SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this docu
ment in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Appeal Case No.: A142/2025
Court a quo Case No.: 16399/2023
In the matter between:
V ALOWORX 33 CC First Appellant
ARCHAR COLYER HEAD N.O. Second Appellant
ARCHAR ALEXANDER BROWNLEE N.O. Third Appellant
ANDREW GRANT KIRKMAN N.O. Fourth Appellant
[Second to Fourth Respondents in their capacities as the joint
trustees of the Cape Leopard Trust (I[...])
ARCHAR COLYER HEAD Fifth Appellant
and
MERCHANT COMMERCIAL FINANCE 1 (PTY) LTD T/A Respondent
MERCHANT FACTORS
Coram: Le Grange, J; Ralarala, J; Montzinger, AJ
Hearing: 27 February 2026
Delivered: 21 April 2026
Summary: Claim for monetary judgment in motion proceedings – reliance for
judgment premised on various agreements concluded between the appellants and the
respondent – conclusion of settlement agreement – the effect of a transactio or
compromise – discretion of court when faced with disputes in motion proceedings –
application of the in duplum rule – settlement agreement confirms independent liability
– a difference in the legal position does not constitute a iustus error to set aside a
compromise.
ORDER
1. The appeal is dismissed.
2. The appellants are ordered to pay the respondent's costs of the appeal, jointly and
severally, the one paying the others to be absolved, on the party and party scale,
with counsel’s fees on scale B.
JUDGMENT
Montzinger AJ (Le Grange J, et Ralarala, J concurring)
Introduction
[1] This is an appeal against the judgment and order of Van den Berg AJ, sitting as
the court a quo , handed down on 19 November 2024. In the court a quo , the
respondent ("Merchant") launched proceedings on motion seeking a monetary
judgment against the appellants, in the sum of R2 ,910,901.91 together with
interest thereon.
[2] The first appellant is Valoworx 33 CC ("Valoworx") , while the trustees of the
Cape Leopard Trust ("the Trust") are the second to fourth appellants. Mr Archar
Colyer Head (“Mr Head”) is the fifth appellant . Judgment was pursued against
Valoworx in the court a quo as the principal debtor, and against the Trust and Mr
Head as sureties for Valoworx’s debt.
[3] The parties exchanged the custom three sets of affidavits and presented oral
argument before the court a quo . The court a quo handed down judgment and
granted the following order:
[3.1] Merchant’s application for the amendment of the Notice of Motion
succeeded in part1.
[3.2] Judgment was granted against the appellants jointly and severally to pay
Merchant the capital amount of R944 ,919.85 in terms of the settlement
agreement.
[3.3] The appellant s were liable to also pay interest to Merchant jointly and
severally on the unpaid capital amount of R944 ,919.85 at 3 percent per
30 days or part thereof calculated from 30 November 2021 (being the
1 This amendment had to do with changing the claim amount in the notice of motion of R2 ,910,901.91 to
the judgment amount of R944,919,85.
date after the last payment was received) up to and not exceeding the
unpaid capital amount.
[3.4] Costs was granted on a party and party scale with counsel’s fees on scale
B.
[4] The appellants on 21 February 2025 unsuccessfully applied for leave to appeal the
court a quo’s judgment. Undeterred, the appellants petitioned the Supreme Court
of Appeal for leave and was successful as that court granted leave to appeal to a
full bench of this Division.
[5] Before the grounds of appeal and their merits are considered it is necessary to set
out the facts that underly the appeal.
Contextualising the facts underlying the appeal
[6] The commercial relationship between the parties have a long history . Merchant is
a privately-owned financial services provider offering businesses a faster, more
flexible alternative to traditional bank finance. Valoworx , on the other hand, is in
the business of model agency that acts as an agent to third party models. It
essentially sources models for its client s and is paid commission for such
procurement.
[7] It seems as if the parties’ paths already crossed during 2012 as Mr Head signed a
surety agreement during that year binding himself as surety and co -principal
debtor for Valoworx’s debt. Three years later, d uring December 2015 Merchant
loaned and advanced, in the form of a credit facility, an amount of R225 ,000.00 to
Valoworx.
[8] It is not clear on the papers how the 2015 credit facility was regulated, However,
it is common cause that in June 2016 the parties concluded a written agreement to
regulate a further credit extension of R500,000.00 by Merchant to V aloworx. To
regulate the extension of th at credit facility Merchant and Valoworx concluded a
written Memorandum of Agreement ("the Term Loan Facility") in terms of which
Merchant agreed to loan to Valoworx a further amount of R500,000.00. The
facility was repayable over an 8 month period with inte rest at the rate of 3% per
30 days or part thereof.
[9] Between 15 July 2016 and 20 February 2018, the parties concluded at least four
written addenda to the Term Loan Facility . The addendums initially increased the
capital sum of the credit facility to R550 ,000.00 and later to R70 5,000.00. The
addendums also extended the loan period first to 10, then 22 and eventually 33
months and also varied the repayment schedule from time to time.
