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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

Case number: 2013/47366

DATE: 18 FEBRUARY 2016

In the matter between:-

FIRSTRAND BANK LIMITED..............................................................................................Applicant

And

MICHAEL GARY HAZAN.............................................................................................1^st Respondent

MANDY HAZAN............................................................................................................2^nd Respondent

And

Case number: 2013/47367

In the matter between:-

FIRSTRAND BANK LIMITED..............................................................................................Applicant

And

HAZAN WHOLESALERS AND DISTRIBUTORS CC....................................................Respondent

JUDGMENT

OPPERMAN AJ

introduction

[1]           On 7 September 2015 the applicant (‘FNB’) sought and obtained a provisional winding up order of Hazan Wholesalers and Distributors CC (‘the Savoy’). This court is now seized with deciding whether a final order for the winding up of the Savoy should be granted. Michael Gary Hazan (‘Mr Hazan’) and Mandy Hazan (‘Mrs Hazan’) signed suretyship agreements binding themselves (to different extents) to the payment of the debts of the Savoy. FNB thus seeks an order for a money judgment against Mr and Mrs Hazan for two amounts (claims A and B) which are alleged to be owing by the Savoy to FNB. There is a third claim - claim C - FNB does not seek judgment in respect of it, as it contends that such claim should be considered and pursued by the liquidators of the Savoy should this court grant a final winding up order. Claims A, B and C have been brought in a separate application. As the facts are closely interlinked to the facts in the winding up application, the parties, by agreement, requested that the two matters be heard together. The Savoy, Mr Hazan and Mrs Hazan, will, collectively, be referred to as the respondents.

COMMON CAUSE FACTS

[2]           In 2004, the Savoy purchased a Spar supermarket. Mr Hazan’s wife, a registered chartered accountant, assisted Mr Hazan, the sole member of the Savoy, in running the business. On 6 August 2009, Mrs Hazan executed a deed of suretyship which is limited to R500 000 (excluding interest). During 2010, Genesis Spar was purchased by the newly formed company Haz Importers (Pty) Ltd (‘Genesis’), of which Mr Hazan was the sole shareholder. On 21 April 2010, FNB and the Savoy entered into a written loan agreement (‘the loan agreement’) in terms of which FNB advanced to the Savoy the sum of R3 000 000 (the subject matter of Claim B). This loan largely financed the purchase price of Genesis.

[3]           On 30 August 2010, FNB issued a payment guarantee in favour of the Spar Group Limited (‘Spar’) for an amount not exceeding R1 000 000 (‘the first payment guarantee’). On 2 March 2012 FNB and the Savoy entered into a written facility agreement (‘the facility agreement’) and FNB lent and advanced monies to the Savoy in terms thereof (the subject matter of Claim A - It bears mentioning, that the facility agreement was preceded by a similar agreement concluded on 25 March 2010.)

[4]           On 23 April 2012, Spar obtained an order, perfecting its security in terms of a general notarial bond (‘the perfection order’). On 24 April 2012 the Genesis account was frozen. On 18 May 2012 the perfection order was set aside and the Genesis account was  ‘unfrozen’.

[5]           Genesis and Spar are involved in litigation. Spar instituted action against Genesis for R 3 612 356.67 allegedly owing to it in relation to stock and the respondents have counterclaimed for damages alleging that Genesis’ demise was a direct consequence of Spar’s conduct after the perfection order was granted. FNB is not a party to such proceedings.

[6]           On 17 August 2012 the first payment guarantee was erroneously called up and on 22 August 2012, FNB paid R1 000 000 to Spar. After the payment of           R1 000 000, the Savoy’s account was in overdraft of R1 071 000. The Savoy had a facility of R500 000 only. FNB accordingly called upon the Savoy to repay the excess amount and to bring the account back within the approved limit. The Savoy launched an urgent application against Spar also citing FNB but not seeking any relief against it. On 28 August 2012, the Savoy was ordered to provide a guarantee and Spar was ordered to pay the Savoy R1 000 000.

[7]           On 18 October 2012, Mr Hazan executed a deed of suretyship in favour of FNB which is limited to R3 000 000 (excluding interest). The second payment guarantee in favour of Spar for the payment of R1 000 000 was issued on 25 October 2012 (‘the second payment guarantee’).

[8]           The Savoy had, prior to 6 February 2013, utilised a speedpoint facility of FNB. On 6 February 2013 the Savoy sold its business.  After this date, credit card transactions were processed and paid to the account of the Savoy. The Savoy did not make payment to Spar of some of the credits in terms of the speedpoint transactions (these speedpoint transactions form the subject matter of claim C).  Spar contacted FNB and made enquiries as to the payments in terms of the speedpoint transactions and FNB, pursuant to such enquiries, paid Spar the sum of              R438 860.22. FNB debited the account of the Savoy. It is this claim and these facts which FNB contends should be postponed to be properly dealt with by the liquidators of the Savoy should a final winding up order be granted.

[9]           The Savoy breached the facility agreement and the loan agreement and all amounts owing became due and payable. FNB, through its attorneys, made demand and the respondents failed to make payment.

[10]        The Savoy is liable to FNB by virtue of the second payment guarantee issued by FNB in favour of Spar,that amount has not become due and payable and FNB has not been called upon to make payment to Spar in terms thereof.  Consequently, this may or may not become a further liability of the Savoy.

