Top Spec Investments v Gounder and Another (4996/06) [2007] ZAKZHC 42 (12 January 2007)

IN THE HIGH COURT OF SOUTH AFRICA Reportable

NATAL PROVINCIAL DIVISION

Case No: 4996\06

In the matter between:

TOP SPEC INVESTMENTS Applicant

And

ANAND GOUNDER First Respondent

KAMITHA GOUNDER Second Respondent

J U D G M E N T

NICHOLSON J

The applicant company seeks the following order :

Payment by the respondents, jointly and severally, to the applicant of the sum of R1 140 000,00;

Payment by the respondents, jointly and severally, to the applicant of the sum of R100 000,00 per month from the 4th July 2006 to the date of payment;

The respondents are ordered, jointly and severally to pay the costs of the application.

The applicant was represented in this matter by Mr J Ploos van Amstel SC and the second respondent by Mr A van Zyl SC. There was no appearance for the first respondent whose attorney withdrew.

The background facts to this matter are as follows. The applicant and first and second respondent, who are married in community of property, are alleged to have entered into a written agreement of loan on 3rd April 2006 at Verulam. It is apparent from the resolution signed by first respondent on 5 May 2006 and certain other documents that the loan was needed to pay for three printing machines that the first respondent was using in his business Viva Quality Print.

The applicant’s director Harry Sidney Spain was authorized to sign the loan agreement but did not do so, due to an oversight. The loan agreement is signed by the first respondent and ostensibly the second respondent, who apparently denies ever having signed the document.

The second respondent alleges that she was first alerted to the alleged loan only when contacted by First National Bank (“FNB”) regarding the cancellation of the existing bond over the residential property.

An attorney Veni Moodley of the firm Veni Moodley and Associates drafted the documents and when they were ready for signature she notified the first respondent that he and his wife should come to her offices to sign them. Veni Moodley took photostats of the identity documents of the first and second respondents which she annexes to her affidavit.

The loan agreement and a power of attorney to register a mortgage bond over the respondents’ immovable property at 10 Paradise Road, Orient Heights, Pietermaritzburg and draft covering mortgage bond were signed by the first respondent at the offices of Veni Moodley in Verulam. When he did so the second respondent was not present.

The circumstances under which she allegedly signed are set out in an affidavit of Jelisha Mathura, a secretary in the employ of Veni Moodley and Associates. After the first respondent signed he informed Miss Mathura that his wife, the second respondent, had hurt her foot and could not climb the stairs.

First respondent undertook to go to her with the documents and obtain her signature. He left, returned with the documents, apparently signed by second respondent, and told Miss Mathura that second respondent had, indeed, signed the documents.

Spain states in his founding affidavit that he annexes a computer printout relating to the electronic transfer of the money ‘to attorney Veni Moodley on behalf of the First Respondent. The reason why the sum of R999 940.00 was transferred, instead of R1 million, was that by agreement with Ms Moodley, on behalf of First Respondent, we deducted a sum of R60 which was the bank charge for a speedy transfer, which the bank refers to as quick pay.’

Apart from the power of attorney in favour of Veni Moodley which indicates that she was the respondents’ attorney, she accounted to the first respondent deducting her fees from the loan and remitting the balance to first respondent.

In the resolution dated 5 May 2006 the first respondent speaks of authorizing attorneys Veni Moodley and Associates to proceed with the registration of the covering bond as per the power of attorney dated 3 April 2006.

Although second respondent denies that Veni Moodley was the agent of the respondents she has no knowledge of the facts and her denial does not avail her, certainly insofar as the first respondent is concerned. It seems to me that the probabilities favour that Veni Moodley and Associates were the attorneys certainly for the first respondent.

Pursuant to the loan agreement the applicant lent and advanced a sum of R1 000 000 to the respondents, which was paid to them on 5 April 2006. Veni Moodley received the said money and paid it to first respondent and various parties on his instructions.

In terms of clause 5.2 of the agreement the maximum term of the loan would not exceed 90 days. The amount of the loan was therefore repayable by no later than 3 July 2006.

In terms of clause 5.1 the respondents undertook to pay a raising fee of R140 000,00 within 90 days, which expired at the end of June 2006.

In terms of clause 5.2 the respondents undertook to pay a penalty raising fee of 10% per month in the event of the amount of the loan not being paid within the said period of 90 days.

