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[2019] ZASCA 33
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De Waal Alberts and Others v Nel NO (128/2018) [2019] ZASCA 33 (28 March 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 128/2018
In
the matter between:
ANTON
DE WAAL
ALBERTS FIRST
APPELLANT
PAUL
JACOBUS DU
PREEZ SECOND
APPELLANT
DARRELL
STRYDOM THIRD
APPELLANT
and
DANIEL
JACOBUS LOUIS NEL
NO RESPONDENT
Neutral
citation:
De Waal Alberts & others v Louis Nel
(128/2018)
[2019] ZASCA 33
(28 March 2019)
Coram:
Leach, Tshiqi, and Zondi JJA and Davis and Eksteen AJJA
Heard:
05 March 2019
Delivered:
28 March 2019
Summary:
Summary judgment – bona fide defence established –
joint and several liability – co-directors had a right to
challenge
the order.
ORDER
On
appeal from:
Gauteng Division of the High Court, Pretoria
(Ranchod J, Molopa J and Makgoka J sitting as a court of appeal):
1. The appeal is upheld with costs of
two counsel.
2. The order of the full court in the
Gauteng Division of the High Court is set aside and substituted as
follows:
‘
a.
The appeal is upheld with costs of two counsel.
b. The order of the court a quo is set
aside and substituted as follows:
i. The application for summary
judgment is dismissed with costs.
ii. The defendant is granted leave to
defend the action.’
JUDGMENT
Tshiqi
JA (Leach and Zondi JJA and Davis and Eksteen AJJA concurring):
[1]
The respondent (plaintiff in the trial court), Mr Daniel Jacobus
Louis Nel, acting in his capacity as a trustee of an entity
known as
the Mankwe Trust instituted action in the North Gauteng High Court,
Pretoria against the appellants (defendants in the
trial court) who
were cited as second, fourth and seventh defendants. The defendants
were sued in their respective capacities as
directors of a firm of
attorneys practising as Alberts, Bekker, Vorster, Pillay &
Associates Incorporated, a private company
duly incorporated in terms
of ss 32 and 49(4) of the Companies Act 61 of 1973 (the Companies
Act), having a share capital and a
memorandum of association
incorporating the provisions of s 53
(b)
of the Companies Act.
The company was cited as the first defendant and the other directors
who are not parties to this appeal were
cited as the third, fifth,
sixth, eighth, ninth, tenth, and eleventh defendants. Another
co-director, Mr Rock Haywood was not cited
and not joined as a party
in the proceedings. The action was based on an alleged irrevocable
company guarantee dated 25 February
2011 contained in a letter
bearing the letterhead of the company and signed by Dr Andre Vorster,
one of the directors of the company
who was cited as the eleventh
defendant.
[2]
The defendants filed a notice of intention to defend the action. The
plaintiff in turn filed an application for summary judgment.
The
application for summary judgment was opposed by the defendants who
raised several points in
limine
and other defences. The
application was heard by Webster J, who found that the points raised
were all irrelevant, raised no bona
fide defence and further that the
guarantee was not ambiguous. He granted the relief prayed for
‘against all defendants,
the one paying to absolve the other
for the sum of R4 million and interest a
tempore mora
at the
rate of 15,5% plus costs of suit’.
[3]
The defendants applied for leave to appeal but, before leave to
appeal was granted to the full court of the Gauteng Division,
Pretoria, the company was liquidated. The liquidators, apparently
because of lack of funding, decided not to proceed with the appeal
on
behalf of the company. The sixth and ninth defendants also did not
proceed with the appeal. On appeal, all the points that had
been
raised before Webster J were again raised before the full court which
disposed of the appeal on a single narrow issue. It
held:
‘
The company had incorporated in
its memorandum of association the provisions of s 53
(b)
of the
Companies Act 61 of 1973 which provides that the directors and past
directors of the company shall be liable together with
the company
for such debts and liabilities of the company as were contracted
during their respective periods of office. Hence,
the liability of
the directors in this matter depends entirely on whether the company
was (and is) indeed indebted to the [plaintiff]
for R4 000 000. The
appeal of the present [defendants], who are former directors of the
company, can only succeed if the summary
judgment against the company
is set aside. It follows that an appeal should have been lodged on
behalf of the company by its liquidators
as it was placed in
liquidation after summons was issued.
As matters stand, the summary judgment
granted by Webster J against the company is unchallenged, and
therefore a valid debt of the
company even though it is in
liquidation.
It therefore follows that by virtue of
s 53 of the Companies Act the directors of the company are liable,
with the company, jointly
and severally for satisfaction of the
judgment debt of the company.’
It
then dismissed the appeal with costs. This appeal is with the leave
of this court.
[4]
Two issues arise in this court, whether: (a) summary judgment should
have been granted by the court of first instance; and (b)
the full
court was correct in holding that the co-directors of the company
were precluded from appealing against the order.
