Industrial Development Corporation of South Africa Limited v Agri Varia Holdings Proprietary Limited (09697/16) [2017] ZAGPJHC 26 (21 February 2017)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 09697/16

Reportable: NO

Of interest to other judges: NO

Revised.

21/2/2017

In the matter between:

INDUSTRIAL DEVELOPMENT CORPORATION

OF SOUTH AFRICA LIMITED

REGISTRATION NO: 1940/014201/06 Applicant

and

AGRI VARIA HOLDINGS PROPRIETARY LIMITED

REGISTRATION NO: 2006/000331/07 Respondent

JUDGMENT

MAHALELO, AJ:

[1] The respondent passed a General Covering Notarial Bond (“notarial bond”) over its movable assets and effects in favour of the applicant on 21 January 2015 as security for its indebtedness to the applicant arising out of a written loan agreement concluded between the parties on 8 December 2014. On 25 April 2016 the applicant obtained an ex parte order perfecting its security and permitting it to take possession of the respondent’s movable assets. The terms of the order were the following:

“It is ordered that:

1. A Rule Nisi is hereby issued returnable on 2 June 2016 calling upon the respondent to show cause, if any, why the following orders should not be made final:-

1.1 The applicant and its agents, employees or nominees or the sheriff or his legally appointed Deputy are authorised to enter upon the premises of the respondent situated at 7 ,8th Avenue, Industriam, Kroonstad and other premises at which the movable assets of the respondent may be found, to take possession of the movable assets, to hold and retain the movable assets as security in terms of the following Notarial General Covering Bond registered in favour of the applicant namely:

1.1.1 The Notarial General Covering Bond Number BN280/2015 which was registered at Bloemfontein Deeds Office by the respondent in the applicant’s favour for the sum of R8000 000.00( Eight million rand) (“the capital”) and a further sum in the amount of R2 400 000.00 (two million four hundred thousand rand)(“the additional sum” ) in respect of all of the respondent’s movable property and effects, of whatever nature and the description and wheresoever situated, both corporeal and incorporeal and both such as the mortgagor (respondent) may now own or as it may in the future acquire, nothing excepted.

1.2 The applicant is to attach the movable assets in accordance with the provision of the Notarial General Covering bond as described in paragraph 1.1.1 above, as security for the respondent’s indebtedness in accordance with the provisions of the Notarial General Covering Bond,

1.3 The applicant is to attach, and /or hold and or to remove and to dispose the movable assets in accordance with the provisions of the Notarial General Covering Bonds as described in paragraph 1.1.1 above, as security for the respondent’s indebtedness in accordance with the provisions of the Notarial General Covering Bond, on confirmation of the Rule Nisi.

2. Paragraph 1.1 and 1.2 above shall operate with immediate effect pending the return date and the finalisation of this application.

3. The issue of costs to be reserved.”

[2] The order of 25 April 2016 was duly served on the respondent. On 1 June 2016 the respondent delivered notice of its intention to defend the application and its opposing affidavit. The applicant’s replying affidavit was duly served on the respondent.

[3] The return day after being extended on several occasions by order of this court was the 23 November 2016.

THE FACTS

[4] The respondent’s indebtedness to the applicant arises from the following facts:

On 8 December 2014 the parties entered into a written loan agreement (“the loan agreement”), in terms of which the applicant at the instance and request of the respondent advanced a loan in the amount of R10 110 000,00 (Ten Million One Hundred and Ten Thousand Rand) subject to certain terms and conditions.

[5] The parties agreed to divide the amounts so advanced under the following headings:

5.1 R5 800 000,00 (Five Million Eight Hundred Thousand Rand) was classified as the Working Capital.

5.2 R1 775 000,00 (One Million Seven Hundred and Seventy Five Thousand Rand) was classified as the Plant and Equipment Loan.

5.3 R2 150 000,00 (Two Million One Hundred and Fifty Thousand Rand) was classified as the Building Loan.

5.4 R192 500,00 (One Hundred and Ninety Two Thousand Five Hundred Rand) was classified as the Business Support Loan.

5.5 R192 500,00 (One Hundred and Ninety Two Thousand Five Hundred Rand) was classified as Business Support Grant.

[6] The loan was secured by a notarial bond in the amount of R8 000 000,00 (Eight Million Rand) registered in favour of the applicant over the movable assets of the respondent. The purpose of the notarial bond was to secure the respondent’s present and future indebtedness to the applicant.

