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[1995] ZASCA 30
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Tattersall and Another v Nedcor Bank Ltd. (340/93) [1995] ZASCA 30; 1995 (3) SA 222 (AD); [1995] 2 All SA 365 (A) (28 March 1995)
Case no 340/93
IN THIS SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between:
NIGEL COLIN TATTERSALL
First Appellant
WILLIAM ALLAN DE BEER
Second Appellant
and
NEDCOR BANK LIMITED
Respondent
CORAM
: JOUBERT, NESTADT, EKSTEEN, VAN DEN HEEVER JJA et OLIVIER
AJA
Date heard: 23 February 1995
Date delivered: 28 March 1995
JUDGMENT NESTADT. JA
:
This is an appeal against the grant in the opposed
motion
2
court of the Transvaal Provincial Division of an application by this
respondent ("the bank") for judgment against the two appellants
and a certain
Pierre Cahn, jointly and severally, in the sum of R2 505 231.90 (together with
certain ancillary relief). It is brought
with the leave of the judge a quo (Roux
J).
The bank's claim is founded on a written agreement entered into on 30 May
1991 and in terms whereof it (through its Sandton branch)
undertook to grant a
so-called building loan of R2.5 m to Khyber Investments. This was a partnership
consisting of the appellants
and Cahn. The purpose of the loan was to enable the
partnership to develop certain immovable property which it had in February 1991
acquired from a company called Mary Brae Holdings (Pty) Ltd ("MBH"). Such
development involved the sale of houses
3
which were to be built on the property. Repayment of the loan was to be
secured by a first mortgage bond over the property and was
to be in monthly
instalments of a specified amount (initially the sum of R42 875.00 but later
increased to R49 477.00 consequent
upon a change in the rate of interest payable
by the partnership).
The bond having been passed, the loan was in due course advanced to the
partnership. This took place in the manner provided for in
the agreement,
namely, by the bank (i) releasing MBH from an indebtedness of its (in the sum of
Rl 802 170.92) to the bank and then
debiting the partnership bond account with
this amount and (ii) between 28 June 1991 and 30 July 1991 making six
("progress") payments
to the partnership in the total sum of R632 859.52. (No
point was made of the apparent discrepancy of
4
R70 201.46 between the total of these two amounts and the sum claimed.) The
partnership, however, failed to make payment of any of
the monthly instalments.
Relying on a term of the loan that in the event of the partnership breaching its
obligations in this manner,
the full amount of the loan would forthwith become
payable, this bank launched its application on 25 September 1992. By this time
the partnership had been dissolved. Hence the claim against the appellants and
Cahn themselves. Cahn is not appealing. He never opposed
the application in the
first place.
Both in the court below and before us, the appellants relied on three grounds
of opposition. They were (i) that the application was
not authorised; (ii) that
it was premature in that when it was brought the monthly instalments referred to
were not yet
5
due and the partnership was therefore not then in breach of its obligations;
and (iii) that pending the outcome of an application
(in circumstances to be
explained) by MBH for an order that the partnership retransfer the property to
it and that the bond in favour
of the bank be cancelled, repayment of the loan
is excused. I proceed to deal with them seriatim. A.
Lack of
authority.
The bank's founding affidavit was deposed to by a Mr Paul Spencer, the
manager of its Sandton branch. In paragraph 2 Spencer alleges
that he is "duly
authorised" to bring the application "as will more fully appear from annexure
PS1 hereto". It may be accepted that
this document does not support the
allegations made. Whether for this reason or otherwise, the appellants in
their
6
answering affidavit simply "deny these allegations". Spencer's replying
affidavit says no more on the issue (save that it states that
he is authorised
"to make this affidavit on behalf of the applicant as will more fully appear
from annexure PS1"). Thereafter, however,
the matter is reverted to in a
supplementary affidavit which was served on the appellants a few days before the
application was argued
and which supplementary affidavit Roux J allowed to be
filed. In it Spencer explains that PS1 was annexed to the founding affidavit
in
error. He proceeds to annex what he says was the intended document. It consists
firstly of an internal letter dated 13 August
1991 purporting to be signed by
the bank's secretary. This letter confirms that the bank's board of directors
had on 26 June 1991
passed a resolution in effect empowering its divisional
director to
7
determine which officials should have the authority to sue on behalf of the
bank. Secondly, there is at copy of a notification apparently
signed on 18
October 1991 by a Mr Hugh Maclachlan who is described as the bank's divisional
director. In it he declares which officials
have such authority. In doing so, he
states that he is acting in accordance with the authority granted to him by the
board on 26
June 1991.
