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[2014] ZAWCHC 57
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Umhlobo Trading CC and Another v Nedbank Limited (14796/2013) [2014] ZAWCHC 57 (12 March 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE
NUMBER:14796/2013
DATE:
12 MARCH 2014
In the matter
between:
UMHLOBO TRADING
CC
…...............................................
1st
Applicant
THAMAYANTHY
MOODLEY
.............................................
2nd
Applicant
And
NEDBANK
LIMITED
............................................................
Respondent
J U
D G M E N T
ROGERS, J:
This is an
application by the defendants in the main case for the rescission of
a summary judgment which was granted against them
at the instance of
the plaintiff on 28 October 2013.
The brief background
to the action is the following as it appears from the particulars of
claim. In late January and early February
2013 the bank concluded a
loan agreement and an overdraft facility agreement with the first
defendant. In terms of the loan agreement,
a sum of R1,05 million
was advanced, repayable in instalments over 16 months. In terms of
the overdraft facility agreement, the
overdraft limit on the cheque
account was to be R250 000. It was alleged, and is common cause,
that the National Credit Act did
not apply to either of these
agreements.
The second
defendant, who appears to be the member of the first defendant and
its controller, signed a suretyship, limited in the
sum of R1,3
million, as did the third defendant. In addition, there already
existed at that time two covering mortgage bonds over
property owned
by the third defendant in KwaZulu Natal in favour of the bank; and a
third covering mortgage bond was registered
on 5 March 2013, as a
security requirement of the agreements which I have mentioned.
According to the
bank, the first defendant fell into default by missing an instalment
on the loan agreement and also by virtue of
its overdrawn account
having a balance in excess of R250 000. On 9 September 2013 summons
was issued. It was duly served. A
defective notice of intention to
defend on behalf of all three defendants was delivered on 17
September 2013. The bank’s
attorneys drew the defendants’
then attorneys, Voss Attorneys, to the error in the notice of
intention to defend, the said
error being the stating of two
conflicting service addresses.
On 26 September 2013
the defendants delivered a valid notice of intention to defend, again
on behalf of all three defendants. On
10 October 2013 the bank
delivered an application for summary judgment for hearing on 28
October 2013. No answering papers were
filed and there was no
appearance when the matter served in the Motion Court on 28 October
2013. Le Grange, J thereupon granted
summary judgment against all
three defendants. He also granted an order declaring the mortgaged
property belonging to the third
defendant as specially executable.
The present
rescission application was delivered on 25 November 2013. The second
defendant, who deposed to the affidavit in support
of the rescission,
stated that his then attorney, Mr Voss, had not informed the
defendants concerning the summary judgment application,
which the
bank had delivered on 10 October 2013, and that the defendants had
been unaware that the matter was serving before court
on 28 October
2013. He says that it was only on 28 October 2013 that he learnt
that an order had been made when Mr Voss sent him
a text message to
that effect. The second defendant says that Mr Voss’ mandate
was immediately terminated and new attorneys,
namely N Hassan
Attorneys, were appointed for the defendants.
The bank gave notice
to oppose the rescission application. The matter served in 3rd
Division on 12 December 2013 before Savage,
AJ, on which occasion, by
agreement, the application was postponed to today for hearing on the
semi-urgent roll with a timetable
for papers and with costs to stand
over. On 30 January 2014 the bank filed its answering affidavit in
the rescission. Somewhat
out of time, on 17 February 2014, the
defendants filed their replying papers, but nothing is made of the
fact that it was a few
days late. By this stage they had again
changed their attorneys of record.
The rescission
application stated that it was being made in terms of Rule 31(2)(b).
In the answering affidavit it was pointed out,
correctly in my view,
that that rule is inapplicable, because the judgment which was
granted on 28 October 2013 was not granted
by virtue of the
defendants being in default of a notice of intention to defend or in
default of a plea. Those are the only circumstances
in which
rescission under Rule 31(2)(b) applies.