The respondents have made no payments and the full amount of the loan and the raising fee remain outstanding.

The first respondent did not deliver an answering affidavit. He delivered a notice in terms of rule 6(5)(d)(iii), which provides as follows :

“(d) Any person opposing the grant of an order sought in a notice of motion shall

…..

If he intends to raise any question of law only he shall deliver notice of his intention do to so, within the time stated in the preceding sub-paragraph, setting forth such question.”

The first respondent contends in his notice that the applicant followed the incorrect procedure because there are material disputes of fact. This point is also taken by the second respondent.

Mr Ploos van Amstel submitted that there are no material disputes of fact. There is no real dispute that the loan agreement was signed by the first respondent and the amount of the loan paid to him. He submitted that in accordance with a long practice in our Courts bare denials are not enough to create a real dispute of fact. He referred in this regard to Da Mata v Otto N.O. 1972(3) SA 858 AD at 882 G – H.

It is apparent that the second respondent disputes that she signed the loan agreement. If she did not sign the agreement then I agree with Mr van Amstel that the first respondent perpetrated a fraud on the applicant. So much is clear from the facts enumerated above.

The first respondent elected not to depose to an answering affidavit and to tell the Court who the other signatory to the loan agreement was. Mr Ploos van Amstel submitted that the dispute as to whether or not the second respondent signed the loan agreement is not material.

In terms of section 15(1) of the Matrimonial Property Act, No 88 of 1984 (‘the Act’) a spouse in a marriage in community of property may perform any juristic act with regard to the joint estate without the consent of the other spouse, subject to the provisions of sub-sections (2), (3) and (7).

The provisions of section 15 (1), (2), (3) and (7) read as follows:

“Powers of spouses – (1) Subject to the provisions of subsections (2), (3) and (7), a spouse in a marriage in community of property may perform any juristic act with regard to the joint estate without the consent of the other spouse.

Such spouse shall not without the written consent of the other spouse _

alienate, mortgage, burden with a servitude or confer any other real right in any immovable property forming part of the joint estate; enter into any contract for the alienation, mortgaging, burdening with a servitude or conferring any other real right in immovable property forming part of the joint estate; alienate, cede or pledge any shares, stock, debentures, debenture bonds, insurance policies, mortgage bonds, fixed deposits or any similar assets, or any investment by or on behalf of the other spouse in a financial institution, forming part of the joint estate; alienate or pledge any jewellery, coins, stamps, paintings or any other assets forming part of the joint estate and held mainly as investments; withdraw money held in the name of the other spouse in any account in a banking institution, a building society or the Post Office Savings Bank of the Republic of South Africa; as a credit receiver enter into a credit agreement as defined in the Credit Agreements Act, 1980 (Act No 75 of 1980) and to which the provisions of that Act apply in terms of section 2 thereof; as a purchaser enter into a contract as defined in the Alienation of Land Act, 1981 (Act No 68 of 1981), and to which the provisions of that Act apply; bind himself as a surety

A spouse shall not without the consent of the other spouse –

alienate, pledge or otherwise burden any furniture or other effects of the common household forming part of the joint estate receive any money due or accruing to that other spouse or the joint estate by way of –

remuneration, earnings, bonus, allowance, royalty, pension or gratuity, by virtue of his profession, trade, business, or services rendered to him;

damages for loss of income contemplated in subparagraph (i); inheritance, legacy, donation, bursary or prize left, bequeathed, made or awarded to the other spouse; income derived from the separate property of the other spouse; dividends or interest on or the proceeds of shares or investments in the name of the other spouse; the proceeds of any insurance policy or annuity in favour of the other spouse;

(c) donate to another person any asset of the joint estate or alienate such an asset without value, excluding an asset of which the donation or alienation does not and probably will not unreasonably prejudice the interest of the other spouse in the joint estate and which is not contrary to the provisions of subsection (2) or paragraph (a) of this subsection."

….

(7) Notwithstanding the provisions of subsection (2)(c), a spouse may without the consent of the other spouse –

sell listed securities on the stock exchange and cede or pledge listed securities in order to buy listed securities;

alienate, cede or pledge –

a deposit held in his name at a building society or banking institution;

(ii)building society shares registered in his name.”