[11]         In terms of clause 4 of each of the suretyships, all admissions or acknowledgements of indebtedness made by the Savoy would be binding on Mr Hazan and Mrs Hazan.  In terms of clause 2 thereof, they also agreed to pay the attorney and own client costs of FNB incurred in the institution of legal action against the Savoy or against them for the recovery of any or all of the amounts mentioned therein. In terms of clause 19 a certificate signed by any of FNB’s managers, whose appointment it would not be necessary to prove, as to the indebtedness of the Savoy and/or the indebtedness of Mr and Mrs Hazan, would be prima facie evidence of such indebtedness for the purposes of any application.

AUTHORITY OF THE DEPONENT TO FNB’S AFFIDAVIT

[12]        The respondents challenged the authority of the deponent to FNB’s founding affidavit, Barend Johannes de Beer (‘Mr de Beer’), a recoveries manager of FNB, to depose to FNB’s founding affidavit and to bring the application on behalf of FNB.

[13]        In determining the question whether a person has been authorised to institute and prosecute motion proceedings, it is irrelevant whether such person was authorised to depose to the founding affidavit. The deponent to an affidavit in motion proceedings need not be authorised by the party concerned to depose to the affidavit. It is the institution of the proceedings and the prosecution thereof that must be authorised. The remedy of a respondent who wishes to challenge the authority of a person allegedly acting on behalf of the purported applicant is not to challenge the authority in the answering affidavit but instead to make use of Rule 7(1) of the Uniform Rules of Court. See Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA) para [14]-[16]; Eskom v Soweto City Council 1992 (2) SA 703 (W) at 705C-J; Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA) para [18]-[19]; ANC Umvoti Council Caucus and Others v Umvoti Municipality 2010 (3) SA 31 (KZP) para [27]-[28] and FirstRand Bank Ltd v Fillis 2010 (6) SA 565 (ECP) para [12] - [13].

[14]        The respondents did not avail themselves of the procedure provided for in Rule 7(1), and it is thus not open to the respondents to challenge the authority of the deponent to FNB’s founding affidavit either in regard to deposing to the affidavits or in regard to instituting the applications. There is no merit in the contention of lack of authority on the part of the deponent to FNB’s founding affidavit.

CERTIFICATES OF INDEBTEDNESS

[15]        In respect of claim A, the facility agreement, respondents contend that the general terms and conditions (‘general terms and conditions’) relied upon by FNB, did not form part of the facility agreement concluded because when the facility agreement was requested by the respondent’s attorney, Mr Zimerman, it was not attached to the response received on 28 May 2013. That being so, no reliance can be placed on clause 6 of the general terms and conditions, being the certificate of indebtedness clause the respondents contend FNB relies upon, to prove the Savoy’s indebtedness to FNB in respect of claim A.

[16]        It is not disputed that the facility agreement was preceded by another facility agreement concluded on 25 March 2010 and that the general terms and conditions formed part of such agreement. Clause 12 of the 2 March 2012 facility agreement provides expressly that the FNB’s general terms and conditions:

‘relating to its banking facilities and annexed to the Bank’s facility letter no……dated 25 March 2010 and marked “Annexure A”, is and will remain of full force and effect in relation to the reviewed and/or additional facilities as herein above set forth. Should you have any queries relating to these general terms and conditions, or if you require the Bank to provide you with a copy of the Annexure A previously signed by you, please feel free to contact us and we shall be glad to supply you therewith’. (own emphasis)

[17]         Respondents argued that even if the general terms and conditions formed part of the facility agreement, reliance could nonetheless not be placed on clause 6 thereof because of the dicta in Thrupp Investment Holdings (Pty) Ltd v Goldrick, [2007] ZAGPHC 23; 2008 (2) SA 253 (WLD) at para [5] - [6].  In Thrupp (supra) it was held that a certificate is merely an evidentiary tool and does not in itself establish liability but merely facilitates proof as between FNB and the Savoy. Because, so the argument ran, no contractual nexus between FNB and Mr and Mrs Hazan existed which would permit the use of these certificates as against Mr and Mrs Hazan, the certificates could not be relied upon.

[18]        Mr Smit pointed out that FNB relied on clause 19 of the suretyship agreements which provided contractual foundations for the use of the certificates both as against Mr Hazan and Mrs Hazan. Clause 19 (which is identical in both suretyship agreements) provides:

‘A certificate signed by any of your managers (whose appointment it shall not be necessary to prove) as to the indebtedness of the Debtor and/or the indebtedness of me/us, or as to any other fact in relation to any of such indebtedness, shall be prima facie evidence of the aforementioned for the purposes of any application or action, judgement or order or for any other purpose whatsoever’. (Emphasis added)

[19]        This clause does indeed create a contractual nexus between FNB and Mr and Mrs Hazan, permitting the use of the certificates. The certificates in issue reflect that a manager of FNB has recorded the indebtedness of the Savoy in respect of both claims A and B.