Mr Filand, who
appeared this morning for the defendants, did not press that point,
but based his argument on the requirements of
the common law. For
the sake of completeness and since it was dealt with in the
plaintiff’s heads of argument, I accept
that Rule 42(1) is of
no application to the present matter.
Although the
founding affidavit in the rescission application did not in terms
place reliance on the common law, the manner in which
the common law
was explained in De Wet & Others v Western Bank Limited
1979 (2)
SA 1031
(A) clarified that, in addition to certain other fairly
narrowly circumscribed grounds of rescission at common law, which
were
not in dispute, there was also a jurisdiction at common law to
rescind default judgments on sufficient cause shown. The
requirements
of sufficient cause were explained in that case and were
again set out in Chetty v Law Society Transvaal
1985 (2) SA 756
(A)
at 764J-765D and in Colyn v Tiger Food Industries Limited t/a Meadow
Feed Mills (Cape)
2003 (6) SA 1
(SCA) para 11. These requirements
are very similar to those which are imposed by Rule 31(2)(b), which
states that a defendant
may seek rescission upon good cause shown.
The element of good cause shown in that rule covers materially the
same ground as the
common law on good cause shown. I therefore do
not think that the mislabelling by the defendants of their
application as being
based on Rule 31(2)(b) has any significance, and
I shall approach the matter in accordance with the common law.
The requirements in
the common law, as laid down in the cases which I have mentioned,
state, firstly, that the party seeking rescission
must present a
reasonable and acceptable explanation for his default. Secondly,
that party must, on the merits, show that he has
a bona fide defence,
which prima facie carries some prospect of success.
Turning to the
explanation for default, I have briefly summarised what the second
defendant said in the founding affidavit in that
regard. His
explanation was criticised by Ms Titus, who appeared this morning for
the bank, on the basis that it was somewhat
threadbare. The
defendants were criticised in particular for not filing a
substantiating affidavit from their erstwhile attorney,
Mr Voss. I
nevertheless think the explanation passes muster. The defendants had
clearly taken steps to instruct attorneys to
oppose the matter. As
soon as they became aware of the summary judgment on 28 October 2013,
they fired their then attorney and
engaged other attorneys and have
since then dealt timeously with the matter. It appears unlikely that
they intended, in the intervening
period, to allow the matter to go
by default.
Although they do not
explain why no affidavit in support was filed by Mr Voss, one might
infer from the circumstances that their
relationship with him is no
longer good and that he may not have co-operated in making an
affidavit which indicated that he was
the one who was at fault in not
keeping them informed of events. I thus would not dismiss the
application merely on the basis
that there is not an acceptable
explanation.
I turn then to the
question whether the defendants have shown a bona fide defence, which
prima facie carries some prospect of success.
That inquiry can in
turn be approached in two legs. The first is whether the defendants
are bona fide at all in opposing the
litigation, in other words are
they putting up a defence which they really wish to pursue at a
trial. In that respect, I am satisfied
that the defendants are
seeking rescission bona fide. They have set out circumstances as I
shall presently adumbrate, indicating
that they, or more accurately
the first defendant, was the subject of fraud by a third party and I
have no doubt that they have
been advised, rightly or wrongly, that
those circumstances, and certain others to be mentioned presently,
give them a good defence
to the bank’s claim. However, the
fact that they are genuine in seeking rescission with a view to
opposing the main case,
does not mean that they have met the second
leg on the merits, which is a defence which prima facie carries some
prospect of success,
or as it is sometimes said, a prima facie
defence.
The defendants’
defence on the merits depends, in brief, on the following factual
allegations. They say that shortly after
the conclusion of the two
agreements with the bank, they developed the idea of consolidating
the first defendant’s indebtedness
with a new financier. To
that end, second defendant had certain discussions with a Mr Rudi
Wilson, who apparently indicated to
the second defendant that his
brother could make, or facilitate the making of a loan to the first
defendant of R5,5 million. In
early April 2013 the second defendant
received a loan application from a certain Sean Bailey in that
connection. Wilson indicated
a few days later that in order to
process the matter further, it was necessary for the second defendant
to make a payment of R20
000 for administrative purposes, which the
second defendant apparently did. That is probably where the fraud
came in and where
the second defendant was fleeced out of R20 000.
