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[2020] ZASCA 160
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Zungu-Elgin Engineering (Pty) Ltd v Jeany Industrial Holdings (Pty) Ltd and Others (1138/2019) [2020] ZASCA 160 (3 December 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 1138/2019
In
the matter between:
ZUNGU-ELGIN
ENGINEERING (PTY)
LTD APPELLANT
and
JEANY
INDUSTRIAL HOLDINGS (PTY) LTD
FIRST RESPONDENT
IAN
LAVERNE
DONJEANY SECOND
RESPONDENT
LEE
SPENCER
DONJEANY THIRD
RESPONDENT
Neutral
citation:
Zungu-Elgin Engineering
(Pty) Ltd v Jeany Industrial Holdings (Pty) Ltd and Others
(1138/2019)
[2020] ZASCA 160
(3
December 2020)
Coram:
PONNAN, VAN DER MERWE and NICHOLLS JJA and LEDWABA
and POYO-DLWATI AJJA
Heard
:
17 November 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email. It has been
published
on the Supreme Court of Appeal website and released to SAFLII. The
date and time for hand-down is deemed to be 10h00
on 3 December 2020.
Summary:
Suretyship – at common law a
surety’s right of recourse arises upon payment to creditor –
s 154(2)
of the
Companies Act 71 of 2008
does not alter common law
position.
ORDER
On
appeal from:
Kwa-Zulu Natal Division of
the High Court, Durban (Chetty J sitting as court of first instance):
judgment reported
sub nom Jeany
Industrial Holdings (Pty) Ltd and Others v Zungu-Elgin
Engineering (Pty) Ltd
2020
(2) SA 504
(KZD)
The appeal is dismissed with costs.
JUDGMENT
Van der Merwe JA (Ponnan and
Nicholls JJA and Ledwaba and Poyo-Dlwati AJJA concurring)
[1]
The first respondent, Jeany Industrial Holdings (Pty) Ltd, the second
respondent, Mr Ian Laverne Donjeany and the third respondent,
Mr Lee
Spencer Donjeany, each bound themselves as sureties and co-principal
debtors in respect of a debt owed by the appellant,
Zungu-Elgin
Engineering (Pty) Ltd, to Hollard Insurance Company Limited
(Hollard). After having made payment to Hollard, the respondents
exercised their right of recourse against the appellant. The narrow
issue in the appeal is whether this debt was owed by the appellant
immediately before the beginning of the business rescue process,
within the meaning of s 154(2) of the Companies Act 71 of 2008
(the
Act).
[2]
The issue arose as follows: Sunrise Energy (Pty) Ltd (Sunrise) and
the appellant entered into a contract in terms of which the
latter
would manufacture tanks for the storage of liquid petroleum gas. The
contract provided that a performance guarantee (guarantee)
had to be
furnished to Sunrise. The appellant entered into an agreement with
Hollard pursuant to which the latter was to provide
the guarantee. On
7 October 2013 Hollard furnished the guarantee to Sunrise. It was a
guarantee of the kind described in
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others
[2009]
ZASCA 71
;
2010 (2) SA 86
(SCA) para 20. It essentially provided that
‘without regard to any claim or dispute of any nature which any
party may allege’,
Hollard would pay an amount not exceeding
R33 951 466 to Sunrise on its ‘first written
demand’, accompanied
by a certificate that the appellant was in
breach of its obligations under the contract with Sunrise.
[3]
The agreement between the appellant and Hollard provided that the
appellant would indemnify Hollard in respect of any payment
that it
made in terms of the guarantee. On 20 September 2013, the first
respondent and three other companies signed a document
entitled
‘RECIPROCAL INDEMNTIY AND SURETYSHIP’ (the indemnity). In
terms thereof they jointly and severally bound themselves
as sureties
and co-principal debtors for the obligations of the appellant to
Hollard. In terms of a Deed of Suretyship (the suretyship)
entered into on the same date, the second and third respondents also
bound themselves jointly and severally with the appellant
as sureties
and co-principal debtors for the latter’s liabilities to
Hollard. At the time the second and third appellants
were directors
of the appellant.
[4]
On 20 February 2015, Sunrise duly demanded payment in terms of the
guarantee. As a result, from 17 to 31 March 2015, Hollard
paid the
total amount of R33 951 466 to Sunrise. Prior to these payments,
on 5 March 2015, Hollard made written demand on
the respondents for
reimbursement of this amount under the indemnity and suretyship.
[5]
On 11 March 2015, the appellant was placed under business rescue at
the behest of a creditor, the Industrial Development Corporation
of
South Africa Ltd. The respondents did not lodge claims related to the
indemnity and suretyship with the business rescue practitioner.
The
business rescue plan in respect of the appellant was approved on
17 July 2015 and was subsequently implemented. It
obviously
did not deal with the respondents’ claim in question.
[6]
Hollard instituted proceedings in the Gauteng High Court,
Johannesburg against the respondents, as well as the three other
signatories to the indemnity, for payment of the aforesaid amount
under the indemnity and suretyship respectively. On 24 June 2016
that
court gave judgment in favour of Hollard against these parties,
jointly and severally, for payment of the amount of R33 951 466,
as well as interest and attorney and client costs.