[20]        In Senekal v Trust Bank of Africa Ltd, 1978 (3) SA 375 (AD) at 382 G, Miller JA held as follows:

As to the second of the grounds referred to above, Mr Du Toit's contention was, in effect, that once such a certificate is shown to be suspect as to its accuracy or reliability in any respect whatever, it has no evidential value and must be entirely disregarded. I have no doubt that that broad contention must be rejected. There might be several items to which such a certificate relates, some of which may appear to be unassailable while others may either be shown to be inaccurate or appear to be of dubious reliability, or might require some modification or adjustment. I can find no reason why in such circumstances the certificate is to be entirely disregarded merely because it is found or thought to be inaccurate or unreliable in certain respects. At the end of the case, when all the evidence (which includes the certificate) is in, the Court must decide whether the party upon whom the onus rests has discharged it on a proper balance of probabilities. As was pointed out by STRATFORD JA in Ex parte Minister Of Justice: In re R v Jacobson and Levy 1931 AD 466 at 478:

"Prima facie evidence, in its more usual sense, is used to mean prima facie proof of an issue the burden of proving which is upon the party giving that evidence."

If the prima facie evidence or proof remains unrebutted at the close of the

case, it becomes "sufficient proof" of the fact or facts (on the issues with which it is concerned) necessarily to be established by the party bearing the onus of proof”. (Salmons v Jacoby 1939 AD 588 at 593.)

[21]        I have already found that the certificates in support of claims A and B may be relied upon ie that the contractual relationship between FNB and Mr and Mrs Hazan (respectively), permits of the use of such an evidentiary tool/s. The next issue which falls for determination, is the reliability of it/them.   

[22]        Mrs Hazan is a chartered accountant by profession and assisted her husband, Mr Hazan, with the running of both the Savoy and Genesis. Who could be more qualified or capable to do the calculations and to demonstrate that the balances relied upon by FNB are wrong? Yet, not one word is spoken about this by Mrs Hazan. There is, of course, no onus on her to speak. However, not to do so in the face of a ‘prima facie’ clause, is bold and not without its consequences. A lot of nit picking took place in respect of the accuracy or otherwise of the certificates. So for example, Mr de Beer, both the deponent to FNB’s founding affidavit and the replying affidavit as well as the author of the certificates, was criticised for saying in the replying affidavit that ‘In fact, at the first meeting with Zimerman, I explained to him my designation and the reason for my involvement in the matter as prior thereto, the Respondents had been dealing with Rees and Brits. The account of the Respondent was handed to me to deal with in recoveries’. This then supposedly meant, that because the Savoy was not a respondent in that case (the money judgment application), that a different entities’ account had been handed to Mr de Beer, and/or even if he had been handed an account of the Savoy, that it could only have been one of the three accounts (because there are three claims, A, B and C). This analysis ignores Mr de Beer’s evidence that he was at a meeting where Mr Zimerman was present, that the entire problem had been discussed and that ‘the account,’ in the context used, clearly referred to the entire package of accounts relating to the Savoy, Genesis and Mr and Mrs Hazan. Why he would take over one feature of the ‘matter’ only from Mr Rees and Mr Brits, is not explained and highly improbable. Why he would go armed with another entities’ account (ie someone completely unrelated to this dispute) to a meeting with Mr Zimerman, is similarly not explained and equally, if not more, improbable and bizarre. Mr de Beer states: ‘To contend that I am unfamiliar with the facts of the matter in circumstances where I have attended meetings and discussed the matter extensively with the respondents and their legal representative and where numerous settlement discussions have ensued, is disingenuous.’    

[23]        The business of the Savoy was sold on 6 February 2013 for some R7 million. The proceeds were not used to settle Savoy’s debts with FNB, but apparently, to settle other debts with Investec Bank. There are no allegations in these papers that other payments to FNB were not taken into account. The disputes relating to Claim C, can be dealt with by the liquidators of the Savoy and have no bearing on the accuracy of the amounts claimed in respect of claims A and B. I find that nothing contained in these papers which casts doubt on the veracity of the content of the certificates relied upon by FNB in support of claims A and B.

[24]        Mr. Smit handed up two recent certificates of indebtedness, relying on the comments of Cloete JA in Rossouw v Firstrand Bank, 2010 (6) SA 439 (SCA) at 454 B-C, for receipt thereof. Mr. Basslian, representing the respondents, objected to such certificates. The certificates reflect the balances due as at 11 February 2016. The respondents did not have sufficient opportunity to consider these ‘fresh certificates’ (they were handed up from the bar during argument). I will disregard them for purposes of this judgment and premise my decision on the certificates annexed to the founding papers. This approach is unduly cautious as the new certificates only contain arithmetical calculations based on facts already before the court and this court is entitled to receive them. 

[25]        Having regard to all the facts of the case and the evidence presented on behalf of all the parties, I conclude that the certificates relied upon by FNB as annexed to their founding affidavit in the money judgment, are accurate as to their content and the prima facie nature has not been upset by anything presented or argued by the respondents.

[26]        I accordingly find that, but for the defences raised and dealt with hereinafter, as at 3 August 2013 the Savoy was indebted to FNB in respect of claim A, the facility agreement, in the sum of R497 326.48 together with interest thereon at FNB’s rate of prime plus 2% per annum calculated daily, compounded monthly in arrears from 3 August 2013 till date of payment and that as at 22 August 2013 the Savoy was indebted to FNB in respect of claim B, the loan agreement, in the sum of R1 709 179.78 together with interest thereon at FNB’s rate of prime plus 2% per annum calculated daily, compounded monthly in arrears from 22 August 2013 till date of payment. 

MR HAZAN’S COUNTERCLAIMS   

[27]        Mr and Mrs Hazan took cession of two claims from the Savoy. The first claim is for the repayment of the amount forming the subject matter of claim C. The second claim relates to rentals and deposit charges levied for the use of a Smart box. The damages claimed in this regard amounts to R 140 000.