As April 2013 drew
to an end, the second defendant, who had not yet received the larger
loan of R5,5 million, was in need of funds
for the first defendant’s
business to purchase petrol for the service station which the first
defendant operated. He approached
Wilson, who said he could provide
an advance on the proposed loan of R450 000. That, according to the
second defendant, was stated
on Friday 26 April 2013. The following
day, which was Saturday 27 April 2013, the second defendant says he
went to Mr Wilson and
collected the cheque and deposited it into the
first defendant’s cheque account. He said that after about
three days, in
other words on or about Tuesday 30 April 2013, he
received advice from the Parow Branch of Nedbank, which is where the
account
was held, that the deposited funds were now available. The
second defendant says that he thereupon caused various amounts
totalling
slightly more than R365 000, to be drawn out of the first
defendant’s cheque account.
In early May 2013,
according to the second defendant, he was contacted by the bank, who
pointed out that there was a discrepancy
in the cheque for R450 000
which had been deposited, because although the amount in digits on
the cheque indicated that sum, the
amount spelt out in words was
missing a zero and thus indicated an amount of only R45 000. He says
that the bank asked him to
arrange a replacement cheque. He states
that on 3 May 2013 he supplied the branch with a replacement cheque
and that was again
deposited to the account. However, he says on 7
May 2013 he was contacted by the bank to say that that cheque had
been dishonoured
by the drawee bank, because the issuer’s
account had been closed.
The result of this,
according to the defendants, was to place the first defendant’s
cheque account in a very substantial overdraft,
because the bank
reversed the two cheque deposits of R450 000. This created
difficulties for the business and ultimately led it
to be unable to
meet the monthly instalment on the loan agreement which was met,
customarily, out of the cheque account. The gross
negligence of the
bank, according to the defendants, disentitles it to claim the relief
it does. Alternatively, the defendants
say the bank is estopped from
saying that the deposited amount was not cleared and that the
defendants were not entitled to draw
against it.
Before I allude to
certain aspects of the bank’s answer to this, it is necessary
to refer briefly to the legal position regarding
the depositing of
cheques in a bank account. In Absa Bank Limited v I W Blumberg &
Wilkinson
[1997] ZASCA 15
;
1997 (3) SA 669
(SCA) the court, in the course of
judgement, referred to evidence from which it appeared that it was
accepted banking practice
that, if a cheque deposited to a bank
account was not paid, the bank would be entitled to debit the
customer’s account with
the amount of that cheque. That
appears at 678b-c of the judgment.
The matter was dealt
with somewhat more fully in Burg Trailers SA (Pty) Ltd & Another
v Absa Bank Limited & Others
2004 (1) SA 284
(SCA), para 9, where
Harms, JA said the following:
“According to
standard banking practice, cheques are accepted subject to a hold
period, in this case, of ten days. It is
common cause that the
client may not during that period insist upon payment of the amount,
even if it otherwise had been “paid”.
This means that
the bank is not unconditionally liable for the amount standing to the
credit of the client and that the credit
may be reversed during that
period.”
I interpose here to
note that at this point the learned judge of appeal refers to a
passage from Absa Bank Limited v Standard Bank
of SA Limited
[1997] ZASCA 71
;
1998 (1)
SA 242
(SCA) at 252c-d. Continuing then with the quotation from the
paragraph by Harms, JA:
“Morgan
submitted that this banking practice is in direct conflict with the
contract between it and Absa and that a banking
practice cannot
override the express terms of an agreement. The statement of law is
probably correct, but I do not agree that
there is a conflict. I
understand the contract to mean no more than that it gives the right
to Absa to withhold payment until
a cheque has been cleared. It does
not detract from its right to make provisional payment and it does
not oblige it to pay unconditionally
upon clearance. One can test
this submission by way of an example: if it should transpire that a
cheque, after having been cleared,
was forged, would the banker
nevertheless be obliged to pay according to the credit entry raised
by it? That cannot be so. The
bank would be entitled to reverse the
entry.”
