Luxottica South Africa (Pty) Ltd v Stanley Building Investments (Pty) Ltd and Another (20303/10, 20304/10) [2010] ZAGPJHC 175 (10 September 2010)

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

REPUBLIC OF SOUTH AFRICA

Case Nos. 20303/10 and 20304/10

Date:10/09/2010

In the two matters between:

LUXOTTICA SOUTH AFRICA (PTY) LTD.......................................................Applicant

and

STANLEY BUILDING INVESTMENTS (PTY) LTD.............................First Respondent

INVESTEC BANK LTD...................................................................Second Respondent

JUDGMENT

MEYER, J

[1] These two cases – 20303/10 and 20304/10 – came before me in the unopposed motion court. Provisional sentence is in each instance claimed against the first respondent on a covering mortgage bond. The second respondent is cited by reason of its interest as the holder of mortgage bonds enjoying a preferent ranking to those held by the applicant.

[2] An action for provisional sentence is founded on a liquid document.1 My concern was whether the covering mortgage bond on which provisional sentence is sought in each case complies with the requirement of liquidity. This requirement was formulated as follows in Rich v Lagerway:2

‘If the document in question, upon a proper construction thereof, evidences by its terms, and without resort to evidence extrinsic thereto, ... an unconditional acknowledgment of indebtedness in an ascertained amount of money, the payment of which is due to the creditor, it is one upon which provisional sentence may properly be granted.’

[3] There appears in each covering mortgage bond a declaration of ‘... the Mortgagor to be truly and lawfully indebted and held and firmly bound to and in favour of ...’ the plaintiff in the sum of ‘the capital’ - R640, 000.00 in the covering mortgage bond on which provisional sentence is claimed under case no. 20303/10 and R9, 754, 531.00 in the covering mortgage bond on which provisional sentence is claimed under case no. 20303/10 – ‘... arising from a consideration set out in the recital.’ A wide variety of possible causes of indebtedness or considerations are recorded in the recitals of each covering mortgage bond,

including ‘a direct or indirect liability incurred by the Mortgagor individually or jointly with others’, ‘moneys lent and advanced’, ‘drafts or bills of exchange’, ‘any suretyship, guarantee or indemnity signed by the Mortgagor in favour of the Mortgagee, or given by the Mortgagee for and on behalf of the Mortgagor’, ‘any payment made by the Mortgagee pursuant to’ each bond, ‘including future debts generally from whatsoever cause arising’.

[4] When each covering mortgage bond is read as a whole and interpreted,3 it becomes clear that an acknowledgment in an ascertained amount of money is not what was intended. Each covering mortgage bond records that it was given as a continuing covering security for all and any sum or sums of money which might then or in the future be owing to or claimable by the plaintiff from any cause mentioned in each instrument and any other cause of whatsoever nature, and that each covering mortgage bond is to remain of full force and effect until cancelled in the deeds registry notwithstanding any fluctuation in, or temporary extinction of, the first defendant’s indebtedness to the plaintiff from time to time. The first defendant, in other relevant provisions of the covering mortgage bond on which provisional sentence is claimed under case no. 20303/10, expressly acknowledges its indebtedness to the plaintiff for indeterminate amounts up to specified maximums of R640 000.00 together with interest thereon, which is referred to as ‘the capital’ and of R160 000.00, which is referred to as ‘the additional sum’,4 and the first defendant, in other relevant provisions of the covering mortgage bond on which provisional sentence is claimed under case no. 20304/10, expressly acknowledges its indebtedness to the plaintiff for indeterminate amounts up to specified maximums of R9, 754, 531.00 together with finances charges thereon (‘the capital’) and of R2, 438, 632.75 (‘the additional sum’). An acknowledgment of indebtedness, not in an ascertained amount of money, but up to a specific sum, does not render the instruments liquid.5

[5] It further becomes clear upon a construction of the covering mortgage bonds that the apparent unconditional acknowledgments of indebtedness relating to the capital sums and interest or finance charges thereon were made in respect of indeterminate amounts which might or might not already have been advanced and to advances which the plaintiff could make in the future. The extent of any indebtedness at the time of the execution of the instruments cannot be ascertained ex facie the covering mortgage bonds.

[6] A covering mortgage bond in which the acknowledgment was given in consideration of an undertaking by the mortgagee to make future advances could be liquid. The connection between the admission or acknowledgment and the concomitant obligation of the mortgagee must appear ex facie the instrument. 6 An undertaking of an unconditional obligation on the part of the plaintiff does not, however, appear ex facie the instruments under consideration. The acknowledgments can therefore also not be said to have been made in consideration for the plaintiff’s undertakings to make future advances or to comply with certain obligations. The apparent unconditional

acknowledgment of indebtedness is, on my interpretation of each covering mortgage bond, no more than ‘merely a conveyancing

form’7 or ‘ceremonial admission’.8

[7] I am accordingly of the view that each covering mortgage bond does not comply with the requirement of liquidity and that provisional

sentence in each case is incompetent.

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

1. The application for provisional sentence in case no. 20303/10 is refused and no order as to costs is made.

2. The application for provisional sentence in case no. 20304/10 is refused and no order as to costs is made.

P.A. MEYER

JUDGE OF THE HIGH COURT

10 September 2010.

1 A concise and, in my respectful view, correct exposition of the relevant legal principles and references to decided cases are to be found in FR Malan et al: Provisional Sentence on Bills of Exchange, Cheques and Promissory Notes (Butterworths), at p 16 et seq.

2 1974 (4) SA 748 (A), at p 754.

3 Boshoff AJP in Harrosmith v Ceres Flats (Pty) Ltd 1979 (2) SA 722 (TPD), at p 732E, said this: ‘Whether or not a clear and unconditional acknowledgement of debt, sufficient to support an interlocutory judgment of provisional sentence, is contained in an instrument is in each case essentially a matter of construction.’

4 The additional sums in both covering mortgage bonds inter alia include ‘... such other costs, charges, life assurance or endowment premiums, expenses and future debts generally ...’

5 Harrowsmith v Ceres Flats (Pty) ltd 1979 (2) SA 722 (T), at p 745; Barclays Western Bank Ltd v Pretorius 1979 (3) SA 637 (N), at pp 650 – 651; Wollach v Barclays National Bank Ltd 1983 (2) SA 543 (A), at p 552F - H.

6 Wolach v Barclays National Bank Ltd 1983 (2) 543 (A), at p 556A and at pp 556E – 559D, and Inlestone v Pereira 1939 WLD 55, at pp 64 – 65.

7 Per Bristow J in Standard Bank v Perl 1904 TS 768 at p 770.

8 Per Didcott J in Barclays Western Bank Ltd v Pretorius 1979 (3) SA 637 (NPD), at p 642F – H.