Buying Exchange Company v Araujo and Another (2420/2007) [2007] ZAFSHC 120 (1 November 2007)

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[2007] ZAFSHC 120
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Buying Exchange Company v Araujo and Another (2420/2007) [2007] ZAFSHC 120 (1 November 2007)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case No. : 2420/2007
In
the case between:-
BUYING
EXCHANGE COMPANY
Applicant
and
J
A A ARAUJO
First
Respondent
S
F R DOS SANTOS
Second
Respondent
_____________________________________________________
HEARD
ON:
18
OCTOBER 2007
_____________________________________________________
JUDGMENT
BY:
MABESELE,
AJ
_____________________________________________________
DELIVERED
ON:
1
NOVEMBER 2007
_____________________________________________________
[1] On
5 June 2007 the applicant approached this Court on an urgent basis
for an interim order in terms of which the security held
by it in
terms of a Notarial Covering Bond passed by the respondents in favour
of the applicant should be perfected.
[2] The
rule
nisi
was issued by Van der Merwe J, calling upon the respondents to show
cause and give reasons why, if any, the order should not be made
final on the return date.
[3] The
applicant is THE BUYING EXCHANGE COMPANY (PROPRIETARY) LIMITED,
registration number 1998/017734/07, a company duly incorporated
and
registered in terms of the relevant statutes of the Republic of South
Africa, with its registered offices at Leppan House, No.
1 Skeen
Boulevard, Bedfordview, Johannesburg.
[4] First and second
respondents trade in partnership as CENTRAL SUPERMARKET, at 9 Brand
Street, Lindley.
[5] The applicant
conducts its business as a central purchasing organisation, which
purchases commodities in bulk from suppliers and
manufacturers on a
cash basis, on behalf of its members. This allows businesses to
apply for membership to the applicant, which
in turn allows the
member to purchase stock and materials through the applicant on
favourable credit terms. The members of the applicant
are general
retail dealers and wholesalers such as supermarkets, conducting
business throughout the Republic of South Africa. The
supplier on
one hand invoices the applicant directly and the applicant pays the
supplier. The applicant on the other hand invoices
the member
directly who is obliged to settle the account within 30 days from
date of invoice.
[6] It
is common cause that during September 2002, the respondents were
admitted as a member of the applicant, pursuant to a membership
agreement entered into between applicant and the respondents.
[7] The
conditions of the membership agreement were as follows: The
respondents would purchase goods through the applicant’s buying
organisation; the respondents agree to furnish security in the form
of a notarial bond in favour of the applicant over the moveable
assets of the respondents; the applicant invoices the respondents for
the goods supplied and payment is to be effected either within
15 of
25 days from the date of statement.
[8] The
salient terms of the Notarial Covering Bond are,
inter
alia
,
as follows:
“
1. As security
for the repayment of the respondents’ indebtedness, the respondents
bound all its movable property as defined in
clause 1.2.1 of the
notarial bond, in favour of the applicant.
2. The scope of respondents’
indebtedness to the applicant will be determined by a certificate
issued under the hand of a duly authorised
officer of the applicant.
3. The
said notarial bond shall be covering security to the amount of the
capital amount, finance charges thereon and for all and
any sums of
money which shall now or may in future be owing to the applicant by
the respondents, from whatsoever cause arising.
4. The
applicant is entitled, in the event of the respondents not being able
to meet its obligations towards the applicant, or whenever
the
applicant has good reason to believe that it will be prejudiced by
any conduct of the respondents, to take and keep possession
of the
respondents’ business and movable assets without prior written
notice to the respondents.”
[9] The
applicant averred in its founding papers that after full
reconciliation of the respondents’ account the respondents are
indebted to it in an amount of R84 240,50 together with interest
thereon at a rate of 16% per annum from 1 February 2007 to date
of
payment. The certificate of balance marked “CET3” is attached to
the papers as proof of indebtedness. But Mr. C.E. Van Tonder,
a
director of the applicant, stated, in his replying affidavit that the
total of the respondents’ indebtedness after reconciliation
amounted to R74 267,41. He stated that the respondents’ account
was reduced by R10 000,00 after he had picked up certain valid
problems from the invoice which was queried by the respondents.
