Firstrand Bank Limited t/a First National Bank v Sterling Industrial Resources CC and Others (218/2017) [2017] ZAGPPHC 978 (20 December 2017)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA, GAUTENG DIVISION, PRETORIA

[FUNCTIONI NG AS MPUMALANGA CIRCU IT COURT, MIDDLEBU RG]

REPORTABLE: YES

OF INTEREST TO OTHER JUDGES: YES

REVISED.

CASE NUMBER 218/2017

20/12/2017

FIRSTRAND BANK LIMITED trading

APPLICANT

Inter alia as FIRST NATIONAL BANK

REGISTRATION NUMBER: 1929/001225/06

And

STERLING INDUSTRIAL RESOURCES CC

1ST RESPONDENT

REGISTRATION NUMBER: 2002/030940/23

JOHANNES NIEMAND ID

2ND RESPONDENT

NO: […]

ALEC DANIEL SANDENBERGH

3RD RESPONDENT

ID NO: […]

JUDGMENT

LEGODI JP

[1] Surety agreement concluded between Firstrand Bank Ltd trading as First National Bank (the applicant) and the third respondent (Mr Alec Daniel Sandenbergh) became the subject of a dispute in these proceedings. At the heart of the dispute the question is whether the third respondent has made himself liable as a surety for the whole amount owed to the applicant by Sterling Industrial Resources (the first respondent) or liable only for a portion thereof as per clause 3 of the surety-ship agreement.

[2] Clause 3 of the surety agreement aforesaid reads as follows: "Amount - The amount recovered from me/us shall be limited to R350 000 (three hundred and fifty thousand rand)

Plus interest or finance charges on that amount, and among others, fees, discount, commissions, duties, levies, charges and costs as may from time to time become due and payable by the Debtor, and all attorney and own client costs including value added tax incurred in legal steps against the Debtor and all costs as stated in clause 25 (costs) for the recovery of any or all of the amounts mentioned above, together with all other necessary and usual charges and expenses and further all amounts and contributions due by FRB in respect of the business rescue, liquidation, sequestration, administration or debt review of the Debtor and I/we shall further be liable for any environmental indemnity provided by the Debtor to FRB. If the National Credit Act of 2005 ("NGA'J applies to this surety-ship, then /!we will be liable for interest and all costs, fees, expenses and charges allowed by the NGA."

[3] The applicant sued the third respondent by way of motion proceedings in terms of which it prays for judgment inthe sum of R616 855.22 against the principal debtor, (first respondent) and two sureties, including the third respondent,jointly and severally, the one paying the other to be absolved.

[4] For its cause of action for the whole amount against any of the respondent, the applicant seems to rely on clause 1 of the surety

agreement which is stated as follows: "Alec Daniel Sandenbergh (Id No. […] (the "surety")

Gives this suretyship in favour of Firstrand Bank Limited (Reg No. 19291001225106) (including without limitation any of its divisions or trading names ) (“FRB”) its successors or assigns-

1. Suretyship - I/we hereby bind myself/ourselves to and in favour of FRB as surety(ies) in solidium (for the whole, full indebtedness and not only for part thereof) for and as co-principal debtorls jointly and severally as ongoing obligation with Sterling Industrial Resources CC (Reg. No. 20021030940123) (the "debtor') For the due payment by the debtor of all and any monies which the debtor may now or from time to time hereafter owe to FRB from whatsoever cause and howsoever arising, including as principal debtor, guarantor, surety or otherwise and for damages, taxes, costs, charges and interest and whatever the debtor is trading alone or in partnership or under any other name. If this suretyship is given in respect of more than one debtor, then the references to "debtor'' shall include the plural as may be required by the context and I/we shall remain liable to FRB in respect of each debtor."

[5] A contract term may be given a meaning which differs both from the literal sense of the language used and from the meaning which a reasonable person would attach to it, provided that such a different understanding was common to the parties at the time of the conclusion of the contract. For those cases where common intention of the parties cannot be established, the contract ought to be interpreted in accordance with the meaning which a reasonable person of the same kind as the parties would give it in the same circumstances.

[6] The test is not a general and abstract criterion of reasonableness but rather the understanding which could reasonably be expected of persons with, for example, the same linguistic knowledge, technical skill, or business experience as the parties.

[7] An order to establish whether the party had a common intention and, if so, what the common intention was, regard is to be had to all the relevant circumstances of the case. Standard terms should be interpreted primarily in accordance with reasonable expectations of their average users irrespective of the actual understanding which either of the parties to the contract concerned a reasonable person of the same kind as the party might have had.

