Firstrand Bank Ltd t/a RMB Private Bank v Nagel (2012/33690) [2013] ZAGPJHC 200 (24 June 2013)

IN THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG

(REPUBLIC OF SOUTH AFRICA)

CASE NO : 2012/33690

In the matter between:

FIRSTRAND BANK LIMITED t/a RMB PRIVATE BANK Plaintiff And LAMBETH JOSEPH LOUIS NAGEL First Defendant LUCGA YADWIGA NAGEL Second Defendant NUNGU TRADING SA (PTY) LIMITED Third Defendant ONYX ENGINEERING (PTY) LIMITED Fourth Defendant

JUDGMENT

KOLBE AJ:

[1] This is an application for summary judgment. On 5 September 2012, the Plaintiff caused summons to be issued against the First, Third and Fourth Defendants as sureties and co-principal debtors in solidum with the principal debtor and against the Second Defendant by virtue of her marriage in community of property with the First Defendant,

for payment, jointly and severally, of the sum of R16 633 376, 16, together with interest and costs.

[2] It is alleged in the Particulars of Claim that on or about 30 October 2009, a facility agreement was concluded between Veritype Investments (Pty) Limited (“the principal debtor”) and the Plaintiff in terms of which the First, Third and Fourth Defendants, bound themselves as sureties for and as co-principal debtors in solidum with the principal debtor, in favour of the Plaintiff, for the due and punctual payment by the principal debtor to the Plaintiff, of all sums of money owing and payable to the Plaintiff in terms of the facility agreement.

[3] On or about 26 April 2010, the facility agreement was amended and the First, Third and Fourth Defendants agreed that their obligations in terms of the deeds of suretyship executed on 30 October 2009, would extend to the further or amended facility granted in terms of the further facility letter.

[4] On 1 February 2012, the Plaintiff notified the principal debtor that it was in arrears in the amount of R1 139 455 and afforded the principal debtor 20 days within which to pay the outstanding balance.

[5] Payment was not received and on or about 24 July 2012, the Plaintiff’s legal representatives forwarded letters of demand to the First, Third and Fourth Defendants in which their attention was drawn to the arrears and that the provisions of the National Credit Act, Act No 34 of 2005 (“the NCA”) were not applicable to their obligations.

[6] After service of summons, notices of intention to Defend were served and filed on behalf of all defendants, which was followed by this application for summary judgment.

[7] The application for summary judgment is opposed by the First, Second and Fourth Defendants. It is indicated in the affidavit resisting summary judgment that the attorney for the First, Second and Fourth Defendants was erroneously instructed to defend the action on behalf of the Third Defendant and would withdraw the notice of intention to defend and also as its attorney of record.

[8] Various defences were raised in the affidavit resisting summary judgment deposed to by the First Defendant on behalf of the First, Second and Fourth Defendants. I shall deal with these defences in the order in which they were dealt with in argument by Mr Naude.

SUMMONS A NULLITY

[9] The first defence raised is that the summons is a nullity. To understand the basis of this defence it is necessary to quote the exact wording of paragraph 5 of the affidavit resisting summary judgment which reads as follows:

“I attach hereto as Annexure “N1” a copy of page 4 of the alleged summons. As is clear from the annexure, the summons

served upon the Defendants was not signed by the Registrar. I am advised that Rule 17 of the High Court Rules requires every

summons to be signed by the Registrar of the High Court. I am advised that the summonses served upon the Defendants are nullities.”

[10] As far as the signing of a summons is concerned, Rule 17(3) provides that:

“Every summons shall be signed by the attorney acting for the Plaintiff … and shall thereafter be signed and issued by the Registrar …”

[11] As far as service of a summons is concerned Rule 4(1)(a)(i) provides that:

“Service of any process of the court directed to the sheriff … shall be effected by the sheriff … by delivering a copy thereof to the said person …”

[12] Mr Naude referred me to the matter of Noord-Kaap Lewendehawe Koöp Bpk v Lombard 1988 (4) SA 810, in which it was held that a summons that was not signed and issued by the Registrar was a nullity.

[13] During argument, Mr Naude on behalf of the First, Second and Third Respondents however accepted that the original summons was in fact signed and properly issued by the Registrar and does not constitute a nullity. He submitted however that what was served on each of the Defendants was not proper copies of the original summons and service therefore constituted an irregularity and that the Plaintiff should have applied for condonation as the unsigned copies contained insufficient information such as the name of the Registrar to enable the Defendants to satisfy themselves that the person who signed the summons was duly authorised to do so.