It is clear that ex
facie
these last two documents Spencer was
authorised to bring the application. As a branch manager he falls within the
class of officials
identified in the notification as having authority to bring
legal proceedings on behalf of the bank. PS1 does not, as was suggested,
detract
from this; it is not in conflict with the clear terms of the divisional
director's delegation.
8
It was, however, submitted on behalf of the appellants that regard cannot be
had to the annexures. This was because, in the absence
of affidavits proving the
resolution of 26 June 1991 and the divisional director's signature to the
notification dated 18 October
1991 and seeing that Spencer did not allege that
he was present when the resolution was passed and the notification signed, these
documents had no probative value; they constituted inadmissible, hearsay
evidence. Moreover, so it was said, Spencer's supplementary
affidavit should not
have been admitted at what was a late stage in the proceedings; and, in any
event, the appellant should have
been afforded an opportunity of answering
it.
On the last point it appears from the judgment a
quo
not that the
appellants sought a postponement, but that there was "a
9
tentative suggestion" that the matter be referred to evidence or at least
that Spencer should be heard on the issue. For the reasons
given by Roux J, I do
not think that he exercised his discretion in any way improperly, either in
allowing the supplementary affidavit
or in refusing to accede to this request
for
viva voce
evidence.
Nevertheless it may be that, in the absence of proper proof of the resolution
and the divisional director's determination and notwithstanding
the appellants'
failure before Roux J to object to the admissibility of the documents on this
ground, they are not evidence. I shall
assume, in favour of the appellants, this
to be the case. I thus leave out of consideration the possible application of
sec 3
of the
Law of Evidence Amendment Act, 45 of 1988
and sec 34(2) of the
Civil Proceedings Evidence Act, 25 of 1965. Even so, I am of
10
the opinion that Spencer's authority was established. A copy of the
resolution of a company authorising the bringing of an application
need not
always be annexed. Nor does sec 242(4) of the Companies Act, 61 of 1973 (to the
effect that a minute of a meeting of directors
which purports to be signed by
the chairman of that meeting is evidence of the proceedings at that meeting)
provide the exclusive
method of proving a company's resolution
(Poolquip
Industries (Pty) Ltd vs Griffin and Another
1978(4) SA 353(W)). There may be
sufficient
aliunde
evidence of authority
(Mall (Cape) (Pty) Ltd vs
Merino Ko-operasie Bpk
1957(2) SA 347(C) at 352 A). In casu I think there
is. What Spencer alleges in the founding affidavit is (i) that he is duly
authorised
and (ii) that such authority appears from PS1. The appellants' denial
is an ambiguous one; it is not clear
11
whether they dispute (i) or (ii) or both. Moreover, the denial is a bare one.
Not only is there no explanation as to how they are
able to gainsay Spencer's
assertion that he is authorised, but no evidence is tendered in support of what
is now argued, viz that
Spencer was not authorised. It would seem that the
denial was what may be called a tactical one. The tactic must fail. This is a
case in which the approach adopted in
Mall's
case (at 352 B), namely that
when the challenge to authority is a weak one, a minimum of evidence will
suffice, applies. Weight must
be given to the use by Spencer of the word "duly"
(authorised). It is an indication that the authority conferred on him was
properly
conferred
(Mall's
case at 352 I)). The papers show that Spencer
had dealt with the grant of the loan and subsequently that he requested
repayment.
It being common
12
cause that the partnership failed to comply, the probabilities are that the
bank (regarding the amount as due) would wish to take
steps to recover what is,
after all, a large sum. And if this be so, Spencer would surely be the person
who would act on behalf of
the bank. Besides, there is independent confirmation
that the bank authorised the proceedings. In an affidavit deposed to by the
bank's Johannesburg attorney and filed in reply to a supplementary affidavit of
the appellants, the attorney, after stating that
his firm acts for the bank "in
this above matter", goes on to say that "my instructions were given to me by the
head office (of the
bank)".
