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[2019] ZASCA 128
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Jacobs and Another v Baumann NO and Others (239/2018) [2019] ZASCA 128 (27 September 2019)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 239/2018
In
the matter between:
TABEA
JACOBS FIRST
APPELLANT
CLIFFORD
JACOBS SECOND
APPELLANT
and
HERRN SEBASTIEN BAUMANN
NO FIRST
RESPONDENT
SAMUEL
SPYCHER SECOND
RESPONDENT
JOHANNES
SPYCHER THIRD
RESPONDENT
RAHEL
SPYCHER FOURTH
RESPONDENT
THERESE
SPYCHER FIFTH
RESPONDENT
DAVID
SPYCHER SIXTH
RESPONDENT
Neutral
citation
:
Jacobs and another v Baumann NO and others
(239/2018)
[2019] ZASCA 128
(27 September 2019)
Coram
:
Leach, Saldulker, Swain and Mokgohloa JJA and Hughes AJA
Heard
:
4 September 2019
Delivered:
27 September 2019
Summary:
South African Reserve Bank – debt rescheduling arrangements
– oral agreement of loan – loan of money by foreign
national to individuals prohibited – requirement that debtor a
company or close cooperation – written loan agreement
between
foreign national and close corporation – money paid to close
corporation – substitution of debtors precluded
– close
corporation failing to make payment – oral agreement not
novated by written agreement – oral agreement
enforceable
against individual debtors.
ORDER
On
appeal from:
Western Cape Division of the High Court, Cape Town
(Le Grange J sitting as court of first instance):
1
The appeal is dismissed with costs.
2
The order of the court a quo is altered to read as follows:
‘
Judgment
is granted in favour of the First Plaintiff in the amount of CHF 730
804.43 or the South African Rand equivalent thereof,
plus interest
from date hereof against the First and Second Defendants jointly and
severally, the one paying the other to be absolved,
including costs
of suit.’
JUDGMENT
Swain
JA (Leach, Saldulker and Mokgohloa JJA and Hughes AJA concurring):
[1]
It is
alleged that the late Mr H R Spycher (the deceased), a Swiss foreign
national, orally agreed to loan CHF 600 000
[1]
to his daughter, Mrs Tabea Jacobs, a permanent resident in South
Africa, and that the debt remains unpaid. Payment was accordingly
sought in an action instituted by Mr Herrn Baumann NO (first
respondent in this appeal), in his capacity as trustee of the estate
of the deceased, together with the second to sixth plaintiffs (second
to sixth respondents in this appeal) in their capacity as
heirs in
the estate. Mrs Jacobs was cited as the first defendant (first
appellant in this appeal) and her husband, Mr Clifford
Jacobs, was
joined as the second defendant (second appellant in this appeal),
because it was alleged that the loan was for the
benefit and use of
both of the appellants and that both of them had guaranteed repayment
of the loan to the deceased.
[2]
The issues to be decided are not those usually associated with a
claim for payment by recalcitrant debtors. The cause of action
was
complicated by the necessary joinder of Tabia Investment Holdings CC
(registration no. CK 88/25344/23, hereafter referred to
as the CC),
as the third defendant. The respondents alleged that in terms of the
oral agreement, the loan was for the use and benefit
of the
appellants, ‘through the third defendant for the purposes of
making certain financial investments.’ Consequently,
it was
alleged that on 2 December 1988 and at Cape Town, ‘in pursuance
of’ the oral agreement concluded between the
deceased and the
first appellant, the deceased and the CC concluded a written
agreement in terms of which the amount of CHF 600
000 was loaned by
the deceased to the CC.
[3]
With regard to the written loan agreement it was common cause that:
(a)
The introduction of the CC as the borrower in the written loan
agreement was a legal requirement of the so-called debt ‘standstill
arrangements’ of the South African Reserve Bank (SARB) in force
at the time. Natural persons were not permitted to contract
for new
or further debt with foreign nationals in terms of these
arrangements; such debtors were limited to juristic persons: a
close
corporation or a company.
(b)
The written loan agreement required the sanction of the Exchange
Control Department of the SARB, which was granted.
(c)
The following terms were implied by law in the written loan
agreement:
(i)
The debt of the CC to the deceased was an ‘affected debt’,
in respect of which capital repayments were coordinated
by the Public
Investment Commissioners established in terms of the Second Interim
Arrangements, between the South African Government
and foreign
creditors; and
(ii)
Substitution of the South African debtor was permitted, provided that
the prior consent of the Exchange Control Department
of the SARB, was
obtained.
[4]
In resisting payment of the loan, the appellants pleaded that the
requisite consent for a substitution of the first appellant
for the
CC, as the debtor, in terms of the written agreement of loan, had not
been obtained. As a result, the first appellant was
not liable to
repay the loan. It was also pleaded that the first appellant could
not have accepted liability for the debt in law,
even if she had
wished to do so. The conclusion of the written loan agreement between
the deceased and the CC was therefore admitted,
but it was alleged
that only the CC was obliged to repay the loan.
[5]
The court a quo (Le Grange J) dismissed the defence that the
requisite consent for a substitution of debtors had not been
obtained.
It found on the evidence that the appellants had, in
various letters and communications with the deceased and the heirs,
acknowledged
personal liability for the loan. It was held that the CC
had been incorporated as a ‘mere corporate vessel’ to
facilitate
the transfer of the money into South Africa, and that the
loan was intended for the benefit and use of the appellants’
business
enterprise. It was also held that the appellants understood
that they, and not the CC, were responsible for repayment of the loan
– ‘in whatever form’.