[14] This was not the defence raised in the affidavit resisting summary judgment which was that the summons served was not signed. I assume that the defence meant to be raised was that the copies served were not signed.

[15] In Protea Assurance Company Limited v Vinger 1970 (4) SA 663 (O), Hofmeyr J said the following on page 666 A of the report:

“(i) The present rules of Court do not require a signed copy of the summons to be served by the Sheriff;

(ii) No provision is made for a duplicate original or even for a certified copy to be served; and

(iii) It is not even stated in the rules that such a copy should contain the name of the Registrar or of his assistant.

In my opinion a copy satisfying the last mentioned requirement cannot linguistically or in simple logic be described as a “true” copy. This becomes all the more apparent if it is realised that the name of the appropriate official could in accordance with such a provision be inserted (and no doubt often is) by some anonymous person whose authority to do so does not appear ex facie the document. The fact alone that the name of the Registrar or of his assistant appears upon a copy of a summons can in any event have no probative value.

Before concluding the discussion of the problem from a linguistic point of view, I should draw attention to the meaning of a summons in ordinary parlance. I suggest that the term does not imply that a document only becomes a summons after the original has been signed by the Registrar or his assistant. Rule 17(2) refers to the contents of a document which is described as a summons before it is even submitted to the Registrar for signature. Rule 17(3) also requires that a document termed a summons should be signed by the attorney acting for the Plaintiff or by the Plaintiff himself and prescribes other requirements in connection with the summons before the original is submitted to the Registrar for signature. … Apart from the considerations already discussed and pointing in the same direction, the provisions of Rule 4(1)(a) should in my opinion be interpreted to refer to the copy of a summons in the ordinary sense of the word and not to a summons after it has been signed by the Registrar.”

[16] I am aware of the dissenting judgment in Scott and Another v Ninza 1999 (4) SA 820 (E) but I am in respectful agreement with the reasoning in Protea Assurance.

[17] There is in my view no merit in the defence raised in the affidavit resisting summary judgment that the summons is a nullity or the amended defence raised in argument namely that service of unsigned copies of the summons constituted an irregularity.

NON-COMPLIANCE WITH RULE 32

[18] A further defence raised in the affidavit resisting summary judgment is that there was non-compliance with the provisions of Rule 32 in that Mr Jan Botha, the deponent to the affidavit filed in support of the application for the summary judgment, states that he is duly authorised to depose to the affidavit in terms of a certificate of authorisation which he then attaches as Annexure “AAA”. However, Annexure “AAA” refers to a Mr Jan Hendrik Botha and not to a Mr Jan Botha and Annexure “AAA” is furthermore not signed and the author thereof apparently attached to a different institution.

[19] There is in my view no merit in this defence as it was not necessary for Mr Jan Botha to refer to any authorisation to depose to the affidavit. Any party is entitled to present evidence by a competent witness who can give relevant evidence.

[20] In Barclays National Bank Limited v Love 1975 (2) SA 514 (D), Miller J said the following on page 515 B:

“Rule 32(2) does not require that the supporting affidavit be made by the Plaintiff himself; any person who can swear positively to the facts may make an affidavit in support of the application and no special authority by the Plaintiff is required for the validity or effectiveness of an affidavit made by him. But even if Plaintiff’s authority were required, such authority might, in the absence of an express allegation that the deponent was duly authorised be properly inferred from the affidavit and other documents properly before the Court … The terms of the special power of attorney given by the Plaintiff to its attorneys are clearly wide enough to include the power to obtain from a suitable deponent an affidavit necessary to the proceedings which they are authorised by Plaintiff to take.”

MORATORIUM ON LITIGATION AND NON-COMPLIANCE WITH THE NCA

[21] Central to the submissions relating to these grounds is the submission that the Respondents were sued not in their capacity as sureties but as co-principal debtors. As I understand the argument, this means that their liability was not accessory to the main debt but separate and distinct. This fact, so the argument goes, is relevant not only to determining whether the moratorium on litigation against the principal debtor in terms of Section 154 of the Companies Act No. 71 of 2008, affects the claim against the co-principal debtors but also whether it follows from the fact that the NCA is not applicable to the principal debt, that the NCA is also not applicable to the claim against the co-principal debtors who are private individuals.

