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IN THE HIGH COURT OF SOUTH AFRICA

FREE STATE DIVISION, BLOEMFONTEIN

 Case no: 531 / 2021

In the matter between:

SB GUARANTEE COMPANY (RF) (PTY) LTD                                             Applicant / Plaintiff

and

BLOEMFONTEIN CELTIC FOOTBALL

CLUB (PTY) LTD                                                                                     Respondent / Defendant

CORAM:                    HEFER AJ

HEARD ON:             22 JULY 2021

JUDGMENT BY:     HEFER AJ

DELIVERED ON:     12 AUGUST 2021

[1]       The Standard Bank of South Africa Limited, represented by a duly authorised representative therein (hereinlater referred to as “the Bank”), and the Defendant duly represented by its sole director and functionary concluded a written home loan agreement in terms whereof the Bank advanced the sum of R930,176.00 to the Defendant as a home loan.

[2]       The relevant material and express terms of the loan agreement were, inter alia, the following:

(i)        The Defendant would be in default under the agreement of loan, inter alia, if it failed to pay any amount payable to the Bank under the agreement of loan on the due date thereof;

(ii)         In the event that the Defendant was in default under the agreement of loan, the Bank was entitled to:

(a)  give the Defendant written notice of such default; and/or

(b)  commence legal proceedings to enforce the agreement of loan, including exercise the Bank’s rights in terms of any collateral held, if applicable, if the Bank had given a default notice to the Defendant and the Defendant had been in default under the agreement of loan for at least 20 business days and at least 10 business days had elapsed since the Bank delivered a default notice to the Defendant and the Defendant had not responded to the default notice or responded to the default notice by rejecting the Bank’s proposal.

(iii)      The Bank was entitled, at its election and without affecting any other rights to recover from the Defendant payment of all amounts owing under the agreement of loan including immediate repayment of the balance of the principal debt owing to the Bank in the event of default.

[3]        The agreement of loan was subject to certain conditions which were for the sole benefit of the Bank, including to require that:

(i)        The Plaintiff provide a guarantee to the Bank in respect of the agreement of loan, in terms of which the Plaintiff agreed to pay the amount owing in terms of the agreement of loan in the event of a default by the Defendant under the agreement of loan;

(ii)      The Defendant signed a written indemnity in terms of which the Defendant indemnified the Plaintiff against any claim by the Bank under a guarantee given by the Plaintiff to the Bank in respect of all sums then and subsequently due by the Defendant to the Bank in terms of the agreement of loan; and

(iii)      A mortgage bond in favour of the Plaintiff be registered for the loan amount over the specified immovable property.

[4]      Pursuant to the loan agreement, the Defendant executed a written indemnity agreement in favour of the Plaintiff and its successors in title. The indemnity provided inter alia that:

(i)        An event of default was defined to mean a failure by the Defendant to pay any amount due and payable to the Bank in terms of the agreement of loan and which failure gives rise to a claim by the Bank against the Defendant in terms of the agreement of loan;

(ii)       A guarantee means a written guarantee given by the guarantor (being the Plaintiff) in favour of the Bank in terms of which the guarantor guarantees to the Bank, the fulfilment of the obligations of the borrower being the Defendant in terms of the agreement of loan, subject to the terms and conditions of such guarantee.

[5]        The relevant material and express terms of the indemnity were inter alia that:

(i)        Except to the extent that the Plaintiff acted with gross negligence, fraudulent intent or in breach of any of its obligations in terms of the guarantee, the Defendant, as a separate and independent primary obligation, indemnified and held the Plaintiff harmless from and against all loss, damage, costs, expenses and liabilities which the Plaintiff may suffer or incur as a result of or in connection with any claims which may be made against Plaintiff by the Bank;

(ii)       The Defendant acknowledged and agreed that if, in terms of a guarantee given to the Bank, the Plaintiff became liable to pay any amount to the Bank, that Defendant would immediately be liable to the Plaintiff in terms of the indemnity for the amount for which the Plaintiff was liable under a guarantee given to the Bank;

(iii)      On receipt by the Defendant of any written notice from the Plaintiff stating that an amount was payable by the Defendant in accordance with the terms of the indemnity, and demanding payment of such amount, the Defendant would, immediately following such written notice or demand, be required to pay such amount without any deduction, in cash into the bank account nominated in writing by the Plaintiff;