[8] There are certain rules by courts for interpreting written contracts in the event of a dispute among the parties. In general, the rules for interpreting contract, language have the goal of determining the parties' intent. The mutual intention of parties at the time of the contract will govern the court's resolution of a contractual dispute if that intention can be determined. Normally courts adhere to the four corners rule, meaning that where possible intent is determined from the written terms of the contract and nothing else.

[9] The court will not go outside the contract unless there is ambiguity or uncertainty in the contract provisions. Contract provisions maybe be considered ambiguous if consideration of the plain meaning and context of the provision can lead to two or more reasonable

constructions. In order to assist the court, parol evidence from outside the contract may be reviewed to resolve the ambiguity. Any ambiguities caused by the drafter of the contract must generally be construed against the drafter.

[10] The third respondent in the instant case, raised the dispute inter alia as follows:

"3.9 As I have bound myself as surety for the limited amount of R350 000.00, and with which I deal herein under more fully, I also made payment of the amount of R200 000.00 in reduction of my liability into this account. Two payments were made of R100 000.00 respectively on the 29th and 30'h of April 2015, and these payments are reflected on my personal bank statements of the said period, and which I attached hereto as Annexure A", and to which I respectfully refer.

3. 12 I respectfully refer the Honourable Court to Clause 3 of such a suretyship agreement, and in terms whereof the parties expressly agree that the amount recoverable from me shall be limited to R350 000.00 (three hundred and fifty thousand rand) plus interest of finance charges on that amount and further fees as stipulated in clause 3.

3.13 As such I deny that the Applicant is entitled to claim the amount of R616 855.22 from me, as the suretyship is limited, if such amount is indeed the correct amount.

[11] In my view the battle line is drawn and I do not think it is of such a nature that it can be resolved through affidavits. Correctly so, the third respondent moves from the premise that the applicant was not entitled to approach this court by way of application, and that there exists a clear factual dispute between the parties. The dispute arises from the ambiguity in clause 1 read with clause 3 quoted in paragraphs 2 and 4 of this judgment. Why would clause 3 be necessary if clause 1 is what was intended by the parties as the applicant wishes to postulate? I need not be too critical as if I making a final determination.

[12] In the circumstance of the case, more information is needed to explore the true intention of the parties at the time when the

contract was concluded. This is necessitated by the ambiguity in the two clauses aforesaid. For example, one may argue that clause 1 was meant to take precedent over clause 3 or vice-versa. The applicant should have foreseen the possibility of the dispute of facts not being capable being resolved without oral evidence or trial.

[13] It is however not my intention to dismiss the applicant's application. Instead, I think, the appropriate recourse will be to

refer the intention of the parties for oral agreement. But because I have already found that the applicant should not have brought the proceedings on motion, costs occasioned by the referral for oral evidence ought to be granted against the applicant and the court elects to case manage the matter.

[14] Consequently, an order is hereby made as follows:

14.1 The matter is hereby referred for oral evidence to determine the intention of the parties.

14.2 The case is hereby postponed and is enrolled on the trial roll of the week 23 April 2018 to hear oral evidence on the intention of the parties and in particular whether the third respondent as a surety is liable for the whole amount jointly and severally with the other respondents or only to a portion thereof as per clause 3 quoted in paragraph [2] of this judgment.

14.3 The applicant is hereby ordered to pay wasted costs of the application insofar as such costs are occasioned by the referral of this matter for oral evidence.

__________________________

M F LEGODI

JUDGE OF THE HIGH COURT

DATE OF HEARING: 21 NOVEMBER 2017

DATE OF JUDGMENT: 20 DECEMBER 2017

FOR THE APPLICANT: JASON MICHAEL SMITH INC ATTORNEY

SUITE 1, 26 BAKER STREET

ROSEBANK, JOHANNESBURG

TEL: 011 447 8188

REF: M Gous - FRB2/0018/DA

C/O Altus Nel, Welthagen Geldenhuys Inc

19 Dr Beyers Naude Street

MIDDLEBURG

TEL: 013 282 8081/ 082 839 1152

FOR THE RESPONDENT: NEUFOFF KHOZA INCORPORATED

C/O SCHALK PIETERSE ATTORNEYS

SANLAMTRUST BUILDING 4

MCCULLUM STREET

TEL: 013 282 4720/21

REF: S8336