The facility
contract in the present case does not contain any particular terms
which would detract from the position which ordinarily
prevails
according to banking usage.
If one then looks at
the first cheque for R450 000, one must have regard to some
additional facts which were disclosed in the bank’s
answering
papers. The bank annexed the bank statements for the relevant
period. In fairness to the defendants, I should mention
that in
their founding papers they say that they had asked for the bank
statements but the bank refused to provide them. Be that
as it may,
the bank statements show that the first cheque for R450 000 was
deposited on 26 April 2013. The cheque, which was annexed
to the
founding affidavit, has the error, or the discrepancy, in the amount
of the cheque which I have previously summarised.
The cheque, I may
add, was dated 25 April 2013 and purported to be drawn by G R E
Middelburg Security Services, and was in favour
of the first
defendant. The bank pointed out that, as reflected in the bank
statements, the first defendant immediately began
to draw substantial
amounts from the current account on the same day that the cheque was
deposited, namely Friday 26 April 2013,
and in fact the bulk of the
amounts were withdrawn on 26 April 2013 and then again on 29 April
2013. The only amount that was
debited on 30 April 2013, before the
reversal of the cheque, was a transfer of R40 000 from the cheque
account to the term loan
account, presumably in payment of one or
more instalments.
According to the
bank, the first cheque was refused by the drawee bank, Standard Bank,
because the issuing customer’s account
had been closed. That
differs from the version of the defendants who say that they were
told that there was a problem because
of the discrepancy in the
amount. I also note that there is a handwritten note on the cheque
which says “amount differs”.
Be that as it may, it seems
to be common cause that by 30 April 2013 it had become apparent that
the first cheque was bad. The
bank statement shows that it was in
fact reversed on that very day, 30 April 2013. Accordingly, if there
is room for a complaint
of negligent conduct by the bank, or conduct
giving rise to an estoppel, that conduct must, insofar as it concerns
the first cheque,
be conduct which happened over the period 26 to 29
April 2013.
If one looks at the
founding affidavit, one does not find an allegation which would point
to negligence or a relevant representation
giving rise to an estoppel
by the bank. What we have, and it is shown irrefutably by the bank
statements, is that the cheque for
R450 000 was deposited on Friday
26 April 2013, and that amounts were immediately drawn against it.
There was no delay of three
days as alleged in the founding papers.
The statement in the founding papers, that it was only on or about 30
April 2013 that
the first defendant began to draw on the amounts
deposited in the current account, is simply not correct. There is no
allegation
that on the very day that the cheque was deposited, 26
April 2013, the amount of the deposited cheque was specially cleared.
One knows from
banking practice and experience that a special clearance requires a
special procedure. It normally entails the payment
of a special
clearance fee. There is nothing on the papers to indicate that, if
the bank had been asked to give this cheque a
special clearance, it
would have done so. The cheque had the discrepancy in the amount and
it appears that, in any event, the
issuing customer’s account
had been closed.
What seems to have
happened is that the amount was provisionally credited to the account
on 26 April 2013 and that, although the
bank could have refused to
honour withdrawals against those uncleared effects, it did not refuse
to do so, but instead honoured
them. That certainly does not
indicate that it represented to anybody that if the deposit turned
out not to be cleared in accordance
with usual banking practice, the
bank would be deprived of its usual right to reverse the credit.
In regard to the
detail of what was drawn out of the accounts, I point out that on the
very day of the deposit, Friday 26 April
2013, an amount of R191 000
was drawn as a petrol payment and a few other modest amounts. On
Monday 29 April 2013 an amount of
about R76 000 was drawn out in
favour of Vishay, which is the first name of the second defendant,
and a further amount of about
R189 000 (again for petrol purchases).
