Afrisam (South Africa) (Pty) Limited v Paget and Others (41969/13) [2014] ZAGPJHC 74 (4 April 2014)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 41969/13

Date: 4 April 2014

In the matter between:

AFRISAM (SOUTH AFRICA) (PTY) LIMITED...................................................Plaintiff/Applicant

And

STUART CAMERON PAGET.................................................................. First Defendant/Respondent

BERNOBERG MILLINGS (PTY) LIMITED.......................................Second Defendant/Respondent

CALSIMENT (PTY) LIMITED...............................................................Third Defendant/Respondent

STURRETT TRADING (PTY) LIMITED.............................................Fourth Defendant/Respondent

CRAIGAN (PTY) LIMITED.....................................................................Fifth Defendant/Respondent

J U D G M E N T

KATHREE-SETILOANE, J:

[1] Afrisam South African (Pty) Ltd makes application for summary judgment against the defendants. It is opposed by the first defendant

only.

[2] The defendants are each sureties for and co-principal debtors in solidum with a company called Cemlock Cement Proprietary Limited (“Cemlock”) in respect of a written acknowledgement of debt entered into between the plaintiff and Cemlock on 28 February 2013 and amended on 29 August 2014 (the “AOD”). The AOD is a compromise agreement reached between the plaintiff and Cemlock following the failure by Cemlock to make due and proper payment in respect of product purchases made by it from the plaintiff.

[3] The AOD provides for the repayment by Cemlock of the admitted debt of R 67 458 312.93 owed to the plaintiff. The debt was to be repaid over a period of 13 months, commencing on 28 February 2013. Clause 4.6 of the AOD provides that in the event that Cemlock fails to make a payment in terms of the AOD or is otherwise in breach of the AOD then the full upstanding balance of the debt due at the date of the default shall immediately become due and payable with effect from the date of delivery by the plaintiff of written notice to that effect. Interest at the prime rate plus 3% and the payment of legal costs on the scale as between attorney and client are both provided for in the AOD.

[4] In terms of clause 3.1 of each of their surety agreements (the “defendants’ surety agreement”) concluded on 28 February 2013, each of the defendants bound themselves to the plaintiff as surety for, and co-principal debtor in solidum with, Cemlock for all monies due by Cemlock arising out of the AOD, including interest and in respect of any costs which the plaintiff

may incur in recovering money due to the plaintiff arising out of the AOD.

[5] Cemlock failed to comply with the AOD in that it failed to make fullpayment of the seventh instalment of R6 million, which was due to be paid on or before 7 September 2013. Cemlock thereafter failed to remedy this breach, despite demand. As a result, the total outstanding debt of R38 161 132.38 due by Cemlock to the plaintiff immediately became due and payable.

[6] The plaintiff therefore, on 9 October 2013, claimed payment ofCemlock’s total outstanding, and admitted, debt in terms of the AOD from each of the defendants (as sureties and co-principal debtors). No payment was forthcoming. The plaintiff therefore seeks payment, in the action, of R36 161 132.38 plus interest at the prime rate plus 3%. The claim is based on a liquid document and for a liquidated amount of money.

[7] The first defendant does not seriously dispute these allegations. Instead, he raises two spurious “defences” to the plaintiffs’ claim, both of which in my view lack merit.

First Defence

[8] The defendant’s first defence is that the AOD is a credit agreement in terms the National Credit Act (the “NCA”),

the plaintiff is not a registered credit provider and therefore the agreement is void. The first defendant also contends that the

application ought to be dismissed because the peremptory requirements of the NCA have not been complied with. The fifth defendant conceded, correctly so, in argument that this defence is without merit and for that reason it will not persist with it.

Second Defence

[9] The first defendant’s second defence relates to the allegedly excessiveprices charged by the plaintiff in terms of the supply agreement which exists between the plaintiff and Cemlock, and pursuant to which the indebtedness which is the subject of the AOD arose. The first defendant contends in this regard that:

(i) the prices charged by the plaintiff pursuant to the supply agreement (annexure OA1 to the opposing affidavit) were too high in the period September 2011 to September 2013;

(ii) those prices should therefore, ex post facto, be reduced; and

(iii) once those prices have been reduced, the extent of Cemlock’s indebtedness to the plaintiff, and which is the subject of the AOD, is reduced to a point where Cemlock is in fact owed money by the plaintiff.