(iv)      The obligations of the Defendant and its liability under the indemnity would continue and remain of full force and effect as a continuing covering security and indemnity until the Plaintiff was finally released and discharged from its obligations under the guarantee;

(v)       The Defendant will not have the right to withdraw from or terminate the indemnity until the Plaintiff had been fully released or discharged from and the guarantee given to the Bank had been cancelled;

(vi)      As security for, amongst others, the obligations of the Defendant arising out of the indemnity or agreement of loan to the Plaintiff or to the Bank (as the case may be), the Defendant would be required to execute or procure the registration of a mortgage bond in favour of the Plaintiff or the Bank over specified property;

(vii)      If the Defendant did not immediately, following the written notice of the demand, pay any amount due and payable by him to the Bank, the Plaintiff upon being notified by the Bank would have the right and be obliged to, amongst others, take all such steps as may be reasonably necessary to realise the mortgage bond and otherwise enforce the claim against the Defendant in terms of the indemnity.

[6]       Pursuant to the conclusion of the agreement of loan and the indemnity referred to, the Defendant caused a mortgage bond to be registered over the identified property in favour of the Plaintiff.

[7]       The relevant material and express terms of the mortgage bond were inter alia that:

(i)       The Defendant acknowledged and declared itself to be lawfully indebted and bound to the Plaintiff, its successors in title, order or assigns, for the specified amount as a continuing covering security for and in respect of every indebtedness or obligation arising from

(a)  the indemnity, as amended, varied, restated, re-issued or novated from time to time;

(b)  any loss, liability, damage, claim, cost or expense of whatever nature which the Plaintiff may incur under or in connection with the guarantee;

(ii)       Should the Defendant be in breach by:

(a)  failing to observe or perform any provisions in the mortgage bond; or

(b)  failing to pay on due date or within any agreed remedial period, any sum which may be legally claimable from the Defendant by the Plaintiff; or

(c)  failing to perform any other obligation or settle any liability to the Plaintiff on due date, or within any agreed remedial period or at all;

then all amounts secured by the mortgage bond would, at the Plaintiff’s option, become immediately due and payable in full upon demand, even if the Plaintiff makes use of any other rights it might have and the Plaintiff may, institute proceedings for recovery thereof and for an order declaring the property executable.

[8]       The Plaintiff and the Bank then concluded a written common terms guarantee agreement (“the common terms agreement”), the relevant material and express terms being, inter alia, that:

(i)        In consideration for the Defendant granting an indemnity and registering a mortgage bond in favour of the Plaintiff over a property purchased by the Defendant pursuant to a home first loan agreement, the Plaintiff agreed, subject to the terms and conditions of the common terms agreement to guarantee the due and punctual payments of all sums then and subsequently due by the Defendant to the Bank pursuant to each individual home first loan agreement which guarantee the Bank agreed to accept;

(ii)       Upon the Plaintiff being notified by the Bank, in writing, to make any payment to the Bank as provided for in the common terms agreement, in that event, inter alia:

(a) The Plaintiff would (through the Bank as servicer), if so required by the Bank in writing, promptly proceed in any competent court against the Defendant under the indemnity given by the Defendant and call up and foreclose on a mortgage bond and enforce such other remedies as may be available to the Plaintiff at law;

(b) The Plaintiff would, in full and final settlement of any obligations of any nature which it may have to the Bank pursuant to a claim made by the Bank under a guarantee, forthwith pay to the Bank all proceeds received from, or on behalf of the Defendant under or pursuant to the indemnity signed by the Defendant.

(iii)      Should the Bank give written notice to the Plaintiff that the Defendant had breached any of its obligations under its home first loan agreement, then, such event, the Plaintiff would forthwith be required to discharge all of its obligations to the Bank in terms of the relevant guarantee by complying with its obligations in terms of the common terms agreement;

(iv)      The notice referred to in (iii) above would be required to contain written details of the breach referred to in the common terms agreement, provided that upon receipt of such notice, the Plaintiff would be obliged to act in accordance with the common terms agreement referred to in (iii).

[9]     The Plaintiff then furnished the Bank with a written guarantee in accordance with the common terms agreement in terms of which, inter alia, the Plaintiff guaranteed the due and punctual payment of all sums which were then and which may subsequently become due by the Defendant to the Bank pursuant to the agreement of loan.