[10] The Term Loan Facility incorporated, by reference, suretyships previously signed
by Mr Head and the Trust as security for the obligations of Valoworx. Mr Head’s
surety was concluded on 24 December 2012 while the Trust's suretyship
agreement was concluded on 23 June 2016 by virtue of its trustees. Both suret y
agreements bound Mr Head and the Trust jointly and severally, irrevocably as
surety and co-principal debtor in solidum with Valoworx for the due and punctual
payment of all monies owing by Valoworx to Merchant. However, t he surety
concluded by Mr Head is one of the contentious issue s in the appeal and will be
returned to, as he alleged that the surety agreement he signed was in favour of a n
entity that is different to the entity that sought the judgment against him.
[11] In any event, t o secure the Trust's obligations, on 7 July 2016 two notarial bonds
were registered in Merchant’s favour over its movable properties . A special
notarial covering bond and a general notarial collateral bond, each providing
security of R2 , 000,000.00 as continuing covering security and an additional
R1,000,000.00 as cover for contingencies.
[12] Valoworx defaulted on its obligations under t he Term Loan Facility and the
addendum agreements. On 14 December 2020, Merchant and the appellants
concluded a written settlement agreement at Cape Town. In terms of the
settlement agreement all the appellants admitted their indebtedness to Merchant in
the amount of R1,094,919.85, together with interest and the payment of legal fees.
[13] The settlement agreement was signed by Mr Head in three capacities: as Member
for Valoworx, as trustee of the Trust, and in his personal capacity. After the
conclusion of the settlement agreement Valoworx thereafter only made three
payments pursuant thereto: R100,000.00 on 4 January 2021; R25,000.00 on 11
March 2021; and R25,000.00 on 29 November 2021. As the total of t hese
payments totalled R150,000.00, an outstanding balance of R944,919.852 remained
outstanding.
[14] Since Valoworx defaulted in its obligations, prior to the present proceedings being
heard in the court a quo, Merchant launched an urgent ex parte application on 12
July 2022 before Dolamo J seeking authorisation to take and retain possession of
the Trust's movable assets in terms of the notarial bonds. Dolamo J granted the
order in the form of a rule nisi.
2 The difference between the capital amount in the settlement agreement of R1 094 919,85 and the
payments of R150 000,00.
[15] The return date of that ex parte application was argued on an opposed basis before
Francis J. Valoworx raised the defence that the Term Loan Facility, addendum
agreements, settlement agreement and Deeds of Suretyship were null and void
because the Term Loan Facility fell within the ambit of the National Credit Act 34
of 2005 ("the NCA") and Merchant was no t registered as a credit provider ("the
NCA defence"). Valoworx contended that it was a "consumer" for purposes of the
NCA because its annual turnover was below R1,000,000.00.
[16] Francis J rejected the NCA defence in his judgment of 25 May 2023. He held that
Valoworx’s annual turnover, properly understood, comprised the totality of all
monies received into its bank account and not merely the commission it retained.
That being the case Francis J found that on the evidence Valoworx’s turnover
exceeded the R1 ,000,000.00 threshold and held that the NCA did not apply.
The rule nisi was confirmed.
[17] Valoworx sought leave to appeal, which was refused. The Supreme Court o f
Appeal and the Constitutional Court were both petitioned for leave. Both petitions
were refused. The NCA defence was accordingly conclusively determined against
Valoworx.
[18] Against this backdrop, Merchant launched the present application on 19
September 2023 seeking a monetary judgment of R2 ,910,901.91 against the
appellants. In the answering affidavit Valoworx raised the same NCA defence and
additional ones. The additional defences were that the in duplum rule was
infringed in that the interest charged was usurious, that Mr Head’s suretyship was
in favour of a different entity, also that motion proceedings were inappropriate
given the foreseeable disputes of fact, and that Merchant had not proved the
quantum of its claim.
[19] By the time the matter was heard by the court a quo on 7 November 2024, the
NCA defence had been finally resolved by the Constitutional Court's dismissal of
Valoworx’s application for leave. T he respondents sensibly no longer persisted
with it before the court a quo and on appeal.
[20] In the court a quo Merchant conceded the applicability of the in duplum rule.
Having regard to the papers as a whole Merchant’s concession was limited to the
new capital amount of R1,094,919.85 contained in the settlement agreement, as its
claim was premised on that agreement. Merchant indicated , in its replying
affidavit, that it would provide an updated certificate of balance . At the hearing,
instead of handing up an updated certificate, counsel for Merchant applied from
the Bar for an amendment of the Notice of Motion and contended that judgment
should be granted for the undisputed capital sum of R944,919.85 time two,
meaning R1,899, 839.70. The court a quo disagreed but granted the amendment
and only entered judgment for the capital amount of R944,919.85.
[21] Before considering the grounds of appeal I briefly restate the test for appellate
interference.
