Land and Agricultural Development Bank of South Africa v Marcus M Farming CC and Others (32745/17) [2017] ZAGPPHC 1058 (6 September 2017)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

Case No: 32745/17

06/09/2017

(1) NOT REPORTABLE

(2) NOT OF INTEREST TO OTHER JUDGES

(3) REVISED.

In the matter between:

LAND AND AGRICULTURAL DEVELOPMENT

BANK OF SOUTH AFRICA

Plaintiff

and

MARCUS M FARMING CC

1ST Defendant

KGABO VIRGINIA MASENYA

2ND Defendant

MATOOTO LYDIA MASENYA

3RD Defendant

PAULINE MPHEFO NGOETSANA

4TH Defendant

CORNELIUS LESIBA KENNETH NGOETSANA

5TH Defendant

LESETJA SOLOMON MASENYA

6TH Defendant

TLOU JULIA MASENYA

7TH Defendant

JUDGMENT

HF JACOBS, AJ:

[1] This is an application for summary judgment of the Land Bank against Marcus M Farming CC[1] and six sureties[2] (the second to seventh defendants) for payment of monies due by Marcus Farming to the Land Bank in terms of a written contract and ancillary relief such as interests, costs and an order declaring Marcus Farming's mortgaged property executable. The seventh defendant deposed to the defendants' opposing affidavit. The defendants do not deny the contract or its terms and do not deny the mortgage bond or suretyships in their affidavits. To the opposing affidavit are attached a notice of exception and confirmatory affidavits of the five other defendants. The defendants raise the following defences in their opposing affidavit read with the notice of exception:

[1.1] First defence: that the Land Bank has more than one cause of action pleaded in its particulars of claim and that the deponent to the Land Bank's

affidavit has failed to verify a specific cause of action and that the two causes of action are mutually destructive;[3]

[1.2] Second defence: that the National Credit Act, 34 of 2005 ("NCA") applies to the legal tie between the parties (the loan of Marcus Farming and suretyships) and that the defendants are entitled to a declaratory order to that effect. The Land Bank contends that the NCA does not apply, and even if it had, that it had complied with its provisions;

[1.3] Third defence: that I should exercise my discretion and refuse summary judgment in order "to give all the sureties, an opportunity to ask for further particulars and defend the claim including the claim by the sixth defendant";

[1.4] Fourth defence: that the loan to Marcus Farming amounts to reckless credit and that the transaction should be declared accordingly and that the

particular issue of reckless credit can only be canvassed at trial and not during summary judgment proceedings;[4]

[1.5] Fifth defence: that the interest claimed by the Land Bank from 31 March 2017 is not properly quantified and the certificates of balance cannot serve as prima facie proof of the defendants' indebtedness to the Land Bank;[5]

[1.6] Sixth defence: that the allegation in paragraph 16 of the Land Bank's particulars of claim to the effect that Marcus Farming breached its repayment obligations in terms of the agreement between the parties lacks particulars as to when Marcus Farming's breach occurred.

[2] Before I deal with the content of the defendants' opposing affidavit, it is necessary to refer to the principles applicable in deciding an application for summary judgment. In Joob Joob lnvestments[6] Navsa JA placed the characteristics of our summary judgment procedure in perspective as follows:

"[29] A summary judgment procedure was first introduced into our practice by the Magistrates' Courts Act of 1917. It was based upon a procedure introduced in England by Order XIV under the Judicature Acts whereby a plaintiff was able, by means of a summary proceeding, to obtain a final judgment when there was no bona fide defence to an action.

[30]

In John Wallingford v The Directors of The Mutual Society (1880) 5 AC 685 (HL) at 699 - 700, Lord Hatherley referred to the objects of the new English procedure as follows:

'I apprehend that from the first the objects of these short methods of procedure has been to prevent unreasonable delay, a delay which was very prejudicial to the creditors, and never, I am afraid, or rather, I am pleased to say, can have been very beneficial to the debtor himself Simply allowing legal proceedings to take place, in order that delay may be applied to the administration of justice as much as possible, is not an end for which we can conceive the Legislature to have framed the provisions which now exist under the several Judicature Acts. If a man really has no defence, it is better for him as well as his creditors, and for all the parties concerned, that the matter should be brought to an issue as speedily as possible; and therefore there was a power given in cases in which plaintiffs might think they were entitled to use the power by which, if it was a matter of account, an account might be immediately obtained upon the filing of a bill, or, if it was a matter in which the debt was clear and distinct, and in which nothing was needed to be said or done to satisfy a Judge that there was no real defence to the action, recourse might be had to an immediate judgment and to an immediate execution.'