Capacity as co-principal debtors

[22] Mr Naude submitted that the body of the Particulars of Claim should be ignored and regard should only be had to the prayers in which relief is claimed against the First, Third and Fourth Defendants in their capacity as co-principal debtors. Had the word “surety” been inserted in the prayers, so he submitted, he would have had to concede that their liability was accessory to the principle debtor’s liability.

[23] With respect to the nature of the liability of a surety who also undertakes liability as a co-principal debtor, Trollip JA said the following in Neon and Kold Kathode Illuminations v Ephron 1978 (1) SA 464 on 472 B-E:

“… The only consequence (albeit an important one) that flows from the surety also undertaking liability as a co-principal debtor is that vis-à-vis the creditor he thereby tacitly renounces the ordinary benefits available to a surety, such as those of excussion and division, and he becomes liable jointly and severally with the principal debtor … However, he retains the right on paying the creditor, to obtain a cession of the latter’s rights and securities in order to recover the full amount from the principal debtor … it follows I think that in the present case Respondent, by also signing as a co-principal debtor, did not transform his accessory obligation as a surety into a joint principal obligation.......’”

[24] In Firstrand Bank Limited v Carlbeck Estates (Pty) Limited and Another 2009 (3) SA 384 (T), Satchwell J had to deal with a similar submission, namely that a co-principal debtor is a debtor in his own right and came to the following conclusion on page 390 H – 391 E:

“[21] The Second Respondent appears to assert the status of debtor as opposed to surety and then to argue that the NCA applied to him and his credit agreement irrespective of that of the First Respondent.

[20] In this argument the Second Respondent is misguided. Following the reasoning of Trollip JA in Neon and Gold Cathode Illuminations (Pty) Limited v Ephron 1978 (1) SA 463 (A) at 471, credit was in fact not granted to the Second Respondent. The loan finance granted and the mortgage bond agreement are and were between the Applicant and First Respondent. The Second Respondent was not advanced credit and did not become party to the contract between the Applicant and First Respondent. He did not contract with Applicant to acquire credit himself or to be a party to the agreement between the Applicant and First Respondent.

[21] The Second Respondent signed as surety and co-principal debtor. The right enforceable by Applicant against Second Respondent arises from the contract of suretyship. The contract between the Applicant and Second Respondent is separate and distinct from the bond agreement between the Applicant and First Respondent, although it is accessory to it. The Second Respondent is not a consumer and did not receive credit. He is a guarantor of a consumer’s obligations to a credit giver. Second Respondent’s contractual relationship with the Applicant remains ancillary to the main agreement between the Applicant and the First Respondent.

[22] The authorities on this point are clear. A surety who has bound himself as surety and co-principal debtor remains a surety whose liability arises wholly from the contract of suretyship. Signing as surety and co-principal debtor does not render a surety liable in any capacity other than a surety who has renounced the benefits of excussion and division. As De Villiers CJ stated “the use of the words “co-principal debtor” does not transform the contract into any other than suretyship.”

[23] Second Respondent could not be and was not sued in his capacity as co-principal debtor since his liability to the bank remains that of surety who has renounced certain rights. This position is correctly referred to by the Applicant in its summons.

[24] In the result the Second Respondent is sued as a guarantor to the obligations of the First Respondent in terms of a credit transaction to which the NCA does not apply. He cannot claim that he is entitled to have received a notice in terms of Section 129 of the NCA.”

[25] The principal is therefore clear that the mere fact that a surety accepted liability as a co-principal debtor does not detract from the fact that the liability of the surety is accessory in nature.

[26] In any event, there is also in my view, no merit in the submission that the body of the Particulars of Claim should be ignored in determining the basis of the liability if the Defendants as the basis of their liability is set out in the body of the Particulars of Claim.

Non-compliance with the provisions of the NCA

[27] The defence raised with respect to the applicability of the NCA is not that notices ito of s129 of the NCA had not been received by the First and Fourth Defendants but that the Plaintiff had failed to assess the financial position of the of the First and Fourth Defendants and that the agreements accordingly constitute reckless credit.

[28] Not a single document is attached in support of the contention that the surety agreements amount to reckless credit. Furthermore, credit was not granted to the First and Fourth Defendants and the liability of the First and Fourth Defendants are furthermore accessory to the principle debt to which the NCA does not apply, and the NCA consequently, for the reasons already stated, not applicable to their liability.

[29] There is in my view, no merit in the contention that the surety agreements constitute reckless credit as defined in the NCA.

