Standard Bank of South Africa Ltd v Essa and Others (18994/2009) [2012] ZAWCHC 265 (23 May 2012)

Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No: 18994/2009

Before: The Hon. Mr Justice Binns-Ward

In the matter between:

STANDARD BANK OF SA LTD ....................................................................................Plaintiff

and

ADAM ESSA ..........................................................................................................First Defendant

SHAIEK COE .....................................................................................................Second Defendant

SHABODIEN HASSAN ROOMANAY ............................................................Third Defendant

JUDGMENT DELIVERED: 23 MAY 2012

BINNS-WARD J:

[1] The plaintiff, which is a commercial bank and a registered credit provider in terms of the National Credit Act 34 of 2005 (‘the

NCA’), instituted action against the three defendants for the payment of certain amounts allegedly due and payable by the latter as sureties in favour of the plaintiff for the debt of Xaler Construction Co. (Pty) Ltd (‘Xaler’). Xaler was the subject of a final winding- up order made on 27 May 2009. Xaler was indebted to the plaintiff on overdraft in the sum of R4 793 836.53, together with interest thereon from 25 May 2009. No dividend has been paid to the plaintiff by the liquidators of Xaler.

[2] The overdraft agreement between the plaintiff and Xaler qualifies as a ‘credit facility’ as contemplated in terms of s 8(3) of the NCA, or failing that, as a 'credit transaction’ in terms of s 8(4).1 Nevertheless, the provisions of the NCA were not applicable to the overdraft agreement between the plaintiff and Xaler. This was so because the agreement concluded between the parties constituted a ‘large agreement’ as contemplated in section 9(4) of the NCA, that is, a credit agreement in respect of which the principal debt falls at or above the higher of the thresholds established in terms of section 7(l)(b) of the NCA and because Xaler, as the consumer, was a juristic person. See s 4(l)(a)(i) and (b) of the

NCA.1

[3] On or about 18 July 2007, and by all indications at the same time and place, each of the defendants executed separate deeds of suretyship in favour of the plaintiff in terms of which each of them bound himself as surety and co-principal debtor in favour of the plaintiff for all the debts of Xaler, of any kind, both present and future (‘the Debts’). In terms of each of these deeds the surety’s contingent liability thereunder was limited to the capital sum of R2,5 million. It is evident from a facility letter addressed by the plaintiff to Xaler, dated 20 July 2007, that the suretyships were executed in order to provide the plaintiff with the security it required in respect of the provision by it of an overdraft facility to Xaler limited to R2,5

million.

[4] On or about 21 September 2007 each of the defendants executed three further deeds of suretyship in respect of the Debts. In terms of those deeds contingent liability thereunder was limited to the capital sum of R1 million. Clause 10.1 of the September suretyships, which provided ‘ This suretyship is in addition to any other suretyship or security, which, the Bank holds at any time for any of the Debts' made it clear that the execution of the deeds extended the limit of the defendants’ individual liability as sureties from the R2,5 million limit provided in terms of the deeds executed in July to 3,5 million. In contradistinction to the position obtaining in respect of the execution of the July suretyships, the circumstances in which the September suretyships were executed are not apparent on the factual evidence before the court.

[5] The defendants were directors of Xaler when they executed the aforementioned deeds of suretyship.

[6] The material facts in the case are not in dispute and the parties were thus able to settle a stated case. Two main issues arise for determination. The first is whether the deeds of suretyship executed by the defendants were credit agreements to which the NCA applies. It is common cause in this respect that the plaintiff did not undertake any assessment of the nature required in terms of s 81(2) of the NCA before obtaining the suretyships from the defendants, nor did it provide the defendants with pre-agreement statements or quotations as required in terms of s 92(2) of the Act. If the suretyships are credit agreements to which the NCA applies, these omissions could bear on the validity of the agreements. The second issue concerns a dispute between the parties over the proper construction of the deeds of suretyship, and in particular the effect thereof on the extent of the defendants’

combined and individual liability thereunder. The plaintiff contends that the suretyships afford it security in respect of the Debts up to an aggregate amount of R 10,5 million plus interest; that is that it could recover up to R3,5 million plus interest from each of the defendants. The defendants, on the other hand, contend that, subject to the terms and conditions of the suretyships, they are jointly and severally contingently liable to the plaintiff in an amount limited to R3,5 million in aggregate.