[31] So too in South Africa, the summary judgment procedure was not intended to 'shut (a defendant) out from defending,' unless it was

very clear indeed that he had no case in the action. It was intended to prevent sham defences from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights.

[32] The rationale for summary judgment proceedings is impeccable. The procedure is not intended to deprive a defendant with a triable

issue or a sustainable defence of her/his day in court. After almost a century of successful application in our courts, summary judgment proceedings can hardly continue to be described as extraordinary. Our courts, both of first instance and at appellate level, have during that time rightly been trusted to ensure that a defendant with a triable issue is not shut out. In the Maharaj case at 425G - 426E, Corbett JA was keen to ensure, first, an examination of whether there has been sufficient disclosure by a defendant of the nature and grounds of his defence and the facts upon which it is founded. The second consideration is that the defence so disclosed must be both bona fide and good in law. A court which is satisfied that this threshold has been crossed is then bound to refuse summary judgment. Corbett JA also warned against requiring of a defendant the precision apposite to pleadings. However, the learned judge was equally astute to ensure that recalcitrant debtors

pay what is due to a creditor.

[33] Having regard to its purpose and its proper application, summary judgment proceeding sonly hold terrors and are 'drastic' for a defendant who has no defence. Perhaps the time has come to discard these labels and to concentrate rather on the proper application of the rule, as set out with customary clarity and elegance by Corbett JA in the Maharaj case at 425G - 426E."

[3] What a defendant is reasonably expected to set out in an opposing affidavit in summary judgment proceedings depends to some extent upon the manner in which the plaintiff's claim has been formulated. The Land Bank's particulars of claim is an 18 page document. The first eight paragraphs contain the citation of the parties. Paragraphs 9, 10 and 11 contain the allegations germane to the contract the Land Bank relies on. A copy of the contract is also attached. Paragraphs 12 to 14 contain particulars of the continuing covering mortgage bond registered over the immovable property of Marcus Farming in terms of which the latter's property is hypothecated to the Land Bank. A copy of the mortgage bond is also attached to the particulars of claim.

[4] In paragraph 15 of the particulars of claim it is alleged that the Land Bank complied with its contractual obligation by advancing the loan amount to Marcus Farming. In paragraphs 16 to 20 of the particulars of claim breach by Marcus Farming of the agreement is alleged, the outstanding balance is stated and two certificates of balance are attached and those paragraphs end with an allegation that despite demand, Marcus Farming fails to pay its indebtedness to the Land Bank.

[5] In paragraphs 22 to 26 the suretyships of the second to seventh defendants are alleged, their terms are set out and the suretyships are attached to the particulars of claim. In paragraph 27 of the particulars of claim the Land Bank avers that the NCA does not apply to the transaction. In paragraph 28 of the same pleading the Land Bank avers in the alternative that, should it be found that the NCA does apply to the transaction, it has complied with its provisions and a number of allegations of compliance with section 129 and 130 of the NCA are made and the notices are attached to the pleading. The particulars of claim concludes under the rubric "Executability of Property" with allegations concerning the executability of the mortgaged property of Marcus Farming.

THE FIRST DEFENCE:

[6] The defendants' allegation that the Land Bank's cause of action is formulated in the alternative is not factually correct. It is not an alternative cause of action. The alternative averments are that, even if it is held that the NCA does apply to the transaction (a finding it disputes and, therefore, does not rely on), it had complied with its provisions insofar as it may be necessary. The alternative averment does not, in my view, disqualify the Land Bank's deponent to its supporting affidavit from verifying the main cause of action. Applicability of the NCA turns on a point of law and the cause of action does not, in my view, appear incapable of verification as required by the provisions of Rule 32(2). In my view the first defence cannot be upheld. I will, however, consider the defendants' defences as if the NCA does apply to the transaction.