At that stage, there is no evidence or allegation by the defendants
that any representation
had been made to them that the amount of the
cheque had been cleared.
In regard to the
type of defence which might potentially arise in this situation, I
can again refer to the case of Absa Bank v I
W Blumberg supra, where,
at 683e-g, Zulman, JA referred to the three categories of cases which
arise in this situation. The first
category were cases where a claim
for damages is made by a customer against its bank because the bank
has dishonoured a cheque
drawn by the customer. The second category
is where the bank is a holder for value of a cheque and seeks to hold
its customer
liable. The third category are cases where estoppel is
relied upon by the customer. As will be apparent from the discussion
which
follows in Blumberg, the first two categories are of no
relevance to this case, but the third category of estoppel might be.
That third category
was discussed by the learned judge of appeal at 684g-685b. He
referred, as an example of that type of case,
to the judgment of
Trust Bank of Africa Limited v Wassenaar
1972 (3) SA 139
(D). In the
I W Blumberg case, Zulman, JA said the following in that regard:
“The Wassenaar
case, to which I have referred in another context, affords an example
in the third category. It concerned
an application for summary
judgment. The defendant submitted that his affidavit disclosed a
defence to the claim made on two bases.
The first was that he never
concluded the contract relied upon by the plaintiff. The second was
that the plaintiff was estopped
from claiming on an overdraft in
excess of R800.”
Zulman, JA
continues:
“The court a
quo quoted with approval the following passage in the judgment of
Milne, J...”
I interpose that the
judgment of Milne, J was the judgment in Wassenaar. That quotation
reads thus:
“If, as a
result of some conduct on the part of the bank, the customer believes
that his account is in credit and, acting
in the faith of such
belief, draws a cheque for an amount which would, if that belief were
correct, not result in his account being
overdrawn, circumstances may
well arise where the bank would not be entitled to recover from the
customer, if it turned out that
the effect of meeting the cheque was
to overdraw the account.”
Zulman, JA
continues:
“The passage
indicates that Milne, J was there considering the defence based upon
estoppel. Relying on this dictum, the court
a quo stated the
following:
“The present
case appears to me to be an instance of “conduct on the part of
the bank”, which causes a customer
to believe that his account
is in credit. Having acted on the faith of that belief, the contract
between the parties does not,
in the present circumstances, permit
the bank to hold him liable for its discovery that it should not have
permitted him to draw
against an uncleared effect.”
This passage
fortifies my belief that the court a quo approached the matter on the
basis of an estoppel. It erred in doing so.
I repeat that no
estoppel was pleaded and the ingredients for a successful defence of
this estoppel did not, in any event, emerge
from a proper
consideration of the evidence led.”
There are two other
cases to which I can refer in which the possible application of
estoppel in similar circumstances was considered.
The first is Absa
Bank Limited v De Klerk
1999 (1) SA 861
(W) at 865d-866a and the
second is Standard Bank of South Africa v Sarwan
[2002] 3 ALL SA 49
(W) at 55c-55i. I should note that neither in the Wassenaar case nor
in the De Klerk and Sarwan cases, nor for that matter in
the I W
Blumberg case, did the defence of estoppel in fact succeed, and I am
not aware of any case in South Africa where the defence
has as a fact
succeeded, though it appears to be accepted that estoppel might apply
in such circumstances. In the Sarwan case
to which I have made
reference, Van der Walt, AJ quoted from I W Blumberg and then
continued as follows at 55g:
“Even where
the parties agreed, as in this matter in respect of the prestige
account, that the account holder may draw immediately
upon “uncleared
effects”, the principle remains the same. Such a privilege
does not distract in the least from the
fundamental principle that
the risk of non-payment, for whatever reason, of a cheque deposited
for collection, falls on the customer
and not the bank. It would, if
otherwise, not be in accordance with sound, financial and commercial
common sense. There may be
exceptional circumstances - perhaps in
the case of a special clearance of a cheque. I express, however, no
view in this regard.