[10] The first defendant appears to suggest that this court has the power to order this ex post facto reduction in prices pursuant to clause 22 of the supply agreement (“the hardship clause”) which reads as follows:

“It is the intention of the Parties that the provisions of this Agreement shall operate between them with fairness and equity. If, during the Term, it should appear that due to a change in circumstances, the execution or implementation of any provision hereof will impose an unreasonable hardship upon either Party, the Parties shall, after consideration of the reasons and circumstances presented by notice in writing by one Party to the other Party, negotiate in good faith and may agree (although there shall be no obligation in this regard) to an amendment of the terms of this Agreement so that they operate between the Parties in fairness and equity”

[11] There are, in my view, a number of insurmountable difficulties with this defence and indeed its reliance upon the hardship clause. Importantly, in this regard, the first defendant cannot defeat a claim under the AOD, by seeking to impugn the underlying causa of the debt, which is the subject of the AOD. This was made clear in Dennis Peters Investments (Pty) Ltd v Ollerenshaw[1] and others where, on not dissimilar facts, Melamet J held that where an acknowledgment of debt was given pursuant to a settlement between the parties (as is the case here), such a compromise had the effect of res judicata and is an absolute defence to an action on the original contract (in this case the supply agreement)[2]. The court went further and held that even if the original causa was invalid, such invalidity would not affect the subsequent transaction

or compromise.[3]

[12] Furthermore, the hardship clause upon which the first defendant relies for his contention that the price under the supply agreement

should be amended (apparently retrospectively), has not, even on the first defendant’s own version been triggered. The hardship

clause quite clearly specifies that its provisions will only come into effect where one party gives written notice to the other of unreasonable hardship. Mr Paget does not allege that Cemlock has at any point prior to these proceedings sought to rely on or otherwise give notice of its intention to rely on the hardship clause. The hardship clause therefore has no bearing whatsoever on the extent of Cemlock’s indebtedness to the plaintiff reflected in the AOD, or indeed upon

the enforceability of the AOD.

[13] The hardship clause further specifies that, once written notice had been given in terms of its provision, the parties must negotiate in good faith and “may agree (although there shall be no obligation in this regard) to an amendment of the terms” of the supply agreement. The first defendant does not allege that the plaintiff and Cemlock reached an agreement to amend the

terms of the agreement, nor does he plead the terms of that amendment. Quite clearly, no such agreement has been reached. In the absence of an agreement, there is simply no basis in law upon which this court can retrospectively amend an agreement between parties. For these reasons I find that this defence is without merit.

[14] Accordingly I find that the first defendant does not have a bona fide defence to the action, and an appearance to defend has been entered solely for the purposes of delay.

[15] In the result, I make the following order:

15.1 The first, fourth and fifth defendants are ordered to make payment to the plaintiff in the sum of R38 161 132.38;

15.2 The first, fourth and fifth defendants are ordered to pay interest on the sum of R38 161 132.38 at the prime rate plus 3% from 18 October 2013;

15.3 The first, fourth and fifth defendants are ordered to pay the costs on the scale as between attorney and client.

_____________________________

F KATHREE-SETILOANE

JUDGE OF THE HIGH COURT OF SOUTH AFRICA,

GAUTENG LOCAL DIVISION,

JOHANNESBURG

Counsel for the Applicant/Plaintiff: Gavin Marriott

Attorneys for the Applicant/Plaintiff: Norton Rose Fullbright South Africa

Counsel for the Respondent/Defendant: Warren Pye

Attorneys for the Respondent/Defendant: Bowes & Turner Inc

Date of Hearing: 17 March 2014

Date of Judgment: 4 April 2014

[1] 1977 1 ALL SA 75 (W)

[2] 1977 1 ALL SA 75 (W) at p 81

[3] Supra, p 82