THE SECOND AND FOURTH DEFENCE:

[7] The NCA contains several provisions aimed at responsible lending practices by credit providers. Those provisions are aimed at maintaining an effective lending or credit regime. The defendants contend that the National Credit Act applies to both the loan agreement between the plaintiff and the first defendant and to the suretyships on which the second to seventh defendants are held liable. By reason of the application of the NCA, so the defendants' allegations go, the provisions of the NCA pertaining to reckless credit apply in casu and that they would be entitled at trial to an order declaring the transaction with the plaintiff as the result of reckless credit. The concepts of over­ indebtedness and reckless credit have been introduced into our law under Part D of the NCA.[7]Section 78(1) expressly provides that Part D of the NCA "does not apply to a credit agreement in respect of which the consumer is a juristic person". The first defendant is a juristic person and Part D of the NCA, therefore, does not apply to the contract between the Land Bank and Marcus Farming. Under the circumstances the first defendant cannot avail itself of the defence of reckless credit created by Part D of the NCA and the defence raised in the opposing affidavit in that regard is no defence in law.

[8] Even if it is assumed that Part D of the NCA applies to the agreement between the plaintiff and the first defendant and between the plaintiff and the other defendants, the following would apply:

[9] The concept of "reckless credit" introduced by the NCA to be applied by credit providers ex ante is aimed at ensuring responsible lending practices. "Reckless credit" is defined in section 1 of the NCA as "credit granted to a consumer under a credit agreement concluded in circumstances described in section 80" of the NCA. Section 80 of the NCA provides as follows:

"80 Reckless credit

(1) A credit agreement is reckless if, at the time that the agreement was made, or at the time when the amount approved in terms of the agreement is increased, other than an increase in terms of section 119 (4)-

(a) the credit provider failed to conduct an assessment[8] as required by section 81 (2), irrespective of what the outcome of such an assessment might have concluded at the time; or

(b) the credit provider, having conducted an assessment as required by section 81 (2), entered into the credit agreement with the consumer despite the fact that the preponderance of information available to the credit provider indicated that[9]-

(i) the consumer did not generally understand or appreciate the consumer's risks, costs or obligations under the proposed credit agreement; or

(ii) entering into that credit agreement would make the consumer over-indebted.

(2) When a determination is to be made whether a credit agreement is reckless or not. the person making that determination must apply the criteria set out in subsection (1) as they existed at the time the agreement was made, and without regard for the ability of the consumer to[10] -

(a) meet the obligations under that credit agreement; or

(b) understand or appreciate the risks, costs and obligations under the proposed credit agreement, at the time the determination is being made.

(3) When making a determination in terms of this section, the value of­

(a) any credit facility is the credit limit at that time under that credit facility;

(b) any pre-existing credit guarantee is-

(i) the settlement value of the credit agreement that it guarantees, if the guarantor has been called upon to honour that guarantee; or

(ii) the settlement value of the credit agreement that it guarantees, discounted by a prescribed factor; and

(c) any new credit guarantee is the settlement value of the credit agreement that it guarantees, discounted by a prescribed factor."

[10] Section 81 of the NCA contain provisions aimed at preventing reckless credit. The section reads as follows:

"81 Prevention of reckless credit

(1) When applying for a credit agreement, and while that application is being considered by the credit provider, the prospective consumer must fully and truthfully answer any requests for information made by the credit provider as part of the assessment required by this section.

(2) A credit provider must not enter into a credit agreement without first taking reasonable steps to assess-

(a) the proposed consumer's-

(i) general understanding and appreciation of the risks and costs of the proposed credit, and of the rights and obligations of a consumer under a credit agreement;

(ii) debt re-payment history as a consumer under credit agreements;

(iii) existing financial means, prospects and obligations; and

(b) whether there is a reasonable basis to conclude that any commercial purpose may prove to be successful, if the consumer has such a purpose for applying for that credit agreement.

(3) A credit provider must not enter into a reckless credit agreement with a prospective consumer.