The test for appellate interference
[22] The question of whether and to what extent a court of appeal may interfere with
the findings of a court of first instance, sitting as a trial court, is a well-ventilated
and established position in our law. The starting point is the principle that a court
of appeal has limited powers to interfere with the decision of a trial court. As the
Supreme Court of Appeal held in Malan3:
"A court of appeal has limited powers to interfere with a decision of the
court of first instance. In relation to the first leg of the inquiry, which is
factual, appeals are subject to the general limitation that courts of appeal
defer to the factual findings of courts of first instance (R v Dhlumayo 1948
(2) SA 677 (A))."
[23] However, the deference ordinarily a fforded to a lower court's factual findings in
trial proceedings has a fundamentally different footing when the matter on
appeal was decided in motion proceedings, as is the case in this matter. The
distinction is important and was articulated with clarity, also in Malan. The rule
contemplates that a court of appeal may interfere with a decision of the court of
first instance where that court decided the case on the papers , i.e. in motion
proceedings, because in such a case the court of appeal is in as good a position to
judge the facts as was the court below.
[24] The circumstances when a court of appeal can interfere with the exercise of a
discretion4 by a lower court also generally forms part of an appeal court’s
considerations. Depending on the type of discretion that was exercised, whether
‘strict’ or ‘loose’ will determine the appellate court’s degree of interference. An
appellate court is generally slow to interfe re with a loose discretion, while a
strict discretion is open to interference if it was not exercised judicially, meaning
that it had been influenced by wrong principles or a misdirection on the facts, or
3 Malan and Another v Law Society of the Northern Provinces 2009 (1) SA 216 (SCA) at par 12
4 See Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and
Another 2015 (5) SA 245 (CC) at paras 85 – 89 and Knox D'Arcy Ltd and Others v Jamieson and
Others 1996 (4) SA 348 (A) at 361I.
that it had reached a decision which in the result could not reasonably have been
made by a court properly directing itself to all the relevant facts and principle5.
[25] Ultimately, this appeal involves proceedings that were determined in the court a
quo on motion. Accordingly, save to the extent that any finding turns on matters
uniquely within the advantage of the court a quo , this Court is in as good a
position as the court a quo to evaluate the evidence on the papers, to decide the
factual issues on the record, and to apply the Plascon-Evans6 approach to resolve
genuine and bona fide disputes of fact.
[26] It is also trite that an appeal lies against the order of a court, not its reasons. Even
if the reasoning of the court a quo is found to be wanting, the appeal must be
dismissed if the order is nonetheless correct 7. Conversely, a respondent in an
appeal may seek to justify the order appealed against on any ground that the
record allows8.
[27] I now turn to evaluating the grounds of appeal.
The grounds of appeal
[28] As stated the appellants rely on four grounds of appeal.
[29] First, th at the court a quo should never have determined the matter given the
dispute about the correct quantum and the application and calculation of the
duplum in respect of interest. Second, the personal liability of Mr Head and
whether he concluded a valid suretyship. Third, that relief against the appellants
5 National Coalition for Gay and Lesbian Equality and Others v Minister of Home Affairs and
Others [1999] ZACC 17; 2000 (2) SA 1 (CC); 2000 (1) BCLR 39 (CC) at para 11.
6 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A)
7 See President of the Republic of South Africa and Another v Tembani and Others 2025 (2) SA 371 (CC)
at ; Zurich Ins Co SA Ltd v Gauteng Provincial Govt 2023 (1) SA 447 (SCA)
8 Jiba v General Council of the Bar of SA 2019 (1) SA 130 (SCA)
should not have been granted on a joint and several basi s because the Notice of
Motion did not specify joint and several liability, and lastly that Merchant
lacked locus standi because it did not allege or prove that its directors authorised
the institution of proceedings.
Ground 1: The disputes of fact
[30] This ground consists of two interrelated considerations. First, the fact that the
court a quo decided to determine the matter on the papers even though the
validity of the 2016 Term Loan Agreement and all subsequent agreements and
the claim amount were disputed. Second, it is contended that in any event the
court a quo incorrectly arrived at the judgment amount of R944,919.85.
[31] First I address the co urt a quo’s decision to determine the matter on the papers.
In opposing the application, Valoworx raise d three principal disputes of fact on
the papers in an attempt to impugn the relief sought.
[31.1] First, it challenged the validity of the 2016 Term Loan Agreement,
raising the NCA defence, as foreshadowed earlier. Valoworx advanced
the proposition that since t he 2016 agreement was non -compliant with
the provisions of the NCA it tainted the validity of all subsequent
agreements, including the December 2020 settlement agreement, and are
they all void ab initio.
[31.2] Second and inextricably linked to the abovem entioned challenge,
Valoworx averred that the settlement agreement was in any event vitiated
by a common or mutual mistake, alternatively iustus error . The
gravamen of this contention was that the parties had concluded the
settlement agreement whilst labou ring under the fundamentally flawed
apprehension that the 2016 Term Loan Agreement constituted a valid
and legally binding obligation. Consequently, so the argument ran, this
mutual misapprehension as to the underlying legal reality negated the
requisite animus contrahendi when the settlement agreement was
concluded thereby stripping it of its enforceability.