I will assume in the second respondent’s favour that her written consent was required either because the loan involved mortgaging immovable property or that it was a credit transaction.

Mr Ploos van Amstel argued that section 15(9) of the Act provides that when a spouse enters into a transaction with a person contrary to the provisions of sub-sections (2) or (3) and that person does not know and cannot reasonably know that the transaction is being entered into contrary to those provisions, it is deemed that the transaction concerned has been entered into with the required consent.

Spain clearly knew that the respondents were married in community of property because each of the said documents records such fact. In addition the power of attorney to pass the mortgage bond records that Veni Moodley is the respondents ‘true and lawful attorney’. As I have mentioned she rendered an account to the first respondent and deducted her fees.

Section 11(1) of the Act provides that the common law rule in terms of which a husband obtains the marital power over the person and property of his wife is repealed. As a consequence in terms of sub-section (2) any marital power which a husband had over the person and property of his wife, immediately prior to the date of coming into operation of this subsection, was abolished.

In terms of section 12 the effect of the abolition of the marital power was to do away with the restrictions which the marital power places on the capacity of a wife to contract and to litigate.

In terms of section 14 subject to certain provisions a wife in a marriage in community of property has the same powers with regard to the disposal of the assets of the joint estate, the contracting of debts which lie against the joint estate, and the management of the joint estate as those which a husband in such a marriage had immediately before the commencement of the Act.

Reverting to sub-section 15(9)(a) the consent of the other spouse is dispensed with where the third party does not know and cannot reasonably know that the transaction is being entered into without the necessary consent. We know that the applicant had no actual knowledge that the signature of the second respondent was forged by or at the instance of the first respondent. The question becomes should the applicant reasonably have known that the first respondent would forge his wife’s signature.

The court has to look and see if there were any warnings signs to put the applicant on its guard against this falsification. We are told by second respondent that she and first respondent are separated and in the throes of a divorce. Sub-section 15(9)(b) provides that if the joint estate suffers a loss as a result of that transaction, an adjustment shall be effected in favour of the other spouse upon the division of the joint estate.

As Mr van Zyl has submitted that such an adjustment might be cold comfort to second respondent as she may be ruined by being saddled with the repayment of the loan in question. We know that in terms of section 16 the court can grant consent if it is unreasonably withheld. There is a similar provision in section 17 relating to the costs incurred in litigation pursued or defended without the other spouses consent.

The enquiry whether the spouse has the consent is within the peculiar knowledge of that party. In Distillers Corporation Ltd v Modise 2001 4 SA 1071 (O) the court had to deal with section 15(2)(h) of the Act which as set out above provides as follows in respect of spouses who are married in community of property: 'Such a spouse shall not without the written consent of the other spouse . . . (h) bind himself as surety.'

The court held that the requirement, in section 15(9)(a), that a person with whom the spouse enters into a transaction 'cannot reasonably know' that the transaction is being entered into contrary to the provisions of section 15(2) implies that the matter must be considered from the point of view of the reasonable man and that the conclusion at which the reasonable man would have arrived must be reached.

The facts in that particular case were that a man who was married in community of property signed a deed of suretyship without the written consent of his spouse, after having read the document and without having been misled by the creditor about its import. The deed contained a provision in which the surety stated that he was 'legally competent to execute it'.

The court held that a reasonable man in the position of the creditor would accept that the surety was aware of the implication of his statement (namely that he had the written consent of his spouse to bind himself as surety), and would accept it as the factually correct position. In such a case, therefore, it must be deemed in terms of sub-section15(9)(a) that the suretyship was entered into with the written consent of the surety's spouse (See in this regard paragraphs [5] at 1075H/I - I and [8] and [9] at 1077E/F - I).

In the Distillers Corporation Ltd case the court considered what the concept of a reasonable man involved and quoted Van Den Heever JA, in Herschel v Mrupe 1954 (3) SA 464 (A) at 490F, where he said:

''The concept of the bonus paterfamilias is not that of a timorous faintheart always in trepidation lest he or others suffer some injury; on the contrary, he ventures out into the world, engages in affairs and takes reasonable chances. He takes reasonable precautions to protect his person and property and expects others to do likewise.''

