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IN THE HIGH COURT OF SOUTH AFRICA

(NORTH GAUTENG LOCAL DIVISION, PRETORIA)

Case No: 37394/12

Date: 2 December 2013

Not reportable

Not of interest to other judges

PRIVATE RESIDENTIAL MORTGAGES

(PROPRIETARY) LTD............................................................................. PLAINTIFF

and

SIMON NKUBA MOKONE.................................................. DEFENDANT/EXCIPIENT

JUDGEMENT

Kooverjie AJ:

A. NATURE OF APPLICATION

1. The defendant took exception to the plaintiff’s amended particulars of claim on the basis that it is bad in law and does not disclose a cause of action.

B. THE PLEADINGS

2. The court takes cognisance of the fact of the following that:

2.1 The exception was noted on 1 February 2013;

2.2 The basis of the exception was that the pleading lacked averments which are necessary to sustain a cause of action. In such an instance it is not required that a notice must first be served on the plaintiff;

2.3 Due to the defendant's failure to set the matter down, the plaintiff has done so.

C. THE EXCEPTIONS

3. The exceptions raised are the following:

3.1 The plaintiff does not disclose a cause of action because the particulars of claim have not been signed properly;

3.2 The High Court does not have jurisdiction to adjudicate this matter;

3.3 The cession is void ab initio and unenforceable. The Minister of Finance as determined by the Bank’s Act 94 of 1990 should have approved the deed of cession between Investec Bank Ltd and the plaintiff;

4. The plaintiff has no locus standi. Annexure "PR5” (a cession agreement) to the plaintiff’s particulars of claim does not assign any right of action to the plaintiff;

4. The cession constituted a simulated transaction;

4. The certificate of balance annexure “PR4” (a certificate of balance), to the plaintiff’s particulars of claim is not competent and admissible proof of indebtedness;

5. The notice in terms of Section 129 (1) of the National Credit Act was incompetent;

4. The defendant’s consent should have been sought in respect of the cession;

3.9 The plaintiff’s claim had prescribed.

D. ANALYSIS

4. Essentially this court in considering the exceptions must determine if there is a clear and concise statement of the material facts upon which the pleader relies for his claim.

5. An exception is a legal objection to a pleading. It complains of a defect inherent in the pleading. This court has to look at the amended particulars of claim as it stands.

6. In order to succeed an excipient has the duty to persuade the court that upon every interpretation which the pleading in question, and in particular the documents on which it is based, can reasonably bear no cause of action.

7. The Appellate Division in McKenzie v Farmer's Co-operative Meat Industries Ltd 1922 AD 16 at 23 succinctly held that every fact which would be necessary for the plaintiff to prove is required and not every piece of evidence which is necessary to prove each fact.

8. In Makgae v Sentraboer (Koooeratief) Bpk 1981 (4) SA 239 (T) at 245 the Court held that the plaintiff:

"moet toesien dat die weseniike feite (dit wii sê die facta probanda en nie die facta probantia of getuienis ter bewys van die facta probanda nie) van sy eis met voldoende duidelikheid en volledig uiteengesit word dat, indien die bestaan van sodanige feite aanvaar word, dit sy reg konklusie staaf en hom in regte sou moet laat slag t.a.v. die regshulp of uitspraak wat hy aanvra."

9. This echoes a distinction - that one must distinguish the facts which must be proved in order to disclose a cause of action (the facta probanda) from the facts which prove them (fact probantia).

10. Rule 18 (4) of the Uniform Rules of Court sets out what is required for a party when it pleads. The object of a pleading is to define the issues so as to enable the other party to know what case he has to meet.

11. It is a basic principle that a pleading should be so phrased that the other party may reasonably and fairly be required to plead thereto. Pleadings must therefore be logical and the cause of action must appear clearly from the factual allegations made.

12. There is no exhaustive test to determine whether a pleading contains sufficient particularity. However the authorities have held that a pleading contains sufficient particularity if it identifies and defines the issues in such a way that it enables the opposite party to know what they are[1].

13. Having regard to the pleadings, in this instance the particulars of claim, this Court finds that the material facts have been pleaded in that the following averments were made:

(1) the parties were identified;

(2) a written loan agreement was entered into with Investec;

(3) Investec is a registered credit provider in terms of Section 40 of the National Credit Act. The defendant was identified as the “mortgagor” therein;

(4) the express terms of the agreement have been set out which inter alia are –

• the loan amount advanced was R2,3 million;

• a first covering mortgage bond was registered over the property;

• the granting of the loan was subject to the registration of the aforesaid bond;

•the defendant was to make instalment payments on a monthly basis within the prescribed time.