[7] Credit agreements which are potentially subject to the NCA are categorised by the statute in three types: ‘credit facilities’,

‘credit transactions’ or ‘credit guarantees’. An agreement which by its character is a combination of any of the aforegoing types is also a credit agreement within the meaning of the term in the Act. See s 8(1) of the NCA. A ‘credit facility’ is defined in s 8(3) of the Act and a ‘credit transaction’ in s 8(4).2 A consideration of the provisions of ss 8(3) and (4) demonstrates that credit facilities and credit transactions arise from agreements

in terms whereof one party (the ‘credit provider’) affords or undertakes to extend credit to the counter-party/ies (the ‘consumer/s’). A ‘credit guarantee’, by contrast, is an agreement in terms whereof a person undertakes or promises to satisfy upon demand any obligation of another consumer in terms of a credit facility or a credit transaction to which the NCA applies; see s 8(5) of the Act3

[8] The plaintiffs case on the first of the aforementioned issues is that the provisions of the NCA are not applicable to the suretyships because no credit was extended to any of the defendants in terms of the suretyships, and therefore the suretyships do not constitute ‘credit facilities’ or ‘credit transactions’ falling within the ambit of s 8(3) or (4) of the NCA. The plaintiff contends that the suretyship agreements constituted ‘credit guarantees’, as contemplated in s 8(5) of the NCA. Section 4(2)(c) of the NCA provides ‘this Act applies to a credit guarantee only to the extent that this Act applies to a credit facility or credit transaction in respect of which the credit guarantee is granted.'. Accordingly, argues the plaintiff, as the overdraft agreement between the plaintiff and Xaler was - for reasons mentioned earlier - not subject to the NCA, so also are the suretyship agreements not subject to the Act.

[9] The defendants take the position that the deeds of suretyship are ‘are multi­functional instruments of debt amounting to inter alia, an acknowledgement of debt, personal security and furthermore constitute and create a relationship of joint and several co-debtorship with the plaintiff.4 They argue that the acknowledgement of debt and the co-debtor characteristics of the contracts constituted credit agreements that

were subject to the provisions of the NCA. They assert, however, that the suretyships were not ‘credit guarantees’ within the meaning of s 8(5) of the Act.

[10] The so-called ‘co-debtorship’ relied upon by the defendants arises from their having bound themselves to the plaintiff in terms of the deeds of suretyship executed in July 2007 as ‘surety(ies) and co-principal debtor(s) for the payment when due of all the present and future debts...of Xaler’. It is well established, however, that the assumption by a surety of an obligation as ‘surety and co-principal debtor’ in no way derogates from the character of the contract entered into as one of suretyship. In context the term ‘co-principal debtor’ denotes nothing more than a waiver of the ordinarily implied right of a surety to the excussion of the principal debtor before recourse may be had by the creditor against the surety. It also constitutes a renunciation of the benefit of division.5 This is confirmed by the fact that the defendants could become obligated to perform in terms of the contracts only if Xaler had

incurred an indebtedness to the plaintiff, and then only to the extent of such debt. The nature of the defendants’ obligation

is therefore entirely accessory in nature. They did not undertake a primary or principal obligation to the plaintiff.

[11] There is nothing in the deeds of suretyship to support the allegation that they constituted acknowledgements of debt. Even if they did, that would not result in their being ‘credit facilities’ or ‘credit transactions’ within the ambit of the NCA.