Apart from being a
term ex lege of the contract between the plaintiff and the defendant,
the right of reversal in the case of non-payment
of a cheque
deposited for collection in a current account is, at the same time,
an independent and substantial principle of the
body of banking law
as developed over a long period by commercial practice, custom and
usage. Its existence and applicability
is not dependent upon
consensus, intention or knowledge on the part of the parties. It is
an integral part of the objective law
pertaining to banking practice
and the relationship between banks and their account-customers.”
Applying those
principles to the circumstances surrounding the first cheque deposit
of R450 000 on 26 April 2013 and its reversal
on 30 April 2013, the
case put up on behalf of the defendants does not show that there are
any special circumstances which deprived
the bank of its right to
reverse the provisional credit once it became clear that Standard
Bank would not pay the cheque. As I
have said, it is clear from the
bank statement that this happened on 30 April 2013, which was well
within the customary 10-day
holding period during which credits, in
the form of deposited cheques, are provisional and may be reversed.
Mr Filand argued
that even if such a right of reversal existed, the bank’s true
claim was not a claim for monies lent in advance,
but was an
enrichment claim. His argument was that the drawings which the bank
honoured in the intervening period between the
deposit of 26 April
2013 and the reversal of 30 April 2013, represented payments which
the bank would not have made but for the
fact that the cheque had
been erroneously credited to the account. In other words, these were
payments made in the mistaken belief
that the bank was paying an
amount which it was obliged to pay within the limits of the overdraft
facility.
The complaint that
the original particulars of claim should have been framed with
reference to the condictio indebiti rather than
on the basis of
monies lent and advanced, was not raised in the rescission
application, was not addressed in the heads of argument,
and thus is
not a matter which the bank has had an opportunity of dealing with.
But in any event, I think the argument is misconceived.
Where, as here, a
bank provisionally credits the amount of a cheque deposit to the
customer’s account, the credit is exactly
that, it is
provisional and is subject to the ordinary banking practice that it
may be reversed. When the bank, prior to the clearance
of the cheque
or prior to the elapsing of the period during which the provisional
credit can be reversed, nevertheless honours
debits which would be in
excess of the facility, but for the provisional credit, the bank is
knowingly lending money to the client
against uncleared effects. The
bank cannot be compelled to so, if that would take the balance of the
account in excess of the
overdraft, but the bank is not precluded
from doing so. And if a bank honours withdrawals against uncleared
effects, it is clearly
lending money at the request of the client in
circumstances where it may not have been obliged to lend the money
but was certainly
entitled to lend the money. In that regard the
position was very clearly laid out in the I W Blumberg case which I
mentioned earlier.
In a different passage in that case, Zulman, JA
said the following at 675i through to 676d:
“The fact that
the appellant may have permitted the respondent to draw cheques
against uncleared effects, despite there being
no agreement in this
regard, would not excuse the respondent, in law, from liability to
make payment to the appellant. The appellant
was perfectly entitled
to choose to honour such cheques, notwithstanding the fact that the
effects earlier deposited had not been
cleared, and to waive any
benefit afforded to it in this regard by its agreement with the
respondent. It would be strange indeed
if it were permissible for a
customer of a bank to draw a cheque on the bank, requesting the bank
to honour the cheque, and thereafter,
when the bank honoured the
cheque despite the absence of an overdraft facility, to then plead
that this would have resulted in
an overdraft facility which had not
been agreed upon. In essence, this is precisely what the respondent
is contending for. It
hardly lies in the mouth of the respondent,
who drew the two cheques in question against uncleared effects,
albeit contrary to
the agreement between the parties, to be heard to
complain that the bank should not have honoured the cheques and
debited its account.
Put differently, it is the appellant, so it is
suggested, who must bear the loss if the uncleared effects were not
met. This
cannot be so.”