On all the evidence I am satisfied that the bank discharged the onus of
showing that the application was properly authorised. To hold
otherwise would be
carrying formality too far.
13
In my view, therefore, Roux J correctly overruled the objection
in
limine
to Spencer's authority.
13.
Was the application premature
?
This issue involves a decision as to when payment by the partnership of the
monthly instalments, to which I earlier referred, was
to begin and in particular
whether, when the application was launched, they were due.
I have thus far not referred to the terms of the loan which are relevant in
this regard. I must now do so. The agreement is embodied
in a number of
documents. There is firstly the letter of grant (dated 13 May 1991) addressed to
the partnership. It is a standard,
proforma document which provides for certain
information to be inserted in individual cases. The letter advises the
14
partnership that its application for a loan has been granted
"against
security of a mortgage bond". There follows in a series of
numbered clauses what are termed "details of the loan". These
include the amount thereof, the identity of the property to be
mortgaged, the rate of interest (this by reference to an annexure) and
the amount of the monthly instalments, namely R42 875, The next
clause is 1.7. It reads: "Commencement of monthly instalments
15/01/1993". (The date has obviously been typed in whereas the
preceding wording is part of the form.) At the foot of the first page
of the letter there is a reference to "further conditions". These are
attached to the letter. One of them is clause 03. It provides as
follows:
"The commencement date of monthly instalments is the 15th day of the month
following the period allowed for completion
15
of the buildings or the date of occupation or the date of final payment,
whichever is the earliest (see clause 1.7)."
There are no other
provisions as to when the loan was repayable.
"The bank's case was that the final progress payment
having been made at the end of July 1991, the partnership was
obliged, in terms of clause 03, to commence monthly repayments of
the loan on 15 August 1991 being the 15th day of the month
"following...the date of final payment". It was not in dispute that on
this basis the partnership was in default and that (subject to the third
issue referred to) the bank was entitled to claim repayment of the
loan. The appellants, on the other hand, relying on clause 1.7,
contended that payment of the monthly instalments only had to
commence on 15 January 1993. Accordingly, so it was said, the
bank had no cause of action when the application was launched on
16
25 September 1992.
The issue thus is: was payment of the monthly instalments to commence as
provided for in clause 1.7 (ie on 15 January 1993) or did
clause 03 govern (so
that payments were due on 15 August 1991)? Whether on a strictly linguistic
interpretation of the contract or
whether on a contextual approach (including a
reference to permissible background evidence), there can be only one answer,
namely
15 August 1991 (being the earlier date relied on by the bank and, in
substance, the one found to be applicable by Roux J).
Prima facie
and in
the absence of any explanatory evidence, it is a little puzzling why the
commencement date is dealt with in two clauses and
why it takes the form it
does. Judging from the evidence to which I shortly refer, it would seem that it
was initially
17
contemplated that the full amount of the loan would only be advanced shortly
before 15 January 1993. The fact that in clause 1.10
the "building completion
date" is given as 16 December 1992, lends some support to this. So, too, does
clause 01 that "provision
has been made for 24 progress draws." Whatever the
reason, however, we must take the contract as it is. Possibly it should be
interpreted
to give clause 03 greater weight or even precedence over clause 1.7.
It is, however, unnecessary to decide this. I shall accept that
the two clauses
must be read together. As I have indicated, they in effect refer to each other.
Adopting this approach, can it be
said that any ambiguity or conflict is
produced? I do not think so. What results is simply a number of alternative
dates for the
commencement of the monthly instalments, ie the 15th of the
month
18
after completion, occupation, final payment or 15 January 1993, whichever is
the earliest. The appellants' argument requires that
clause 03 have no effect.
This is untenable. It also means that though having advanced the loan by the end
of July 1991, repayments
would only begin some 18 months later. It is improbable
that the parties intended such a consequence.
The appellants relied on an alternative defence. It was founded on the
allegation (contained in their answering affidavits) that during
their
negotiations with the bank for the loan, it was orally agreed (with Spencer)
that payment of the monthly instalments would
begin on 15 January 1993. There
was, so it was said, uncertainty as to when development of the property would be
completed and thus
when the loan would be finally advanced; this event would
determine when repayments would commence; the date agreed on
19
was designed to clarify this; in the result clause 03 "does not correctly set
out the prior oral agreement...and the common continuing
intention"; indeed,
clause 03 had been deleted on the copy of the agreement given to the
appellants.