[10]    According to the Plaintiff, the Defendant, in breach of the terms and conditions of the agreement of loan, failed to pay the monthly amounts due in terms thereof. The Plaintiff’s attorneys then served a demand for payment in terms of the indemnity to the Defendant requiring the Defendant to pay the full amount so due and payable forthwith.

[11]     The Plaintiff instituted action against the Defendant for the full amount which Defendant is presently indebted to the Bank under the agreement of loan and therefore, according to the Plaintiff, under the indemnity pursuant to an alleged breach of the terms and conditions of the agreement of loan by failing to pay the monthly amounts due in terms of the latter agreement.

[12]     In response to the allegations as contained in the Plaintiff’s Particulars of Claim, the Defendant raised three special pleas.

[13]    The first special plea is to the effect that, according to the Defendant, the Plaintiff’s summons is premature because Plaintiff’s notice in terms of section 129 is inadequate and/or outdated.

[14]     The second special plea is to the effect that according to the Defendant, Defendant has paid all amounts that were overdue in terms of the home loan agreement and that according to Defendant, the breach was remedied in terms of section 129(3) of the National Credit Act, 34 of 2005 (“the NCA”), and further that reinstatement of the agreement of loan and/or the mortgage bond occurred by operation of law.

[15]    The third special plea by the Defendant also refers to the reinstatement of the agreement by the amounts which had been paid by the Defendant however this reinstatement is pleaded without reference to the NCA.

[16]     At this stage, the matter was brought before court in an application for summary judgment by the Plaintiff.

[17]     In its affidavit in support of the summary judgment application, Plaintiff dealt with the defences as raised by the Defendant.

[18]    As far as the first special plea is concerned, according to the Plaintiff, the Defendant is a juristic person as provided for and envisaged in the NCA whose asset value and annual turnover, equalled or exceeded the threshold value determined by the Minister in terms of section 7(1) of the NCA and that the NCA does therefore not apply to the Defendant. In its affidavit, according to the Plaintiff, insofar as it may be held that the Defendant, at the time when the various credit and security agreements were concluded, did not possess the requisite asset value and/or annual turnover, then in that event the Plaintiff pleads that the credit agreement concluded between the respective parties is one as contemplated in section 4(1)(b) of the NCA which is a large agreement as described in section 9(4) of the NCA in terms of which Respondent is a juristic person whose asset value or annual turnover at the time when the credit agreement was concluded, was below the threshold value determined by the Minister in terms of section 7(1) of the NCA. Furthermore, according to the Plaintiff, the credit agreement constitutes a large agreement and is secured by a mortgage bond which has as its effect that applicability of the NCA to the Defendant is excluded by operation of law.

[19]     As far as the second special plea is concerned, the Plaintiff firstly repeats the non-applicability of the NCA for the reasons already mentioned and repeats the allegations as contained in the Particulars of Claim to the effect that upon an event of breach committed by the Defendant, the Plaintiff was entitled at its election and without affecting other rights which it may have in terms of the credit agreement, to recover from the Defendant payment of all amounts owing under the credit agreement, including immediate repayment of the balance of the principal debt owing to the Plaintiff.

[20]     As far as the third special plea is concerned, the Plaintiff relies on the same grounds insofar as the second special plea is concerned.

[21]     According to the Plaintiff the Defendant has no bona fide defence to the claim of the Plaintiff.

[22]    In its opposing affidavit to the application for summary judgment, the Defendant disavows the deponent to the founding affidavit filed in support of the application for summary judgment’s personal knowledge of the facts of the matter.

[23]     Secondly, the Defendant, in its opposing affidavit, joins issue with the deponent to the founding affidavit’s attachment of certain documentation.

[24]     The Defendant further in opposing the application for summary judgment, disputes the validity of the certificate of balance mainly because the mentioned certificate is not signed by a manager of the Plaintiff.

[25]     As far as the merits of the action is concerned, the Defendant pleaded as follows:

          “(i)       Plaintiff has not paid Standard Bank in terms of the indemnification;

(d)   Standard Bank receives payments and accepts same from Defendant;

(e)   Standard Bank still tenders the debit order against Defendant’s bank account;

(f)    Standard Bank receives payments and keep the said payments from the Defendant;

(g)   Had it been indemnified or paid by Plaintiff it would not have done so. (In the statement, Standard Bank requires Defendant to verify all transactions reflected on the statement and notify any discrepancies to the Bank); and

(h)  Standard Bank still considers the Defendant to be liable to Standard Bank and between Standard Bank and Defendant the original loan agreement is being considered to be of full force and effect.”

