BOE Bank Limited v Lockhat NO, BOE Bank Limited v Lockhat NO and Others (1422/02, 1423/02) [2007] ZAKZHC 49 (8 May 2007)

IN THE HIGH COURT OF SOUTH AFRICA

NATAL PROVINCIAL DIVISION

1422/02

BOE BANK LIMITED PLAINTIFF

versus

CASSIM MAHOMED LOCKHAT N.O. DEFENDANT

AND

1423/02

BOE BANK LIMITED PLAINTIFF

CASSIM MAHOMED LOCKHAT N.O. FIRST DEFENDANT

ASIYA LOCKHAT N.O. SECOND DEFENDANT

ISMAIL MAHOMED LOCKHAT N.O. THIRD DEFENDANT

AHMED MAHOMED LOCKHAT N.O. FOURTH DEFENDANT

RESERVED JUDGMENT

Delivered on: 8 May 2007

NTSHANGASE, J

Introduction

[1] In two applications the applicant who is the plaintiff in the main actions seeks to amend its summonses and declarations in cases 1422/2002 and 1423/2002 to substitute the plaintiff “BOE Bank Limited” with a new plaintiff, FirstRand Bank Limited. I shall refer to the parties as plaintiff and defendant respectively as they were in the main action and deal with the applications together in what follows.

[2] The application in case 1422/2002 relates to an action in which the defendant Cassim Mahomed Lockhat is sued on a written Deed of Suretyship in which the defendant allegedly bound himself as surety and co-principal debtor to the plaintiff in respect of monies owed by the Cassim Mahomed Lockhat Trust (“the Trust”). The application in case 1423/2002 relates to an action in which the summons was amended to cite first, second, third and fourth defendants as individual trustees in a claim for the balance of the principal debt together with finance charges thereon in respect of monies allegedly lent and advanced by the plaintiff to the first defendant under security of a mortgage bond.

The Issues

[3] The basis for the application for the amendment is stated to be that as at the time of the institution of the actions against the defendants the claims against the defendants vested in FirstRand Bank Limited.

[4] In opposing the application the defendants contend that –

The mere acquisition of assets by the entity sought to be cited as the substitute plaintiff does not endow the substitute with locus standi.

Alternatively, the substitution of a new plaintiff is not an amendment as is accordingly not competent since it was not a mere misnomer and constitutes the introduction of an entirely different entity from that in the original summons.

Alternatively, that at the time of institution of the proceedings, BOE Bank Limited did not exist either in terms of section 54(6)(a) and/or (b) of the Banks Act 94 of 1990 (“the Act”) or at all and the present proceedings were a nullity in as much as the transfer of assets was effected according to the proposed amendment ‘on or about 15 March 2002.’ In the premises, in this Division, the amendment is incompetent pursuant to the decisions of:

Friends of the SICK SSA Association v Commercial Properties (Pty) Ltd 1996(4) SA 154(d), and Van Heerden v Du Plessis 1969(3) SA 298(O).

The Corporate history of the plaintiff

[5] In the affidavit of Victor Stupel the plaintiff provides a corporate history of the plaintiff which I state briefly. On 30 September 1998 NBS Boland Bank Limited changed its name to BOE Bank Limited (‘BOE’).

[6] With effect from 15 March 2002 FirstRand Bank Limited took over certain assets and liabilities of BOE consisting of an operating division known as NBS Home Loans, part of the business which consists of residential home loans, in terms of section 54 of the Act, which included inter alia all the rights and obligations to and arising from the loan agreement, mortgage bond and deed of suretyship to which these actions relate. The Minister of Finance granted consent to the transfer of such assets in terms of section 54(1) of the Act on 15 March 2002. The Registrar of Deeds Circular No. 11 of 2002 confirmed the effective date of the transfer to be 15 March 2002.

[7] On 21 February 2003 BOE’s registration as a Bank was cancelled in terms of section 27 of the Act as evidenced by Government Gazette Notice 601 of 2003.

[8] The written loan agreement pertaining to the main action was concluded on or about 18 March 1997 between the Trust and NBS Bank Limited and the relevant mortgage bond was registered on 18 April 1997. The Deed of Suretyship in issue in this matter was initially signed in favour of NBS Bank Limited. In the names’ mutation process in the corporate history of the plaintiff, NBS Bank Limited later acquired the name ‘BOE Bank Limited’.