(5) the basis of Investec’s performance in terms of the agreement;

(6) the defendant breached the agreement on the basis of his failure to pay monthly instalments;

(7) Investec ceded all its rights, title and interest in the loan agreement and the mortgage bond by virtue of cession ;

(8) such cession entitled the plaintiff to claim all amounts outstanding and obtain an order declaring the mortgaged property executable.

14. I will deal with each exception separately below.

(I) First exception - inadequate signatures

15. The excipient alleged that the summons should be signed by both an advocate and an attorney or if the attorney has the right of appearance then such attorney’s signature should appear as envisaged in terms of Section 4 (2) of the Right of Appearance in Court’s Act 62 of 1995.

16. This ground cannot stand. The plaintiff has correctly pointed out the amended particulars of claim, had been signed properly by the attorney authorised to do so in terms of Section 4 (2) of the Right of Appearance in Court’s Act. Reference is made to p65 of the record.

The first exception is therefore dismissed with costs.

(ii) Second exception - no jurisdiction

17. The excipient excepted on the basis that the High Court does not have jurisdiction to decide upon the matter on the following basis:

17.1 only the Magistrates’ Court has jurisdiction to adjudicate matters arising from the National Credit Act 34 of 2005 (NCA);

17.2 the High Court is prohibited from exercising jurisdiction in all matters arising out of the NCA;

17.3 the loan agreement alleges that the relevant parties have consented to the jurisdiction of the Magistrates’ Court.

18. The plaintiff’s case was that the relevant portion of the loan agreement read together with the mortgage bond determines that Investec at its option, is entitled to institute proceedings in any division of the High Court of South Africa. (Record p. 75, paragraph 9 reads as follows):

“The borrower consents in terms of Section 45 of the Magistrates’ Court Act, No 32 of 1944 to Investec taking action or enforcing any of its rights under this agreement in the Magistrates’ Court of any district having jurisdiction in respect of the borrower, by virtue of Section 28 (1) of the aforesaid act. Investec nevertheless, at its option, is entitled to institute proceedings in any division of the High Court of South Africa which has jurisdiction, including the Commercial Court, if applicable, and in the latter event, the borrower consent to the jurisdiction of the Commercial Court."

19. Reference was made to Nedbank v Mateman and Another v Stringer and Another [2007] ZAGPHC 295; 2008 (4) SA 276 (T) where the court concluded that it has jurisdiction to decide all matters arising out of the NCA.

20. The defendant contended that the “Full Bench” misrepresented the object of the NCA, which specifically excluded the High Court from having jurisdiction. On the holistic reading of the Magistrates’ Court Act and the NCA only the Magistrates’ Court has jurisdiction of unlimited nature to hear and adjudicate all matters arising from the NCA. The High Court is specifically prohibited from exercising jurisdiction in all matters arising from the NCA except for appellative jurisdiction.

21. Section 90 (2) (k) (vi) (aa) & (bb) of the NCA states:

“A provision of a credit agreement is unlawful if-

…

(k) it expresses, on behalf of the consumer –

…

(vi) a consent to the jurisdiction of-

(aa) the High Court, if the magistrates’ court has concurrent jurisdiction; or

(bb) any court seated outside the area of jurisdiction of the court having concurrent jurisdiction and in which the consumer resides or works or where the good in question (if any) are ordinarily kept.”

22. Although the Full Bench contended that this subsection does not elevate itself to the jurisdictional ouster of the High Court, it failed to have regard to the totality of the Act, its purpose and other relevant statutory provisions and legal principles.

23. Firstly the subsection specifically prohibits any contractual consent to the High Court where magistrates’ court have concurrent jurisdiction.

24. This bears the following implication:

24.1 that having unlimited monetary jurisdiction, the Magistrates court enjoys primary jurisdiction in all matters falling under the NCA;

24.2 that the High Court’s jurisdiction in NCA matters is secondary or appellate akin to join the jurisdictional relationship between the Provincial Division of the High Court and the Supreme Court of Appeal;

24.3 that although the SCA has jurisdiction over the defendant, who is ordinarily resident in its jurisdiction and related and ancillary matters the plaintiff has to employ the Provincial Division as the court of the first instance;

24.4 that this procedural mechanism places a temporary prohibition of the High Court’s jurisdiction; and

5. that the prohibition implies the overall objects of the Act which is the NCA debts.