[6]
For these reasons the court a quo rejected the appellants’
argument that the respondents had sued the wrong defendants,
finding
that the respondents had established, on a balance of probabilities,
that the appellants were indebted to the estate of
the deceased.
Judgment was then granted in favour of the respondents for payment of
the amount of CHF 730 804.43, or the South
African Rand equivalent,
plus interest from the date of the judgment against the appellants,
jointly and severally, including costs
of suit. The court a quo
refused leave to appeal, which was subsequently granted by this
court.
[7]
At the outset, the ambit and effect of the so-called debt ‘standstill
arrangements’, relied upon by the appellants
to avoid payment
of the loan, must be considered. During the 1980’s, the
apartheid policy of the South African Government
resulted in trade
and financial sanctions being imposed by the international community.
Capital withdrawals and disinvestment from
South Africa followed, and
certain international banks refused to renew credit facilities. The
temporary closure of the foreign-exchange
market was therefore
announced by the South African authorities on 28 August 1985,
followed by a declaration on 1 September 1985
of a suspension in the
repayment of South Africa’s foreign debt. The country was
therefore forced to reschedule the repayment
of its foreign debt,
over a prolonged period of time, through a series of what were
referred to as debt ‘standstill arrangements’,
more
correctly referred to as ‘rescheduling arrangements’.
[8]
The first of these rescheduling arrangements, described as the First
Interim Arrangements, ended on 30 June 1987. This was followed
by the
Second Interim Arrangements, which endured from 1 July 1987 to 30
June 1990 and, thereafter, by the Third Interim Arrangements
which
lasted from 1 July 1990 to 31 December 1993. The Final Arrangements
for the rescheduling of foreign debt came into effect
on 1 January
1994 and were terminated on 15 August 2001, when the rescheduling of
the country’s foreign debt came to an end.
[9]
A consequence of these rescheduling arrangements was that a foreign
national, such as the deceased, could not lend money directly
to a
permanent resident, such as the first appellant, in South Africa. A
loan could only be made in the following manner. The foreign
lender
would have to purchase South African foreign debt owned by a foreign
creditor bank, at a prevailing discount rate, by concluding
a
sub-participation agreement with the foreign creditor bank. The South
African borrower would then have to apply to Exchange Control,
at the
SARB, for approval to receive a new foreign loan from the foreign
lender, for the face value of the loan purchased. The
foreign lender,
as the new owner of the foreign debt, would request the Public
Investment Commission (the PIC), being the entity
responsible for co-
ordinating all debt affected by the moratorium, for approval to pay
the face value of the foreign debt to the
South African borrower, at
the prevailing commercial rand exchange rate. In return, capital and
interest payments had to be made
by the South African debtor to the
foreign creditor via the PIC (which controlled payment to the foreign
bank), and thence via
the sub-participation agreement from the
foreign bank to the foreign creditor, at the commercial Rand
equivalent.
[10]
In compliance with these requirements, the appellants acquired the
members’ interests in the CC and the amounts of CHF
378 000 and
CHF 222 000 were paid to the CC on 1 November 1988 and 4 November
1988, respectively, in terms of the written loan
agreement. In
accordance with the Second Interim Arrangements, these payments were
initially made by the deceased to Lazard Bros
and Co Ltd (Lazard
Bros), an English Bank, in terms of a written Sub-Participation
Agreement, to purchase South African foreign
debt owned by the bank.
Lazard Bros in turn made payment to the PIC, which then made payment
to Investec Bank, who then made payment
into the account of the CC,
held at First National Bank. At a later stage Lazard Bros, with the
approval of the SARB, concluded
an Assignment Agreement with the
deceased, in terms of which the deceased was substituted for Lazard
Bros as the owner of the South
African foreign debt. Payment of the
loan then had to be made by the CC to the deceased.
[11]
A resolution of the appeal requires a determination of three issues:
(a)
Whether an oral agreement of loan was concluded between the deceased
and the appellants.
(b)
If an oral agreement of loan was concluded, whether the agreement is
valid and enforceable in terms of the regulations contained
in the
Interim Arrangements.
(c)
If the oral agreement of loan is valid and enforceable, whether the
appellants and the deceased regarded the oral agreement
of loan as
governing their contractual relationship, after the conclusion of the
written agreement of loan between the deceased
and the CC. In other
words, the issue is whether they ever agreed to a novation of the
oral agreement of loan by the written agreement
of loan, or whether
they regarded the written agreement of loan simply as a formality to
comply with the requirements of the Interim
Arrangements, to enable
the appellants to receive the loan from the deceased in terms of the
oral agreement of loan.
[12]
Evidence as to the conclusion of the oral agreement of loan was given
by Mr Johannes Spycher, the son of the deceased. He stated
that his
sister, the first appellant, asked the deceased for a loan and
proposed the idea of a ‘debt purchase’. At
that time
nobody in Switzerland understood what this entailed, so the argument
went, but the first appellant organised everything,
with the result
that the deceased gave her a loan of CHF 600 000. This resulted in
the first appellant being credited with an amount
of approximately
CHF 941 000 in South Africa, as a result of the deceased having
purchased the South African foreign debt at the
prevailing discount
rate and the first appellant, having received the face value of the
loan purchased, at the prevailing commercial
rand exchange rate.
