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[2010] ZAWCHC 16
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African Dawn Property Transfer Finance 1 (Pty) Ltd v Caronet Properties (Pty) Ltd and Another (16892/2008) [2010] ZAWCHC 16 (15 February 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NO: 16892/2008
In
the matter between:
AFRICAN
DAWN PROPERTY TRANSFER
FINANCE
1 (PTY) LIMITED
Applicant
and
CARONET
PROPERTIES (PTY) LTD
1
st
Respondent
(Registration
no: 2004/010823/07)
DE
JAGER, EVADNE ESTELLE
2
nd
Respondent
JUDGMENT
DELIVERED ON THE 15th DAY OF FEBRUARY 2010
LOUW,
J:
[1]
The applicant seeks final relief on notice of motion in the form of
an order against the respondents jointly and severally for
payment
of R370 284, 36 together with interest at the rate of 6,5% per month
from 1 September 2008 together with costs on the attorney
and client
scale.
[2]
On 7 January 2008 the applicant concluded a written loan agreement
(the loan agreement) with the first respondent. The first
respondent
is a company and is a juristic person as defined by the National
Credit Act 34 of 2005 (the Act).
[3]
In terms of the loan agreement the applicant lent the amount of R
281 350, 40 to the first respondent, together with interest
thereon
at the rate of 5% per month. The loan agreement provides that if the
first respondent should fail to repay the loan on
the terms agreed,
the outstanding balance will attract interest at the rate of 6,5%
per month compound.
[4]
On 21 December 2007 the second respondent, a practising attorney who
is also the sole director of the first respondent, executed
a deed
of suretyship (the deed of suretyship) in terms whereof she bound
herself as surety and co-principal debtor to the applicant
for the
first respondent's indebtedness under the loan agreement. The second
respondent agreed to pay the costs of recovery of
any amount from
her under the suretyship on the attorney and client scale.
[5]
The suspensive condition contained in clause 7.1 of the loan
agreement was not fulfilled, but the applicant waived compliance
therewith.
[6]
The respondents have filed answering papers in the form of an
answering affidavit deposed to by the second respondent. The
applicant has filed replying papers.
[7]
The applicant complied with its obligations under the loan
agreement by paying the following amounts on 7 January 2008:
1.
R250 000,00 to the second respondent;
2.
R707 540,00 to Mageza Le Roux Vivier & Associates;
3.
R20 000,00 to Finspire; and
4.
R4 275,00 to applicant;
[8]
The respondents failed to effect payment of the amount of R370
284,36 with interest thereon from 1 September 2008 due to the
applicant under the terms of the loan agreement.
[9]
Section 4 of the Act provides that certain agreements are exempt
from the provisions of the Act. Ms Feinstein on behalf of the
applicant contended that the provisions of sections 4[1) (a) and
4(1) (b) apply to the loan agreement and exempt it from the
provisions
of the Act.
[10]
Since the loan agreement is in any event excluded from the
provisions of the Act by section 4(1 )(b), it is not necessary to
consider and decide whether, in the light of certain disputed facts
on the papers, the provisions of section 4(1) (a) also apply
to and
exclude the loan agreement from the provisions of the Act.
[11]
The effect of the provisions of section 4(1 )(b) is that a large
agreement (as defined in section 9(4)], in terms of which
the
borrower is a juristic person whose asset value at the time of the
conclusion of the agreement is below the threshold value
(in this
case Rim), is nevertheless excluded from the provisions of the Act.
Section 9(4) (b) defines a large agreement to include
a credit
agreement which is a credit transaction other than a pawn
transaction or a credit guarantee and in respect of which the
principal debt is at or above the threshold determined under the
provisions of section 7(1) (b). The threshold which has been
determined is the amount of R250 000, 00.
[12]
The principal debt under the loan agreement is R 281 350, 40, and
the loan agreement is neither a pawn transaction nor is it
a credit
guarantee. The provisions of section 4(1) (b) therefore exclude the
loan agreement from the provisions of the Act. It
is common cause
that if the loan agreement is excluded, the deed of suretyship is
likewise excluded from the provisions of the
Act.
[13]
In argument, Mr White who appeared on behalf of the respondents took
a different tack and did not contend that the loan agreement
is
subject to the provisions of the Act.
[14]
Mr White pointed out that the applicant seeks final relief on notice
of motion and that such relief may only be granted 'If
those facts
averred in the applicant's affidavits which have been admitted by
the respondent, together with the facts alleged by
the respondent,
justify such an order' ( per
Corbett
JA
in
Plascon-Evans
Paints v Van Riebeeck Paints
[1984] ZASCA 51
;
1984
(3) SA 623
at 634H-I). He contended that the applicant has not made
out a case for the granting of the relief sought, because properly
construed,
the evidence shows that the transaction between the
parties was in fact and despite the outward appearance, an agreement
of loan
between the applicant and the second respondent. Since it is
common cause that the provisions of the Act would apply if the loan
agreement was concluded with the second respondent, being a natural
person and that the applicant has not complied with the provisions
of Section 129 of the Act, the claim would be unenforceable, he
contended.
[15]
Mr White submitted that the evidence shows that the contract of loan
entered into between the applicant and first respondent
and the deed
of suretyship entered into by second respondent were simply devices
employed by the parties to take what was in fact
intended to be and
in fact was a loan of money by the applicant to a natural person,
the second respondent, out of the ambit of
the Act and thus to
deprive the second respondent of the consumer protection to which
she is entitled to under that Act.