25. Van der Merwe J in the Nedbank matter gave due consideration to a clause in the mortgage loan agreement where the similar wording as in this matter regarding the jurisdiction was contained therein –

"... The bank, is nevertheless, at its option entitled to institute proceedings in any division of the High Court of South Africa which has jurisdiction”

26. Van der Merwe J held that the bank merely reserves its right to approach the High Court. He found that Section 90 does not affect the jurisdiction of the High Court. The High Courts retain their jurisdiction where he held –

“S90 was intended to obtain forum shopping in credit agreements. To expend its scope and preview to the overall jurisdiction of the High Court beyond mere clauses in credit agreements is to accord the section a meaning which it neither has or was ever intended to have.[2]

27. His findings were premised on the jurisdiction of the High Court in terms of Section 169 of the Constitution and Section 19 (1) and 19 (3) of the Supreme Court Act 59 of 1959.

28. This exception can therefore also not be sustained.

The exception is dismissed with costs.

• Third, fourth, sixth and seventh exceptions

This court will deal with the third, fourth, sixth and seventh exceptions hereunder. In order to properly consider these exceptions, one has to appreciate the legal relationship between the cedent, the cessionary and the debtor. In this case Investec, the plaintiff and the defendant.

(iv) Third exception - no locus standi

29. The defendant alleged the particulars of claim is excipiable on the basis that the plaintiff has no locus standi in terms of the deed of cession it executed with Investec Bank.

30. The cession is void and unenforceable in that:

30.1 the deed of cession secured the written pre-approval of the Minister of Finance as contemplated by the Banks Act 94 of 1990 (Banks Act);

30.2 the deed of cession of the mortgage bond has conveyed no real right to the plaintiff by means of registration by the Registrar of Deeds;

30.3 the deed of cession does not assign the right of action to the plaintiff;

30.4 it does not cede the right title and interest to claim R 1.2 million against the defendant but only the right, title and in the mortgage bond.

31. The plaintiff contended the following:

31.1 Pre-approval for the cession by the Minister of Finance was not required;

31.2 Nowhere in the particulars of claim is it alleged that the plaintiff operates as a financial institution as contemplated in terms of the Banks Act.

32. The excipient based the exception on the following reasoning:

32.1. Investec Bank is the registered credit financial provider in terms of Section 40 of the NCA and it is further implicated that the cedent is an incorporated bank within the meaning of the Banks Act;

32.2 The cedent is Investec Bank;

32.3 The plaintiff is the cessionary of the cedent’s claim;

4. In order for a valid and effective cession of rights, title and interest to take place between the cedent and the plaintiff, the cedent should have secured the written pre-approval of such cession or transfer of rights from the Minister of Finance in terms of the Banks Act. To substantiate this, he refers to Section 54 of the Bank Act.

“No compromise, amalgamation or arrangement referred to in Chapter XII of the Companies Act and which involves a bank as one of the principle parties to the relevant transaction, and no arrangement for the transfer of all or any part of the assets and liabilities of a bank to another person, shall have legal force unless the consent of the Minister, conveyed in writing through the Registrar, to the transaction has been obtained before hand”

4.13. And Section 54 (2) (c) of the Banks Act provides that:- “The Minister shall not grant his consent referred to in subsection (1) unless in the case of the transfer of assets and liabilities referred to in subsection (1) which entails the transfer by the transferor bank of the whole or any part of its business as a bank, such transfer is effected to another bank or to a person approved by the Registrar for the purpose of the said transfer”

33. This resulted in the plaintiff failing to allege the following:

33.1 that the cedent secured the written pre-approval of the Minister of Finance over the deed of cession forming part of the plaintiff’s claim;

33.2 that the plaintiff is a person approved by the Registrar of Banks for the taking of cession.

(v) Fourth Exception

34. The exception constituted an argument that in law, a right can be conveyed from the mortgage to another person only by means of a cession of the mortgage bond duly registered by the Registrar of Deeds in terms of the provisions of the law. He refers to Section 16 of the Deeds Registries Act 47 of 1937.

35. The plaintiff alleges that:

35.1 The cedent ceded its right, title and interest to the loan agreement and to the mortgage bond;

35.2 Annexure “PR5” constitutes a cession of the mortgage bond between the cedent and the plaintiff and that the cession of the bond requires registration in the Deeds Office;

35.3 The right of action was assigned to the plaintiff in terms of the agreement set out in paragraph 12 of its particulars of claim.

36. However the excipient alleged that:

36.1 Conveyance of any real right to the plaintiff by means of endorsement in the Deeds Office is legally incorrect and bad in law. In law, a right can be conveyed from the mortgagee to another person only by means of a cession of a mortgage bond duly registered by the Registrar of Deeds in terms of the provisions of the law. He refers to Section 16 of the Deeds Registries Act;

36.2 It is only upon registration of the mortgage bond that a real right in the property hypothecated in constituted in favour of the mortgagee in terms of the Deeds Registries Act;

36.3The endorsement is thus insufficient compliance in terms of Section (8) (a) (i) of the Deeds Registries Act.