[13]
He stated that, although the deceased never wanted to make an
investment in South Africa, he wanted to help his daughter and
the
only way in which he could do this, legally, was by way of a close
corporation. The deceased, however, regarded the loan as
one to the
appellants; that it was the appellants who were liable to repay the
loan to him and not the CC. This was because the
loan had been given
to them and they introduced the need for a close corporation in order
to receive the loan. He stated that the
deceased was clear in his
mind, that the appellants owed the debt and that the CC was nothing
more than a vehicle to facilitate
the loan to them. When asked about
the assignment agreement concluded between Lazard Bros & Co Ltd
and the deceased, which
reflected the CC as the debtor, he stated
that the deceased understood that all of this was arranged by the
first appellant in
order to receive the loan.
[14]
Despite this evidence, counsel for the appellants nevertheless
submitted that the only contract in respect of which evidence
was led
was the written agreement of loan. This submission was based upon
certain answers that Mr Johannes Spycher gave whilst
being
cross-examined. Having been referred by counsel to the allegation in
the particulars of claim, that an oral agreement was
concluded
between the first appellant and the deceased, the following exchange
took place between Mr Spycher and counsel:
‘
What
you say is that as far as you’re concerned, there was no oral
agreement. — No, never.’
However,
when his answer is considered in the context of his evidence as a
whole, it is clear that, as a layman, he was confused
as to whether
it was the oral agreement of loan or the written agreement of loan
that was relied upon. This is clearly illustrated
by the following
exchange with counsel, after he was later referred to the written
agreement of loan:
‘
This
is the written loan agreement that you are suing on today? —
Yes.
You’re
not suing on a different agreement? — As I declared you, this
was the vehicle.
Yes,
that’s the vehicle, but I’m asking you, are you suing on
this agreement or any other agreement? — This was
– ja,
this was the agreement, the final agreement.
Only
this agreement? — (No audible reply).
You’re
nodding your head, you must say yes, please, you must provide an
audible answer – Yes and no.
Yes.
So that is the agreement you’re suing in (sic) and no other
agreement, right. Now… (intervention) — There
is also a
moral agreement.
No,
but you said earlier on there wasn’t an oral agreement —
Yes, a moral, not an oral.’
[15]
In further support of this submission counsel for the appellants,
following the same line of cross-examination with Mr David
Spycher
(the sixth respondent), submitted that his answers were to the same
effect. Having referred Mr Spycher to the written agreement
of loan,
the following exchange then took place between Mr Spycher and
counsel:
‘
There’s
no other agreement that you rely on in this matter. — I’m
not sure if they made other agreements. That
Johnny knows, as I know,
this is the only one.
You
don’t know about any other agreement? — Yes.’
However,
earlier in his cross-examination, the following exchange took place:
‘
Yes.
So what she said to you [referring to the first appellant] is that if
your father loans the money, then he has to enter into
a written
agreement with a company or a close corporation. Is that correct? —
Yes.’
The
meaning of the affirmative answer is clear. It is this: the deceased
would have to agree to loan the money to the first appellant
and the
deceased would then have to enter into a written agreement of loan,
with a company or a close corporation, for the first
appellant to
receive the loan.
[16]
It is clear that Mr Johannes Spycher had a very close relationship
with the deceased and was privy to his attitude concerning
the loan.
The admission of this evidence was never challenged, nor were its
contents rebutted, because neither of the appellants
gave evidence.
In any event, it is obvious that the conclusion of an oral agreement
of loan between the deceased and the first
appellant would had to
have preceded the acquisition of the CC and the necessary approvals,
as well as the purchase of South African
debt owned by an English
bank, to enable the first appellant to receive the loan. I am
accordingly satisfied that it was proved,
on a balance of
probabilities, that an oral agreement of loan in the amount of CHF
600 000 was concluded between the deceased and
the first appellant.
[17]
The next issue to be determined is whether the validity of the oral
agreement of loan was affected by the Interim Arrangements.
The
question is whether the purpose of the regulations, framed in terms
of the Interim Arrangements, was to render a contract concluded
in
contravention of their provisions void
ab initio
. The oral
agreement of loan contravened the Interim Arrangements because a loan
was made by a foreign national, being the deceased,
to a South
African permanent resident, being the first appellant, without the
necessary SARB approval. In addition, the loan was
made to an
individual and not to a close corporation or company.
[18]
The answer to this enquiry is to be found in Schedule 1 to the Third
Interim Arrangement, where the Regulations made in terms
of s 9 of
the Currency and Exchanges Act 9 of 1933 (the Exchange Control
Regulations) are set out. Regulation 2 provided that:
‘
No
person shall with effect from 1 July 1990 until 31 December 1993 make
payment to or in favour of any foreign creditor except
payment in a
special restricted account and except payment in respect of - ’
A
list of exceptions to the prohibition then followed, none of which
are relevant to the present enquiry. Regulation 7 went on to
provide
as follows:
‘
Any
person who contravenes or fails to comply with any provision of
regulation 2 or 3 or any condition referred to in regulation
5 shall
be guilty of an offence and liable on conviction to a fine not
exceeding R250 000 or to imprisonment for a period not exceeding
five
years, or to both such fine and such imprisonment.’
Although
we have not been favoured with copies of the regulations in respect
of the other Interim Arrangements, it can safely be
assumed that they
are couched in identical terms. This is because the regulations were
promulgated in terms of the
Currency and Exchanges Act 9 of 1933
and
each of the Interim Arrangements sought to achieve the same
objective.