[7] The notarial bond provides that the amount of the respondent’s indebtedness to the applicant would be determined and proved by mere production of a certificate purporting to have been signed by any of the applicant’s authorised officials whose appointment, qualification and authority need not be proved.

[8] The notarial bond further provides that upon the happening of an event of default or breach of the loan agreement, the applicant shall be entitled to forthwith take possession of the movable assets of the respondent and thereby perfect its pledge of the assets. The applicant furthermore has the right in terms of the notarial bond, to hold the assets as security for payment of all the amounts owing by the respondent and to retain such possession for so long as it may deem fit, to dispose of the assets or any of them by public auction, public tender or by private treaty or otherwise in its sole discretion and to convey good valid and free title to the purchaser or the transferee thereof.

[9] Any application to court in terms of or arising from the notarial bond or the loan agreement could be brought by the applicant at its election either ex parte or on notice to the respondent.

[10] The applicant alleges that the respondent is in breach of the loan agreements in that it has failed to make payment of the instalments as well as interest thereon on the dates on which the instalments were due. The breach of the loan agreements and the respondent’s liability to the applicant is in dispute. The respondent denies that agreements were concluded as alleged between it and the applicant.

POINT IN LIMINE

[11] The respondent raised a point in limine that the deponent to the applicant’s founding affidavit was not authorised to depose to the founding affidavit and to institute this application on behalf of the applicant.

[12] In the founding affidavit filed on behalf of the applicant Mr Marcus Senyatsi (“Senyatsi”) states that he was duly authorised to depose to the affidavit in terms of the resolution attached as “IDCI”. In its answering affidavit, the respondent stated that he did not admit that Senyatsi was authorised to depose to an affidavit on behalf of the applicant and put the applicant to the proof thereof. With regard to “IDCI”, the respondent stated that it is merely an authorised signature list which does not do any of the following: differentiate between the level of authority of the authorised persons, describe the authorities, more particularly the signing rights of the relevant authorised persons, make any reference to the deponent being authorised to make oath on behalf of the applicant and that the deponent is authorised to make decisions pertaining to the submission of any application on behalf of the applicant.

[13] It is irrelevant whether Senyatsi had been authorised to depose to the founding affidavit. The deponent to an affidavit in motion proceedings need not be authorised by the party concerned to depose to the affidavit. It is the institution of the proceedings and the prosecution thereof which must be authorised. (See Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA).

[14] In Mall (Cape) (Pty) Ltd v Merino Ko-operasie Bpk [1957] 2 All SA 242 (C) it was stated:

“The best evidence that the proceedings have been properly authorised would be provided by an affidavit made by an official of the company annexing a copy of the resolution but I do not consider that that form of proof is necessary in every case. Each case must be considered on its own merits and the Court must decide whether enough has been placed before it to warrant the conclusion that it is the applicant which is litigating and not some unauthorised person on its behalf.”

[15] In the present case, Senyatsi, in paragraph 1.1 of the founding affidavit states that:

“I am an adult male employed by the applicant as its Manager, Legal and International Finance Department.”

Further in paragraph 1.3 that:

“I am duly authorised to depose to this affidavit in terms of the resolution ‘IDCI.”

Furthermore in paragraph 1.4 that:

“I am fully acquainted with the allegations contained herein, which are within my personal knowledge and belief, …”

[16] Although not specifically stated, from the reading of the above paragraphs, the inference becomes irresistible that it was the applicant who conferred authority upon Senyatsi. Furthermore, the proceedings in the present case were instituted and prosecuted by a firm of attorneys purporting to act on behalf of the applicant. A firm of attorneys was duly appointed to represent the applicant. It must therefore be accepted that the institution of the proceedings in the present case was duly authorised. I am therefore satisfied that enough has been placed before me to conclude that it is the applicant who is litigating against the respondent and not some unauthorised person on its behalf. There is therefore no merit in the point in limine raised.

DEFENCES RAISED BY THE RESPONDENT

[17] The respondent raised three defences namely:

(a) The loan agreement between the applicant and the respondent was not validly concluded as the representative of the respondent was not authorised to conclude same on behalf of the respondent. In this regard, it was argued on behalf of the respondent that, the resolutions of the respondent were and are invalid as they were not signed by the shareholders of the respondent, nor were they signed by all the directors of the respondent. That the mere fact that section 66 of the Companies Act permits delegation of authority to a single director does not mean that it has in actual fact happened and the third party cannot accept that it has happened. Further that, the respondent had not conferred the requisite authority either expressly or impliedly, and the applicant cannot rely on estoppel as no representation was made by the respondent to the applicant, the only representations that were made to the applicant were by the unauthorised director. The respondent contended therefore that, the loan agreements could not be concluded with the applicant therefore both the loan

agreements and the Notarial Bond are null and void. The respondent contended furthermore that, it was a condition precedent of the loan agreement that a resolution should be provided to the applicant in order for the loan agreement to be concluded.