[28]        The agreement of cession, in terms of which the claims were ceded to Mr Hazan, is dated 21 February 2014. The liquidation application in respect of the Savoy, was issued on 19 December 2013 and is accordingly the date upon which the winding-up is deemed to commence. A concursus creditorum is instituted at that moment and no transaction can thereafter be entered with regard to estate matters by a single creditor to the prejudice of the general body.

[29]        The cession occurred after 19 December 2013. Accordingly, and in terms of section 341(2) of the Companies Act 61 of 1973 (‘the 1973 Companies Act’) as read with Companies Act 71 of 2008 (‘the 2008 Companies Act’) the cession of it’s claims by the Savoy to Mr Hazan is void, unless a Court otherwise orders. Section 341 (2) provides:

‘Every disposition of its property (including rights of action) by any company being wound-up and unable to pay its debts made after the commencement of the winding-up, shall be void unless the Court otherwise orders.’

[30]        There is no application before the court to order otherwise.  The cession is accordingly void.

DISPUTES OF FACT

[31]        Mr. Basslian contended that there are major disputes of fact on the papers which are not capable of resolution on the affidavits alone.  These relate to 1.) the alleged collusion between FNB and Spar; 2.) whether Mr Hazan had signed the deed of suretyship under economic duress as stated by him; 3.) whether FNB’s actions in paying out the first payment guarantee to Spar of R1 million, freezing the account and then demanding that Mr Hazan sign a deed of suretyship, especially in circumstances where Spar had admitted that it had called for payment of the first payment guarantee in error, led to or contributed to the financial demise of Savoy; 4.) whether FNB was entitled to debit Savoy’s speedpoint account and transfer the sum to Spar, more particularly in light of the agreement between Savoy and Spar providing for an adjustment account between the parties; 5.) whether the general terms and conditions were attached to the facility agreement.

[32]        In Wightman t/a JW Construction v Headfour (Pty) Ltd, [2008] ZASCA 6; 2008 (3) SA 371 (SCA) At para [13], Heher JA held as follows:

“[13] A real, genuine and bona fide dispute of fact can exist only where the court is satisfied that the party who purports to raise the dispute has in his affidavit seriously and unambiguously addressed the fact said to be disputed. There will of course be instances where a bare denial meets the requirement because there is no other way open to the disputing party and nothing more can therefore be expected of him. But even that may not be sufficient if the fact averred lies purely within the knowledge of the averring party and no basis is laid for disputing the veracity or accuracy of the averment. When the facts averred are such that the disputing party must necessarily possess knowledge of them and be able to provide an answer (or countervailing evidence) if they be not true or accurate but, instead of doing so, rests his case on a bare or ambiguous denial the court will generally have difficulty in finding that the test is satisfied. I say 'generally' because factual averments seldom stand apart from a broader matrix of circumstances all of which needs to be borne in mind when arriving at a decision. A litigant may not necessarily recognise or understand the nuances of a bare or general denial as against a real attempt to grapple with all relevant factual allegations made by the other party. But when he signs the answering affidavit, he commits himself to its contents, inadequate as they may be, and will only in exceptional circumstances be permitted to disavow them. There is thus a serious duty imposed upon a legal adviser who settles an answering affidavit to ascertain and engage with facts which his client disputes and to reflect such disputes fully and accurately in the answering affidavit. If that does not happen it should come as no surprise that the court takes a robust view of the matter”.

See too Grancy Property Ltd v Manala and others, 2015 (3) SA 313 (SCA) at paragraph [19]. Prior to dealing with the disputes, I draw attention to a feature which weighed heavily with me in assessing the disputes. It is the failure, on behalf of the respondents, to have dealt with (or to have attempted to deal with), the allegations contained in the replying affidavit. There was no fourth set of affidavits. There was also no application to receive a fourth set. The respondents omitted to do so at their peril. Most of the averments contained in the replying affidavit stand uncontested.

General terms and conditions part of the facility agreement

[33]        I have already found that the general terms and conditions were part of the facility agreement. They were contained in the facility that was granted on 25 March 2010 and then again, incorporated expressly, into the actual facility agreement  (claim A). In so far as it is denied that the general terms and conditions were part of the facility agreement, I reject such version. There is no attempt by Mr Hazan to explain the express terms of the facility agreement as quoted in paragraph [16]. There is no claim for the rectification of the facility agreement if it is being contended that such clause (incorporating the general terms and conditions) did not form part of the facility agreement. There is simply no scope for arguing that such terms were not part of the facility agreement having regard to the admissible evidence in this matter.

[34]         However, as indicated hereinbefore, the entire dispute as to whether or not the general terms and conditions formed part of the facility agreement, is irrelevant as FNB is not relying on the general terms and conditions for purposes of receipt of the certificate of indebtedness in respect of Claim A.