[26]     In short, Defendant relies on the fact that Plaintiff cannot aver that any amount is due, owning and payable to it. The Bank has not issued any specific instructions to Plaintiff or made any demand from Plaintiff to pay. In the event that it did make such a demand, Plaintiff has not paid yet. Plaintiff is therefore, according to the Defendant, not entitled to any payment from the Defendant.

[27]    In its founding affidavit, in support of the application for summary judgment, the Plaintiff dealt extensively with the allegations as contained in Defendant’s plea and the defences raised therein, including the three special pleas raised by the Defendant. In the Defendant’s opposing affidavit, the Defendant, save for pointing out certain technical aspects regarding the Plaintiff’s claim, dealt in essence with the defence of the Defendant in respect of the merits of the action. The Applicant in its Heads of Argument also dealt fully with those technical aspects as contained in Defendant’s plea as well as its opposing affidavit as well as the merits in respect of Plaintiff’s claim. In its Heads of Argument, Defendant’s counsel limited Defendant’s opposition to the application for summary judgment to the merits of Plaintiff’s claim and did not pursue any of the special pleas as raised by the Defendant. Counsel on behalf of the Defendant also limited themselves to the merits of the Plaintiff’s action during argument in court. For that reason, I do not deem it necessary to deal with such special pleas raised by the Defendant in its plea and pointed out in its opposing affidavit in respect of the application for summary judgment. For that reason and also in view of my finding herein, I will only deal with Defendant’s defence regarding the merits of the Plaintiff’s claim.

[28]    Plaintiff’s claim against the Defendant is premised on the indemnity granted by the Defendant in favour of the Plaintiff, the mortgage bond which was registered over the specified property in favour of the Plaintiff as well as the Plaintiff’s guarantee in terms of which it guaranteed the due and punctual payment of all sums which may become due by the Defendant to the Bank and the subsequent breach of the terms and conditions of the agreement of loan.

[29]     In Plaintiff’s first letter of demand sent to the Defendant during February 2021, the following was said by the attorney acting on behalf of the Plaintiff:

“In terms of the indemnity, Celtic indemnified our client from any claims which may be made against it by Standard Bank of SA Ltd, under a guarantee which our client provided to Standard Bank of SA Ltd for the payment of Celtic’s debts under the loan agreement.

Celtic is currently indebted to Standard Bank of SA under the loan agreement in the sum of R67 397.10 as on 28 September 2020 together with interest thereon at the rate of 8.70% per annum.

Standard Bank of SA Ltd has requested our client to proceed against Celtic for the recovery of the amount due and to pay the amounts recovered from you to Standard Bank of SA Ltd. Our client therefore demands that Celtic immediately settle the amount due to it by making payment thereof into the following account.”

[30]    If one considers the terms of the indemnity agreement in conjunction with the common terms guarantee agreement as far as the indemnity is concerned, the Defendant’s liability towards the Plaintiff only arises once the Bank lodges or makes a claim against the Plaintiff or the Plaintiff becomes liable to pay any amount to the Bank.

[31]     From the context of the letter referred to, it would appear that Defendant’s liability towards the Plaintiff would on that date only be limited to the amount as referred to in the said letter.

[32]    Considering the provisions of the common terms guarantee agreement, the guarantor’s liability, being the Plaintiff, towards Standard Bank only arises once Standard Bank notifies Plaintiff in writing to make any payments to Standard Bank being the creditor. In other words, once Standard Bank notifies the Plaintiff in writing to make any payments, the immediate liability referred to in the indemnity agreement, comes into operation. That is not the basis on which the letter of demand was sent by the Plaintiff to the Defendant. In the letter, it was stated that the creditor, being Standard Bank, has requested Plaintiff to proceed against the Defendant for recovery of the amount due. No documentation had been placed before me to show that Standard Bank had indeed made such notification to the Plaintiff in writing, i.e. to make payments to Standard Bank and further that Standard Bank in writing requested the Plaintiff to promptly proceed under the indemnity and called up the foreclose on the mortgage bond and enforce such other remedies as may be available to it at law. The immediate liability referred to in the indemnity agreement, could only arise once the provisions of the common terms guarantee agreement had been adhered to, namely the written request for any payments by the creditor, Standard Bank, directly towards the Plaintiff. No such request forms part of the papers in consideration of the application before Court. The submission by counsel appearing on behalf of the Applicant that notice to the Plaintiff is not necessary, is therefore not correct.