[19]
In
Schierhout v Minister of Justice
1926 AD 99
at 109 the
following was stated:
‘
It
is a fundamental principle of our law that a thing done contrary to
the direct prohibition of the law is void and of no effect.’
In
G B Bradfield
Christie’s Law of Contract in South Africa
7ed
(2016) at 395, the author, having quoted this passage, adds the
following:
‘
An
extension of this principle is that, when a contract is not expressly
prohibited but it is penalized, that is the entering into
it is made
a criminal offence, then it is impliedly prohibited and so rendered
void . . . .’
However,
as pointed out in
Wierda Properties v Sizwe Ntsaluba Gobodo
[2017]
ZASCA 170
;
2018 (3) SA 95
(SCA) para 17, these are not inflexible
rules and;
‘
What
must ultimately be determined is the purpose of the legislative
provision. These principles are mere guidelines in ascertaining
that
purpose.’
In
similar vein the following was stated in
Standard Bank v Estate
Van Rhyn
1925 AD 266
at 274:
‘
After
all, what we have to get at is the intention of the Legislature, and,
if we are satisfied in any case that the Legislature
did not intend
to render the Act invalid, we should not be justified in holding that
it was. As
Voet
(1.3.16) puts it – “but that which
is done contrary to law is not
ipso jure
null and void, where
the law is content with a penalty laid down against those who
contravene it.” Then after giving some
instances in
illustration of this principle, he proceeds: “The reason of all
this I take to be that in these and the like
cases greater
inconveniences and impropriety would result from the rescission of
what was done, than would follow the act itself
done contrary to the
law.”’
[20]
The Interim Arrangements together with the regulations, designed as
they were for the purpose of protecting the revenue of
South Africa,
are akin to a revenue statute. In
McLoughlin NO v Turner
1921
AD 537
at 544, the following was stated: ‘This is a revenue
statute and it is a well-recognised rule of construction that the
mere
imposition of a penalty for the purpose of protecting the
revenue does not invalidate the relative transaction . . . . But, of
course, the Legislature may prohibit or invalidate the transaction
even where the sole object is to protect the revenue. And if
that
intention is clear effect must be given to it.’
[21]
In the present case, there is no express provision in the regulations
invalidating the underlying causa in respect of a prohibited
payment
to a foreign creditor, nor an express provision invalidating the
payment itself. In addition, a severe penalty of a fine
not exceeding
R250 000 or imprisonment for a period not exceeding five years, or
both such fine and imprisonment, are imposed.
As pointed out in
Swart
v Smuts
1971 (1) SA 819
AD at 831F-G, a severe penalty may
support the conclusion that the Legislature regarded this as a
sufficient sanction, without
rendering the prohibited conduct a
nullity.
[22]
In my view, when regard is had to the fact that what is expressly
prohibited is a payment to a foreign creditor, the breach
of which
results in the imposition of a severe penalty, the regulations do not
result in the underlying causa for the payment being
rendered null
and void. Consequently, the failure of the oral agreement of loan to
comply with the requirements of the Interim
Arrangements does not
affect its validity, nor the validity of a payment made in accordance
with its terms.
[23]
I turn to consider the third issue, namely whether the appellants and
the deceased regarded the oral agreement of loan as governing
their
contractual relationship, even after the conclusion of the written
agreement of loan. In other words, whether the appellant
and the
deceased ever intended to novate and replace the oral agreement of
loan with the written agreement of loan. The appellants
did not plead
that the oral agreement of loan was novated by the written agreement
of loan. Although the appellants denied the
conclusion of the oral
agreement of loan, they nevertheless admitted the allegation made by
the respondents, that the written agreement
of loan was concluded ‘in
pursuance of the deceased and First Defendant’s agreement’,
being the oral agreement.
Whether inadvertent or intended, the
admission was correctly made, as it is clear that the written
agreement of loan was only concluded
pursuant to the oral agreement
in order to comply with the formalities of the Interim Arrangements,
so that the appellants could
lawfully receive the loan.
[24]
Of central
importance, in determining whether the evidence shows that the
appellants and the deceased regarded the oral agreement
as governing
their obligations in respect of the loan, is the evidence that the
appellants sold their members’ interest in
the CC, on 3 May
1993, to third parties (the Unzens) for the sum of R470 000. Clause
9.1.3 provided that the appellants indemnified
the purchasers against
‘any claim of whatsoever nature by Hans Rudolph Spycher arising
out of the loan agreement concluded
between the Corporation and the
said Spycher’. Clause 12.1 provided that the appellants would
be entitled to retain the name
Tabia Investment Holdings CC, which
they then registered as the name of a new close corporation, with
registration number, CK 93/21115/23.
The new owners of the CC with
registration number CK 88/25344/23 then renamed it as ‘Unzens
Investment Holdings CC’,
as they were entitled to do in
accordance with clause 12.2 of the sale agreement.
[2]
The CC retained its original registration number CK 88/25344/23 and
was deregistered on 15 December 2005. The deceased was never
notified
of the sale by the appellants of their members’ interest in the
CC.
[25]
As a result, because the appellants had divested themselves of
control over the CC, it could not and would not perform its
obligations in terms of the written loan agreement after 3 May 1993.