Zulman, JA then
cited certain South African authorities and continued:
“As pointed
out by Cozens-Hardy, Master of the Rolls, in Cuthbert v Robarts
Lubbock & Co
[1909] 2 Ch 226
at 233:
“If a customer
draws a cheque for a sum in excess of the amounts standing to the
credit of his current account, it is really
a request for a loan and
if the cheque is honoured, the customer has borrowed the money.”
That shows very
clearly that where an uncleared effect which has been provisionally
credited to the account is later reversed, intervening
withdrawals
against those uncleared effects represent monies lent and advanced
and the claim is correctly framed as one on an overdraft
rather than
as a condictio indebiti. That disposes of the provisional crediting
and reversal of the first cheque for R450 000.
As regards the
second cheque of R450 000, that was deposited on 3 May 2013 and was
timeously reversed on 6 May 2013. On that occasion
it is undisputed
that it was refused because Standard Bank had returned the cheque to
Nedbank unpaid on the basis that the issuing
customer’s account
had been closed. The defendants do not say that in the period
between 3 and 6 May 2013 the bank said
or did anything which
prejudiced them. The defendants’ focus is rather on the period
following the depositing of the first
cheque not the period following
the depositing of the second cheque.
With reference to
the reason for which the second cheque was refused, namely the
closure of the account, I have already alluded
to the fact that,
according to the bank in its answering papers, that was also the
reason why the first cheque of R450 000 was
not honoured and why it
was, therefore, reversed on 30 April 2013. There is some support for
that view in the letter which Ms
Schroder, on behalf of the bank,
wrote to the second defendant on 7 May 2013 by way of e-mail. She
said the following:
“Attached
hereto please find a copy of the cheque that was unpaid (for the
second time) as per “account closed”.
Vishay, as per our
telephonic discussions this morning, please revert back urgently as
the overdrawn position on the account needs
to be rectified
immediately. I urge you to please not attempt to rectify the
position with yet another cheque from the drawer
of the cheque, but
to request either an electronic transfer or alternatively, a bank
guaranteed cheque.”
This provides
contemporaneous support for the view that the second cheque, like the
first cheque, was dishonoured because the issuing
customer’s
account was, according to the paying bank, a closed account. But the
conclusions I have reached are not affected
by whether the first
cheque was ultimately refused and reversed on 30 April 2013 due to
the issuing customer’s account having
been closed or because of
the discrepancy in the amount of the cheque.
What I have said
thus far is sufficient to show that the essential element for an
estoppel in these circumstances, namely a negligent
representation by
the bank, is completely lacking and that nothing has been put up to
show why the bank was not entitled to reverse
the deposited cheques
of R450 000 and to sue its customer for the resultant substantial
overdrawn balance. Had the defendants
overcome this hurdle, they
would also have needed to address, for purposes of estoppel, the
question whether, as a result of any
representation by the bank, they
acted to their prejudice. In the present case, this is not a
situation where the money which
was drawn out by the first defendant
over the period 26 to 30 April 2013 was lost to it through some
fraudulent transaction. The
money was actually spent in buying
petrol or in the one instance seems to have been paid to the second
defendant personally, though
no doubt in connection with the first
defendant’s business. The petrol and other goods acquired with
the withdrawn money
thus took the place of the funds advanced by the
bank.
All that seems to
have happened is that the bank has become the first defendant’s
creditor for the amounts used to buy the
petrol, whereas if the
defendants had not been duped by Wilson and others, the new financier
would have been the person who would
have lent them those funds.
Either way, the first defendant would have been indebted for the
amounts drawn to buy petrol. They
have the petrol, or had it, and
would have had to pay either Nedbank or the new financier for the
borrowed funds. It is questionable
in those circumstances whether
the negligent conduct on which the defendants rely caused the first
defendant to act to its prejudice.
If the first
defendant is liable for the reasons I have explained, it is not in
dispute that the second and third defendants, as
sureties, are liable
subject to the limits of their suretyships.