[12] The import and significance of the defendants’ reference to the deeds of suretyship as constituting ‘instruments of debt’ amounting to ‘personal security’ escapes me. Their employment of the term ‘personal security’ appears to be founded in the definition of ‘unsecured credit transaction’ in reg. 39(3) of the National Credit Regulations, 2006. The definition goes as follows: unsecured credit transaction” means a credit transaction in respect of which the debt is not supported by any pledge or other right in property or suretyship or any other form of personal security other than credit life insurance\ In context the expression ‘personal security’ is used in the commonly encountered way merely to distinguish security consisting of a personal right from that manifested by a real right in a third party’s property, such as in a pledge or a mortgage. The defendants’ counsel did not deal with this argument in his oral address; understandably so, because it does not take the case anywhere.

[13] In contending that the suretyships do not qualify as ‘credit guarantees’ within the meaning of the Act the defendants rely on the distinction in law between a guarantee, which imposes a self-standing principal obligation on the guarantor,6 and a suretyship, which creates an obligation which is entirely accessory to that of a principal debtor.7 While the distinction between these types of contracts is easy to state in the abstract, in practice it can sometimes be difficult to determine into which of the types a particular agreements falls.8 It is also a not infrequent occurrence for parties to describe what is unquestionably a contract of suretyship as the provision of a guarantee.9

[14] In my experience the contract of guarantee is not frequently encountered in practice- and when it is. the guarantor is more often than not a financial institution such a bank or insurance company, whereas that of suretyship - especially in the context of the extension of credit by lending institutions to their corporate customers - is ubiquitous. With a single exception,10 which is not relevant, the NCA does not employ the word ‘guarantee' other than as part of the term ‘credit guarantee’. The term ‘credit guarantee’ is widely defined in s 1 of the Act to mean ‘an agreement that meets all the criteria set out in section 8(5)' of the Act. The words ‘surety’ or ‘suretyship’ do not appear anywhere in the Act. It seems to me that the definition of ‘credit guarantee’ in s 8(5) of the Act may be wide enough to encompass a contract of guarantee related to the performance by another of person of his or her obligations under a contract qualifying as a credit facility or a credit transaction, as well a contract of suretyship intended to provide a form of personal security in respect of the performance of its obligations by a principal debtor under a credit agreement in terms of s 8(3) or (4) of the NCA.

[15] The provisions of s 8(5) of the NCA have been set out above.11 It involves the undertaking by a person to satisfy the obligation of ‘another consumer’. It is clear that a suretyship

provided in favour of a credit provider in terms of the Act in respect of a principal obligation incurred by another consumer could

fall within the ambit of the meaning of the term ‘credit guarantee’.12 The word ‘consumer’ is specially defined.13 It is apparent from the definition that a ‘consumer’ only qualifies as such under the Act if it is a party to a credit

agreement to which the Act applies. Thus, as Xaler’s overdraft debt does not arise in respect of a credit agreement to which the NCA applies, and as Xaler consequently does not fall within the definition of ‘consumer' with.the result that it could not have been ‘another consumer’ within the meaning of s 8(5), the suretyships in the current case clearly did not qualify as a ‘credit guarantees’ within the meaning of the term as defined in the subsection. The suretyships also do not fall within the ambit of any of the other types of agreement categorised in terms of the other provisions of s 8 of the Act, and thus do not qualify as a ‘credit agreement1 in terms of the Act.14 (The ‘greater certainty’ which s 4(2)(c) of the NCA15 purports to provide is in the result - certainly on the facts of the current case - actually quite superfluous.)

[16] Despite the fact that it has been accepted in numerous judgments ~ including at least one of the Supreme Court of Appeal16 - that contracts of suretyship to which the NCA does apply qualify as ‘credit guarantees’ within the meaning of s 8(5) of the NCA, counsel for the defendants maintained doggedly that were not. He did this in order to avoid the consequences of s 4(1) read with s 9(4) of the Act, alternatively, of s 4(2)(c) thereof. But needing for the purpose of his argument to keep the suretyships as credit agreements within the scope of the Act, he therefore sought to bring them within the categories of credit facilities or credit transactions in terms of s 8(3) or 8(4)(f) of the Act. There was no merit in these arguments.