As I understood the appellants' argument it was that in the circumstances
outlined and despite the absence of any allegation as to
mistake, they were
entitled to a rectification of the agreement so as to delete clause 03. I am not
sure that a case for rectification
is sufficiently made out. But even if it is,
I remain entirely unpersuaded that Roux J was wrong in rejecting the appellants'
version
(that the true agreement was that payment of the monthly instalments
would start only on 15 January 1993). In my opinion this was
one of those
exceptional matters on motion where the Court
20
could be satisfied that the respondents (now the appellants) had not raised a
genuine or bona fide dispute of fact (cf
Plascon-Evans Paints Ltd vs Van
Riebeeck Paints (Pty) Ltd
1984(3) SA 623(A) at 634 I -635 C). I do not
propose to canvass the factors relevant to this conclusion in any detail.
Perhaps the
position can be summarised in the following way. The bank in its
affidavits denied the oral agreement relied on by the appellants.
It adequately
explained how certain lines came to be drawn across clause 03. This was
inadvertently done. The appellants, far from
later alleging that the monthly
instalments were not due before 15 January 1993, accepted that they were. This
is evidenced by their
subsequent conduct. The papers reveal that on two
occasions in January and February 1992 the bank wrote letters to the partnership
in effect alleging that the
21
instalments were due and in the one case requesting payment by the
partnership. It was to be expected that if instalments were not due
this would have been stated. It was not. There was simply no
reaction. In the circumstances and in the absence of any satisfactory
explanation, the appellants' silence constituted an admission by
conduct
(McWilliams vs First Consolidated Holdings (Pty) Ltd
1982(2) SA 1(A) at 10 D-F). That is not an end of the matter. As
appears from the judgment a
quo
there are a number of other
instances of the appellants having, by clear implication,
acknowledged that the instalments were due before 15 January 1993.
I refer to two of them. On 5 February 1992 the first appellant in a
letter to Cahn stated:
"I would like to advise you that R49 477 is payable to the SA Perm on 14
February. Please advise as to how you can assist
22
in providing finance for this as well as other creditors of the
partnership."
On 8 April 1992 the second appellant in a letter to
the bank (for the
attention of Spencer) acknowledged that "a lack of ability
to service
the bond may cause the (bank) to foreclose on the bond". He was
clearly not referring to what might happen in January 1993. Here,
too, the attempt, proffered in the appellants' supplementary answering
affidavits, to justify the statement cited is wholly unconvincing.
The cumulative effect of what has been stated, so it
seems to me, is quite destructive of the appellants' version that it was
orally agreed that repayment of the loan would only commence on
15 January 1993. This being so and on a proper construction of the
written terms referred to, the monthly instalments were due as from
15 August 1991. The application was therefore not premature.
23
C.
The MBH defence
.
It will be recalled that the loan was to enable the partnership to develop
certain immovable property and that such property had been
acquired by the
partnership from MBH. The defence now under consideration arises from MBH
having, as indicated earlier, brought an
application for an order that the
property be retransferred to it and that the bond, passed by the partnership in
favour of the bank
in order to secure the loan, be cancelled. The application
was brought in the Witwatersrand Local Division against the partnership
and the
bank. MBH's cause of action was that transfer had been secured through a fraud
by the partnership. Whilst the bank did not
oppose the application, the
partnership did. It denied it had been fraudulent. Nevertheless, the application
was
24
granted. This was on 7 August 1992. A point taken by MBH in
limine
that the partnership had not authorised the opposition to the application was
upheld. However, the order was subsequently set aside
on appeal. The proceedings
were referred to trial, presumably on the merits. The matter is still
pending.