[9] In regard to these historical facts I do not find that there can be any genuine dispute at all. The main actions were instituted by BOE on or about 3 May 2002. Given that BOE’s registration as a bank was cancelled on 21 February 2003 I find no support for the defendant’s contention that as at the date of institution of the main actions BOE no longer existed and that both summonses whereby such actions were instituted were a nullity.

[10] Clearly, in respect of such assets as were transferred with effect from 15 March 2002, as at the time of the institution of the actions against the defendants, the claims against the defendants vested in FirstRand Bank Limited and not in BOE anymore.

[11] Mr Tobias pointed to the fact that as certain assets only and not all were being dealt with one had to examine which particular asset endows one with the right of substitution and he argued that there was a failure on the part of the plaintiff to identify the specific asset which endowed such a right. On the authority of Hart v Pinetown Drive-In (Pty) Limited SA 464(D) he argued with apparent reference to 469C-D that in proceedings of this nature where the affidavits take the place of pleadings and should disclose fully such facts as would be necessary for determination of the issue in an applicant’s favour, it behoved the plaintiff to make full disclosure by identifying the specific assets taken over by FirstRand Bank Limited.

[12] In my view, in the present case, the plaintiff has, in the affidavit of Victor Stupel sufficiently identified what was taken over as was earlier named under paragraph [5] in this judgment. Now, what is being dealt with here is an application for an amendment of the summons and, not being a trial, the plaintiff in my view bears no burden to prove its locus standi or to prove the takeover of specific assets and liabilities which pertain to the loan agreement, the mortgage bond and the Deed of Suretyship earlier referred to. I consider all of these to be matters for proof at the trial. I consider the plaintiff’s

case to be sufficiently stated for present purposes. In Hart supra at 469B the court, in dealing with an objection of the kind now under consideration, stated that “the enquiry is only whether a prima facie case has been made out in the petition.” In the present case I consider that such prima facie case has been made out. The defendants’ objection in respect of this leg must, in my view, fail.

[13] It was further argued on behalf of the defendants that as the effect is that the bank taking transfer steps into the shoes of the transferor bank, it is not a clarification of a defective pleading; it would be a substitution under Rule 15(2) of the Uniform Rules. The employment of Rule 15 would, in my view, be inappropriate. In an explanatory note to the Rule, Erasmus on the ‘Superior Court Practice’ at B1-118 states that “(t)he Rule regulates the procedure only where substitution becomes necessary by reason of change of status. Where no change of status is involved the court will grant an application for substitution involving the introduction of a new persona on being satisfied that no prejudice will be caused to the opposite parties.”

[14] In Nedcor Investment Bank Ltd v Visser NO and Another SA 588(T) at 594E-H the court stated:

“Hence, the effect of the provisions of section 54(3)(b), (c) and (d) in the present context is that UAL obtained the same rights and was subject to the same obligations as Syfrets had immediately prior to the transaction, i.e. all agreements, appointments, transactions and documents entered into, made, drawn up or executed with Syfrets immediately prior to the transaction were of full force and effect. They had to be construed for all purposes as if they had been entered into, made, drawn up or executed with or by or in favour of UAL. Furthermore, any reference in any bond, pledge, guarantee instrument or any other document, including pleadings of and to Syfrets had to be construed as a reference in such document initially to UAL and later to NIB. Thus, whenever the name Syfrets appears in any document, including any process on or after 12 March 1998 then the reference therein should be NIB. This substitution is brought about by section 54(3). In the circumstances it s evident that there was due compliance with the provisions of s 54 and from the moment of compliance any reference to Syfrets is deemed to be a reference to NIB.”

[15] In casu the plaintiff has shown the transfer and takeover to have occurred in full compliance with the provisions of section 54(3) of the Act.

Prescription, prejudice, incompetence of the proposed amendment, mala fides

[16] In regard to the aspect of prejudice by reason of prescription I find to be apposite, the following dictum from ABSA BANK Ltd v Van Biljon and Another 2000(1) SA 1163(W) at 1169H-J:

“(32) In my view, a complete answer to the problem raised on prescription is to be found in the wording of s 54.