[7]
On 7 December 2016, the respondents entered into a settlement
agreement with Hollard. During the period from 5 October 2017
to 10
April 2018, the respondents, in discharge of the appellant’s
indebtedness to Hollard, paid the total amount of R250 000
in
instalments to the latter.
[8]
Following hereon, the respondents sued the appellant in the
KwaZulu-Natal High Court, Durban, for payment of the amount of
R250 000, based on the surety’s right of recourse against
the principal debtor. The appellant defended the action and
the
respondents applied for summary judgment. The opposed application for
summary judgment came before Chetty J. He concluded that
the
appellant had failed to disclose a defence in law and granted summary
judgment, but gave leave to the appellant to appeal to
this court.
[9] Section 154(2) of the Act
provides:
‘
If
a business rescue plan has been approved and implemented in
accordance with this Chapter, a creditor is not entitled to enforce
any debt owed by the company immediately before the beginning of the
business rescue process, except to the extent provided for
in the
business rescue plan.’
[10]
The appellant’s sole argument proceeded along the following
lines. The debt owed by the appellant to the respondents
under the
surety’s right of recourse arose on 20 February 2015, when
Sunrise demanded payment from Hollard in terms of the
guarantee.
Therefore, so the argument went, the debt became owing prior to the
commencement of the business rescue proceedings
on 11 March 2015. As
the approved and implemented business rescue plan did not provide for
this debt, the respondents were not
entitled to enforce it in the
court a quo.
[11]
It is difficult to understand why the appellant chose 20 February
2015 as the date on which the debt in question became owing.
As I
have said, Hollard only made payment to Sunrise during the period 17
to 31 March 2015. It is true that Hollard had demanded
payment from
the respondents on 5 March 2015. Even if it is accepted that their
liability towards Hollard arose on that date, it
matters not. The
question is when did the appellant become liable to the respondents
under the surety’s right of recourse.
[12]
The surety’s right of recourse is succinctly summarised in C F
Forsyth and J T Pretorius
Caney’s The Law of
Suretyship
6 ed (2010) at 159:
‘
The
surety who has paid the debt of the principal debtor to the creditor
has a right of recourse against the debtor; he is entitled
to
reimbursement by the principal debtor of what he has paid the
creditor. This was so in Roman law, notwithstanding that payment
of
the debt extinguished it and released the debtor; it became the
Roman-Dutch law and is our law.’
[13]
In
Proksch v Die Meester en Andere
1969 (4) SA 567
(A) this
court considered the common law principles in respect of when the
surety’s right of recourse arises. With extensive
reference to
Roman and Roman-Dutch authorities, Rumpff JA said at 584H-585A:
‘
It
appears clear that at common law, a surety could only be regarded as
a creditor of the principal debtor, when he had paid the
creditor.’
(Translated)
[1]
See
also
Proksch
at
589D-E,
Caney
at 163 and P A Delport and Q Vorster
Henochsberg
on the
Companies Act
71
of 2008
Vol 1 at 445. The
same applies to the right of recourse between co-sureties. See
Caney
at 174.
[2]
[14]
There is a presumption in our law that a statutory provision does not
alter the common law unless it says so explicitly or
by necessary
implication. See
Law Society of the Cape of Good Hope v C
1986
(1) SA 616
(A) at 639E and 25
Lawsa
2 ed
Part 1
para 340. The
appellant contended that to permit claims against a company that were
not provided for in the approved and implemented
business rescue
plan, might jeopardise the business rescue. That may be so, but is
irrelevant. The question is whether s 154(2)
of the Act expressly or
by necessary implication varied the common law principle that a debt
based on the surety’s right
of recourse arises upon payment to
the creditor. It did nothing of the sort. On the contrary, in terms
of s 154(2) the question
whether any debt was owed by the company at
the specified point in time, is to be determined in terms of existing
law, including
the common law.
[15]
The only defence that the appellant had raised, was bad in law. It
follows that the court a quo correctly granted summary judgment
and
that the appeal must fail.
[16]
The appeal is dismissed with costs.
_______________________
C H G VAN DER MERWE
JUDGE OF APPEAL
Appearances:
For
appellant: A E Bham SC, with him A Laher
Instructed
by: Edward Nathan Sonnenbergs, Sandton
Honey
Attorneys, Bloemfontein
For
respondents: V Voormoolen SC (Heads prepared by C J Pammenter SC)
Instructed
by: Zeiler Jankey Inc., Durban North
Webbers
Attorneys, Bloemfontein
[1]
‘Dit skyn duidelik te wees in die gemene reg dat ‘n borg
alleen dan as krediteur van die hoofskuldenaar geag kon
word wanneer
hy die skuldeiser betaal het.’
[2]
The principle is subject to exceptions that are unnecessary to
tabulate as the appellant rightly conceded that none of them are
applicable to the matter. See
Caney
at 165-166.