[18] Owing to the conclusion reached in paragraph [15], above, it is not necessary to consider the basis upon which the defendant’s

counsel argued that the suretyships were not ‘credit guarantees’ within the meaning of the Act. It is necessary only

to consider his argument that they qualified as ‘credit facilities’ or ‘credit transactions’. As pointed

out by counsel for the plaintiff, apart from any other consideration, there is nothing about the nature of suretyship in general, or the deeds of suretyship executed by the defendants in particular, which provides for a deferment in respect of the sureties’ obligation to pay as is required by 8(3)(a)(ii)(aa) or s 8(4)(f)17 of the Act, and which thus has to be manifest as a term of the agreements, if the defendants’ counsel’s argument were to hold good. Accordingly, even if one were to assume - against the weight of authority - in favour of the defendant’s counsel’s

argument that the contract of suretyship does not in any circumstances qualify for categorisation as a ‘credit guarantee’ in terms of s 8(5) of the NCA, the result would be that as it also did not qualify as a ‘credit facility’ or a ‘credit transaction’, a contract of suretyship would not fall within the ambit of the Act as a credit agreement under any circumstances. The result on that approach - to which I should make it clear am unable to subscribe - would fatally undermine the achievement by defendant’s counsel of his ultimate objective, which was to seek: to demonstrate that the suretyship agreements entered into by the defendants were void for non-compliance by the plaintiff with the requirements of s 92(2) of the NCA. Section 92(2)

is of application only to contracts which fall within the ambit of the Act.

[18] The first issue therefore falls to be determined in favour of the plaintiff.

[19] Turning to the second issue, which concerns the proper construction of the deeds of suretyship: Clause 3 in each of the deeds of suretyship executed by the defendants provided:

3. Multiple sureties

3.1. If there are more than one of us, this suretyship applies to us individually and to any combination of us together (joint and several liability).

3.2. This is so even if any other person who was expected to sign this or any other suretyship as a surety for part or all of the Debts -

3.2.1. does not sign; or

3.2.2. is released as a surety; or

3.2.3. is found not to be bound as a surety.

[20] As mentioned, it is evident, if one considers the terms of the facility letter dated 20 July 2007, that the three deeds of suretyship executed by the defendants on 18 July 2007 were provided"to satisfy the plaintiffs conditions for agreeing to allow Xaler an overdraft limit of R2,5 million. It is similarly evident that in executing the respective deeds of suretyship each of the defendants would have been aware, and would have intended, that the other two of them would undertake essentially identical obligations in favour of the plaintiff. The situation was one thus plainly falling within that contemplated by clause 3.2 of the respective deeds. I am left in no doubt that each of the defendants entered into the respective transactions on the basis that, together with the other two of them, he would be one of ‘multiple sureties’ within the meaning of clause 3 of the respective deeds of suretyship. It follows from the provisions of clause 3.1 that the common intention of the parties, including the plaintiff, was that the defendants - or at least those of them who, consistently with the originating scheme apparent from the terms of the facility letter, duly executed deeds of suretyship - would be jointly and several contingently liable in terms thereof to the plaintiff in an amount limited in aggregate to R2,5 million.

[21] This construction also fits sensibly from a commercial perspective into the factual matrix provided by the link between the execution of the deeds of suretyship and the conditional agreement by the plaintiff to allow the principal debtor to avail of overdraft facilities up to a limit of R2,5 million. It is improbable that the plaintiff would have sought to require personal security from the directors of Xaler in the aggregate amount of R7,5 million in respect of a principal debt limited to only R2,5 million. Such a requirement could have no practical efficacy. If there is any ambiguity in the deeds of suretyship allowing a different and more onerous construction to be contended for - as the plaintiff did - the less onerous construction falls to be preferred. This is in accordance with the principle that in a case where the language of the contract allows it, a provision in a suretyship agreement must be construed restrictively, and in favour of the surety.18

[22] It is common cause that the second set of suretyships were also directed primarily at securing the payment of Xaler’s overdraft debt. The most probable inference to be made in the circumstances is that the overdraft facility that required securing must have been increased from one with a limit of R2,5 million to one of R3,5 million. There is no indication in the factual evidence to suggest any other basis to distinguish the execution of the essentially identically worded second set of suretyships from the first set. In the result there is no reason to construe them any differently from the first set.