(4) For all purposes of this Act, it is a complete defence to an a/legation that a credit agreement is reckless if-

(a) the credit provider establishes that the consumer failed to fully and truthfully answer any requests for information made by the

credit provider as part of the assessment required by this section; and

(b) a court or the Tribunal determines that the consumer's failure to do so materially affected the ability of the credit provider to make a proper assessment."

Section 83 provides for the declaration of a credit agreement and reads as follows.

"83 Declaration of reckless credit agreement

(1) Despite any provision of law or agreement to the contrary, in any court or Tribunal proceedings in which a credit agreement is being considered, the court or Tribunal, as the case may be, may declare that the credit agreement is reckless, as determined in accordance with this Part.

(2) If a court or Tribunal declares that a credit agreement is reckless in terms of section 80(1)(a) or 80(1)(b)(i), the court or Tribunal, as the case may be, may make an order-

(a) setting aside all or part of the consumer's rights and obligations under that agreement, as the court determines just and reasonable in the circumstances; or

(b) suspending the force and effect of that credit agreement in accordance with subsection (3)(b)(i).

(3) If a court or Tribunal, as the case may be, declares that a credit agreement is reckless in terms of section 80 (1) (b) (ii), the

court or Tribunal, as the case may be-

(a) must further consider whether the consumer is over-indebted at the time of those proceedings; and

(b) if the court or Tribunal, as the case may be, concludes that the consumer is over-indebted, the said court or Tribunal may make an

order-

(i) suspending the force and effect of that credit agreement until a date determined by the Court when making the order of suspension; and

(ii) restructuring the consumer's obligations under any other credit agreements, in accordance with section 87.

(4) Before making an order in terms of subsection (3), the court or Tribunal, as the case may be, must consider-

(a) the consumer's current means and ability to pay the consumer's current financial obligations that existed at the time the agreement

was made; and

(b) the expected date when any such obligation under a credit agreement will be fully satisfied, assuming the consumer makes all required payments in accordance with any proposed order."

[11] The provisions of the National Credit Act dealing with the prevention and consequences of reckless credit has a far-reaching impact on contracts to which the above quoted provisions of the NCA apply. Sections 80, 81 and 83 of the NCA record a large amount of detail and, if successfully relied on by a defendant, may result in declaring the contract with that defendant void or in many respects unenforceable. In SA Taxi Securitisation (Pty) Ltd[11] Levenberg AJ after quoting the well-known dictum of Colman J in Breytenbach v Fiat SA (Edms) Bpk[12] said:

"The principles enunciated in Breytenbach v Fiat are no less applicable when the defendant, deposing to an affidavit resisting summary judgment, is relying upon defences based upon sections of the NGA. Since the enactment of the NGA, there seems to be a tendency in these Courts for defendants to make bland allegations that they are 'over-indebted' or that there has been 'reckless credit'. These a/legations, like any other allegations made in a defendant's affidavit opposing summary judgment, should not be 'inherently and seriously unconvincing', should contain a reasonable amount of verificatory detail, and should not be 'needlessly bald, vague or sketchy'. A bald a/legation that there was 'reckless credit' or there is 'over-indebtedness' swill not suffice."[13]

I share the view expressed by Levenberg AJ. The view accords with the principles set out in Mahara[14] and Joob Joob lnvestments.[15] No facts are set out in the opposing affidavit with the required measure of particularity to conclude that they have crossed the threshold to show that they will at trial have the defences based on reckless granting of credit in terms of the NCA.

[12] The second to seventh defendants are not parties to the loan agreement

between the plaintiff and the first defendant. No credit was advanced to them. They are not consumers as defined in the NCA. They are sureties for the obligations of the first defendant created by an agreement to which the NCA does not apply for the reasons stated above. The second defence is, therefore, not a defence in law.