[31.3] Thirdly, Valoworx denied that it was indebted to Merchant in the amount
of R2 ,910,901.91 and pleaded that in any event the original capital
amount advanced by Merchant was R705 ,000.00 and that V aloworx has
already repaid an amount in excess of that totalling R1,080,000.00.
[32] On consideration of the record, I find that the foreshadowed disputes were not of
such a nature that the court a quo could not determine them on the papers. In
motion proceedings a court is generally confined to the common-cause facts9.
However, where real disputes of fact arise on the affidavits, the court is not
obliged mechanically to grant or refuse relief but rather enjoys a range of
options provided by rule 6(5)(g) 10. A court may dismiss the application outright
if the disputes were reasonably foreseeable and the applicant nonetheless chose
motion proceedings 11 or if the application is not dismissed the court can adopt
the procedure that is best to ensure that justice is done with the least delay 12 and
in that regard exercises a discretion 13. The court can also decide the matter on
9 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] 2 All SA 366 (A), 1984 (3) SA 623
(A) at 634
10 Rule 6(5)(g) provides: Where an application cannot properly be decided on affidavit the court may
dismiss the application or make such order as it deems fit with a view to ensuring a just and expeditious
decision. In particular, but without affecting the genera lity of the afore -going, it may direct that oral
evidence be heard on specified issues with a view to resolving any dispute of fact and to that end may
order any deponent to appear personally or grant leave for such deponent or any other person to be
subpoenaed to appear and be examined and cross -examined as a witness or it may refer the matter to trial
with appropriate directions as to pleadings or definition of issues, or otherwise
11 Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T);
12 Johannesburg City Council v The Administrator Transvaal (1) 1970 (2) SA 89 (T)
13 Cresto Machines(Edms) Bpk v Die Afdeling Speuroffisier SA Polisie Noord -Transvaal 1970 (4) SA 350
the responde nt’s version 14 or resolve the dispute where it is possible of
resolution on the papers.
[33] I can find no basis to interfere with the court a quo’s discretion to rather
determine the matter on the papers. Nothing on the papers suggest that the
discretion was not exercised judicially. In any event, the discretion in this
instance is a loose one where an appellate court’s interference is limited.
[34] Furthermore, it appears that the court a quo considered various factors to rather
decide the matter on the papers. Firstly, Merchant relied exclusively on the
settlement agreement as its cause of action to claim payment. Second, once the
NCA defence was f inally determined the ‘disputes’ as foreshadowed were no
longer disputes as the validity and enforceability of the settlement agreement
was no longer an issue. Lastly, in respect of the issue of quantum the court a quo
had all the material information before it to arrive at the decision that it did.
[35] Therefore, a just and expeditious determination on the papers was possible and,
given the protracted litigation history between the parties, was plainly desirable.
The court a quo was therefore perfectly justified to determine the matter on the
papers, without having to resort to the more extreme outcome of dismissing the
application. This ground is therefore not a basis to uphold the appeal.
The correct quantum amount
[36] Next I consider whether the court a quo’s decision in respect of the quantum
amount justifies interference on appeal. The appellants’ basis for persisting with
disputing the quantum is based on the claim that if the in duplum rule is applied
(T) 365; Pautz v Horn 1976 (4) SA 572 (O)
14 As per the Plascon-Evans supra approach
to the original capital loan of R705 ,000.00 it mean t that Merchant could only
ever have been entitled to judgment in an amount equal to double the original
loan amount being R1 ,410,000.00. Therefore, so the argument went, since the
appellants had paid an amount of R1 ,080,000.00 prior to conclusion of the
settlement agreement, it meant that Merchant could never be granted judgment
in excess of R330 ,000.00 or R180 ,000.00, if the post settlement payments of
R150,000.00 are also deducted from the R1,410,000.00.
[37] To give due consideration to th is ground it is necessary to first set out how the
matter was pleaded in the papers and then how the court a quo arrived at the
judgment amount of R944,919.85.
[38] In the founding affidavit Merchant initially pleaded a monetary claim of R2 ,910,
901.91, said to be due “in terms of the Term Loan Facility and the addenda
thereto … the Suretyships … and the Settlement Agreement”, supported by a
certificate of indebtedness dated 15 September 2023. Merchant relied on the
settlement agreement that was concluded on 14 December 2020. The appellants
in the answering affidavit disputed the quantum amount relying on in duplum
and the amount already repaid. In reply Merchant expressly conceded that the in
duplum rule applied and undertook to recalculate and f urnish an updated
certificate of balance at the hearing, thereby abandoning reliance on the
R2.91 million as originally claimed.
[39] When no updated balance certificate was filed, counsel for Merchant shifted in
oral argument before the court a quo, accepted that the original certificate was
erroneous and instead invit ed the court a quo to take the capital amount of
R1,094,919.85, recorded in the settlement agreement , less the three common
cause payments that equalled R150,000.00 that was made post the conclusion of
the settlement agreement and to grant judgment in the amount of
R1,889,839.70, being the R944,919.85 times two. The court a quo did not oblige
but rather granted judgment in the amount of R944 ,919.85 being the difference
between the amount recorded in the settlement agreement of R1 ,094,919.85
minus the post settlement payments of R150,000.00.
