural Development Bank Act, 15 of 2002 (“the
Act”)
in the form of loan agreements, instalment sale agreements and
covering bonds as well as from suretyship agreements
securing such
advances. Prior to instituting such action, plaintiff brought an
Application against first defendant, in the form
of a rule nisi for
the attachment of assets as contemplated in section 33(4) of the
Act. The rule nisi was granted and the order
was subsequently made
final. The present action was instituted against first defendant in
pursuance of such final order and
against the other defendants in
the ordinary course.
Special Pleas
The defendants raised certain Special Pleas. In terms of such
pleas, they pleaded firstly, that this court does not have
jurisdiction
in respect of the third defendant in the absence of
confirming or founding jurisdiction (“First Special Plea”);
secondly, that the court does not have jurisdiction to declare the
immovable properties, referred to in the Plaintiff’s
Particulars of Claim, executable inasmuch as those properties are
situate in the Eastern Cape (“Second Special Plea”)
and
thirdly, that the relief sought in prayers (d) and (e) of the
Plaintiff’s Particulars of Claim are not competent on
the
basis that the plaintiff has failed to address a written demand to
the first defendant in terms of section 33(3)(b)(i) of
the Act
(“Third Special Plea”). I will deal with each of these
special defences
ad seriatim
.
First Special Plea: Absence of Jurisdiction in respect of Third
Defendant
It is common cause that the third defendant is a foreign company
registered according to the laws of the United Kingdom of Great
Britain and that it is duly registered in London. Its indebtedness
to the plaintiff arises from a written Deed of Suretyship
(annexure
“M”) in terms of which it bound itself as surety and
co-principal debtor to the plaintiff for the obligation
of first
defendant. Plaintiff submitted that this court has the necessary
jurisdiction to entertain the claim against third
defendant on the
grounds that the Deed of Suretyship was signed on behalf of
plaintiff at Pretoria, Gauteng on 9 February 2005
and, in terms of
clause 15 of the said Suretyship, third respondent agreed and
submitted to the jurisdiction of the Magistrate’s
Court and
the High Court of South Africa. This is disputed by third defendant
who pleaded that this court does not have jurisdiction
in the
absence of a court order confirming and founding jurisdiction. I
am, therefore, required to determine that issue.
The determination of that issue turns around the interpretation of
clause 15 of the Deed of Suretyship. A convenient point
of
departure would be to interpret the meaning and import of clause 15
of the Deed of Suretyship which makes express provision
for
jurisdiction. It reads as follows:
“
15.
JURISDICTION
15.1
For the purpose of all or any proceedings
herein, the Surety hereby consents to the jurisdiction of the of
the Magistrate’s
Court having jurisdiction under Section 28
of the Magistrate’s Court Act (Act no. 32 of 1944, as
amended), notwithstanding
that such proceedings are otherwise
beyond its jurisdiction. This clause shall be deemed to constitute
the required consent
conferring jurisdiction upon the said Court,
pursuant to Section 45 of the Magistrate’s Act.
15.2
It shall nevertheless be in the sole
discretion of Land Bank to proceed against the Surety in such
Magistrate’s Court
or any other court (including the High
Court) having jurisdiction.”
It is common cause that third defendant is a
peregrinus
insofar as this court is concerned. Plaintiff is an
incola
of this court in that it has a branch office within the jurisdiction
of this court although its head office is situated in Pretoria.
First, second and fourth defendants are either resident and/or carry
on business within the jurisdiction of this court and are
accordingly
incolae
of this court. Third defendant has, in
terms of clause 15 relating to jurisdiction, consented and submitted
to the jurisdiction
of the Magistrate’s Court or any other
court (including the High Court) having jurisdiction.
Adv
Fisher
, on behalf of the defendants, submitted that
clause 15 of the Deed of Suretyship does not envisage a consent to
jurisdiction
but rather an agreement that the Magistrate’s
Court would have jurisdiction where the High Court already has
automatic
jurisdiction over a party agreeing to such jurisdiction.
There is no jurisdictional fact in clause 15 which indicates that
the
Magistrate’s Court would only have jurisdiction if the
High Court has automatic jurisdiction. On the proper reading and
construction of the clause, the indication is to the contrary.
Implicit in the clause is the fact firstly, that
peregrine
third defendant has effectively submitted its person to the
jurisdiction of the South African courts which have the necessary
jurisdiction rather than the courts of Great Britain in connection
with any legal proceedings emanating from the said suretyship
and
secondly, such jurisdiction is conferred on the High Court with the
Magistrate’s Court having concurrent jurisdiction.