Moratorium on legal action

[30] It is contended in the affidavit resisting summary judgment that the principal debtor is under business rescue and as a result, the Plaintiff cannot proceed against it in legal proceedings. The First and Fourth Defendants make the bald allegation that the business rescue plan has been approved and implemented without attaching any supporting documentation in this regard.

[31] In any event, I agree with the submission by Mr Ali on behalf of the Plaintiff that the action instituted in these proceedings is not directed towards the principal debtor and to the extent that the First and Fourth Defendants contend that as a consequence of the business rescue procedure, the Plaintiff is precluded from proceeding against the co-principal debtors, the contention is without merit as the co-principal debtors are not under business rescue.

[32] In Investec Bank v Bruins 2012 (5) SA 430 (WCC), the Plaintiff sought an order for summary judgment against the Defendant who was the surety to two companies in liquidation.

The Defendant in that case opposed the summary judgment application on the basis that the Plaintiff could not proceed against him as surety as the companies were under supervision and about to commence business rescue proceedings. The Defendant further contended that in terms of Section 133(2) of the Companies Act, the Plaintiff was prohibited from proceeding against him as surety as he as surety was entitled to claim the benefit of the moratorium afforded to the company under business rescue. He further contended that as a result of the business rescue procedure, the principal debt was an uncertain amount as it would be subject to the business rescue plan.

[33] It was held by the Court in Invested Bank that the privilege of a statutory moratorium in favour of a company under business rescue was a defence in personam. It is a personal privilege or benefit in favour of only the company that is under business rescue. Accordingly, it was concluded that the statutory moratorium in favour of the companies did not avail the surety.

[34] There is therefore in my view also no merit in this defence.

NON-JOINDER OF THE PRINCIPAL DEBTOR

[35] It is contended in the affidavit resisting summary judgment that the principal debtor has a substantial and material interest in the outcome of the proceedings and is therefore a necessary party.

[36] This contention is clearly without merit as the principal debtor has no direct and substantial interest in the outcome of this matter.

[37] In Burger v Rand Water Board and Another 2007 (1) SA 30 SCA at 33, the Supreme Court of Appeal summarised the principles applicable to joinder as follows:

“The right to demand joinder is limited to specific categories of parties such as joint owners, joint contractors and partners and where the parties have a direct and substantial interest in the issues involved and the order which the Court might make, or if such an order cannot be substantiated or carried into effect without prejudicing that party, unless the Court is satisfied that he/she has waived his/her right to be joined.”

[38] What a direct and substantial interest is was defined as follows by Corbett CJ in United Watch and Diamond Company (Pty) Limited v Disa Hotels Limited and Another 1972 (4) SA 409 (C) at 415 E-F:

“A direct and substantial interest can be connoted as an interest in the right which is the subject matter of the litigation and ... not merely a financial interest which is only an indirect interest in such litigation. This view of what constitutes a direct and substantial interest has been referred to and adopted in a number of subsequent decisions and it is generally accepted that what is required is a legal interest in the subject matter of the action which could be prejudicially affected by the judgment or the order.”

[39] It is clear that in this matter no finding of the Court could affect the position of the principal debtor.

CONCLUSION

[40] A defendant in summary judgment proceedings must allege facts which if proved at the trial will be an answer to the Plaintiff’s

claim. He also has to demonstrate that such a defence is bona fide which means that the Defendant’s allegations ought not to be inherently and seriously unconvincing.[1]

[41] I agree with the submission by behalf of Mr Ali on behalf of the Plaintiff that the defences raised in the affidavit resisting summary judgment are either factually incorrect or legally flawed.

[42] In my view the First, Second and Fourth Defendants failed to raise any defence valid in law.

[43] Although Mr Naude did not represent the Third Defendant, he submitted that in the event of any order being granted against the First, Second and Fourth Defendants that the matter ought to be referred to the Registrar to consider granting judgment by default against the Third Defendant.

[44] There is in my view no reason why this procedure should be followed. All relevant facts are before this Court and I see no reason why an order cannot be granted against the Third Defendant.

[45] In the result I make the following order:

Judgment is granted against the First, Second, Third and Fourth Defendants, jointly and severally for :

1. Payment of the sum of R16 633 376,16;

2. Interest on the aforesaid sum at the rate of 9% per annum from 3 July 2012 to date of payment calculated daily and compounded monthly;

3. Costs on the attorney and client scale.

KOLBE AJ

[1] See: Breitenbach v Fiat SA 1976 (2) SA 226 (T) 227 G – 228 B