THE FIFTH AND SIXTH DEFENCE:

[13] The contract between the Land Bank and Marcus Farming places, amongst other obligations, the obligation on Marcus Farming to repay the loan. The amount of the instalments must be clear to Marcus Farming (and the other defendants as they have a close relation with Marcus Farming.) The allegation in paragraph 16 of the particulars of claim is also clear namely that Marcus Farming breached the terms of the contract by not paying all or some of the instalments. Their allegation that the said paragraph of the particulars of claim lacks particulars about the breach is exactly that, an allegation, which, considered in context, is without any factual premise. If Marcus Farming paid the instalments in terms of the loan agreement it would have been able to, and on authority of the case law referred to above, expected to, set out facts relevant to such payments as to the date, amount and method of payment. No such facts are supplied. That defence is not shown to exist on the required standard of proof mentioned above, but it also appears not to be bona fide.

[14] Our law has been trite that certificates of balance may by agreement between parties to a contract serve as prima facie proof of the debt under that contract. The defendants' challenge of the certificate (paragraphs 43 to 47 of the opposing affidavit), has no factual premise. The loan amount is clear, so is the interest rate applicable thereto and surely the defendants would know if and when Marcus Farming paid the instalments (if any) to the Land Bank. Those facts, presented in evidence to refute the prima facie proof of the amounts reflected in the certificate, are lacking. There are no facts upon which I can conclude that the defendants would frustrate the prima facie proof of the amounts reflected as the outstanding balance of the debt at a future trial. The defence under consideration, also, does not pass muster and is not raised as a bona fide defence in law.

THIRD DEFENCE:

[15] That brings me to the third defence raised on behalf of the defendants. In addition to the discretionary relief sought by the defendants I may refuse summary judgment even if all the requirements for the granting thereof have been satisfied. That discretion may only be exercised in exceptional circumstances. As far as the declaratory relief to order that the land may be declared executable there is a further discretion. I am of the view that no exceptional circumstances exist in casu to withhold summary judgment. In my view the land should be sold in execution to reduce the indebtedness of the defendants as soon as possible. I hold the view mindful of the fact that the seventh defendant is a widow and an elderly person. At the contractual interest rate applicable to that outstanding debt (and the prevailing mora interest rate) a considerable sum accrues monthly as interest to the debt. It is a simple calculation to arrive at that conclusion. Accommodation for the seventh defendant can be obtained at a substantially lesser amount and, conveniently so it would seem as the other sureties are her relatives. It is often clear when sitting in Motion Court that to delay judgment, something that often has to happen for good reason, cannot be beneficial to a debtor as the outstanding debt increases daily. This view tallies with what Lord Hatherley mentioned in the case law referred to in paragraph 2 above more than a century ago. I am of the view that summary judgment should be granted as sought.

In the circumstances I grant summary judgment:

1. Against the first, second, third, fourth, fifth and sixth defendants jointly and severally with each other, the one paying the other to be absolved for:

1.1 R7 435 584.04 and interest on the said amount at a rate of 12.5% per annum from 31 March 2017; and

1.2 R515 548.32 and interest on that sum at a rate of 10% per annum from 31 March 2017;

2. Against the seventh defendant, jointly and severally with the first to the sixth defendants for R250 000.00 and interest on that sum at a rate of 12.5% per annum from 31 March 2017;

3. An order declaring Portion 51 of the Farm Modderfontein 188, Registration Division I.P., North West Province, specially executable;

4. Costs of the action against the first to seventh defendants on a scale as between attorney and own client.

H F JACOBS

ACTING JUDGE OF THE HIGH COURT

PRETORIA

Land & Agricultural Development Bank of SA_Judgment_HFJ AJ

[1] The first defendant ("Marcus Farming")

[2] The seventh defendant's liability under suretyship differs from the others.

[3] The same allegations are made in the notice of exception. The exception was not moved, but I will consider the points raised

therein as part of the opposing affidavit.

[4] See paras 27-42 of the opposing affidavit.

[5] See paras 43-47.

[6] Joob Joob Investments v Toks MavundlaZek 2009 (5) SA 1 (SCA) at [29]-[33].

[7] Sections 78-88.

[8] My underlining.

[9] My underlining.

[10] My underlining.

[11]SA Taxi Securitisation (Pty) Ltd v Mbatha (and two similar cases) 2011 (1) SA 310 GSJ.

[12] 1976 (2) SA 226 (T} at 228.

[13] SA Taxi Securitisation v Mbatha supra at (26).

[14] See paragraph 2 above.

[15]See paragraph 2 above.