[40] Mr Wilken, for the appellants, argued that having regard to the manner in which
Merchant’s case was pleaded and even accepting that the approach by the court
a quo was correct, judgment was possible at most in the amount of R330,000.00
or as a minimum R180,000.00. These amounts are arrived at by taking double
the original capital amount of R705,000.00 that equals R1,410,000.00 minus the
admitted payments made by V aloworx of R1,080,000.00 or R1,230,000.00. Mr
Wilken also argued that the application of the in duplum rule cannot be excluded
by the conclusion of a settlement agreement.
[41] On behalf of Merchant, Mr Newton argued that the amount of R1 ,094,919.85
that the parties agreed to in the settlement agreement constituted a transactio or
compromise, which exting uishes the parties pre -existing rights and obligations.
On that approach it meant that the amounts paid prior to conclusion of the
settlement agreement are irrelevant and the application of the in duplum rule is
also not offended as it begins to run again on the new amount in the settlement
agreement.
[42] The conclusion o n this issue depends on the legal position that governs
transactio or compromise and the operation of the in duplum rule and what the
consequences are when these legal concepts intersect.
Transactio and compromise and the settlement agreement
[43] The common law in duplum rule provides that arrear interest ceases to
accumulate once it equals the amount of the outstanding capital debt. Its purpose
is to protect borrowers from exploitation by lenders who allow interest to
accumulate15. The Constitutional Court in Paulsen16 also confirmed that
contracting parties cannot waive the application of the rule, nor can the practice
of a bank alter it.
[44] Oneanate also makes clear that interest debited to an account and added to the
outstanding balance does not thereby lose its character as interest. The mere act
of a creditor capitalising interest, treating it as an accounting entry that increases
the capital balance, does not convert interest into capital for purposes of the in
duplum rule17.
[45] The question raised i n this appeal is whether the in duplum rule’s application is
circumvented when the parties, after interest has accumulated, conclude a
written settlement agreement that amalgamates the outstanding capital and
interest into a new single consolidated amount, expressed and admitted as a new
capital amount.
[46] The legal character of a settlement agreement ( transactio) is well-established. It
constitutes a compromise that finally settles disputed or uncertain rights or
15 Standard Bank of South Africa Limited v Oneanate Investments (Pty) Ltd (in liquidation) [1998] 1 All
SA 413 (A) at 426 ; Paulsen and Another v Slip Knot Investments 777 (Pty) Limited (CCT 61/14) [2015]
ZACC 5; 2015 (3) SA 479 (CC); 2015 (5) BCLR 509 (CC) (24 March 2015) paras 121
16 para 122 with reference to Oneanate supra at 828D-E.
17 Oneanate at 427
obligations between parties. Save to the extent that the compromise provides
otherwise, it extinguishes the dispute d rights and obligations and substitutes a
new obligation in their place. Our courts have long held that a compromise, even
without being made an order of court, has the effect of res iudicata 18. The
settlement agreement therefore operates as a juristic ac t in its own right that
stands independently of the underlying transaction it compromises.
[47] The question then becomes: when a settlement agreement expresses the
compromised indebtedness as a single consolidated amount, as occurred here
with the amount of R1,094,919.85, does that amount constitute a "new" capital
debt to which the in duplum rule applies afresh, with interest again permitted to
accumulate to equal th e consolidated amount, o r must one look through the
settlement figure and identify what po rtion of it was "true" capital , in this case
the R705,000.00, and what portion was capitalised interest, with the result that
the in duplum cap is measured only against the original R705,000.00.
[48] The key to resolving this question lies in the legal nature of the transactio itself.
When parties conclude a settlement agreement that extinguishes the original debt
and substitutes a new obligation in its place, the conventional understanding in
our law is that the parties have created a new obligati on. Furthermore,
a transactio involves mutual consensus: the debtor has agreed, expressly and in
writing, that the compromised amount is the debt owed. To allow the debtor
subsequently to decompose that amount into its constituent capital and interest
elements and then invoke the in duplum rule against the original capital alone,
would in effect allow the debtor unilaterally to resile from a concluded
18 See Road Accident Fund v Taylor ZASCA 64; 2023 (5) SA 147 (SCA) at paras 38 – 39 where the legal
position with regards to a transactio or compromise is discussed.
compromise. That would be impermissible, because it would undermine the
finality that a transactio is designed to produce.
[49] A good example of the application of the principle that a settlement agreement is
final is found in Leech19. The facts of that matter were that the Trust agreed to
pay a settlement amount of R4.125 million to Absa Bank to discharge its debts
and secure a restructuring of its property holdings. It was common cause that
this settlement figure included ultra in duplum interest, meaning interest that
exceeded the capital limit of the original debt. The Trust subsequently sued t he
bank for the "overpayment" relying on the condictio indebiti, arguing that it had
paid the excess amount in the mistaken belief that it was legally owing. The
Supreme Court of Appeal dismissed the claim, finding that the payment was not
made under a mis taken belief but rather as a conscious, calculated settlement to
achieve commercial advantages and avoid litigation.