[23] The second issue therefore falls to be decided in favour of the defendants.

[24] The action has had a somewhat tortuous history, involving an application for summary judgment, an exception and an opposed application by the plaintiff to amend its particulars of claim. The costs implications of all these procedures were left over for determination at the trial and thus fall to be decided in this judgment.

[25] The claim was of a character which justified the plaintiff in bringing an application for summary judgment if it was of the belief that the defendants did not have a defence. The defendants raised essentially two defences in their affidavits opposing the summary judgment application. The first went to an inconsistency between the sum of R3,5 million claimed in the summons and the sum of R3 500 which was ostensibly the amount claimed in terms of the application for summary judgment. The much lower amount apparently claimed in the summary judgment application was in the circumstances plainly identifiable as the product of a typographical error. There were similar patent errors in paragraphs 23, 27 and 31 of the particulars of claim. To address the issue the plaintiff amended its notice of application. In the circumstances there was nothing exceptionable about this; cf Absa Bank Limited v Carstens NO and others [2010] ZAWCHC 52 (23 March 2010), Standard Bank of SA Ltd v Naude and Another 2009 (4) SA 669 (ECP); Standard Bank of South Africa Ltd v Roestof2004 (2) SA 492 (W) and Van den Bergh v Weiner 1976 (2) SA 297 (W). The other defence raised was based on the issues of the application of the NCA, as traversed in the main section of this judgment. In the face of those allegations the summary judgment application, understandably, was not argued. The plaintiff submits that the costs of the summary judgment should be made costs in the cause. Ordinarily I would agree. It is a matter of concern, however, that the deponents to affidavits made in support of applications for summary judgment can make such affidavits, purportedly after reading the summons, without detecting glaring errors of the nature just described in the formulation of the claim. In the circumstances of the unacceptably careless approach by the deponent to the plaintiff s supporting affidavit I have decided that no order as to costs shall be made in respect of the summary judgment application.

[26] As for the rest it is convenient to describe the subsequent conduct of the matter in the lead-up to trial essentially as it was set forth in a note on costs handed up to me by the plaintiffs counsel at the hearing: Following the withdrawal of the summary judgment application, the defendants, in July 2010 delivered a notice of exception in which they raised the the NCA issue and the issue of the inconsistency of the pleaded claim with the content of the deeds of suretyship (in other words the first and second issues disposed of in the main part of this judgment). Subsequently, in February 2011, the plaintiff gave notice of its intention to amend the particulars to deal with these two issues. The defendants objected to the intended amendments on the basis that the

proposed amendments would not cure the alleged excipiability. Their objection essentially was that the particulars of claim in the form in which the plaintiff sought to render them by amendment would not address the objections set out in the notice of exception previously delivered. On 24 March 2011 the parties, by agreement, took an order made in chambers directing that the exceptions would be heard on 10 October 2011, together with any application by the plaintiff for the amendment of the particulars of claim. All questions of costs stood over for later determination. Thereafter, in May 2011, the plaintiff again gave notice of its intention to amend the particulars of claim in an attempt to address the defendants’ complaint about the inconsistency of the claim with the deeds of suretyship, as properly construed. The defendants, however, persisted with their objections to the proposed amendments. As a consequence, in June 2011, the plaintiff launched an application for leave to amend its particulars of claim.

[27] In the event the defendants’ exception and the application for amendment were not argued because the parties subsequently agreed that the plaintiff would be permitted to effect the amendments, and that the defendants would plead thereto ‘without abandonment of the legal defences that underlie such objections and exceptions’. That agreement was incorporated in a court order made by the Judge President on 25 October 2011. Costs stood over for later determination.

