THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Not Reportable
CASE NO. 31/2005
In the matter between
INVENTIVE LABOUR STRUCTURING
(PTY) LIMITED Appellant
and
DENNIS CORFE Respondent
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CORAM: SCOTT, JAFTA JJA and CACHALIA AJA
HEARD: 9 NOVEMBER 2005
DELIVERED: 18 NOVEMBER 2005
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Summary: Deed of suretyship – m istake – rectification thereof can only be
ordered if the contract complies with the formality requirements.
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JUDGMENT
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JAFTA JA
[1] This appeal concerns a default judgment, the granting of which
depended upon the rectification of a deed of suretyship. During September
2004 the appellant instituted an action against the respondent in the High
Court, Pietermaritzburg, for the rectif ication of a deed of suretyship and
payment of the sum of R240 119,93 with interest and costs. The respondent
did not defend the action and the appe llant applied for a default judgment
and rectification of the contra ct of suretyship. The court a quo (Theron J)
refused the prayer for rectification and dismissed the application for default
judgment. With leave of the court a quo the appellant contests that refusal
and the dismissal of the application for default judgment.
[2] In essence the appellant’s case, as set out in the particulars of claim,
is the following:
(a) a close corporation called D & R Di stributors CC was indebted to the
appellant in the amount of R240 119, 93 plus interest at the rate of
2.5% per month from 16 October 2003 to date of payment;
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(b) on 5 August 2003 the respondent ex ecuted a deed of suretyship in
terms whereof he bound himself as surety and co-principal debtor for
D & R Distributors CC’s indebtedness to the appellant;
(c) by error common to both parties and contrary to their intention, the
respondents name was inserted as th e principal debtor instead of D
& R Distributors CC;
(d) accordingly the deed of suretyship must be rectifie d by deletion of
the words ‘Dennis Corfe’ in their re ference to the principal debtor
and be substituted with the words ‘D & R Distributors CC’.
[3] When the matter came before the court a quo counsel who then
appeared for the appellant, drew its atte ntion to the fact that two decisions
of that court stood in the way of the relief sought. Those decisions are
Republican Press Ltd v Martin Murray Associates CC 1996(2) SA 246 (N)
and Nuform Farmwork and Scaffolding (Pty) Ltd v Natscaff CC 2003(2)
SA 56(D). Holding the view that it was bound to follow these decisions, the
court a quo declined to authorise rectification and dismissed the request for
a default judgment.
[4] It is now settled that a deed of su retyship which is invalid for want of
compliance with the formal requirements of s 6 of the General Law
Amendment Act 50 of 1956 (‘the Act’) cannot be rectified so as to make it
comply ( Intercontinental Exports (Pty) Ltd v Fowls 1999(2) SA 1045
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(SCA) at 1051 C-G). Section 6 of the Act, insofar as it is relevant,
provides:
‘No contract of suretyship entered into af ter the commencement of this Act, should be
valid, unless the terms thereof are embodied in the written document signed by or on
behalf of the surety ….’
[5] In the past, the word ‘terms’ in the section has b een construed to
include the identification of the three ne cessary parties, ie the creditor, the
principal debtor and the surety ( Fourlamel (Pty) Ltd v Maddison 1977(1)
SA 333(A) at 345A-D and Intercontinental Exports (Pty) Ltd (supra) at
1051B). If any one of the three parties is not identified ex facie the contract,
it will be invalid for want of compliance with statutory requirements.
[6] As a general rule the determina tion of whether rectification of a
suretyship should be ordered or not i nvolves a two-stage enquiry. The first
is to determine whether the formal re quirements contained in s 6 are met.
The focal point at this stage is wh ether the written document, on its face,
constitutes a valid contract of suretyship or not. If it does not, the enquiry
ends there. If it does, then the e nquiry moves to the second leg which
focuses on whether a proper case for r ectification has been made out. If the
answer to the latter question is in the affirmative, an orde r for rectification
must be granted.
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[7] Against this background I shall now consider whether rectification
should have been granted in the pres ent case. The relevant part of the
contract of suretyship reads as follows:
‘I, the undersigned Dennis Corfe do hereby bind myself jointly and severally in favour
of:
Inventive Labour Structuring
(hereinafter called “the Creditor”)
as surety for and co-principal in solidum with:
Dennis Corfe
(hereinafter called “the Debtor”)
for the due payment of every sum of money which may now or a any time hereafter be
or become owing by the Debtor to the Creditor from whatsoever cause or causes arising,
and for the due performance of every other obligation, howsoever arising, which the
Debtor may now or at any time hereafter be or become bound to perform in favour of
the Creditor.’