[5]
It is apposite to start with the first issue. Summary judgment is an
extraordinary, drastic remedy, in that it closes the door
to a
defendant who wishes to defend an action. It should only be granted
if the plaintiff’s case is unimpeachable or the
defence is
bogus or bad in law or where the giving of notice to defend amounts
to an abuse of the court process. (
Maharaj v Barclays National
Bank Limited
1976 (1) SA 418
(A) at 423F-G;
Edwards v Menezes
1973 (1) SA 299
(NC) at 303E-F).
[6]
In its particulars of claim, the plaintiff alleged that it, on behalf
of Mankwe Trust, entered into an agreement with Southern
Palace 194
Investments (Pty) Ltd (Southern Palace) and one Louis Steyn in terms
of which it sold 5% shareholding in an entity called
Inyanga to
Southern Palace and Steyn for R4 million. The purchase price was
payable on or before 31 October 2010. Southern Palace
and Steyn
failed to pay the purchase price in terms of the agreement and a
second agreement was entered into on 9 February 2011.
In the second
agreement, the parties recorded that Southern Palace and Steyn had
failed to perform in terms of the first agreement
and agreed that
Southern Palace and Steyn would pay an amount of R1 000 000 on or
before 30 March 2011, after which the plaintiff
would have no further
claim against Southern Palace or Steyn. On 25 February 2011 Southern
Palace and Steyn entered into a third
agreement with the plaintiff,
Mankwe Trust represented by Nel, in terms of which Southern Palace
and Steyn purchased 5% of the
issued share capital in Inyanga from
the plaintiff for an amount of R4 million payable on 31 October 2010.
[7]
The particulars of claim further alleged that on or about 25 February
2011 the company provided Inyanga with an irrevocable
guarantee in
the amount of R4 million; that the guarantee was valid until Southern
Palace made a wire transfer in the amount of
R4 million to Inyanga on
or before 31 March 2011; that on or about 25 February 2011 Inyanga
ceded its rights, title and interest
in the guarantee to the
plaintiff (Mr Nel in his capacity as a trustee of Mankwe Trust); that
on or about 4 March 2011, the plaintiff
called for payment of the
amount of R4 million from the company; and that the company failed to
perform in terms of the guarantee.
[8]
The alleged guarantee read as follows:
‘
IRREVOCABLE COMPANY
GUARANTEE
INYANGA TRADING 444 (PTY) LTD
. . . .
Dear Sirs,
MATTER: SALE OF SHARES AGREEMENT:
SOUTHERN PALACE INVESTMENTS 194 (PTY) LTD // INYANGA TRADING 444
(PTY) LTD
I
Mr JP NEL (INYANGA TRUST)
We, Alberts Bekker Vorster Pillay &
Associates Incorporated do hereby unconditionally guarantee and swear
under penalty of perjury
to provide the necessary security in hand in
the amount of R4, 000,000.00 (Four Million Rands) in favour of
Inyanga Trading 444
(Pty) Ltd with Registration Number:
2006/002142/07 with physical address known as 78 Gleneagles Drive,
Silver Lakes, Pretoria,
0054.
We. Alberts Bekker Vorster Pillay &
Associates Incorporated hereby unconditionally guarantee that this
Irrevocable Company Guarantee
is supported and financially backed by
a Mexican Sovereign Financial Bond known as a Mexican Estados Estados
Mexicanos Bonos De
Liquidacion De Los Sueldos De Los Empleados
Federales 1923 series "B" with denominations of US$100,
with bond serial
number 073528 and with a value of US$ 58 000 000.00
(fifty eight million united states dollars).
We further confirm that, to the best
of our knowledge, the Company Guarantees are from legally earned,
good, clean and cleared funds
of non-criminal origin, free of any
liens or encumbrances, and this irrevocable Company Guarantee in the
amount of R4, 000,000.00
(Four Million Rands) is valid for a period
until Southern Palace Investments 194 (Pty) Ltd made a wire transfer
in the amount of
R4, 000,000.00 (Four Million Rands) to Inyanga
Trading 444 (Pty) Ltd or before 31 March 2011 at close of banking
hours at this
office upon the respective expiry date.
This guarantee shall be governed by
and construed with the laws of South Africa and shall be subject to
the jurisdiction of the
South African courts.
This Irrevocable Guarantee is subject
to the conclusion as pertained in the terms and conditions of
compliance being met on or before
14 March 2011.
The authorized signatory herein is in
full control of this Irrevocable Company Guarantee.’
[9]
In order to successfully oppose the application for summary judgment,
the company had to show that it had a bona fide defence
to the claim.
As appears from the particulars of claim, it was alleged that the
guarantee was furnished as security for a debt
arising from a sale of
shares by Mankwe Trust to Southern Palace, as recorded in the first,
second and third agreements between
the two entities. The terms of
the alleged guarantee had to be interpreted against the backdrop of
these alleged agreements, specifically
the third agreement dated 25
February 2011.