[50] Valoworx’s defence overlaps strikingly with the defence raised by the Trust in
Leech. Valoworx seeks to allege an overpayment based o n an alleged
contravention of the in duplum rule on the original loans. However, just as
in Leech, Valoworx freely concluded a settlement agreement that consolidated
its liability into an agreed figure of R1 ,094,919.85. The settlement agreement
expressly d istinguished this new capital amount and provided for a new,
prospective interest liability. Valoworx could therefore have been under no
illusion that R1,094,919.85 was the new capital amount to which it was binding
itself. Having agreed to this consolidat ed figure to settle the dispute, and having
reaped the benefits of that settlement, Valoworx cannot now attempt to dissect
19 ABSA Bank Ltd v Leech and Others; [2001] 4 All SA 55 (A); 2001 (4) SA 132 (SCA)
the agreed amount and claim "overpayment" on the historical debt and demand
an in duplum unravelling.
[51] The judgment in F & I Advisors20 is also relevant . In that case, the Supreme
Court of Appeal rejected an attempt by a defendant to vaguely invoke the in
duplum rule without having properly pleaded it. Harms JA noted that while a
court will not order the payment of interest in c onflict with the in duplum rule if
the facts clearly show a contravention, the court is not obliged to embark on
a mero motu scavenger hunt. The general principle remains that a defendant
must formulate the dispute clearly in their pleadings. A claim for i nterest is not
inherently "illegal" in the same way a criminal prohibition is. T hus, if a
defendant wishes to rely on the in duplum rule, they must plead the specific facts
demonstrating the breach.
[52] In the present matter Valoworx’s answering affidavit contains a generalised
assertion that the amount claimed offends the in duplum rule and that the
applicant has “overreached”, but nowhere do they plead how the admitted
settlement amount of R1 ,094,919.85 is composed as between capital and
interest, nor do they explain on what factual basis that figure is said to
contravene the rule. They do not allege that the post -settlement interest claimed
exceeds that compromised amount, nor do they advance any computation
directed at the operative indebtedness, being the “compromised amount”
recorded in the settlement agreement.
[53] Furthermore, the defence that the original capital amount R705,000.00 has been
overpaid as Valoworx has repaid an amount of R1,080,000.00, is untenable
20 F & I Advisors (Edms) Bpk en 'n Ander v Eerste Nasionale Bank van Suidelike Afrika Bpk. 1999 (1) SA
515 (SCA); [1998] 4 All SA 480 (A)
having regard t o Valoworx’s own statement. That statement contains details of
arrear interest and intermittent capital repayments. On consideration of the
statement it is quite apparent that the arrears interest is substantial and by
applying the repayments first to arre ars interest, it means that a substantial
amount in capital was still due by December 2020. For example by 1 August
2016 the outstanding capital was R325,000.00 and the arrear interest was R
248,452,31. A payment of only R15,000.00 was made. That meant tha t the
capital was not reduced by the R15,000.00 payment as the arrear interest had to
be settled first. This had the effect that most of the initial repayments would not
have reduced the capital amount.
[54] In any event, there is nothing in the record t hat can contradict a finding that the
amount of R1,094,919.85 stipulated in the settlement agreement falls to be
treated as a newly agreed capital sum under the compromise . That means that
the applicant’s pursuit of judgment on the unpaid portion thereof, with interest
running afresh on that capital subject to the in duplum cap, is not unlawful and
does not offend the rule.
[55] Therefore, since the parties agreed on 14 December 2020 that the indebtedness
(of whatever prior composition) amounted to R1,094,919.85, and the appellants
accepted that figure as the consolidated capital sum, the y undertook to repay .
The fact that the capital of the original loan totalled R705 ,000.00 does not, on
the analysis above, permit the appellants now to invoke the in duplum rule by
reference only to the original capital amount. The settlement agreement (i.e.
the transactio) extinguished the earlier obligations and substituted a fresh capital
liability of R1 ,094,919.85. The in duplum rule now once again applies t o this
amount. The court a quo was therefore correct to use it as the starting point for
the judgment granted.
[56] Consequently, the court a quo’s decision to determine the matter on the papers
does not amount to an error that justify interference.
Ground 2: Validity of Mr Head’s suretyship
[57] As stated earlier, t he surety that Mr Head concluded was not concluded with
Merchant21 but rather a different entity at the time known as Merchant Factors
(Prop: Merchant Commercial Finance (Pty) Limited) (Registration Number
1998/018914/07) ("the 1998 Company"). Clause 27 of Mr Head ’s suretyship
provided that the 1998 Company could cede the suretyship to any third party
"which acquires the creditor's claim against the debtors, or any part thereof."