Freezing of Genesis account 

[35]        On 23 April 2012, the Spar obtained the perfection order. On 24 April 2012 Spar instructed FNB to immediately place a hold on all debits (withdrawals, debit orders, etc) of the Genesis account. A copy of the perfection order was attached to the instruction to FNB by Spar, to ‘freeze’ the Genesis account.  The perfection order reads:

‘Pending the final determination of this application, the Applicant (Spar) is authorised for the purposes of perfecting its security……………to:

1. Take possession of and retain all or any of the movable property and to retain such possession for so long as the Applicant (Spar) may deem fit;

2. Carry on the business of the Respondent (Genesis) relating to the movable property in the name of and at the expense of the Respondent and for that purpose to purchase goods and do whatever else the Applicant (Spar) deems necessary;

3. Operate and draw on the banking account of the Respondent (Genesis) and to instruct that all funds in such accounts or which may be paid into such accounts, be paid to the Applicant (Spar) or be not withdrawn therefrom or to the order of the Respondent (Genesis)……’

[36]        There was some debate about the interpretation of this order. Mr. Basslian argued that this order did not entitle Spar to request FNB to ‘freeze’ the Genesis account. He argued that such an interpretation would go against the spirit of the order which was that Spar should run the business. It could not run the business, so the argument went, if a hold was placed on all debits. This court need not decide whether the perfection order authorises Spar to instruct FNB to put a hold on all debits of the Genesis account. What is crystal clear from the order though, is that FNB was required to henceforth take instructions in respect of the operation of the account, from Spar and not from the actual account holder, being Genesis. The order expressly strips the Savoy of its authority and clothes Spar with it. In terms of the order, FNB was not required to perform a policing function and to enquire from Spar whether the business of Genesis was being run properly ie that suppliers were being paid etc. FNB would not know whether Spar was running the business of Genesis using its own resources/accounts. Be that as it may, para 1.3 of the order is, at worst for FNB, ambiguous. If, as Mr de Beer contends, FNB construed the perfection order to mean that Spar was entitled to instruct FNB to put a hold on all debits of the account, such interpretation of paragraph 1.3 of the order can most certainly not be considered unreasonable and contrary to the provisions of the perfection order.

[37]        On 28 April 2012 FNB was requested not to ‘freeze’ the Genesis account. On 30 April 2012, FNB responded that they could only do this if they received a letter on either Spar’s letterhead or from Spars’ attorneys and an indemnity, indemnifying FNB from anything that resulted from the ‘unfreezing’ of the account. No such letter was forthcoming. On 18 May 2012 the perfection order was set aside and the Genesis account was  ‘unfrozen’. However, according to Mr and Mrs Hazan, Genesis could not be resuscitated and it never reopened for trade after 18 May 2012. Genesis and Spar are involved in litigation. Spar instituted action against Genesis for R 3 612 356.67 allegedly owing to it in relation to stock. Mr and Mrs Hazan have counterclaimed for damages alleging that Genesis’s demise was a direct consequence of Spar’s conduct after the perfection order was granted. FNB is not a party to such proceedings. It is significant that FNB were not joined to such proceedings yet, two years after the event, when the answering affidavit was signed on 21 February 2014, FNB was implicated in the demise of Genesis. One would have thought that if Mr and Mrs Hazan had truly held the belief that FNB had been responsible for the demise (or had contributed to the demise) of Genesis, that FNB would have been joined as a party to the proceedings where this very issue was going to be decided. As at the date of the hearing being 11 February 2016, at a time when it would appear that the claim against FNB had prescribed, this version was still being advanced yet nothing had been done about it. I can only conclude that the respondents do not seriously hold the view that there is any merit in the point. I find there is no merit in this accusation.

Payment of the guarantee, freezing of the Savoy account and signing of the suretyship under duress

[38]        On 17 August 2012 the first payment guarantee was called up and on           22 August 2012, FNB paid R1 000 000 to Spar. There is no suggestion in this matter that FNB was not obliged to make payment to Spar of the R1 000 000. Nor could there be. The law is clear in this regard. In Guardrisk Insurance Company Ltd v Kentz (Pty) Ltd, [2014] 1 All SA 307 (SCA), Theron JA held as follows:

“[28] Our courts, in a long line of cases and also relying on English authorities, have strictly applied the principle that a bank faced with a valid demand in respect of a performance guarantee, is obliged to pay the beneficiary without investigation of the contractual position between the beneficiary and the principal debtor. One of the main reasons why courts are ordinarily reluctant to entertain the underlying contractual disputes between an employer and a contractor when faced with a demand based on an on demand or unconditional performance guarantee, is because of the principle that to do so would undermine the efficacy of such guarantees. This court in Loomcraft referred to the fact that the autonomous nature of the obligation owed by the bank to the beneficiary under a letter of credit ‘has been stressed by courts both in South Africa and overseas’. The learned judge referred to a number of authorities, both local and English to illustrate this point. Similarly, this court in Lombard Insurance, confirmed that the obligation on the part of the bank to make payment on a performance guarantee is independent of the underlying contract and whatever disputes may arise between the buyer and the seller are irrelevant as far as the bank’s obligation is concerned.

[29] In my view this principle is based on sound reason. It underscores the commercial nature of performance guarantees. In determining whether payment should be made on such a guarantee, accessory obligations are of no consequence. The very purpose of the guarantee is so that the beneficiary can call up the guarantee without having to wait for the final determination of its rights in terms of accessory obligations. To find otherwise, would involve an unjustified paradigm shift and defeat the commercial purpose of performance guarantees”.

See too Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association, 2014 (2) SA 382 (SCA).