I believe that the applicant took reasonable precautions in placing the drafting and signing of the documents in the hands of an attorney. An attorney is subject to the discipline of the law society and the court and can be expected to act reasonably. There was nothing known to the applicant to have placed it on its guard and warn it that the first respondent was the sort of rogue who would commit a massive fraud on his wife.

Legal academics have emphasized that the courts should adopt an approach that least restricts commercial traffic and that the ordinary businessman who has made enquiries ought to be able to rely on what the other spouse says. See South African Family Law Second Edition by Cronje and Heaton page 82.

In Boberg Law of the Family and Persons Second Edition the authors state that ‘a misrepresentation by the contracting spouse should not, given the wording of the provision, prejudice the third party.’ See page 191 foot note 107.

The information at the applicant’s disposal was that the first respondent wanted to buy three printing machines to carry out his business more profitably and, presumably, benefit the community estate. If the courts were to set the standards higher then not only would this seriously depart from the clear words of the statute but it would also stultify the wheels of commerce.

Harcourt J also had occasion to attempt to characterize the reasonable man in Broom and Another v The Administrator, Natal 1966 (3) SA 505 (D) at 516F - G where he said the following:

''One striking caution in this regard is contained in a criticism of an otherwise eminent English Judge who was extremely strict in regard to the issues of negligence and contributory negligence, and of whom it was said that he required of litigants the foresight of a Hebrew prophet and the agility of an acrobat. Care must be taken to avoid excessive demands upon the concept of the reasonably prudent man.''

Mr van Zyl has argued that more enquiries should have been made about whether the second respondent was actually consenting. The attorney tasked with drafting the documents and securing their signature was in possession of copies of the identity books of the respondents and must have been secure in the knowledge that second respondent was acquiescing in the deal.

Even if the attorney is regarded as the agent of the applicant I am not convinced it was unreasonable to leave it in her hands to secure the signatures of the two respondents.

It seems to me that the legislation is designed to deal with where losses should fall in society. In this instance the competing victims are the applicant and the second respondent. The real scoundrel is the first respondent who has behaved most duplicitously and feloniously in securing the loan. To have the foresight of an old Testament prophet is what Mr van Zyl asks of the applicant. But that is not what the legislation requires - it is reasonable foresight.

The second respondent is not without her remedies. I have mentioned the remedy that accrues with the dissolution of the marriage and the joint estate. In Pretorius v Pretorius and Another, 1948 (1) SA 250 (AD), Schreiner JA had the following to say at pp. 255 - 6:

"The term 'fraud', when used in connection with the abuse of his administrative powers by a husband has not, as far as I am aware, been authoritatively explained... How far the concept of fraud is here to be regarded subjectively and how far objectively is a question of some difficulty... I do not find it necessary in the present case to attempt to state precisely the circumstances that must be present before a wife can attack the exercise by her husband of his powers in dealing with the joint estate, or her share in it. Looking at the matter subjectively she would at least have to show that the circumstances rendered it probable that the husband had her rights in mind when he entered into the impugned transaction and that he appreciated that it would prejudice those rights. Looking at the position objectively she would at least have to show that the transaction was in all the circumstances an unreasonable one for her husband to enter into. It may well be that she might have to prove much more..."

Even if the wife has to prove more and in this regard I am mindful of what was said in Davis v Brisley's Minors, 18 S.C. 407, where the court equated the concept "fraud of the wife" to "wilful intention to prejudice the wife", it seems to me to have been shown in this case. In Boberg the learned authors state that ‘the state of mind of the spouse violating the consent provision is irrelevant. Thus the transaction can be deemed to have been with consent even if the contracting spouse acted with intention of defrauding the other spouse.’ See page 192.

Any sympathies for the second respondent - and I hasten to add these are very considerable - are ameliorated by regard being had to her remedies against her husband. In addition of course first respondent has committed a very serious fraud against her and against applicant. That matter will be referred to the Director of Public Prosecutions.

A number of other points were taken by the first respondent in his notice. As is apparent from the notice filed the first respondent contends that the agreement was not signed on behalf of the applicant and therefore cannot found a cause of action. Mr Ploos van Amstel correctly pointed out that an agreement of loan is not required to be in writing. In this case the agreement is in writing and was signed by the first respondent, but not by the applicant. I agree that the fact that the agreement was not signed on behalf of the applicant is irrelevant to its validity and enforceability.