The appellants have sought to rely on MBH's claim to the property as an
excuse for non-payment of the loan on various bases. In summary
they are:
(i) In the event of it being found that the partnership's title to the
property was defective, this was due to the negligence of the
attorneys who
attended to registration of transfer from MBH to the partnership; in so acting,
such attorneys were the agent of the
bank; accordingly,
25
the partnership would have a claim for damages against the bank; such damages
"are at least an amount equivalent to what is claimed
by the bank", (ii) "The
acquisition of the property by the partnership and the loan formed one
indivisible transaction; in particular
the object of the loan was to enable the
partnership to develop the property; it was therefore an implied, alternatively
a tacit
term of the loan that the partnership would acquire an unassailable
title to the property; unless it did, the loan was not repayable;
alternatively,
properly interpreted, this was the effect of the loan. (iii) The payment of the
amount of R1.8 m by the bank to MBH
could only be regarded as part of the
loan
26
advanced to the partnership if the partnership acquired a valid title to the
property; if it did not, the bank was not entitled to
have debited this amount
to the partnership's bond account; the loan was to this extent therefore not
repayable. Against the background
of these allegations, the appellants in their
affidavits made the submission that "if the registrations of the land and of the
mortgage
bond be invalid, or there be uncertainty as to the validity of such
registrations, there is no basis on which the applicant may make
its present
claim against...the partnership". Before us Mr
Slomowitz
. on behalf of
the second appellant, amplified this by contending that the issues that have
arisen in MBH's pending proceedings are
largely the same as those which arise in
the present
27
appeal and that it is highly undesirable that the two matters be separately
disposed of; accordingly the appeal should be upheld and
the application stayed
pending the outcome of MBH's claim.
The appellants'contentions are misconceived. There is no basis (in relation
to (i) above) on which it could be found that the attorneys
who attended to
transfer of the property from MBH to the partnership acted on behalf of the
bank. True, they were the same attorneys
who did act for the bank in relation to
the registration of the mortgage bond passed by the partnership in favour of the
bank. But
qua
transfer, it is abundantly clear from the agreement of sale
between MBH and the partnership and from the evidence of the conveyancer
himself
that the attorneys acted on behalf of MBH. There is, therefore, ex
facie
the papers before us, no question of the
28
partnership having a claim for damages against the bank of the kind
envisaged.
I turn to (ii) above. The argument cannot be acceded to. The fact that MBH
claims that the bond passed by the partnership in favour
of the bank be
cancelled is irrelevant. It would simply mean that the bank loses its security.
But its cause of action against the
partnership is on the underlying loan. No
doubt the appellants will find themselves in an unfortunate position were MBH's
application
to succeed. The partnership would then have been deprived of the
property (with improvements) but yet be obliged to repay the loan
including the
sum of approximately R1.8 m which it never actually received. But these
consequences cannot avail the appellants when
it comes to their relationship
with the bank. As already stated, the
29
loan was to enable the partnership to develop the property. To some extent
therefore the transaction between MBH and the partnership
was linked to the one
between the bank and the partnership. But not indivisibly so. There is no
warrant, on the allegations made
by the appellants in their affidavits, for
implying a term in their agreement with the bank, the effect whereof would be to
make
repayment of the loan dependent on the outcome of the dispute between MBH
and the partnership over the property. It would be a somewhat
unusual provision.
Normally the lender of money is not concerned with whether the borrower uses it
gainfully or not. The contended
for implication would moreover conflict with the
express terms as to repayment, ie clauses 1.7 and 03. It follows that the
construction
relied on must also be rejected.
30
This leaves for consideration the defence referred to in (iii) above. It was
an express term of the loan (clause 08) that the
"amount owing under the existing bond be liquidated from the
proceeds of this loan". It was on this basis that it was stated, towards the
beginning of this judgment, that the loan to the partnership
was advanced in
part by MBH being released from its indebtedness to the bank. Such indebtedness
was secured by the bond referred
to in clause 08. The bond was cancelled. The
bank was therefore entitled to regard the R1.8 m as having been advanced to the
partnership.
And, for the reasons previously stated, this was not dependent on
the fate of the transaction between the partnership and MBH.
In the result, Roux J justifiably rejected the MBH defence. It follows that
the application was correctly granted.
31
The appeal is dismissed with costs. Such costs are to include the fees of two
counsel.
H H Nestadt Judge of Appeal
JOUBERT, JA )
EKSTEEN,JA ) CONCUR
VAN DEN HEEVER, JA )
OLIVIER, AJA )