[28] In the circumstances I consider that the costs attendant on the various amendments and attempted amendments of the plaintiffs particulars of claim, including the notices given in respect thereof, should be borne by the plaintiff on an unopposed basis. The subject matter of the various objections to the proposed amendments and of the exceptions were the stuff of the matter argued before me on the stated case. I therefore consider that those costs, including any costs which may have been incurred in connection with the contemplated hearing of the exceptions and application for leave to amend set down for hearing on 10 October 2011 should be treated be treated as costs in the cause. In arriving at this conclusion I have not overlooked that the defendants’ construction of the deeds of suretyship has been upheld. In that regard I agree with the submission by the plaintiffs counsel that it is unlikely, however, that a court would have been willing to determine the question of the proper interpretation of the agreements on exception. The cogency of the plaintiffs counsel’s submission in this respect is to a great extent borne out by the terms of the parties’ agreement reflected in the order taken on 25 October 2011.

[29] The plaintiff was represented at the hearing before me by senior counsel, assisted by a junior. The plaintiff sought an order awarding it the costs of two counsel. The defendant’s counsel argued against the making of such an order. Having regard to the amount involved in the claim and the novelty and intricacy of the arguments advanced on behalf of the defendants on the application of the NCA, I am satisfied that the engagement by the plaintiff of the services of two counsel was reasonable. Their involvement was reflected in detailed and well-researched heads of argument which were of valuable assistance to me in preparing for the hearing and delivering judgment with expedition.

[30] In the result the following orders are made:

(a) Judgment is granted in favour of the plaintiff against the defendants jointly and severally, the one paying the others to be absolved, for payment of the sum of R3 500 000 as claimed in terms of prayer (b) of the particulars of plaintiffs claim, as amended, dated October 2011, together with interest thereon at five percent above the plaintiffs prime rate per annum, calculated daily and compounded monthly in arrear from 25 May 2009 to date of payment.

(b) Save as provided in terms of paragraphs (c) and (d), below, the defendants shall be jointly and severally liable for payment of the plaintiffs costs of suit in the action, including all interlocutory proceedings, as taxed or agreed, including the costs of two counsel where such were employed.

(c) There shall be no order as to costs in respect of the summary judgment application.

(d) The defendants’ costs attendant on the receipt and consideration of the various amendments of the plaintiffs particulars of claim, including the notices in terms of rule 28 given in respect thereof and application for leave to amend shall be paid by the plaintiff on an unopposed basis.

A. G. BINNS-WARD J

Judge of the High Court

1Sub-sections 8(3) and 8(4) of the NCA provide as follows: (3) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2) or section 4 (6) (b), constitutes a credit facility if, in terms of that agreement- (a) a credit provider undertakes- (i) to supply goods or services or to pay an amount or amounts, as determined by the consumer from time to time, to the consumer or on behalf of, or at the direction of the consumer; and (ii) either to- (aa) defer the consumer's obligation to pay any part of the cost of goods or services, or to repay to the credit provider any part of an amount contemplated in subparagraph (i); or (bb) bill the consumer periodically for any part of the cost of goods or services., or any part of an amount, contemplated in subparagraph (i); and (b) any charge, fee or interest is payable to the credit provider in respect of (i) any amount deferred as contemplated in paragraph (a) (ii) (aa); or (ii) any amount billed as contemplated in paragraph (a) (ii) (bb) and not paid within the time provided in the agreement. (4) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2), constitutes a credit transaction if it is- (a) a pawn transaction or discount transaction; (b) an incidental credit agreement, subject to section 5 (2); (c) an instalment agreement; (d) a mortgage agreement or secured loan; (e) a lease; or (f) any other agreement, other than a credit facility or credit guarantee, in terms of which payment of an amount owed by one person to another is deferred, and any charge, fee or interest is payable to the credit provider in respect of- (i) the agreement; or (ii) the amount that has been deferred.