[39]        The letter calling for payment in terms of the first payment guarantee expressly advised that it was the Savoy which owed Spar R 3 612 356.67.  FNB was obliged to make payment and did so. After the payment of R1 000 000, the Savoy’s account was in overdraft of R1 071 000. The Savoy had a facility of R500 000 only and accordingly called upon the Savoy to repay the excess amount and to bring the account back within the approved limit. The Savoy was informed that until this had occurred, no drawings would be allowed against such account. The respondents contend that this conduct was unlawful and amounted to the ‘freezing’ of the Savoy’s account. I disagree. The payment of the guarantee (which FNB was obliged to make) resulted in the account exceeding the granted facility. FNB was not ‘freezing’ such account. FNB merely instructed the Savoy to pay the excess and to bring the account in line with the R 500 000 overdraft limit. There is nothing in the conduct described thus far which would suggest that FNB’s conduct was in any way unlawful.

[40]        On 23 August 2012 and in writing, Spar conceded that the demand it had made to FNB which had resulted in the R1 000 000 being paid to them, had been done in error and undertook to repay the funds that had been paid over to FNB. At this stage FNB adopted the position that it would not reissue the guarantee until the money had been repaid and Spar adopted the approach that it would not pay back the money until the guarantee was issued. On 24 August 2012 FNB advised that they were prepared to issue a payment guarantee provided the excess on the current account was repaid and that Mr Hazan was to provide FNB with a suretyship limited to R3 000 000. The Savoy launched an urgent application against Spar also citing FNB but not seeking any relief against it. The founding affidavit of Mr Hazan, in support of such application was annexed to the replying affidavit filed by FNB. It is evident that the respondents have an axe to grind with Spar. If there were grounds to contend that FNB and Spar were colluding, one would have expected such allegations in that application. Other than criticizing FNB for not first contacting the respondents prior to paying the first payment guarantee, no other conduct of FNB is complained of.

[41]         On 28 August 2012, the Savoy was ordered to provide a guarantee and Spar was ordered to pay the Savoy R1 000 000 (‘Kgomo J’s order’). The order reads:

‘1. The First Respondent (Spar) is to make payment of R1 000 000 (One Million Rand) to the Applicant (the Savoy) immediately upon receipt of a bank guarantee, the details and conditions whereof are clearly set out in 2 below.

2. The Applicant (the Savoy) is to provide the First Respondent (Spar) with a valid bank guarantee in the amount of R1 000 000(One Million Rand) which guarantee shall be in the same format as that annexed to the Applicant’s founding affirmation in the application herein’.

[42]        No mention is made of FNB in Kgomo J’s order and no obligations whatsoever are imposed on FNB to issue a guarantee. The order was evidently misconstrued by Mr Zimerman in subsequent correspondence. He was clearly under the mistaken belief that Kgomo J’s order created an obligation for FNB to issue a new guarantee. The fact of the matter is that the respondents could have approached any financial institution to issue a guarantee. It was the Savoy’s obligation to provide Spar with a guarantee prior to the R1 000 000 being returned to the Savoy and not FNB’s. It is not insignificant that the founding affidavit in support of the relief ultimately embodied in Kgomo J’s order, does not indicate any difficulty with or unwillingness to sign a suretyship as required by FNB to issue a new guarantee.

[43]        On 29 August 2012, Mr Zimerman advised FNB that Mr Hazan was prepared to sign the suretyship and that FNB should prepare the documents in respect thereof. On 11 September 2012, Mr Zimerman wrote to FNB explaining that it had taken too long to prepare the suretyship documents and that Mr Hazan was no longer prepared to sign the suretyship. FNB was threatened with an urgent application in the event of the guarantee not having been reinstated by the end of the business day on 11 September 2012. No such urgent application was launched. Mr de Beer, speaking on behalf of FNB in it’s replying affidavit explained that the issuing of the guarantee constituted a new transaction and that FNB was under no contractual obligation to provide a guarantee nor was any court order in place, directing it to provide a guarantee. Mr de Beer explained that, in an attempt to avoid further legal proceedings, he had called for a meeting. On 13 September 2012 a meeting was held which was attended by Mr Zimerman, Mr de Beer and Ms Silberman (FNB’s attorney of record). At such meeting Mr Zimerman explained that Mr Hazan was not prepared to sign the suretyship in circumstances where Mr Hazan had been advised by Mr Rees (on behalf of FNB) that the facilities granted to the Savoy had been terminated. Mr de Beer assured Mr Hazan that the facilities had not been terminated. This was confirmed by Ms Silberman in a letter dated 13 September 2012. On 19 September 2012 Ms Silberman was contacted by Mr Zimerman who informed her that Mr Hazan was prepared to sign the suretyship whereafter FNB would be in a position to issue the guarantee in favour of Spar. Mr Zimerman further explained that he didn’t want the guarantee to be issued until such time as a meeting, which Mr Zimerman had arranged with Spar, had taken place. On 15 October 2012 Mr Zimerman requested FNB to issue the guarantee upon Mr Hazan signing the suretyship. On 18 October 2012, Mr Hazan executed a deed of suretyship in favour of FNB which is limited to R3 000 000 (excluding interest). The second payment guarantee in favour of Spar for the payment of R1 000 000 was issued on 25 October 2012 (‘the second payment guarantee’).