At this time, an amount of CHF 484 220.36 was still owed by
the CC to
the deceased, in terms of the written loan agreement. This amount is
based upon the allegations made in the appellants’
plea, that
between 16 February 1989 and 19 October 1992 ie before they divested
themselves of its control, the CC paid interest
in the amount of CHF
261 644.26 and capital in the amount of CHF 115 779.64 to the
deceased.
[26]
This
evidence is a clear indication that the appellants did not regard the
written loan agreement, in which the CC was the debtor,
as the
governing agreement. If they had, they would have obtained the
consent of the Exchange Control Department of the SARB for
a
substitution of the new close corporation, albeit with the original
name Tabia Investment Holdings CC (with registration number
CK
93/21115/23) for the CC (with the original registration number CK
88/25344/23), in the written loan agreement. That the appellants
had
no intention of doing this is clearly illustrated by the indemnity
that they furnished to the purchasers of their members’
interest in the CC. The furnishing of this indemnity by the
appellants also shows that, even as laymen, they knew that the CC,
albeit with a change of name to Unzens Investment Holdings CC (but
with the original registration number CK 88/25344/23), remained
as
the debtor in terms of the written agreement of loan,
[3]
but with no prospect of performing its obligations. They must
therefore also have known, even as laymen, that the new close
corporation,
albeit with the original name Tabia Investment Holdings
CC (with registration number CK 93/21115/23), was not the debtor in
terms
of the written loan agreement. This factor, together with the
evidence of later payments made directly by the appellants to the
deceased, as well as acknowledgements of their personal liability to
repay the loan, supports the conclusion that the appellants
regarded
the oral agreement of loan, and not the written agreement of loan, as
the governing agreement in respect of the loan from
the deceased, and
that the written agreement had merely been the vehicle used to move
the loan funds from abroad into this country.
[27]
Before examining the evidence as to the payments made directly to the
deceased by the appellants, the manner in which some
of these
payments were dealt with in the appellants’ plea must be
considered. The respondents alleged in their particulars
of claim
that:
‘
19.
On the 12th January 1989 First Defendant [first appellant] started
making repayments to the deceased and continued making repayments
erratically over the years. At times both First and Second Defendants
[first and second appellants] made payments to the deceased.
The last
payment made by First Defendant [first appellant] was on the 5th
March 2004.’
In
reply, the appellants pleaded, that:
‘
30.
The First Defendant [first appellant] did not make any repayments on
the aforesaid loan to the deceased in her personal capacity.’
However,
after the appellants had divested themselves of control of the CC,
any payments made to the deceased could only have been
made by the
appellants personally, in terms of the oral agreement of loan. This
was because neither the new close corporation,
albeit named Tabia
Investment Holdings CC (with registration number CK 93/21115/23), nor
the appellants were parties to the written
loan agreement.
[28]
The appellants also pleaded that:
‘
31.
The First Defendant [first appellant] did, however, make a number of
ex gratia
payments to the deceased after the latter had
represented to her that he was in dire financial straits. The First
Defendant [first
appellant] remitted a monthly amount of SwFc
1,010.00 to the deceased from 24 February 2002 to 22 September 2003
and, thereafter,
until his death during or about February 2004, SwFc
1,000.00.’
As
will be seen, it is clear from the evidence that the first appellant
made repayments on the loan in her personal capacity and
that, by no
stretch of the imagination, could these monthly payments be regarded
as ‘
ex gratia
payments’.
[29]
Despite the appellants having divested themselves of control of the
CC as from 3 May 1993, the first appellant in a letter
dated
September 1993, addressed to the deceased and her mother, stated the
following:
‘
The
two parties to the loan agreement of SFR 600 000 are T.A.B.I.A.
Investment Holdings, members Cliff and Tabea Jacobs on the one
side
and on the other side H.R. Spycher. The agreement exists explicitly
between these two parties and is limited to both these
parties. No
further party including Johnny or others have a legal right to
interfere with this agreement.’
It
is incomprehensible how the first appellant could make this statement
to her parents without revealing to them that she and her
husband,
the second appellant, had four months earlier sold their members’
interest in the CC and acquired a new close corporation.
Furthermore,
that although the new close corporation was registered with the
original name of the CC, ie Tabia Investment Holdings,
it was not a
party to, nor bound by, the written loan agreement. It was also not
disclosed that, in the future, the CC now renamed
as Unzens
Investment Holdings CC, under the control of new owners but still
bound by the written loan agreement, could not and
would not perform
any of its obligations in terms of that agreement.
[30]
Later in this letter the first appellant referred to a discussion she
had held with her parents in May 1993, before they flew
back to
Switzerland, and said the following:
‘
The
agreement stipulates 10% interest per annum and capital repayments
after 10 years. The “concept” is clear. Before
you flew
back to Switzerland in May this year we discussed the repayments
(interest) for this year.
Cliff
and I discussed with Papa that we cannot pay the interest mid of
August but only in November
.
Papa discussed his situation with Tobli and Papa also said
that
if he needs the money mid of August he would let me know by the end
of May; in this case I would sell my land in order to meet
the
payment deadline
.
This conversation took place between the legal parties to the loan
agreement.’
(Emphasis added.)
Because,
to the knowledge of the appellants, the CC would no longer make
interest payments in terms of the written loan agreement,
and because
neither Tabia Investment Holdings CC, nor either of the appellants
were parties to that agreement, their personal undertaking
to pay
interest – ie ‘we cannot pay the interest’ –
could only have been made in terms of the oral agreement
of loan. In
confirmation of this understanding, the first appellant then
personally undertook to transfer an amount of CHF15 000
on 15
November 1993, and a further amount of CHF 15 000 on 15 December
1993, as payment of interest.