The underlined names are inserted in handwritten form to a typed
document and the suretyship is signe d at its end by the surety, Dennis
Corfe.
[8] Bearing in mind that at this stag e one is confined to looking only at
the document constituting the suretyship to see if it contains the necessary
formalities, I am of the view that the present suretyship does, on its face,
identify the creditor, the principal de btor and the surety. However, it is
clear that the names of the surety and the principal debtor are the same and
they are names of a natural person. Th is renders the suretyship capable of
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at least two possible interpretations. The first is that the surety and the
principal debtor are one and the same person. The second is that they are
two parties with identical names.
[9] The first interpretation would certainly lead to non-compliance with
the necessary formal requirements because in our law a person cannot stand
surety for his or her own debt (Nedbank Ltd v Van Zyl 1990(2) SA 469(A)
at 475E-I). On this interpretation the suretyship would fail to identify the
principal debtor and the surety as two distinct parties.
[10] But the second reveals the identitie s of both the principal debtor and
the surety as two parties with identi cal names. On this interpretation the
suretyship contract is formally valid. In Intercontinental Exports (Pty) Ltd
Smalberger JA, in a similar but not identical context, said at 1053D-F:
‘The principal debtor is referred to in clause 1.2 of the suretyship as “Mr Frank
Fowles”. The name of the surety is reflected as “Frank Turner Fowles”. The names,
though similar, are not identical, and ex facie the suretyship do not necessarily refer to
the same person. Even if the two names were identical, it would not follow as a matter
of course that they referred to the same person. The parties might for instance, be father
and son who happen to have the same name s, a not uncommon oc currence. In those
circumstances, and a fortiori in the present, a deed of suretyship would be capable of
being construed ex facie the document itself as reflecting a creditor, principal debtor and
surety and would be formally valid on that score.’
[11] In a case where the c ontract being construed is capable of more than
one interpretation, one meaning lead ing to invalidity and the other not,
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preference must be given to the latter meaning in order to save the contract
from invalidity. That much is trite. Therefore, the present suretyship - when
properly construed - complies with the formal requirements in s 6 of the
Act.
[12] I turn to the second leg of the enquiry. As previously stated, it is
alleged that both parties in this ma tter had intended th at the respondent
would stand surety for D & R Distributors CC’s indebtedness to the
appellant. The respondent’s name was mistakenly inserted in the suretyship
agreement as referring to the principa l debtor. As a result the suretyship
agreement failed to reflect the partie s’ common intention. These facts
constitute a sufficient basis for granting rectification. It follows that the
court a quo erred in declining the request for rectification.
[13] In the light of what has been said above, it is not necessary to
determine whether Republican Press and Nuform Farmwork & Scaffolding
(Pty) Ltd were correctly decided. Both cases are distinguishable from the
present matter.
[14] Since the only difficulty that st ood in the way of the relief sought
being granted was the question of rectification, it follows that the appeal
must succeed. Insofar as costs of the appeal are concerned, it seems to me
that it would be fair in the circumstances of this case to make no order as to
costs. The respondent did not appear in this court. He informed the
appellant’s attorneys by way of a letter dated 6 April 2005 that he would
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not oppose the appeal. In the court a quo the relief sought was refused after
the appellant’s counsel had referred the court to the decisions mentioned in
para [13] above. The court’s attention was not drawn to the decision of this
court in International Exports (Pty) Ltd. Had this been done an order in the
appellant’s favour would in all probability have been granted.
[16] The following order is made:
1. The appeal is upheld.
2. The order of the court a quo is set aside and replaced with the
following order:
‘(a) An order is granted for rectification of the deed of suretyship,
Annexure B to the particulars of cl aim, by the deletion of the name
“Dennis Corfe” immediately after the words “as surety and co-
principal debtor in solidum with” and substituting therefor the name
“D & R Distributors CC”.
(b) The defendant is ordered to pay the sum of R240 119,93 with interest
at the rate of 2.5% from 16 October 2003 to date of payment together
with costs. The latter order will operate jointly and severally with
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any order issued against D & R Di stributors CC arising out of the
same debt.’
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C N J A F T A
J U D G E O F A P P E A L
SCOTT JA ) CONCUR
CACHALIA AJA )