[58] It was argued on behalf of the appellants that the court a quo erred in holding Mr
Head personally liable because (i) his suretyship was executed in favour of the
1998 Company, not Merchant; (ii) the sale of business agreement produced in
reply was insufficient and impermissibly raised for the first time in the replying
affidavit; (iii) that e ven if the suretyship was validly ceded, a suretyship cannot
be ceded where there is no underlying debt at the time of cession , and at the date
of the sale (July 2014), the indebtedness to the applicant only arose in 2016.
[59] This argument was further expanded on in a supplementary note, filed after the
appeal was argued, on behalf of the appellants. The contention was now also that
the settlement agreement of 14 December 2020 is vitiated, insofar as it purports
to bind Mr Head in his personal capacity, by a common mistake ( iustus error)
relating to the existence and transferability of the suretyship executed by him in
21 Merchant Commercial Finance 1 (Pty) Ltd (Registration Number 2014/075671/07)
December 2012 in favour of the 1998 company. It was submitted that the parties
concluded the settlement agreeme nt under the incorrect assumption that Mr
Head’s suretyship had been validly transferred to Merchant. The argument
continued that the assumption was wrong in law because the principal debt was
not ceded and the compromise therefore rests on a defective causa as regards to
Mr Head.
[60] The starting point to resolve the issue of Mr Head’s liability is to have regard to
how the issue is raised on the papers. Mr Head’s answering affidavit indeed
denies liability under the 2012 suretyship on the basis that it w as executed in
favour of the 1998 company. However, the only iustus error relied upon in the
answering affidavit in relation to the settlement agreement is pleaded at
paragraph 41, where it is alleged that the parties concluded the settlement
agreement under a common mistake in believing that “the first agreement was
binding”, being the defence founded upon the National Credit Act. No allegation
is made that the settlement agreement was concluded under a common mistake
concerning the cession or transfer of the 2012 suretyship, nor are facts pleaded to
sustain such a case. The iustus error argument sought to be advanced on appeal
in relation to the suretyship is therefore not the case made out in the answering
affidavit. On this basis alone the argument cannot be sustained.
[61] In any event, even if I assume in Mr Head’s favour that the point is prope r, the
requirements for setting aside a compromise on the ground of mistake are not
established. A compromise ( transactio) is concluded precisely to settle disputes
or uncertainty concerning rights and obligations. As explained in Gollach22 a
compromise may in principle be set aside on the ground of iustus error, but not
22 Gollach & Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co (Pty) Ltd and Others 1978(1)
SA. 914 (A)
merely because one party later contends that it misjudged the merits of the very
disputed compromise. The enquiry is whether the alleged mistake relates to a
basic assumption which the parties elevated, expressly or tacitly, to a term or
condition upon which the validity of the compromise depends.
[62] The settlement agreement does not support the premise that Mr Head’s personal
undertaking was conditional upon the legal efficacy of the 2012 suretyship as
against the applicant. On the contrary, on the facts, Mr Head signed the
settlement agreement in his personal capacity and, together with Valoworx and
the Trust, was defined as one of “the Debtors” who admitted indebtedness for
the compromised amount and undertook, upon breach, to be liable jointly and
severally for that amount. The background record al in clause D, referring to the
prior conclusion of suretyships, is not framed as an express or implied condition
of Mr Head’s personal liability under the compromise. In the result, even if there
was uncertainty about Merchant’s ability to enforce the 2012 suretyship, that
would at most be part of the antecedent dispute which the settlement agreement
was concluded to resolve, rather than a condition upon which Mr Head’s newly
assumed liability was made to depend.
[63] There is a further, fatal difficulty. A “common mistake” requires that both
parties laboured under the same incorrect perception. Merchant does not admit
any such error. In reply it accept ed that the 2012 suretyship was executed in
favour of the 1998 company, but all eged that it acquired th e 1998 Company’s
business, including its assets, liabilities and securities, and that the suretyship
was transferred to it pursuant thereto. So on the fact s there is no agreement that
there was a common mistake.
[64] The mistake i s rather premised on an alleged misunderstanding of the legal
position. The opposing legal views on the ‘mistake’ is this. The appellants rely
on SA Breweries 23 as authority for the proposition that the cession of a
suretyship without an underlying debt is impermissible and that a party had no
right of action for the future debts of its debtors and it could not cede rights that
had not accrued to it. Merchant in response rely on Panamo24 and Odendal25 that
the suretyship was a "continuing covering suretyship" that survived even the
extinction of indebtedness, and that the surety agreement permitted cession
without reference to Mr Head and that it is not essential that the principal
obligation exists at the time when the suretyship contract is entered into and that
a suretyship may be contracted with reference to a principal obligation which is
to come into existence in the future.
[65] However, the authorities are clear that a common mistake is only concerned with
an error of fact. A misunderstanding by the parties on a legal position is not a
basis to invoke a mistake to set aside a settlement agreement on the basis of
iustus error. On the papers, therefore, the necessary element of a shared factual
incorrect assumption or error is not established. At best for Mr Head, the parties
hold opposing legal views concerning the effect of the alleged transfer of
cession.