[31]
That the first appellant understood and accepted that both of the
appellants were personally liable to repay the loan is clearly
illustrated by a further extract from this letter:
‘
Up
to now I have not said much about the personal aspect of the loan. I
would like to say the following: In 1988 the possibility
of the
assumption of liabilities arose from pure “coincidence”
or also as an act of God. Cliff and I prayed to God
at that time
that
if we were unable for whichever reason to repay the loan and the
interest
then the
assumption of liabilities shall not materialize and we do not want
any shares of that money.
The
loan amount is enormous and the responsibility lies sometimes heavily
on my shoulders.
Not
one day passes when I do not think of the loan; and
I
can only find peace when Cliff and I have repaid it all.
I
know that the money comes from your “old-age pension” and
that your financial situation has been aggravated by the
recession in
Switzerland. Cliff and I pray together every day that God guides us
in our business and that he also guides South
Africa through these
bad times.
I am fully
aware that if we do not repay the money in full some family members
will never forgive me. Therefore Cliff and I dedicate
ourselves 100%
to settle this debt
.’
(Emphasis added.)
[32]
The next step in the saga was that Mr Johannes Spycher obtained a
Power of Attorney from the deceased on 8 May 1995 and travelled
to
Cape Town, where he met the appellants. It was agreed at this meeting
that the interest rate would be reduced from 10 per cent
to 5 per
cent and that the appellants undertook to start repaying the loan as
soon as they could. This agreement was confirmed
in a letter written
by the second appellant and endorsed by the first appellant, by way
of her signature, in which the following
was stated:
‘
We
acknowledge our debt to you and, indeed, have never denied it
.
We hereby sincerely thank you for giving us this wonderful start in
our lives . . . .
We
do not hide from our creditors, and certainly not from a creditor
such as yourself
, who
we love and respect . . . . [My proposed solution is that the]
original interest rate agreed upon (10 percent) be reduced
to 5
percent. Johnny has already agreed to this in your name. Tabea and I
sincerely thank you for this concession . . . .
Tabea
and I accept responsibility as the debtor of your loan to ourselves
of November 1988.
’
(Emphasis added.)
It
bears repetition that the acceptance by the appellants of
‘responsibility as the debtor of your loan to ourselves of
November
1988’ could only be an acceptance of responsibility in
terms of the oral agreement of loan, because neither the new close
corporation, albeit named Tabia Investment Holdings CC (with
registration number CK 93/21115/23), nor the appellants were parties
to the written loan agreement. The letter also serves as an
acknowledgement and acceptance that both of the appellants were
parties
to the oral agreement and liable to repay the loan.
[33]
In addition, of significance with regard to the agreement to vary the
interest rate is that the written loan agreement contained
a
non-variation clause in the following terms:
‘
No
variation or amendment hereof or addition hereto shall have any force
or effect unless reduced to writing and signed by the parties
or
their duly authorised representatives.’
Consequently,
the oral agreement to vary the interest rate, which was thereafter
implemented by the parties, could only be enforceable
in terms of the
oral agreement of loan. In addition, the appellants no longer
possessed any authority to agree to this variation
on behalf of the
CC, now named Unzens Investment Holdings CC, who, as we have seen,
remained the debtor in terms of the written
loan agreement.
[34]
The same theme of personal liability on the part of the appellants
was repeated in a letter written by them to the deceased
dated 28
January 1996, in which the following was stated:
‘
Our
forward projections take into account the following:
-
Our interest re-payments to yourself over the next (approximately) 3
years.
-
. . .
-
Our plan for the re-payment of loan capital to yourself in November
1998.’
Although
the letter was headed ‘Loan – H R Spycher – Tabia
Investment Holdings CC’, the reference to Tabia
Investment
Holdings CC was erroneous and grossly misleading because this was now
the name of the new close corporation, which was
not a party to the
written loan agreement.
[35]
In a letter dated 12 May 1996 and with the same misleading heading as
in the prior correspondence, the appellants addressed
a proposal to
Mr David Spycher (the sixth respondent) that interest and capital
would be paid over a period of 10 years from November
1988. The
proposal was again couched in terms indicating a personal liability,
for instance ‘Should we be unable to repay
the capital amount
in November 1998, or a portion thereof . . .’.
[36]
Thereafter, and on 21 February 1997, the appellants wrote to the
deceased and the third respondent. The letter had the same
misleading
heading, namely, ‘Loans of SFr 378,000 & SFr 222,000 –
H R Spycher / Tabia Investment Holding CC’,
and said the
following:
‘
Whilst
it is and has always been our intention to comply with the provisions
of the above Loan Agreement as amended on 2 June 1995,
it is our
contention, duly supported by conclusive documentation in our
possession, that the dates and amounts of interests payable
as
reflected in said letter are fundamentally incorrect and are
therefore not due and payable on the dates mentioned in said letter.’
Their
statement that they wished to comply with the provisions of the
‘above Loan Agreement as amended on 2 June 1995’,
which
is a reference to the written loan agreement, with a purported
reduction in the interest rate payable from 10 per cent to
5 per
cent, was disingenuous. The appellants knew that they no longer
controlled the debtor in terms of the written loan agreement,
being
the CC, now named Unzens Investment Holdings CC, and that their new
close corporation, named Tabia Investment Holdings CC,
and themselves
were never parties to the written loan agreement. Consequently, their
legal obligation to comply with the provisions
of the ‘loan
agreement’ could only be located within the oral agreement of
loan.