Mr Filand argued
that if the plaintiff had, in the summary judgment proceedings, fully
disclosed the circumstances under which the
first defendant came to
be unable to honour its loan instalment, namely through conduct of
the bank which effectively froze its
current account, the court
hearing the summary judgment would not, or might not, have granted
summary judgment. For the reasons
I have explained on the merits of
the matter, a full explanation of all of these matters would not have
led to a different conclusion.
Put differently, if the defendants
had not been in default of appearance at summary judgment and had
filed an affidavit opposing
summary judgment along the lines of their
papers in the rescission application, I think summary judgment would
still have been
granted.
In any event, the
bank’s claim was correctly framed in its particulars of claim
as a claim for monies lent in advance. The
reason why the loan
instalment on the term loan had not been paid was not something which
needed to be pleaded. Beyond that, the
bank did not have opportunity
or occasion to disclose anything more, because as is well known, the
verifying affidavit in summary
judgment proceedings cannot go beyond
stating the deponent’s personal knowledge and the confirming
the allegations in the
particulars of claim. Further evidence may
not be placed before the court by the plaintiff in summary judgment
proceedings.
The last aspect I
need to consider is the rescission directed at the order declaring
the third defendant’s property in KwaZulu
especially
executable. All that is said in the rescission application in that
regard is that the property is the primary residence
of the third
defendant and that she resides there with her 17 year old son. If
the third defendant had said that, and said no
more, in opposing
summary judgment, I do not believe that a court would have refused
summary judgment. It is not enough, in order
to ward off
executability of immovable property in accordance with the principles
which have been laid down in regard to section
26 of the
Constitution, to say that one occupies a property as one’s
primary residence. It is necessary to show that eviction
will
deprive the person of adequate housing, which is what the
Constitution entitles a person to have.
I do not know, and
have not been told, anything about the value of the property, except
that I know that it was put up on at least
three occasions as
security for the first defendant‘s liabilities. One must
assume that it is a property of reasonably substantial
value if the
bank was willing to have registered over it the three covering
mortgage bonds mentioned in the papers. The bank was
also willing to
take a suretyship from the third defendant in an amount of R1,3
million. There is thus no reason to infer that,
if the property is
in due course sold in execution and if, as a result, the third
defendant and her 17 year old son need to vacate
it, the third
defendant will not have resources to procure another similar or more
modest property for her and her son, which will
still constitute
adequate housing. As has been stated in several cases, the right to
adequate housing to which the Constitution
refers in section 26 is
not the right to stay in a house of one’s choice, even though
one cannot afford it.
For all of those
reasons, the application for rescission must be refused. Ms Titus,
for the bank, said that in accordance with
the two contracts between
the bank and the first defendant, and also in accordance with the
suretyships, the bank was entitled
to costs on the attorney/client
scale. Although there are provisions in the relevant contracts and
in the suretyships for the
payment of attorney and client costs in
general terms, it is trite that the court always has a discretion in
regard to the scale
on which costs should be paid. There also may be
a question whether the agreement for the payment of costs on the
attorney and
client scale extends not only to actions by the bank to
enforce its right but also to a defence by the bank when a rescission
application
is brought.
Whatever the correct
legal position may be, I am inclined in this case to exercise my
discretion against making a special costs
order. Firstly, I have
some sympathy for the predicament in which the defendants found
themselves, because on these papers, at
any rate, I must assume that
they have been victims of a fraud, and that they were acting in good
faith in bringing these proceedings.
Secondly, I am inclined to
think that the costs which will be recoverable by the bank on the
attorney/client scale are not going
to be materially different from
those which it would recover on the ordinary scale in a case such as
the present, where only one
counsel has been engaged in a relatively
straightforward matter.
The order I
therefore make is:
1. The application
for rescission is dismissed.
2. The defendants
are jointly and severally liable to pay the costs of the respondent
in the rescission application (the plaintiff
in the main action) on
the ordinary scale, including those reserved by this court on 12
December 2013.
ROGERS, J