The more
pertinent question that requires to be answered is: Which division
of the High Courts of South Africa has the necessary
jurisdiction?
In terms of the consent and submission, the Magistrate’s Court
and the High Court have concurrent jurisdiction. The plaintiff
has
been entrusted with the discretion to make an election whether to
institute the proceedings either in the Magistrate’s
Court or
the High Court having the necessary jurisdiction. In this instance,
plaintiff has elected to institute proceedings
in the High Court of
the Cape of Good Hope Provincial Division. The principal debtor,
namely first defendant carries on business
in the jurisdiction of
this court and gave as its
domicilium et executandi
address
within the jurisdiction of this court. Second defendant, who is the
principal shareholder and director of first and
second defendants,
is resident and gave his
domicilium et excecutandi
address
within the jurisdiction of this court. Fourth defendant likewise
carries on business and gave its
domicilium et executandi
address within the jurisdiction of this court. Third defendant bound
itself as surety and co-principal debtor to plaintiff for
the
obligation of first defendant. In my view the election made by
plaintiff, by virtue of the consent and submission of third
defendant, in order to institute action against it out of this
court, accords with the doctrine of effectiveness.
Heher JA
in
Hay Management Consultants v P3 Management
Consultants
2005 (2) SA 522
quoted with approval from
Forsyth
Private International Law
4
th
ed at 215-16:
“…
It is submitted that effectiveness in this slightly
attenuated sense should suffice to justify the exercise of
jurisdiction on the
grounds of submission. …The South African
Courts should as a matter of policy encourage submission. As
economic development
in Southern and Central Africa proceeds, there
is no reason other than archaic restrictions on the exercise of
jurisdiction, why
the local courts should not develop an
international role akin to that of the Commercial Court in London.
…Thus peregrines
should not find that, if they have submitted
to the jurisdiction of the South African courts, their property is
still at risk of
being seized to found or confirm jurisdiction.”
Scott JA
in
Naylor v Jansen; Jansen v Naylor
2006 (3)
SA 546
(SCA) at 559D-E said that an attachment to found or confirm
jurisdiction and a submission to the jurisdiction both have the
effect
of founding or confirming jurisdiction. It was held that an
attachment serves only to provide an
incola
with property or
security in South Africa against which the judgment can be executed.
A submission, on the other hand, entitles
an
incola
to
enforce the judgment in the country of the
peregrinus
.
Harmse JA
in
Tsung v Industrial Development Corporation of
SA Ltd
[2006] ZASCA 28
;
2006 (4) SA 177
(SCA) at 181E-F re-affirmed the
principle:
“If a peregrine defendant has submitted –
whether unilaterally or by agreement – to the jurisdiction of
the
court of the incola, an attachment or arrest to found or confirm
jurisdiction is not only unnecessary, it is not permitted”
.
I agree with the submission of Adv
Jacobs
that clause 15 of
the Deed of Suretyship constitutes a submission by consent on the
part of third defendant and the need to obtain
an order to found or
confirm jurisdiction is, therefore, obviated. Third defendant’s
Special Plea that this court has
no jurisdiction in respect of third
defendant in the absence of an order confirming or founding
jurisdiction is accordingly dismissed
with costs.
Second Special Plea: Absence of Jurisdiction to Declare Property
Executable
I now turn to discuss the Second Special plea, namely, that this
court does not have the jurisdiction to declare the immovable
properties referred to in the plaintiff’s Particulars of Claim
executable as the properties are situate in the Eastern
Cape. Our
courts have given conflicting decisions on this issue. The legal
writers also expressed divergent views on the issue.
It was
submitted on behalf of defendants that it is not competent for this
court to grant the necessary relief as it is not
the forum rei sitae
of such property notwithstanding the provision of section 26 (1)
of the Supreme Court Act, 59 of 1959. Section 26 provides for
service and execution of civil process issued from one division of
the Supreme Court to be effected within the jurisdiction of
any
other division. In support of his submission, Adv
Fisher
referred to
Weibren’s Trust & Others v Holmes &
Another
1960 (3) SA 461
(D). In that case
Henning AJ
,
after analising various authorities concluded:
“
In my opinion the section does not confer, either expressly
or by necessary implication, jurisdiction on one Division to declare
executable immovable situated in another Division. This
interpretation leaves it open to the plaintiffs to approach the Court
in whose area of jurisdiction the properties are to make the order
now asked for by invoking the provisions of sec 26 and making
a
formal application to the Court concerned (see
Ex parte
Hill
,
1924 O.P.D. 116).
”
On this particular issue, plaintiff nailed its colours to the mast
of the decision in the case of
Ivoral Properties (Pty) Ltd v
Sheriff, Cape Town
2005 (6) SA 96
(C).