[10]
The main and fundamental problem with the alleged guarantee is that
it is, at the very least, confusing and can also be subject
to attack
for different reasons. First, in terms of the alleged guarantee the
company appears to undertake to provide security
in favour of Inyanga
but the particulars of claim alleged that the purchase price was
payable to the seller, Mankwe Trust and that
in terms of the
agreements, the seller of the shareholding was Mankwe Trust. There is
no suggestion that any money was due to Inyanga
and it is not
suggested that Inyanga sold any shares to Southern Palace. It is thus
unclear on what conceivable basis Southern
Palace and Steyn would be
indebted to Inyanga, as the latter is not reflected as a creditor on
any of the relevant agreements.
Second, the language used in the
alleged guarantee is problematic in that it appears to give an
undertaking to provide security
for an amount in favour of Inyanga.
It certainly does not undertake to pay the amount on a certain date
or under certain conditions.
Third, the first paragraph states that
it is an unconditional guarantee to provide the necessary security
but the penultimate paragraph
says that it is ‘subject to the
conclusion as pertained in the terms and conditions of compliance
being met on or before
14 March 2011’. Counsel for the
respondent was unable to shed light on what this penultimate
paragraph means.
[11]
Another fundamental problem which relates more to the alleged
indebtedness rather than the alleged guarantee, is that the
particulars of claim alleged that the full purchase price of R4
million was payable on 31 October 2010, but the third agreement
on
which reliance was placed for the claim was only concluded on 25
February 2011. For all these highlighted reasons, Webster J
erred in
granting summary judgment. The respondent’s case may well be
open to legitimate attack on different grounds, but
most certainly a
bona fide defence has been established.
[12]
This then takes me to the second issue: the judgment of the full
court regarding the liability of the company and its co-directors
in
terms of s 53 of the Companies Act, read with s 23 of the Attorneys
Act. Section 53 provides:
‘
Memorandum may contain special
conditions and may provide for unlimited liability of directors –
The Memorandum of a company
may, in addition to the requirements of s
52 –
a) . . . .
b) In the case of a private company,
provide that the directors and past directors shall be liable
jointly
and severally
, together with the company, for such debts and
liabilities of the company as are or were contracted during their
periods of office,
in which case the said directors and past
directors shall be so liable.’
Section 23 of the Attorneys Act (prior
to its amendment in 2014) provides: ‘Juristic person may
conduct a practice
1)
A
private company may, notwithstanding anything to the contrary
contained in this Act, conduct a practice if –
a)
such company is incorporated and registered as a private
company under the Companies Act, 1973 . . . with a share capital, and
its
memorandum of association provides that all present and past
directors of the company shall be liable jointly and severally with
the company for the debts and liabilities of the company contracted
during their periods of office.’
[13]
The legal implications of s 53 of the Companies Act and s 23 of the
Attorneys Act are that they impose on directors, past and
present, a
statutory liability to the creditors
singuli et in solidum
for
companies’ debts and liabilities. They are also liable for any
debts and liabilities incurred before a company’s
liquidation.
(See
Fundtrust (Pty) Ltd (In Liquidation) v Van Deventer
1997(1)
SA 710 (A)). A creditor may pursue a claim against any one of the
debtors and it remains for the debtor or debtors so sued
to claim
against each other a proportionate share of the debt. The effect of
Webster J’s order therefore was that the plaintiff
could decide
to enforce the court order and claim the full amount from the company
only or any of the co-directors. After the company
went into
liquidation, the plaintiff could enforce the court order against any
of the co-directors. It thus follows that each of
the co-directors
were well within their respective rights to approach the court, in
order to appeal against Webster J’s order
on any competent
ground. It follows that the court a quo erred in holding that the
appellants were precluded from appealing.
[14]
For these reasons, both the issues on which this appeal turns must be
decided in favour of the appellants, and the appeal must
succeed.
[15]
A further issue that troubled this court when dealing with this
appeal is the unacceptable delays at different stages in the
High
Court. The
ex tempore
judgement by Webster J was handed down
by 15 December 2011 but the signed version is dated 10 May 2012, some
five months later.
Leave to appeal was only granted three years later
on 28 August 2015 and it took the full court seven months to hand
down its judgment.
The issues raised in this matter are neither novel
nor complex and there is no explanation for the unreasonable delay.
These delays
have to be avoided because they impact on the rights of
litigants to have their disputes resolved in a fair and speedy
manner.
[16]
I make the following order:
1. The appeal is upheld with costs of
two counsel.
2. The order of the full court in the
Gauteng Division of the High Court is set aside and substituted as
follows:
a.
The appeal is upheld with costs of two counsel.
b.
The order of the court a quo is set aside and substituted as follows:
i. The application for summary
judgment is dismissed with costs.
ii. The defendant is granted leave to
defend the action.
___________________
Z
L L Tshiqi Judge of Appeal
APPEARANCES
For
the Appellant: J G Cilliers SC (with S J Coetzee)
Instructed
by: Geyser & Coetzee Attorney, Centurion Hill Mchardy &
Herbst Inc., Bloemfontein
For
the Respondent: mS G Gouws (with R Raubenheimer)
Instructed
by: Louis Nel Incorporated, Pretoria McIntyre van der Post Attorney,
Bloemfontein