(b) The applicant failed to give the requisite notice of breach in accordance with clause 14.1.2 of the loan agreement. In this regard, the respondent argued that while the applicant’s rights may not be suspended, its ability to enforce those rights under the loan agreement are suspended until such time that the requisite notice is given.

(c) The court lacks jurisdiction to hear the matter as the cause of action did not arise within the court’ jurisdiction in that:

(a) The loan agreement was not concluded in Johannesburg.

(b) The notarial bond is not registered within the jurisdiction of the court but in Bloemfontein.

[18] The respondent abandoned this defence and it became unnecessary for the court to determine the issue.

[19] It seems to me convenient to consider the respondent’s defence of failure by the applicant to give the requisite breach notice. It is my view that the determination of this issue may dispose of the matter. I will therefore deal with that issue first.

[20] The applicant alleged that the respondent failed to make proper and timeous repayments of the instalments of both the Working Capital and Building loans. According to the applicant, as at 10 February 2016 the respondent was indebted to it in respect of the Working Capital loan in the sum of R5 316 840.63 plus interest at the rate of 8% per annum and in the sum of R2 164 135.08, plus interest at the rate of 15.35% per annum in respect of the Building Loan. Both amounts calculated from 11 February until date of payment. In terms of clause 7.1 and 7.3 of the loan agreement the respondent had to repay the loan in instalments on specified periods. The relevant portion of the clauses read:

“7.1 The Working Capital shall be repaid in 47 equal monthly instalments of R120 800.00 each and a final instalment of R122 400.00. The first of which shall be paid on the 1st day of the month following the Drawdown date and the remainder thereafter on the 1st of each and every succeeding month until the Working Capital has been repaid in full.

7.3 The Building Loan was to be repaid in 119 equal monthly instalments of R17 900,00 each and a final instalment of R19 900,00, the first of which shall be paid on the 1st day of the month following the 1st drawdown date and thereafter on the first day of each succeeding month.”

[21] The respondent, in paragraph 18 of the answering affidavit acknowledged that it did not make payments to the applicant as agreed in terms of the loan agreement. The respondent however, argued that the application was premature.

[22] Clause 14.1.2 required that the applicant gives the respondent 14 days’ notice to set the indebtedness right. Clause 14.1.2 reads:

“the full amount owing under the Loan plus all other amounts and costs shall, failing rectification of such breach or failure, where such rectification or remedy is possible, within 14 (fourteen) days of having been given notice in writing by the lender of such breach or failure, forthwith and without any further notice become payable by the borrower and the Lender shall be entitled to withhold any amount not yet advanced to the borrower, …”

[23] The applicant argued that it was not necessary to give the respondent the requisite breach notice.

[24] The purpose of the breach notice is to inform the defaulting party of its default, what the party is required to do to rectify the default, the time period within which that must be done and the consequences of failure to do so.

[25] It is immediately clear that the applicant never gave the respondent an opportunity to rectify the default as alleged in paragraphs 28 and 29 of the founding affidavit. It is so that in terms of the notarial bond, the applicant had an election to bring the application on an ex parte basis. In an ex parte application all facts which might influence the court in coming to a decision must be disclosed by the applicant. Failure to do so may be visited by a Court subsequently setting aside the ex parte order.(See Hassan v Berrange NO 2012 (6) SA 329 (SCA). The failure to afford the respondent an opportunity to rectify its default is a fatal defect in the applicant’s application.

[26] It follows, for all the aforegoing reasons, that the applicant did not disclose all the facts to the court which granted the ex parte order. In my view the application was premature.

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

1. The Rule Nisi is discharged.

2. The applicant is to pay the costs.

_________________________________________________

M B MAHALELO

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA

APPEARANCES

Counsel for the Applicant: Adv BF Gedegder

Adv Yina

Instructed by:

Ramushu Mashile Twala Inc

Counsel for the Respondent: Adv R Bhima

Instructed by:

Goodes and Seedat Inc

Date of Hearing:

23 November 2016