[44]        In Medscheme Holding (Pty) Ltd and another v Bhamjee, 2005 (5) SA 339 (SCA), Nugent JA held at para [18] as follows:

‘[18] English and American law both recognise that economic pressure may, in appropriate cases, constitute duress that allows for the avoidance of a contract. As pointed out by Van den Heever AJ in Van den Berg & Kie Rekenkundige Beamptes v Boomprops 1028 BK 1999 (1) SA 780 (T), that principle has yet to be authoritatively accepted in our law. While there would seem to be no principled reason why the threat of economic ruin should not, in appropriate cases, be recognised as duress, such cases are likely to be rare. (The point is underlined by the dearth of English cases in which economic duress was found to have existed.) For it is not unlawful, in general, to cause economic harm, or even to cause economic ruin, to another, nor can it generally be unconscionable to do so in a competitive economy. In commercial bargaining the exercise of free will (if that can ever exist in any pure form of the term) is always fettered to some degree by the expectation of gain or the fear of loss. I agree with Van den Heever AJ (in Van den Berg & Kie Rekenkundige Beamptes at 795E - 796A) that hard bargaining is not the equivalent of duress, and that is so even where the bargain is the product of an imbalance in bargaining power. Something more - which is absent in this case - would need to exist for economic bargaining to be illegitimate or unconscionable and thus to constitute duress.’ (quoted without footnotes).

[45]        I fail to see any duress in the conduct of FNB. Mr de Beer in the replying affidavit says that at the end of October 2012, when the issue relating to the provision of the second payment guarantee was finalised, there was no documentation or correspondence indicating any contention on the part of the respondents that: 1. FNB and Spar had colluded to bring about the financial ruin of the Savoy; 2. Mr Hazan had felt it unfair that he was required to sign the additional suretyship in order to give effect to FNB’s security requirements so that the new guarantee could be issued; 3. The suretyship had been signed under protest or in circumstances where Mr Hazan felt threatened or under some form of duress; and 4. FNB had played a part in the demise of the Savoy or in any of the circumstances which resulted in the situation of which the respondents now complain.

[46]        The bargain (the suretyship) might well be the product of an imbalance in bargaining power. But this is not enough for the successful reliance on economic duress as a defence. One cannot but feel empathy for the predicament Mr and Mrs Hazan found themselves in when Genesis was erroneously snatched away from them by Spar. However, something more would have to be shown in this case to show that the conduct of FNB, in reassessing their risk and calling for added security in the circumstances of this case, was unconscionable and constitutes duress.  Such facts are absent.

Prejudice – Release from suretyships

[47]        In Bock and others v Duburoro Investments (Pty) Ltd, 2004 (2) SA 242 (SCA) at 242 , Harms JA held as follows at para [20]:

‘This Court, in ABSA Bank Ltd v Davidson 2000(1) SA 1117 (SCA)  ([2002] 1 B All SA 355) at para [14], was confronted with the submission that:

'there is a general so-called ''prejudice principle'' in our law to the effect that, if a creditor should do anything in his dealings with the principal debtor which has the effect of prejudicing the surety, the latter is fully released'. 

It came, in the words of Olivier JA, without any mincing, to the conclusion that no such principle exists and held (at para [19]):

'As a general proposition prejudice caused to the surety can only release the surety (whether totally or partially) if the prejudice is the result of a breach of some or other legal duty or obligation. The prime sources of a creditor's rights, duties and obligations are the principal agreement and the deed of suretyship. If, as is the case here, the alleged prejudice was caused by conduct falling within the terms of the principal agreement or the deed of suretyship, the prejudice suffered was one which the surety undertook to suffer. Counsel who drafted the plea was therefore on the right track when he sought to base his case upon prejudice which flowed from the breach of an obligation, contractual in the present circumstances'.

[48]        It would also appear that Mr and Mrs Hazan request that a finding be brought out that they be totally released from their suretyship obligations, this in the face of the fact that a suretyship agreement signed by Mr Hazan, limited to R200 000, was already in place when the suretyship forming the subject matter of this application, was signed.

[49]        From the authorities it is clear: There is no general principle of release when conduct which is prejudicial to the surety is proven. When looking at prejudice, one must consider whether there is a breach of obligation/s on behalf of the creditor. Respondents did not contend that a contractual obligation had been breached by FNB. One looks in vain for such an obligation and the breach thereof. I accordingly find that this defence is in fact and in law, unsustainable.

Collusion between FNB and Spar

[50]        The respondents have in their answer specifically alleged that FNB, in collusion with Spar, engaged in conduct to actively bring about the financial ruin of the respondents. Why they would want to do so, is perplexing. They have an investment in ensuring that the moneys advanced by them be repaid. Conduct designed to bring about the financial ruin of the respondents is completely against their interests. Be that as it may, I find such a proposition, having regard to the analysis of the evidence, unfounded and without merit. Further, in almost seventeen months of FNB dealing with the respondents, never once prior to the delivery of the answering affidavit was mention ever made of such collusion or of any unlawful or untoward conduct on the part of FNB. During the meetings and correspondence annexed to the papers, no mention is made that they had any claim against FNB. I reject this vague and unsubstantiated statement for the reasons, not only mentioned under this rubric, but also having regard to all considerations mentioned and discussed in this judgment.

THE WINDING- UP APPLICATION

[51]        In order for a final winding up order to be granted, FNB has to demonstrate: that it is a creditor of the Savoy within the meaning of Section 346(1)(b) of the 1973 Companies Act, which is to be read with Item 9 of Schedule 5 of the 2008 Companies Act; and that the Savoy is unable to pay its debts within the meaning of Section 345 of the 1973 Companies Act.