1Sub-sections 8(3) and 8(4) of the NCA provide as follows:

(3) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2) or section 4 (6) (b), constitutes a credit facility if, in terms of that agreement-

(a) a credit provider undertakes-

(i) to supply goods or services or to pay an amount or amounts, as determined by the consumer from time to time, to the consumer or on behalf of, or at the direction of the consumer; and

(ii) either to-

(aa) defer the consumer's obligation to pay any part of the cost of goods or services, or to repay to the credit provider any part of an amount contemplated in subparagraph (i); or

(bb) bill the consumer periodically for any part of the cost of goods or services., or any part of an amount, contemplated in subparagraph (i); and

(b) any charge, fee or interest is payable to the credit provider in respect of

(i) any amount deferred as contemplated in paragraph (a) (ii) (aa); or

(ii) any amount billed as contemplated in paragraph (a) (ii) (bb) and not paid within the time provided in the agreement.

(4) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2), constitutes a credit transaction if it is-

(a) a pawn transaction or discount transaction;

(b) an incidental credit agreement, subject to section 5 (2);

(c) an instalment agreement;

(d) a mortgage agreement or secured loan;

(e) a lease; or

(f) any other agreement, other than a credit facility or credit guarantee, in terms of which payment of an amount owed by one person to another is deferred, and any charge, fee or interest is payable to the credit provider in respect of-

(i) the agreement; or

(ii) the amount that has been deferred.

1Those provisions read as follows: (1) Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm's length and made within, or having an effect within, the Republic, except- (a) a credit agreement in terms of which the consumer is- (i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related

juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7 (1) [i.e. R1 million]; (ii) ........ (iii) ....... (b) a large agreement, as described in section 9 (4), in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the time the agreement is made, below the threshold value determined by the Minister in terms of section 7 (1) [i.e. R1 million]

1Those provisions read as follows:

(1) Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm's length and made within, or having an effect within, the Republic, except-

(a) a credit agreement in terms of which the consumer is-

(i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related

juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7 (1) [i.e. R1 million];

(ii) ........

(iii) .......

(b) a large agreement, as described in section 9 (4), in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the time the agreement is made, below the threshold value determined by the Minister in terms of section 7 (1) [i.e. R1 million]

2See note 1, above.

3Sub-section 8(5) of the NCA provides: (5) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2), constitutes a credit guarantee if in terms of that agreement, a person undertakes or promises to satisfy upon demand any obligation of another consumer in terms of a credit facility or a credit transaction to which this Act applies.

3Sub-section 8(5) of the NCA provides:

(5) An agreement, irrespective of its form but not including an agreement contemplated in subsection (2), constitutes a credit guarantee if in terms of that agreement, a person undertakes or promises to satisfy upon demand any obligation of another consumer in terms of a credit facility or a credit transaction to which this Act applies.

4Para. 7 of the defendants’ heads of argument.

5See Neon and Cold Cathode Illuminations (Pty) Ltd v Ephron 1978 (1) SA 463 (A) at 471C - 472E. There was no practical difference between the effect of the suretyships exexuted by the defendants in July 2007 and those executed in September 2007 because in the latter the benefits of excussion and division were expressly renounced (see clauses 2.1 and 2.2).

6Forsyth & Pretorius Caney ’s The Law of Suretyship 6th ed. 2010 (Juta), at 33-34; Pretorius Suretyships and Indemnity (2001) 13 SA Merc LJ at 95-101; and see Carrim v Omar [2001] 3 A11 SA 71 (W) at para.s 28-68 and the discussion thereof by Christopher Forsyth and Max Du Plessis in a note published under the title Suretyship, Guarantee and Islamic Banking in (2002) 119 SALJ at 671-678.

7See e.g. Trust Bank of Africa Ltd v Frysch 1977 (3) SA 562 (A) at 584F-585G; and Sapirstein and others v Anglo African Shipping Co (Pty) Ltd 1978 (4) SA 1 (A) at 11G - fin.