There are a number of cases which show that where the parties are shown to have been ad idem as to the material conditions of the contract, the onus of proving an agreement that legal validity should be postponed until the due execution of a written document lies upon the party who alleges it. First National Bank Ltd v Avtjoglou 2000(1) SA 989 CPD at 995 E. Build a Brick BK en ‘n Ander v Eskom 1996(1) SA 115 OPD at 129 A.

In addition the first respondent contends that “the whole of alleged written agreement upon which applicant relies is not before the Court and the cause of action is rendered incomplete.” I am not sure what the first respondent’s contention is in this regard. From the above facts it is not disputed that the first respondent signed the loan agreement and that the sum of R1 000 000 was paid to him pursuant thereto. There is no further part of the written agreement which is missing and which is necessary to support the cause of action.

In his notice the first respondent contends that “applicant has failed to establish the requisites for payments as provided for in the alleged written agreement, in that inter alia, no certificate of balance due or pay authority has been provided.”

There was no certificate of balance and no transfer of any property was contemplated. In his affidavit Mr Spain explained that the wrong form was used. I agree that clause 4 of the loan agreement can be ignored because it has no relevance to the transaction. It is not disputed that the sum of R1 000 000 was paid to the first respondent and it is not open to him to say that the payment to him should not have taken place.

A further point taken by the first respondent is that payment should not have taken place until transfer was effected.

I agree that what was said above with regard to the certificate of balance also applies to this point. No transfer was contemplated. In any event, I agree that the first respondent cannot say that he is not liable to repay the loan because the payment to him should not have been made.

Furthermore in his notice the first respondent contends that the applicant has not complied with its obligations in that it did not advance to him the sum of R1 400 000,00. Spain explained in his affidavit that the agreement of loan referred to the sum of R1 400 000,00 because what was envisaged was that the applicant would discharge the amount owing to first National Bank by the respondents under the existing mortgage bond, which was approximately R400 000,00. In that event the amount of the loan would have been R1 400 000,00. On the evidence that did not happen and the amount paid to the respondents in terms of the loan agreement was the sum of R1 000 000.

I am also in agreement with Mr Ploos van Amstel that just because a lesser sum was lent to the respondents does not mean that they do not have to pay it back.

Finally the first respondent alleges that the applicant’s explanations are inadmissible as they offend “the combined effect of the parol evidence rule and the rule that no evidence may be given to alter the clear and unambiguous meaning of a contract.” I am of the judgment that the reliance on the parol evidence rule is misplaced.

From the facts in this matter it is not disputed that the first respondent borrowed the sum of R1 000 000 from the applicant which was repayable not later than 90 days after the date of payment.

The applicant does not contend that the agreement was different from the wording of the document. At best for him some of the clauses in the agreement are irrelevant and inapplicable to the transaction. I agree with Mr Ploos van Amstel that clauses 1.4, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 1.13 as well as clauses 3 and 4 and the first sentence of clause 11 can safely be ignored.

As I see the facts in this matter, the parties used the standard form agreement where the borrower has sold an immovable property and borrows money for a period not exceeding 90 days, which will be repaid out of the proceeds of the sale. The loan is secure because the money is only advanced against a conveyancer’s certificate and pay authority, in terms of which the conveyancer is authorized to pay the amount owing to the lender out of the proceeds of the sale.

What transpired in this matter is that the first respondent did not sell an immovable property. The intention was that he would secure the loan by passing a covering mortgage bond over their immovable property. I agree that the fact that the security did not materialize cannot affect the validity of the loan agreement.

What is absolutely clear is that the money was paid to the first respondent because the attorney thought that both respondents had signed the necessary documents for the registration of a covering bond.

In the event the bond was not registered because the second respondent denied that the signature on the documents was hers.

In the premises I grant the following order:

Payment by the respondents, jointly and severally, to the applicant of the sum of R1 140 000,00;

Payment by the respondents, jointly and severally, to the applicant of the sum of R100 000,00 per month from the 4th July 2006 to the date of payment;

The respondents are ordered, jointly and severally to pay the costs of the application.

Counsel for the Applicant : Mr J A Ploos van Amstel SC (instructed by Von Klemperers Attorneys)

Counsel for the Second Respondent : Mr A van Zyl Sc (instructed by Stowell and Company

Date of hearing : 12th December 2006

Date of judgment : 12th January 2007