[52]        On 2 March 2012 the facility agreement was entered into between FNB and the Savoy in terms of which the Savoy was afforded a working capital facility in the amount of R500 000, a first card facility of R27 200, a leverage finance term loan of R2 388 502 and a guarantee facility of R1 000 000.

[53]         It is common cause that the facilities were made available to the Savoy, that FNB had advanced monies to the Savoy in terms thereof and that FNB had provided the second payment guarantee to Spar in the sum of R1 000 000 which has not been called up and is a contingent liability.

[54]        It is further common cause that the loan agreement was entered into between FNB and the Savoy on 21 April 2010 and here too, the advance of the funds is not disputed and it is not suggested that the amount has been repaid.

[55]        In terms of Section 346(1)(b) of the 1973 Companies Act, an application to the court for the winding-up of a company may be made by one or more of its creditors (including contingent or prospective creditors).  The court need look no further than the second payment guarantee which is a contingent liability and which, on the Savoy’s own version ‘has not yet been called up by the Spar Group’, at least ‘at this stage’.

[56]        As concerns both the claims in terms of the facility agreement and the loan agreement, the Savoy had the benefit of the funds in terms of both agreements and it is not suggested that they have been repaid. Significantly, both the facility agreement and the loan agreement provide that payment must be made without set-off or deduction.

[57]         FNB directed a notice in terms of Section 69 of the Close Corporations Act 69 of 1984, to which no response was received. The Savoy failed to make payment or to secure or compound the indebtedness to FNB and is therefore deemed unable to pay its debts.

[58]        In addition, it is not disputed by the Savoy that its business was sold and it is not suggested that the Savoy conducts business and is able to pay its debts. The Savoy is commercially insolvent both on its deemed inability and on its demonstrated inability to pay its debts.

[59]        Although the court has a discretion not to grant a winding-up order, despite all the jurisdictional requirements having been met, this is a narrow discretion in circumstances where a creditor has a debt which a company cannot pay and the creditor is entitled, ex debito justitiae to a winding-up order, see Sammel and Others vs President Brand Gold Mining Co Limited 1969 (3) SA 629 (A) at 662F; ABSA Bank Limited vs Rhebokskloof (Proprietary) Limited and Others 1993 (4) SA 436 (C) at 440 to 441.

[60]         In FirstRand Bank Limited vs Evans 2011 (4) SA 597 (KZD) at para 27 p 607 Wallis J (as he then was) held (in a sequestration application):

“there is little authority on how this discretion should be exercised, which perhaps indicates that it is unusual for a court to exercise it in favour of the debtor.  Broadly speaking, it seems to mean that the discretion falls within that class of cases generally described as involving a power combined with a duty.  In other words, where the conditions prescribed for the grant of a provisional order of sequestration are satisfied, then, in the absence of some special circumstances, the court should ordinarily grant the order.  It is for the respondent to establish the special or unusual circumstances that warrant the exercise of the court’s discretion in his or her favour”.

[61]        No special or unusual circumstances have been established or suggested by the Savoy to persuade the court to exercise its discretion against granting a final winding-up order. It was argued that the conduct complained of by the respondents, is not directed at the court’s discretion. But even if it were, I find no reasons to exercise my discretion against the granting of a final order particularly in circumstances where the business of the Savoy has been sold, it is neither factually nor commercially solvent and the application was not brought on the basis that it is just and equitable.

[62]        The statutory requirements were complied with. That this had occurred was initially questioned but after considering the documents in the court file, conceded.

ORDERS

[63]        I accordingly grant the following orders:

In respect of case number 2013/47367 – the liquidation application

1.    The respondent is hereby placed under final winding-up in the hands of the Master of the High Court of South Africa;

2.    Costs of the application are to be costs in the winding-up of the respondent.

In respect of case number 2013/47366 – the money judgment

Claims A and B

Judgement is granted against the first and second respondents, jointly and severally, the one paying the other to be absolved in the following terms:

1.     Claim A - Payment of the sum of R 497 326.48 plus interest thereon at the applicant’s prime rate of interest plus 2% per annum, calculated daily, compounded monthly in arrears from 3 August 2013 to date of payment;

2.     Claim B - Payment of the sum of R 1 709 179.78 plus interest thereon at the applicant’s prime rate of interest plus 2% per annum, calculated daily, compounded monthly in arrears from 22 August 2013 to date of payment;

3.     In respect of claims A and B – The first respondent’s liability is limited to R 3 000 000 plus interest thereon at the applicant’s prime rate of interest plus 2% per annum, calculated daily, compounded monthly in arrears from 19 December 2013 to date of payment.

4.     In respect of claims A and B – The second respondent’s liability is limited to R 500 000 plus interest thereon at the applicant’s prime rate of interest plus 2% per annum, calculated daily, compounded monthly in arrears from 19 December 2013 to date of payment

5.     Costs of the application as between attorney and client

CLAIM C

a.     Claim C is postponed sine die.

I OPPERMAN

Acting Judge of the High Court

Gauteng Local Division, Johannesburg

Heard: 11 February 2016

Judgment delivered: 18 February 2016

Appearances:

For Plaintiff: Adv JE Smit

Instructed by: Werksmans Attorneys

For Respondent: Adv M Basslian SC

Instructed by: Taitz & Skikne Attorneys

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