6. Sixth exception - No locus standi on verbal cession

37. The excipient alleged that the defendant’s consent was not sought or granted in respect of the verbal agreement of agency with Investec Bank.

38. The plaintiff alleged that during November 2007 it concluded a verbal agreement of agency with Investec Bank where Investec Bank was granted standard foreclosure rights including inter alia, recovery of monies or debts arising out of the loan agreement.

39. By necessary implication, Investec transferred its right to both claims ex contractu and in terms of the related security to the plaintiff.

(vii) Seventh exception

40. There is no allegation of any declaration of payment of consideration or monies by the plaintiff to Investec.

41. The deed to transfer the right title and interest in the loan agreement and first mortgage bond constitute a simulated transaction.

· Analysis and findings

42. Essentially the cession in issue is where the creditor (Investec) transferred its right to claim to a third party against the debtor. The third party (cessionary) is the plaintiff in this matter. The original creditor was Investec who no longer has the right of action against the debtor.

43. Cession involves the substitution of a new creditor (cessionary) for the origina creditor (cedent). The effect of the transaction is to divest the cedent of his right to sue the debtor[3].

44. Such cessions are common as it makes commercial sense and is convenient. It facilitates commerce by enabling a creditor, in this case Investec, to turn his rights to account by selling them instead of enforcing such rights itself.

45. Our authorities have established that a cession of the cedent’s right title and interest although passing the cedent’s contractual rights will not pass ownership without delivery[4]. In this instance it would be delivery of the bond.

46. The substantive requirements for a valid cession is that a duly constituted agreement must exist. All that is crucial is that there must be intention between the parties. It is not a requirement for it to be in writing.

47. Our Courts have also considered the true nature of an allegedly simulated cession that is normally carried out in an attempt to outmanoeuvre the defendant. However where the intention to cede is genuine and the purpose is not unlawful or against public policy the cession will be valid[5]. The true intention of the parties is considered and such enquiry is a factual one. In this instance, this court is satisfied that the cession was a genuine commercial arrangement between the parties.

48. It had further been established that notice to the debtor is not necessary, although advisable as the debtor’s attention must be drawn to the fact that he has a duty to pay the cessionary and not the cedent.

49. Notice of the cession means knowledge, from whatever source obtained. Therefore registration of the cession in the Deeds Office is deemed to constitute sufficient notice[6].

50. As aforesaid the effect of an absolute cession divests Investec of all the rights ceded. The extent and nature of these rights are set out in Annexure “PR5”. Thereafter only the cessionary (the plaintiff) and not the cedent is entitled to sue for the enforcement of those rights. However the cedent may sue as an agent for the cessionary[7].

51. Having regard to the aforesaid position of our law, the exceptions are not sustainable on inter alia the following basis:

51.1 The cession of the mortgage bond appears to have been registered in the Deeds Registries Office. The plaintiff’s counsel referred this court to the Deed’s office registration stamp on the cession agreement. Further deliberation on whether registration is required is dealt with below;

51.2 Investec (cedent) ceded its right, title and interest not only the ioan to claim the R1 million and an additional sum of R200 000,00 to the plaintiff. Investec further ceded all its right title and interest in the mortgage bond with bond number B64204/2007 to the plaintiff;

51.3 Investec by virtue of the loan agreement further pleads in paragraph 11 of the amended particulars of claim the following, which allows it to sue as an agent for the plaintiff, namely:

“11.1 The Investec Bank agreed to the (sic) sell and the plaintiff agreed to purchase the rights tile (sic) and interest in certain loan agreements, which includes the loan agreement, Annexure “PR1”, supra from Investec Bank together with the benefits of related security.

11.2 Investec Bank could act, as an agent on behalf of the plaintiff and Investec Bank would implement its standard fineclosure procedure, from time to time, to recover any monies owning (sic) in terms of the loan agreement...”

The aforesaid legal relationship may exist and is a matter of evidence at the trial.

51.4 Notice of the default was certainly given to the defendant by the plaintiff. Reference is made to Annexure “PR6”.

52. It is a requirement that the Registrar of Deeds is required to register a cession. But the issue is whether the registration is essential before a cessionary requires a real right?