(33) To paraphrase Combrink J, the transfer takes place ‘by operation of law’. Assuming therefore that the transfer had taken place and that s 54 had been complied with (as I was invited to do), I find that ABSA became a party to the action on 1 August 1992 when the transfer of such assets and liabilities took place. I also find that the reference in the two covering bonds to the ‘Trust Bank of Africa Ltd’ is to be deemed to be a reference to ABSA. I find that the delay in the amendment of the particulars of claim to introduce the name of ABSA Bank Ltd does not impact upon this at all”.

[17] It has been argued further on behalf of the defendants that the amendment south is, in this Division incompetent on the authority of ‘Friends of the SICK Association v Commercial Properties (Pty) Ltd 1996(4) SA 154(d) and Van Heerden v Duplessis 1969(3) SA 298(O) and that one cannot breath life by way of an amendment to a nullity. With reference to the reliance place on these two last mentioned

cases it is necessary to point to the full bench decision of this Division in Four Tower Investments (Pty) Ltd v André’s Motors 2005(3) SA 39 AT 47A-C wherein Galgut DJP (Nicholson J concurring), in referring to where it had been held that an amendment to correct the name to that of the company would go further than a mere rectification of a misdescription as was stated in Friends of the SICK Association supra he had this to say:

“It seems from the report that the party who had brought and at all times prosecuted the action was in fact the corporation, and to the extent that such facts as are disclosed in the judgement do not serve to distinguish the case, I believe with respect as Van Heerden J was inclined to do in the Embling case at 699H-I, that it was wrongly decided. In that regard it was also pointed out by Goldstein J in Rosner’s case supra at 128H that it was not the real plaintiff that had changed, only is description.” [The Rosner case referred to here is Rosner v Lydia Swanepoel Trust 1998(2) SA 123(W)].

[18] The court in the Four Tower Investments (Pty) Ltd case supra further stated at page 47E:

“As I have already said, however, if the citation of a party is nothing more than a misdescription, it should not matter whether the incorrect citation happens on the fact of it to refer to a non-existing entity or indeed to an existing but uninvolved entity.”

[19] Similarly in Luxavia (Pty) Ltd v Gray Security Services (Pty) Ltd 2001(4) SA 211 (W) wherein the action had been launched in the name of an incorrect plaintiff the court allowed the amendment and at 219J-220A-B stated:

“In Friends of the SICK Association the court accepted at 157E-F that an amendment that has the effect of introducing a new persona in law as the plaintiff is not in itself a bar to the granting of such amendment, subject only to considerations of prejudice to the defendant. Given that the purpose of such an amendment is invariably to correct an original error or to take account of a subsequent change in the description of the plaintiff, it is in my view difficult to justify an approach that will produce a different

outcome solely on the strength of where or not the originally incorrect citation related to a then extant legal persona.”

[20] What now remains to be considered is prescription and whether or not the application is one that is made mala fide or is one that is prejudicial to the defendants. In regard to such issues the court in Four Tower Investments (Pty) Ltd supra stated:

“The function of the court is of course to resolve disputes between litigating parties, and justice can only be done if the real issues are defined in the pleadings and ventilated in court. For this reason it is by now well established that an application for amendment will always be allowed unless it is made mala fide or would cause prejudice to the other party which cannot be compensated for by an order for costs or by some other suitable order

such as a postponement.”

[21] In regard to prescription, although not pleaded by the defendants, I may refer to Four Tower Investments (Pty) Ltd supra at 44D-E:

“If therefore, the other requirements are met and an amendment is sought to change the name of a plaintiff then prescription would have been interrupted by the service of the summons only if the facts show that it is by or on behalf of he creditor concerned, the one whose correct description is sought to be introduced by means of the amendment, that the process had been served on the defendant.”

[22] In the present case it has not been contended that the application in one that is made mala fide. I am unable to find that the amendment if allowed would in any way be prejudicial to the defendants and, given their pleas in the alternative as filed in the main actions, it is evident that they do not stand to lose any substantive defence that they could have raised against BOE but not against FirstRand Bank Limited. In regard to prescription it is also instructive t refer to Associated Paint and Chemical Industries (Pty) Ltd v Smit 2000(2) SA789 (SCA) at 794:

“As a general rule a plaintiff is not precluded by prescription from amending his claim, provided the debt which is claimed in the

amendment is the same debt as originally claimed and provided of course that prescription of the debt originally claimed has been duly interrupted.” The court referred to Sentrachem Ltd v Prinsloo 1997(2) SA 1(A) 15A-16D, with particular reference to 15J-16D, where Eksteen JA held as follows:

“Die eintlike toets is om te bepall of die eiser nog steeds dieselfde, of wesenlik dieselfde skuld prober afdwing. Die skuld of voderingsreg moet minstens uit die oorspronklike dagvaarding kenbaar wees, sodat ʼn daaropvolgende wysiging eintlik sou neerkom op die opklaring van ʼn gebrekkige of onvolkome pleitstuk waarin die vorderingsreg, waarop daar deurgaans gesteun is, uiteengesit word. (Churchhill v Standard General Insurance Co Ltd 1977(1) SA 506 (A) op 517B-C; Maluleka se saak supra op 29C; Mokoena v SA Eagle Insurance Co Ltd 1982(1) SA 780(O) en Frol Holdings (Pty) Ltd v Sword Contractors CC 196(3) SA 016 (O).) So ʼn wysiging sal uiteraard nie ʼn ander vorderingsreg naas die oorsprongklike kan inbring nie, of ʼn vorderingsreg was in die oorspronklike dagvaarding prematuur of voorbarig was, te red nie, of om ʼn nuwe party tot die gedign to voeg nie (Vergelyk Churchill se saak supra; Imprefed (Pty) Ltd v National Transport Commission 1990(3) SA 324 (T); Neon and Cold Cathode Illuminations (Pty) Ltd v Ephron 1978(1) SA 463(A) en Park Finance Corporation (Pty) Ltd v Van Niekerk 1956(1) SA 669(T).)”

[23] In Four Tower Investments (Pty) Ltd supra three requirements for the interruption of prescription were stated to be laid down by the following provisions of section 15(1) of the Prescription Act No. 68 of 1969:

‘The running of prescription shall … be interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt.’

The three requirements are:

“(a) There must be a process whereby payment of the debt is claimed;

(b) Such process must be served on the debtor; and

(c) It must be the creditor who claims the debt by means of the process so served.”

[24] I consider the requirements to have been satisfied in both these cases in which the debts were indeed claimed as per requirement (a) referred to earlier by process served on the debtor as per requirement (b). Insofar as requirement (c) states that it must be the creditor who claims the debt by means of the process it is confirmed that such requirement was in casu met in the light of the following dictum from Four Tower Investment (Pty) Ltd supra at 44D-E:

“If, therefore, the other requirements are met, and an amendment is sought to change the name of the plaintiff, then prescription will have been interrupted by the service of the summons only if the facts show that it is by or on behalf of the creditor concerned, the one whose correct description is sought to be introduced by means of the amendment, that the process had been served on the defendant.” (my emphasis)

[25] Accordingly, the assets as were transferred in terms of section 54(3) of the Act as well as the claim thereto having vested in FirstRand Bank Limited as at the time of institution of the actions, such actions as were instituted by BOE in fact lodged claims on behalf of FirstRand Bank as a creditor which is sought to be introduced by means of the amendment in these proceedings.

[26] I find accordingly that prescription was interrupted.

Conclusion

[27] In the present proceedings if the amendment sought were to be refused, certainly wrongly, all that it likely to happen is that both these actions would most likely be instituted afresh in the name of the properly described plaintiff and with precisely the same cause of action. The defence to such actions would also inevitable be put up in precisely the same terms as appear in the defendants’ pleas filed in both actions in the alternative, and giving rise to the same issues that now stand to be tried. The result which would follow would be a waste of time and costs.

Costs

[28] I consider it to be equitable that in both cases the plaintiff be ordered to pay the costs of the applications but that in respect of the costs consequent upon the opposition thereto such costs be borne by the defendants.

The Order

[29] In the result the following order is made:

The applications for amendments in terms of the Notices of Motion dated 22 November 2006 in case 1422/2002 and 1423/2002 are granted.

Costs of such applications in both cases are to be borne by the plaintiff save for the costs consequent upon the opposition thereto, which shall be borne by the defendants.

Date of Hearing: 2 March 2007

Date of Judgment: 8 May 2007

Counsel for the plaintiff: Adv R Van den Heever

Instructed by: Hack Stupel & Ross

C/O Von Klemperers

Counsel for the first defendants: Adv D G Tobias

Instructed by: M/S Shaukat Karim & Company

C/O Cajee, Setsubi & Chetty Inc.

14