[66] Therefore, Mr Head’s reliance on iustus error to avoid personal liability under
the settlement agreement cannot succeed. The defence is not properly pleaded in
the answering affidavit; and, in any event, the papers do not establish a common
23 SA Breweries Ltd v Van Zyl 2006 (1) SA 197 (SCA) and Pizani and Another v First Consolidated
Holdings (Pty) Ltd 1979 (1) SA 69 (A) paras 9. -10
24 Panamo Properties 103 (Pty) Ltd v Land and Agricultural Development Bank of South Africa 2016 (1)
SA 202 (SCA).
SA 202 (SCA).
25 Odendal and Another v Structured Mezzanine Investments (Pty) Ltd (482/13) [2014] ZASCA 89 (30
May 2014), at para 9, with reference to Trust Bank of Africa Ltd v Frysch 1977 (3) SA 562 (A)
mistake as to one of the conditions of the compromise, nor do they establish that
the parties shared the alleged misapprehension.
[67] Clauses 1, 2 and 3 of the settlement agreement provide operatively that (i) the
appellants (including Mr Head) admit their indebtedness in the sum of R1 ,094,
919.85; (ii) t he appellants undertake to repay the amount jointly and severally;
and (iii) i n the event of breach, they are liable jointly and severally, the one
paying the other to be absolved.
[68] The settlement agreement therefore creates an independent source of liability for
Mr Head as he signed in his personal capacity. He further admits in the
answering affidavit that the settlement agreement was concluded. The settlement
agreement is not a suretyship and is rather a compromise agreement in which Mr
Head, in his personal capacity, made an admission of indebtedness and
undertook an obligation to pay. Even if the underlying suretyship were invalid,
the settlement agreement stands as a distinct causa for Mr Heads liability.
[69] Consequently, t his ground does not justify interference with the court a quo’s
order.
Ground 3: Joint and several liability not sought in the Notice of Motion
[70] The appellants contend that the notice of motion did not specify that Merchant
wanted judgment joint and several ly against all the appellants and merely
claimed judgment against the m all without the words "jointly and severally."
The appellants submit that if relief is granted, it should only be on a pro
rata basis.
[71] Merchant’s response is that joint and several liability was expressly sought in
paragraph 13 of the founding affidavit, which states: "The purpose of this
application is to procure a monetary judgment against the First to Fifth
Respondents ('the Respond ents'), jointly and severally, the one to pay the other
to be absolved, together with ancillary relief." Furthermore, the amendment to
the notice of motion, which was granted by the court a quo in paragraph 1 of its
order, is not appealed against.
[72] While the notice of motion as originally framed was inarticulately worded, the
founding affidavit , which constitutes the pleadings in motion proceedings
together with the Notice of Motion , expressly and unambiguously sought joint
and several relief against the appellants . The appellants were not prejudiced .
They understood the case against them. The settlement agreement itself provides
for joint and several liability.
[73] There is thus no merit in this ground, and it does not justify interference with the
order of the court a quo.
Ground 4: Lack of authority / locus standi
[74] The appellants contend that Merchant, a juristic entity, neither alleged nor
proved that its directors authorised the institution of these proceedings and
accordingly lacks locus standi.
[75] The deponent, Mr Connor, stated in paragraph 1 of the founding affidavit that he
is a director of the applicant and that he is "duly authorised to depose to this
affidavit and to apply for the relief set out in this application." This averment
was not challenged in the answering affidavit.
[76] The court a quo correctly dealt with this point, noting that the parties had been
engaged in litigation for more than two years and the respondents had never
previously disputed the authorisation for the institution of any proceedings. The
point was raised as an afterthought.
[77] In Mall (Cape) 26 the Court accepted that where a respondent has offered no
evidence to suggest that the applicant is not properly before the court, then a
minimum of evidence will be required. Here there is more than a minimum: the
deponent affi rms he is a director and that the institution of the application is
authorised. The respondent did not challenge this in the answering affidavit. No
evidence has been placed before the court to suggest that the proceedings were
unauthorised.
Conclusion and order
[78] Having found that none of the grounds of appeal justify interference with the
order of the court a quo , the appeal must be dismissed. As to costs, I see no
reason to depart from the ordinary rule that costs follow the result.
[79] The following order is proposed:
1. The appeal is dismissed.
26 Mall (Cape) (Pty) Ltd v Merino Ko-operasie Bpk 1957 (2) SA 347 (C)
2. The appellants are ordered to pay the respondent's costs of the appeal,
jointly and severally, the one paying the others to be absolved, on the
party and party scale, with counsel’s fees on scale B.
_____________________
A Montzinger
Acting Judge of the High Court
I agree, and it is so ordered.
_______________________
A Le Grange
Judge of the High Court
I, agree
______________________
N.E. Ralarala
Judge of the High Court
Appearances:
Attorneys for first and fifth applicants: R Allom Attorneys
Counsel for first to fifth appellants: Mr L Wilken
Attorneys for respondent: BDP Attorneys
Counsel for respondent: Mr A Newton