[37]
Mallinicks, the attorneys for the appellants at the time, then became
involved and, by way of a letter dated 27 November 1998,
made an
offer to ‘Family Spycher’. The letter was headed ‘Affairs
Mrs Tabea Jacobs and Mr Cliff Jacobs’
and offered a 33.4 per
cent shareholding in all properties trading as Villa Belmonte. A
further offer was made in the following
terms:
‘
In
addition
our clients
will pay you R5000 (five thousand rands) per month, on account of the
indebtedness
escalated
at 10% (ten percent) annually, payable quarterly in South African
Rands into a local trust account controlled by Family
Spycher. It may
be possible to legally pay this in Switzerland.’
(Emphasis
added.)
No
mention is made of the close corporation, Tabia Investment Holdings
CC, and the offer is made on behalf of the appellants in
respect of
‘the indebtedness’, indicating a personal liability to
repay the loan, which again is only comprehensible
within the
provisions of the oral agreement of loan.
[38]
In June 2001, the first appellant then wrote to the deceased, in the
following terms:
‘
What
I really believe is that you are in financial difficulties and I am
very sorry to hear that you are financially destitute.
I am willing
to pay you SFR 1500 = R6000 per month and I am currently in the
process of obtaining the approval from the Reserve
Bank . . . . In
your last letter you write for the first time what is actually
possible
,
before that
you just
insisted on your contractual right
without
considering the above circumstances and the exchange rate.
My
debt has tripled in Rand. It was simply impossible to repay the
capital and interest at the same time
.’
(Italics my own; underlining original.)
Yet
again, the first appellant acknowledges the existence of ‘my
debt’, which consists of capital and interest, and
also that
the deceased has a ‘contractual right’ to demand payment.
The first appellant also gives a personal undertaking
to make payment
at the rate of R6000 per month. These acknowledgements are
irreconcilable with the pleaded case of the appellants,
as referred
to above, that these were ‘ex gratia payments’ to the
deceased after he had represented to the first appellant
that he was
in dire financial straits. These acknowledgements are only
comprehensible within the provisions of the oral agreement
of loan.
[39]
It is therefore clear that the deceased and the appellants regarded
the oral agreement of loan, and not the written agreement
of loan, as
the governing agreement in respect of the loan from the deceased.
However, whether the appellants are liable to make
payment to the
respondents of the outstanding amount of CHF 730 804.43 requires a
determination of two special pleas raised by
the appellants to the
claim of the respondents, as well as a challenge to the authority of
the first respondent. The special pleas
were as follows:
(a)
The first special plea was that, because the respondents alleged that
the first and second appellants had undertaken to repay
the loan to
the deceased, as guarantors of the loan to the CC, this claim against
the appellants was in the nature of a suretyship.
It was pleaded that
the provisions of the General Law Amendment Act 50 of 1956 had not
been complied with, because the terms of
the guarantee were not
embodied in a written document, duly signed by or on behalf of the
sureties and, as a result, the guarantee
was unenforceable. There is
no merit in this. As set out above, the evidence establishes that the
appellants were personally liable,
in terms of the oral agreement of
loan, and not as sureties in respect of the written agreement of
loan.
(b)
The second special plea raised the defence of extinctive
prescription. It was alleged that, because of the failure of the CC
to make payment of interest on the loan on 1 June 1993, the
acceleration clause in the written agreement of loan was triggered,
with the result that the entire balance outstanding became due and
payable immediately. The three-year period of prescription provided
for in the Prescription Act 68 of 69 expired by 31 May 1996, whilst
the summons was only served on 1 February 2005. The answer
to this
special plea of prescription is that it was raised in respect of the
written agreement and not in respect of the oral agreement
of loan.
However, even if it had been raised in respect of the oral agreement
of loan, it would have failed. This is because the
appellants pleaded
that the first appellant made monthly payments to the deceased from
24 February 2002 to 22 September 2003 and,
thereafter, until his
death in February 2004. These constituted an acknowledgement of the
debt and interrupted the running of prescription.
[40]
I turn to the challenge raised as to the authority of the first
respondent. In the respondents’ particulars of claim
it was
alleged that the first respondent acted in his official capacity as
Trustee [Erbenvertreter (Superprovisorisch)] of the
estate of the
deceased, ‘having been so appointed by a competent court in
Switzerland in accordance with the laws of Switzerland
in terms of
the Civil Code Article 554 Section 1.4 read with Article 556 Section
3’. These allegations were denied by the
appellants and it was
submitted that the first respondent was therefore required to prove
both his locus standi and his authority
to sue.
[41]
In order to place this challenge in context, it is necessary to
consider two previous judgments in this matter. In the first
judgment, the High Court (Bozalek J) upheld an application by the
respondents for the substitution of the first respondent, as
‘representative of the heirs’ of the estate of the
deceased, for a Mr Wirz. The appointment of Mr Wirz as ‘administrator
of the estate’ of the deceased had been set aside by a Swiss
Canton Court on 25 April 2005, at the instance of the appellants.
The
decision was based upon a finding that the procedural rights of the
first appellant had been seriously infringed as a result
of a failure
to afford her a hearing before his appointment.