[16]
Relying in the following authorities, Mr White contended that the
court should give effect to what he called the actual transaction
between the parties rather than the ostensible transactions
evidenced by the loan agreement and the deed of suretyship:
In
Kilburn
v Estate Kilburn
1931
AD 501
, it was held by Wessels AC J at 507 that:
'It
is a well known principle of our law that Courts of law will not be
deceived by the form of a transaction. They will rend aside
the veil
in which the transaction is wrapped and examine its true nature and
substance.
Plus
valeat quod agitur quam quod simulate concipitur.'
And
In
Zandberg
v Van Zyl
1910
AD 302
, it was held by Innes J at 309 that:
'Not
infrequently, however (either to secure some advantage which
otherwise the law would not give, or to escape some disability
which
otherwise the law would impose), the parties to a transaction
endeavour to consume its real character. They call it by name,
or
give it a shape intended not to express but to disguise its true
nature. And when a Court is asked to decide any rights under
such an
agreement, it can only do so by giving effect to what the
transaction really is; not what it informs the Court to be. The
maxim then applies
plus
valeat quod agitur quam quod simulate concipitur.
But
the words of the rule indicate its limitation. The Court must be
satisfied that there is a real intention, definitely ascertainable,
which differs from the simulated intention. For, if the parties in
fact mean that a contract shall have effect in accordance with
its
tenor, the circumstances that the same object might have been
attained in another way will not necessarily make the arrangement
other than it purports to be. The inquiry, therefore, is in each
case one of fact, for the right solution of which no general rule
can be laid down.'
[17]
The question is whether the evidence as it appears from the papers
bears out Mr White's contentions.
[18]
It is common cause that the second respondent first approached the
applicant for a loan and that the request was declined.
The
applicant's evidence is that this was done because the applicant
does not provide finance to individuals. It is common cause
that the
first respondent then applied for a loan, that the loan agreement
was concluded with the first respondent who warranted
that it had an
annual income in excess of R 1 m.
[19]
The second respondent says that the applicant was fully aware that
this warranty was not correct. Mr White contended that the
evidence
shows that the applicant was aware that the first respondent could
not repay the loan and that its income figure given
to the applicant
before the conclusion of the loan was only a projection. This he
contended is borne out by supporting documentation
obtained by
applicant from the second respondent and the documents not required
to be submitted by the second respondents to the
applicant. He
referred in this regard to annexure 'AD 19' to the applicant's
replying affidavit.
[20]
The second respondent states that the applicant accepted the
warranty
on the basis that the first respondent did not at the time have the
income but had a projected income. This projected income,
the second
respondent explains, would have come from a property
development
which involved the first respondent purchasing two
properties
for redevelopment and the envisaged sale of 30 residential
units
cut from these properties. The sale of the properties to the first
respondent
was subject to a resolutive condition that failed and which
resulted
in the sale not going through. The second respondent's
evidence
then continues as follows:
It
now appears as if the Applicant granted the loan to the First
Respondent
inter
alia
on
the strength of the potential of the First Respondent to have an
annual income in excess of R 1,000,000 with a net monthly income
sufficient to pay the loan amount. Had the development proceeded, I
too was, at the time, of the opinion that the First Respondent
would
be able to honour the loan agreement and (I) therefore acquiesced.
[21]
Later, the second respondent returns to the respondents' intention
regarding the repayment of the loan. She states as follows:
It
has always been the intention of the First Respondent and myself to
repay and honour the terms of the loan agreement. In this
regard it
needs to be said that first Respondent, prior to the deed of sale
failing, also attempted marketing some of the stands
it though would
be approved for residential development in order to satisfy the
claim of the Applicant. Due to adverse market conditions,
First
Respondent did not succeed in this.
[22]
The second respondent's evidence is not that the parties intended
the loan agreement to be between the applicant and the second
respondent and that they intended to disguise that agreement as an
agreement between the applicant and the first respondent. What
is
clear is that while the first respondent initially wished to
conclude a loan agreement in her own name, this was not possible
because the applicant did not advance loans to private individuals.
The transaction was then intentionally structured as a loan
to the
first respondent. The import of the second respondent's evidence is
that since she was at the time of the opinion that 'the
First
Respondent would be able to honour the loan agreement (she)
therefore acquiesced'. She states that it had 'always been the
intention of the First Respondent and myself to repay and honour the
terms of the loan agreement' and that both she and the first
respondent at the time believed that the first respondent would be
able 'to repay and honour the terms of the loan agreement'.
[23]
This evidence contradicts the contention that the parties to the
loan agreement intended the loan to be between the applicant
and the
second respondent and that the parties, despite ostensibly entering
into the loan agreement and the deed ot suretyship,
nevertheless
intended to conclude and in fact did conclude a loan agreement
between the applicant and the second respondent. The
evidence does
not establish that by signing the loan agreement, the parties
intentionally sought to create the impression that
they intended to
bring about a contract between the applicant and the first
respondent while they actually intended a different
result, namely a
contract of loan between the applicant and the second respondent in
her personal capacity.
1
The evidence establishes that the parties intended and did, by
signing the written loan agreement conclude the loan agreement
between the applicant and the first respondent.
[24]
In the result the applicant is entitled to the following order which
I herewith make against the first and second respondents
jointly and
severally, the one paying the other to be absolved, save in respect
of the order as to costs which is made severally:
Payment
of the sum of R370 284,36;
2.
Interest on the abovementioned amount at the rate of 6.5% per month,
calculated and compounded on a daily basis from 1 September
2008 to
date of payment, both days inclusive;
3.
Costs
on the party and party scale against the first respondent and cost
on the attorney and client scale against the second respondent.
W
J LOUW, J
1
See
van
der Merwe et al Contract General Principles, third edition
at
p 24