53. Our authorities have been instructive on this issue over the years.

53.1 In Graaf-Reinet Board of Executors Ltd v Estate Erlank 1933 CPD

41, it was held that registration was unnecessary and that the cession was complete with the delivery of the bond by the cedent to the cessionary;

53.2 Counsel for the excipient referred this court to Lief NO v Dettman 1964 (2) SA 252 (A) at 273 where the Appellate Division concluded that the real right which a mortgagee acquires with the registration of a mortgage bond can be conveyed only by means of a cession of the mortgage bond duly registered by the Registrar in terms of Section 3 (f) read with Section 16 of the Deeds Registries Act;

53.3 Subsequently in Lief v Western Credit (Africa) (Ptv) Ltd 1966 (3) SA 344 (W) 350A-B the court had noted the findings in Lief v Dettman supra. However due to the subsequent amendment to Section 16 of the Deeds Registries Act, it held that a mortgage bond can be validly disposed of by mere cession;

53.4  The court acknowledged the distinction between the sale of land and the cession of mortgage bonds over land. The former requires registration in the Deeds Registries Office to pass ownership so as to be effective against creditors upon insolvency, whilst the cession becomes effective upon its execution[8].

54. Having regard to the aforesaid, this court is satisfied that the cessionary acquired a right to enforce its claim against the defendant and further has the required locus standi to do so.

Therefore the third, fourth, sixth and seventh exceptions are dismissed.

(viii) Fifth exception - certificate of balance

55. The excipient contends that annexure “PR4” which constitutes the contractual certificate of balance does not constitute proof of indebtedness to the plaintiff by the defendant.

56. The defendant contended that Investec Bank further ceded all its right, title and interest in the mortgage bond as well as the loan agreement to the plaintiff.

57. This was an out-and-out cession. Consequently the cedent (Investec Bank) was immediately divested of its right title and interest on the aforesaid claim against the defendant.

58. The averment in paragraph 10 of the amended particulars therefore presupposes that the defendant was indebted to the cedent and not the cessionary (plaintiff).

59. This court should have regard to the nature of the “certificate of balance”.

60. The loan agreement refers to it as the “certificate of indebtedness”.

61. Clause 10 of the loan agreement, which illustrates the status of such certificate namely –

(1) the nature and amount of any indebtedness of the mortgagor to the Bank shall be determined and proved by written certificate signed by the relevant officials having such authority;

(2) the certificate is prima facie proof of the contents thereof;

(3) such certificate shall be binding upon the mere production thereof;

(4) such amount reflected in the certificate is due and payable in any legal proceedings against the mortgagor;

(5) such certificate shall be valid as a liquid document against the mortgagor in any competent court.

62.On this basis the exception cannot stand in light of the aforesaid being an express term of the loan agreement between Investec Bank and the defendant.

This exception is therefore dismissed.

· Sixth exception - Section 129 (1) Notice

63. The excipient alleges that annexure “PR7" (copy of track and trace report) is inadmissible as evidence because it was not certified as correct within the meaning of the Electronic Communication and Transaction Act 25 of 2002.

64. Such notice is inadmissible as evidence as an official of the SA Post Office did not certify it as correct. Consequently, this claim is premature.

65. This exception cannot be sustained. It in no way influences the basis upon which the cause of action is pleaded.

66. All that is required and had been sufficiently pleaded is that a notice was transmitted to the defendant by registered mail as envisaged in Section 129 (1) of the NCA.

67. Section 129 (1) of the NCA requires the consumer to be notified of his default under a credit agreement in writing. This requirement was indeed met by the plaintiff in this matter.

This exception is therefore dismissed.

· Eighth exception – Prescription

68. The excipient relies on prescription as the debt had prescribed as the period, which has claimed the debt is 30 years.

69. The plaintiff contends that the period of prescription is 30 years as it is a debt secured by or subject to a mortgage bond as envisaged in Section 11 (a) (i) of the Prescription Act.

70. As aforesaid, this court has set out the relationship between Investec and the plaintiff.

71. The debt remains a debt secured by a mortgage bond, which period is 30 years.

72. The defendant is further heeded to the procedures set out in the Uniform Rules of Court. The proper procedure to raise prescription in action proceedings is by way of a plea or special plea and not by way of exception. The reason is that the plaintiff may have a valid answer (such as delay or interruption) to the plea of prescription, which may be raised in replication[9].

Consequently this exception is dismissed.

E. CONCLUSION

73. This court finds that by virtue of the cession of the loan agreement and the mortgage bond, the cessionary properly pleaded cancellation and termination of the loan agreement as well as the claim for repayment of all outstanding amounts (as set in paragraph 15 of the particulars of claim).

74. This court is therefore satisfied that the factual allegations made in the particulars of claim does sustain a cause of action.

F. ORDER:-

75. The following order is therefore made:

(1) The exceptions are dismissed with costs.

H KOOVERJIE

Acting Judge of High Court

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