[42]
Thereafter,
on 21 September 2005 the first respondent was appointed as the
‘representative of the heirs.’ His appointment
was
unsuccessfully challenged by the appellants and he then approved the
present action that was pending at the time. The appellants
then
appealed the order of substitution granted by the High Court to this
court.
[4]
The appellants
contended that a substitution of the executor was impermissible
because the summons in the action was a nullity,
as there was no duly
appointed executor when it was issued, and Mr Wirz lacked
authorisation to litigate on behalf of the deceased
estate.
[43]
In dismissing the appeal, this court noted at para 11 that the first
question to be considered was the role of a ‘representative
of
heirs’ of a deceased estate, in the context of Swiss law.
Noting that no evidence was led in this regard, and that little
could
be gleaned from the translation from Swiss German to English of the
two judgments from the Swiss Canton Court, because of
their poor
quality, it then stated the following at para 13:
‘
In
that case, it must be presumed that Swiss law is the same as South
African law on this aspect. The rule in our law is that the
only
proper person to litigate on behalf of a deceased estate, in the
vindication of its assets, is its executor even to the exclusion
of
the beneficiaries in the estate. This means that a Swiss equivalent
of an executor of the deceased estate was required to initiate
and
conduct the action instituted on 1 February 2005. It must then be
considered whether Wirz’s appointment as administrator
of the
estate and involvement in the action meet this requirement.’
This
court then noted at para 15 that the crisp question for decision was
whether Wirz’s appointment was lawful. If it was,
then the
institution of the action was proper, as his appointment was set
aside after this date. If it was unlawful, then the summons
was a
nullity, that could not be amended by the substitution of the first
respondent for Mr Wirz.
[44]
This court, at para 20, then noted that the only flaw found by the
Swiss appeal court in Mr Wirz’s appointment was merely
procedural. The order for his appointment would therefore stand,
until it was properly set aside. The consequence of this was that
any
steps taken by him, on the authority of the court order appointing
him as administrator of the estate, before being withdrawn,
were not
unlawful. As a result, the summons issued in his name on behalf of
the deceased estate was not a nullity. Of particular
significance to
the present issue is what was stated by this court at para 21:
‘
The
effect of the substitution is not to introduce a new party,
but
merely to replace an irregularly appointed executor with the proper
one.
’
(Emphasis
added.)
What
this court decided therefore, was that the first respondent was
properly appointed as the Swiss equivalent of an executor of
the
estate of the deceased. As a result, the first respondent possessed
the necessary authority in South African law to litigate
on behalf of
the estate of the deceased in the vindication of its assets, and to
proceed with the action against the appellants.
[45]
There is accordingly no basis for the submission made by the
appellants that the first respondent failed to prove his appointment
by the Swiss court and that there was no evidence that, under Swiss
law, the first respondent had authority to institute legal
proceedings on behalf of the estate of the deceased. As regards the
challenge that the particulars of claim incorrectly referred
to the
wrong articles of the Swiss Civil Code as the basis for the
appointment of the first respondent (which was conceded by the
third
respondent), this can have no effect upon the finding of this court
that the first respondent possessed the necessary authority
to
litigate on behalf of the estate of the deceased.
[46]
As correctly conceded by counsel for the respondents, the second to
the sixth respondents, as beneficiaries of the estate of
the
deceased, do not have locus standi to litigate on behalf of the
estate. The order of the court a quo will therefore be amended,
to
provide for judgment in favour of the first respondent, alone,
against the appellants. In the exercise of my discretion, I do
not
regard this amendment as a sufficient ground to alter the costs order
granted by the court a quo in favour of the respondents,
or the costs
order I intend making in favour of the respondents in the appeal.
[47]
I make the following order:
1
The appeal is dismissed with costs.
2
The order of the court a quo is altered to read as follows:
‘
Judgment
is granted in favour of the First Plaintiff in the amount of CHF 730
804.43, or the South African Rand equivalent thereof,
plus interest
from date hereof against the First and Second Defendants jointly and
severally, the one paying the other to be absolved,
including costs
of suit.’
__________________
K G B Swain
Judge of Appeal
Appearances:
For
Appellants: P Tredoux
Instructed
by:
JMB
Gillan Attorneys, Cape Town
Honey
Attorneys, Bloemfontein
For
Respondents: J Butler SC
Instructed
by:
Luitingh
& Associates, Rondebosch
McIntyre
van der Post, Bloemfontein
[1]
CHF is the currency abbreviation for Switzerland’s currency,
the Swiss Franc. The abbreviation ‘CHF’ is derived
from
the Latin name of the country, ‘Confoederatio Helvetica’,
with the ‘F’ standing for ‘franc’.
[2]
To avoid confusion, the close corporation with registration number
CK 88/25344/23 will continue to be referred to in the judgment
as
‘the CC’, despite the alteration of its name from ‘Tabia
Investment Holdings CC’ to ‘Unzens
Investment Holdings
CC’, to distinguish it from the new close corporation with
registration number CK 93/21115/23, named
‘Tabia Investment
Holdings CC’.
[3]
In terms of
s 21(1)
of the
Close Corporations Act 69 of 1984
, a
change of name of a close corporation in terms of the Act does not
affect any right or obligation of the close corporation.
[4]
Jacobs & others v Baumann NO & others
[2009] ZASCA 43
;
2009
(5) SA 432
(SCA).