Tugendhaft v Fratellis Bright Water Commons CC and Another (29383/2007) [2008] ZAGPHC 180 (20 June 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO 29383/2007

In the matter between

ASHLEY

TUGENDHAFT APPLICANT

and

FRATELLIS BRIGHT WATER COMMONS CC

FIRST RESPONDENT

TERRA HUMANITAS (PTY) LIMITED

SECOND RESPONDENT

______________

J U D G M E N T

VAN OOSTEN J

[1] In this application the applicant seeks payment of the sum of R1 642 741,00 from the respondents jointly and severally, due in terms of a written loan agreement (the agreement). The first respondent opposes the relief sought. A notice of opposition was filed on behalf of the second respondent by the attorneys acting for the first respondent. This however was done, according to the first respondent’s attorneys without the second respondent’s specific instructions to do so and merely ex abudante cautela. The attorneys have subsequently withdrawn as attorneys of record on behalf of the second respondent. The second respondent did not further oppose the relief sought, and it follows that the applicant is entitled to judgment against the second respondent.

[2] As against the first respondent, it is not in dispute that the amount claimed by the applicant is due, owing and payable. The dispute between the applicant and the first respondent in essence concerns the question whether the first respondent and the entity (forming part of the group of debtors to whom the loan was made) described in the loan agreement as “Fratelli Management” are one and the same. In clause 1.1.6 of the agreement “Fratelli Management” is defined as “Fratelli Management (Proprietary) Limited, (previously a close corporation under registration number 2003/087867/23)”. The applicant accordingly in prayer A of the notice of motion seeks a rectification of the clause to read: “Fratelli Management” means Fratelli Management CC, a close corporation with registration number 2003/087867/23”

[3] It is the applicant’s case that the second respondent is the party that bound itself to the loan agreement. The must therefore prove his entitlement to a rectification of the agreement. In support of the claim for rectification the applicant says the misdescription was occasioned by a representation of one Todor Asenov Todorov (who signed the agreement on behalf of Fratelli Management and who was the sole member of Fratelli Management CC) that the first respondent had been converted to a limited liability company which was not so, resulting in the misdescription not being in accordance with the common continuing intention of the parties, who, it is further stated signed the agreement in the bona fide but mistaken belief that it recorded the correct description of the first respondent. It is common cause that the name of the first respondent has in the meanwhile been changed from Fratelli Management CC to Fratellis Bright Water Commons CC.

[4] The first respondent’s answering affidavit is deposed to by Atanas Spassov Valtchanov, who became its sole member long after conclusion of the agreement. He therefore has no personal knowledge of the conclusion of the agreement which caused him to rely on what was apparently told to him in this regard by Todorov, who is the only person representing the first respondent that would have personal knowledge of these aspects. Todorov has not deposed to an affidavit for the reason proffered that he has been and still is in Bulgaria.

[5] On the papers as they stand the first respondent essentially contests the applicant’s assertion that the first respondent was misdescribed in the loan agreement. The answering affidavit on behalf of the first respondent sets forth a lengthy and I confess not always easy to understand version revealing the involvement of several entities in the events that led to the conclusion of the agreement. In the view I take of the matter I do not think it will serve any useful purpose to embark upon a decipherment of those allegations. Suffice to say, it essentially constitutes an attempt to prove that the first respondent in fact was not the entity concerned, but that the description I have referred to was meant to apply to a so-called “complete separate legal entity to the first respondent and having the name Fratelli Management (Pty) Ltd” which was neither registered nor did it exist.

[6] The applicant submits that the version put up by the first respondent is untenable for a number of reasons. There is considerable merit in the contention. On the other hand, a dispute of fact exists on the papers before me. The dramatis persona, Todorov’s own version is not before me. Rectification generally should be brought by action. It concerns the common intention of the parties to the agreement, which as a rule can only be properly resolved on the hearing of oral evidence. There are indeed strong pointers to the first respondent being the party concerned: but one thereof is the registration number reflected in the description I have referred to, which is that of the first respondent. The first respondent opposing contentions encompasses inter alia that an addendum to the agreement was signed by the applicant on 2 February 2007, which presented an opportunity to him to rectify the agreement which he did not avail himself of. All these aspects, including the probabilities that may arise from the facts eventually found proven in my view cannot decisively be determined without the hearing of oral evidence. For these reasons the application, in my view, should be referred to trial, so that all necessary evidence relating to the intention of the parties as well as the true nature of the entities involved can be dealt with.

[7] It remains to deal with the costs of the application. Normally those would have been ordered to be costs in the cause. In the present matter however I have formed a different view. Two considerations have led me to conclude that the first respondent should bear the applicant’s costs of the application: firstly, the absence of an affidavit by Todorov. The availability of modern sophisticated means of communication simply negates any sustainable excuse for the first respondent’s failure to file his affidavit. The absence thereof as I have alluded to, is one of the considerations having persuaded me, not without hesitation I should add, to refer this matter for trial. Secondly, Valtchanov’s reference in the answering affidavit to the true party he was advised of by the second respondent’s representative one Inziger, as being “a completely separate legal entity” was effectively exposed by counsel for the applicant in argument before me as an insurmountable improbability in the version proffered by the first respondent. In response hereto counsel for the first respondent sought to attach a different meaning to the expression being a reference to the same entity but which had undergone a change of name. While I have no doubt in the bona fides of the submission, I cannot simply ignore this aspect as the plain wording of the language used in the answering affidavit,

clearly supports the applicant’s contention. Counsel for the first respondent’s assurance concerning the different meaning of the expression brought to the fore the consideration that the answering affidavit in all probability was settled by the first respondent’s legal advisers and that it accordingly better ought to be dealt with in cross-examination of the witness himself. In view hereof I am constrained to find that had the matter been properly dealt with by the first respondent, finality either way could well have been reached without having had to resort to the trial procedure with the inevitable delay it will cause.

[8] In the result I make the following order:

8.1 As against the first respondent:

8.1.1 The application is referred to trial, subject to the following directions:

8.1.1.1 The notice of motion is to stand as a simple summons.

8.1.1.2 The first respondent’s answering affidavit is to stand as its notice of intention to defend.

8.1.1.3 The applicant must deliver a declaration within 20 days of the date of this order, whereafter the Rules of Court will apply in regard to time limits, the delivery of further pleadings and pre-trial procedures.

8.1.2 The first respondent is ordered to pay the applicant’s costs of the application thus far incurred.

8.2 As against the second respondent, jointly and severally with any judgment that may be granted against the first respondent:

8.2.1 Payment of the sum of R1 642 741,00.

8.2.2 Interest on the amount in par 1 above at the rate of 7,5% per month from 23 October 2007 to date of payment.

8.2.3 Costs of the application on the scale as between attorney and own client.

_____

FHD

VAN OOSTEN

JUDGE

OF THE HIGH COURT

COUNSEL

FOR THE APPLICANT ADV A SUBEL SC

APPLICANT’S ATTORNEYS TWB & PARTNERS

COUNSEL

FOR FIRST RESPONDENT ADV G NEL

RESPONDENTS’ ATTORNEYS NAM-FORD INC

DATE OF HEARING 12 JUNE 2008

DATE OF JUDGMENT 20 JUNE 2008