[10] In
paragraph 13.8 of the replying affidavit, Van Tonder stated as
follows:
“
...
Unfortunately, “JA2” is the first indication that I have ever
received from the respondents indicating what is accepted by
the
respondents or not and therefore, upon receipt of that document in
the court papers, I was able for the first time to pick up
certain
valid problems that the respondents had which resulted in the amount
claimed from the respondents reducing by some R10 000,00.”
[11] Notwithstanding the
aforementioned reconciliation made by the applicant in February 2007,
Van Tonder visited the premises of
the respondents to establish from
the respondents reasons for failure to settle their debt which
exceeded R200 000,00 during the
latter part of 2006.
[12] Mr. Fourie, who
appeared on behalf of the applicant, contended that the respondents
are indebted to the applicant in an amount
of R74 267,41. This
contention, regrettably, is not in accordance with the relief which
the applicant seeks. Mr. Fourie argued
also that the discrepancies
in the accounts of the respondents came about as a result of certain
payments which were made by the
respondents directly to the suppliers
contrary to the membership agreement.
[13] The respondents
dispute that they are indebted to the applicant. They dispute also
that they are in financial difficulty. The
first respondent stated,
in his opposing affidavit, that they are expanding their existing
business operation with a view to take
over another business. He
stated further that their bookkeeper made a reconciliation of the two
accounts which their partnership
opened with the applicant. The
bookkeeper brought to light that the partnership has a credit of R12
498,73 in the accounts. According
to the first respondent, the
partnership did deal directly with the suppliers, pursuant to the
partnership terminating its membership
of the applicant during June
2006.
[14] The
applicant initially averred that the respondents are indebted to it
in an amount of R84 240,50. This amount is reflected
in the
certificate of balance by means of which the respondents’
indebtedness to the applicant will be determined. After contestation
of this amount by the respondents, (the case which the respondents
were called to meet) the applicant adjusted its version insofar
as it
relates to the amount allegedly owed to it by the respondents.
Although the applicant advanced reasons for its different versions,
it is apparent that a dispute of fact exists, which cannot be
resolved on the papers, in my view. The applicant should have
realised
that a dispute of fact is bound to develop when launching
this application. The applicant nevertheless proceeded by way of
motion
for final relief in a matter where it was obvious that the
proper procedure was to proceed by way of action.
[15] The
security which is held by the applicant in terms of a notarial
covering bond is accessory to the main debt (which is disputed).

Until such time that the dispute is resolved, the security cannot be
realised. (See
SA
BANK OF ATHENS LTD v VAN ZYL
2005 (5) SA 93
(SCA).)
[16] For the reasons
stated above the applicant is not entitled to the relief sought.
[17] The
only remaining question is whether this application be dismissed or
the matter be referred for evidence under Rule 6 of the
Rules of this
Court.
[18] In
ROOM
HIRE CO (PTY) LTD v JEPPE STREET MANSIONS (PTY) LTD
1949 (3) SA 1155
(T) it was held that where a dispute of fact is
shown to exist the Court has a discretion as to the future course of
the proceedings.
The Court held that the application may be
dismissed with costs, particularly when the applicant should have
realised when launching
his application that a serious dispute of
fact was bound to develop. Murray AJP (on p. 1162) stated as
follows:
“
It is certainly
not proper that an applicant should commence proceedings by motion
with knowledge of the probability of a protracted
enquiry into
disputed facts not capable of easy ascertainment, but in the hope of
inducing the Court to apply Rule 9 (now Rule 6)
to what is
essentially the subject of an ordinary trial action.”
[19] Since the applicant
should have realised that a serious dispute was bound to develop, it
proceeded with the application at its
own peril. This application
should be dismissed, therefore.
[20] In
the premises, I make the following order:
1. The
rule
nisi
issued on 5 June 2007 is discharged.
2. The applicant is
ordered to pay the costs.
__________________
M.M. MABESELE, AJ
On
behalf of the applicant: Adv. J.A. Fourie
Instructed
by:
Vermaak and Dennis
Attorneys
36 First Avenue
BLOEMFONTEIN
On
behalf of respondents: Adv. C.A. Human
Instructed
by:
Wessels
& Smith
Standard
Bank Building
Corner
Aliwal & St Andrew Streets
BLOEMFONTEIN
/sp