[33]     In terms of the indemnity, upon receipt by the borrower, being the Defendant, of any written notice from the Plaintiff stating that an amount is payable by the Defendant in accordance with the terms of the indemnity and demanding payment of such an amount, if the borrower does not immediately, following the written notice of demand, pay any amount due and payable by it, the Plaintiff will have the right and be obliged to take all such steps as may be reasonably necessary to realise the security in terms of the security agreements and otherwise to enforce the claim against the Defendant in terms of the indemnity. Again, this will only come into effect once the Plaintiff becomes liable with reference to the provisions of the terms of the common terms of the guarantee agreement, namely that the Plaintiff is notified in writing to make payments to Standard Bank. If that has not been the case, the Plaintiff will not have the rights and obligations referred to.

[34]     In Plaintiff’s Particulars of Claim it is alleged that, prior to the institution of the action, the Bank notified the Plaintiff of the Defendant’s breach of the agreement of loan and that the Plaintiff was forthwith required in terms of the Plaintiff’s guarantee to discharge all its obligations to the Bank by promptly proceeding in a competent court against the Defendant, under the indemnity, by calling up and foreclosing on the mortgage bond and enforcing such other remedies as were available to the Plaintiff at law. In Mr Tsangarakis’, acting on behalf of the Plaintiff, Heads of Argument reference is made to Defendant’s “… bold and unsubstantiated allegation that there was no specific written instruction” as required by the guarantee agreement. The fact that the deponent to the founding affidavit filed in support of the application for summary judgment, is in the employ of Standard Bank, and was authorised to depose to the said affidavit on behalf of the Plaintiff, does not constitute a written instruction as envisaged by the common terms guarantee agreement.

[35]     In favour of the Plaintiff it is considered that the default in respect of certain payments must have been brought to the attention of the Plaintiff at some stage. In the absence however of any notice / demand / request by the Bank to the Plaintiff, this must have been in the form of an “informal” notice to the effect that the Defendant was at some stage in default vis-à-vis Standard Bank. However there was not compliance with the relevant provisions of the general terms of guarantee agreement as far as a demand for payment / request to discharge all its obligations to the Bank by promptly proceeding in a competent court against the Defendant, as alleged by the Plaintiff, is concerned.

[36]    As far as Plaintiff relies on the terms of the mortgage bond agreement, it needs to be mentioned that the Section 129(1)(a) notice which was sent ex abundanti cautela by the Plaintiff’s attorneys to the Defendant during April 2018 already, alleges that the Defendant has not met its obligations towards “our client in respect of the above agreement …,” in respect of the mortgage bond under the account number referred to. It is not even evident from this letter that it is indeed on behalf of the Plaintiff and not Standard Bank on whose behalf this notice was sent.

[37]     As far as Plaintiff’s reliance on the provisions of the mortgage bond agreement is concerned and in particular the provision relating to foreclosure, it cannot be said that the Defendant is in breach of such provisions of the mortgage bond agreement because it appears that no sum is legally claimable from the Defendant by the Plaintiff or that Defendant has failed to perform any other obligation or settle any liability under the mortgage bond agreement on a due date.

[38]     In the absence of the required written demand for payment, in particular that the Plaintiff has not shown that Standard Bank notified the Plaintiff in writing to make any payments, it cannot be found that the Defendant is liable towards Plaintiff and in effect, that as correctly pointed out by Mr Reinders, assisted by Mr Greyling on behalf of the Defendant, the amount as claimed or any other amount is due and payable by the Defendant towards Plaintiff.

[39]     For that reason, the application for summary judgment cannot succeed. The Defendant does have a bona fide defence to Plaintiff’s claim.

ORDER:

Therefore, I make the following order:

1.    The application for summary judgment is dismissed.

2.    Defendant is granted leave to defend the action.

3.    Costs in respect of the application for summary judgment will be costs in the main action.

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J J F HEFER, AJ

On behalf of the Applicant:            Adv S Tsangarakis

                                                            Instructed by: Honey Attorneys

                                                            Honey Chambers

                                                            Northridge Mall

                                                            Bloemfontein

On behalf of the Defendant:          Adv SJ Reinders and P du P Greyling

                                                            Instructed by: Bredenkamp Attorneys

                                                            54 Kellner Street

                                                            Bloemfontein

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