Van Reenen J
,
after extensively and in-depth examining the various conflicting
authorities and the views of our legal writers, concluded that
the
decision in
Weinbren’s Trust & Others v Holmes &
Another
(
supra
) is no longer good law. He went on
further to say that, in his view, the judgment of
Hall J in
Colonial Mutual Life Assurance Society Ltd v Tilsum Investments
(Pty) Ltd
1952 (4) SA 134
(C)
is not plainly wrong and he
is accordingly bound thereto.
I agree with the
ratio
decidendi
of
Van Reenen J
in
Ivoral Properties
(
supra
) and find myself likewise bound to the decision of
Hall J
in
Colonia Mutual
(
supra
).
I accordingly find that this court is competent to declare the
property in question executable and defendants’ Special
Plea
that this court has no jurisdiction to declare the immovable
properties in question executable, inasmuch as those properties
are
situate in the Eastern Cape, is dismissed with costs.
Third Special Plea: Absence of Written Demand
Defendants plead that the failure of plaintiff to address a letter
of demand as contemplated in section 33(3)(b)(i) of the Act
bars
plaintiff from instituting this action. Plaintiff firstly, denies
that such a letter of demand was not sent and secondly,
in any case,
denies that such a letter of demand is a prerequisite to the
institution of an action.
The Act grants the Land Bank extraordinary remedies in the event of
the debtor defaulting with payment to it. The Land Bank
is
empowered, after having made a written demand, to apply to court, as
a matter of urgency, to attach and sell assets of the
debtor. In
granting such an order the court may impose conditions with regard
to the institution of action and the giving of
necessary guarantees.
In this matter plaintiff brought an application for the attachment
of the assets of first defendant pending
the institution of an
action. The court issued a rule nisi authorising the attachment of
the assets of first defendant and imposed
a condition that, in the
event of first defendant’s liability being disputed, plaintiff
institute action for the recovery
of monies owing to it. The
present action against first defendant is in pursuance of such court
order.
Section 33(3)(b)(i) of the Act provides that before the plaintiff
can bring an application for the attachment and sale of defendants’
assets, seven days must have elapsed after a written demand had
been made for the repayment of advances made to the debtor.
It is
common cause that when plaintiff brought the application for the
attachment of the assets of first defendant, a letter
marked
“annexure HJ20” was submitted in support of such
application. The letter, after addressing various issues,
concludes
as follows:
“
In view
of the fact that the undertaking to pay the
R10million by 30 June 2005 has not been fulfilled, together with
the fact that
interest payments and instalments under the various
loans are in arrears, Land Bank will have no other option than to
take appropriate
legal action in order to protect its interest.”
Defendants’ case, as I understand it, is that, before
plaintiff could have instituted the action, it was a requirement
that a letter of demand should have preceded it. In my view such
prerequisite is misconceived for three reasons. Firstly, section
33(3)(b)(i) contemplates a letter of demand as a prerequisite only
in the case of an application for attachment and sale of assets
and
not for the institution of the action. Secondly, section 33(4)(b)
provides that a court may impose conditions for the institution
of
an action. In confirming the rule nisi against first defendant, the
final order provided that plaintiff shall institute the
action
against first defendant for recovery of monies allegedly owed to
first defendant. The court did not impose a condition
that the
institution of the action should be preceded by a letter of demand.
Thirdly, that annexure HJ20 did in fact precede
not only the
institution of the action, but also the application. A further
letter of demand would have been superfluous. The
letter of demand
as contemplated in section 33(3)(b)(i) only applies to first
defendant and not to the other defendants.
I conclude, therefore, that there is no merit in the Third Special
Plea that a further letter of demand had to be sent before
plaintiff
instituted the present action. I accordingly dismiss the Third
Special Plea with costs.
In summary, the three Special Pleas are dismissed with costs.
For
Plaintiff : Adv D J Jacobs
Attorney(s) : Cliffe
Dekker
For
Defendants : Adv W Fisher
Attorney(s) : Meyer
& Associates
The Land and Agricultural
Development Bank of SA v SA Eels (Pty) Ltd & Others
Cont/…