8See e.g. Sassoon Confirming and Acceptance Co (Pty) Ltd v Barclays National Bank Ltd 1974 (1) SA 641 (A); List v Jungers 1979 (3) SA 106 (A) and Carrim v Omar supra. The most material reason to properly draw the distinction is for the purposes of determining whether the contract in question is subject to the formalities in respect of contracts of suretyship prescribed in terms of s 6 of the

General Law Amendment Act 50 of 1956. A surety is also entitled to certain benefits under common law. See Caney's The Law of Suretyship op cit, supra, at 26.

9See Caney’s The Law of Suretyship op cit, supra, at 32-34; Mouton v Mynwerkersunie 1977 (1) SA 119 (A) at 136A-E; Basil Read (Pty) Ltd v Beta Hotels (Pty) Ltd & Others 2001 (2) SA 760 (C), at 766D.

10See s 90(2)(g)(ii).

11In note 4.

12See e.g. Firstrand Bank Ltd v Carl Beck Estates (Pty) Ltd and another 2009 (3) SA 384 (T); Nedbank Ltd v Wizard Holdings (Pty) Ltd and others 2010 (5) SA 523 (GSJ) and Structured Mezzanine Investments (Pty) Ltd v Davids and others 2010 (6) SA 622 (WCC).

12See e.g. Firstrand Bank Ltd v Carl Beck Estates (Pty) Ltd and another 2009 (3) SA 384 (T);

Nedbank Ltd v Wizard Holdings (Pty) Ltd and others 2010 (5) SA 523 (GSJ) and Structured Mezzanine Investments (Pty) Ltd v Davids and others 2010 (6) SA 622 (WCC).

13See s 1 of the NCA. The definition of 'consumer' goes as follows: in respect of a credit agreement to which.this Act applies, means- (a) the party to whom goods or services are sold under a discount transaction, incidental credit agreement or instalment agreement; (b) the party to whom money is paid, or credit granted, under a pawn transaction; (c) the party to whom credit is granted under a credit facility; (d) the mortgagor under a mortgage agreement; (e) the borrower under a secured loan; (f) the lessee under a lease; (g) the guarantor under a credit guarantee; or (h) the party to whom or at whose direction money is advanced or credit granted under any other credit agreement (underling supplied for emphasis).

13See s 1 of the NCA. The definition of 'consumer' goes as follows:

in respect of a credit agreement to which.this Act applies, means-

(a) the party to whom goods or services are sold under a discount transaction, incidental credit agreement or instalment agreement;

(b) the party to whom money is paid, or credit granted, under a pawn transaction;

(c) the party to whom credit is granted under a credit facility;

(d) the mortgagor under a mortgage agreement;

(e) the borrower under a secured loan;

(f) the lessee under a lease;

(g) the guarantor under a credit guarantee; or

(h) the party to whom or at whose direction money is advanced or credit granted under any other credit agreement

(underling supplied for emphasis).

14Cf. Nedbank Ltd v Wizard Holdings (Pty) Ltd and others supra, at para. 10 and Structured Mezzanine Investments (Pty) Ltd v Davids and others supra, at para. 16.

15Section 4(2)(c) of the NCA provides: For greater certainty in applying subsection (})- [see note 2 above] ....... (c) this Act applies to a credit guarantee only to the extent that this Act applies to a credit facility or credit transaction in respect of which the credit guarantee is granted;

15Section 4(2)(c) of the NCA provides:

For greater certainty in applying subsection (})- [see note 2 above]

.......

(c) this Act applies to a credit guarantee only to the extent that this Act applies to a credit facility or credit transaction in respect of which the credit guarantee is granted;

16Ribeiro and Another v Slip Knot Investments 771 (Pty) Ltd 2011(1)SA575 (SC A).

17See note 1, above for the text of the provisions.

18See e.g. HNR Properties CC and another v Standard Bank OfSA Ltd [2004] 1 All SA 486 (SCA). at para 14.