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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

(1)     REPORTABLE: NO

(2)     OF INTEREST TO OTHER JUDGES: NO

(3)     REVISED. NO

DATE: 25 May 2021

 

CASE NO: 2020/23712

In the matter between:
ASTEK PROPERTY GROUP (PTY) LTD	Applicant
and
CRYPTON PROPERTIES CC	First Respondent
KOSTA GEORGIEV	Second Respondent

 

JUDGMENT

SIWENDU J

Introduction

[1]          The applicant, Astek Property Group (Pty) Ltd (Astek), is a family operated company, with its principal place of business at 74 Kyalami Road, Kyalami Business Park, Midrand, 1684. Two of its directors are father and son, Mr Sydney Baker and Mr Craig Baker. Its business is in the building and construction industry.

[2]          The first respondent is Crypton Properties CC (Crypton), a close corporation registered according to the company laws whose chosen domicilium address is c/o Schoonees, Belling & Georgiev Attorneys, 23 7th Avenue, Corner Second Street, Edenvale, Gauteng.

[3]          The second respondent is Mr Kosta Georgiev, a practicing attorney at Schoonees, Belling & Georgiev Attorneys. He is the sole member of Crypton. His chosen domicilium address is the law firm and that of Crypton. Mr Georgiev bound himself as a surety and a co-principal debtor with Crypton in respect of a loan advanced to Crypton by Astek. He is cited in his personal capacity as surety and co-principal debtor. The Deed of Suretyship was concluded on 13 February 2013.

[4]          Astek seeks a payment of R1 996 839.04, plus interest at the rate of 9% reckoned from 5 July 2020, together with costs, based on a written loan agreement entered into with Crypton on 13 February 2014. The initial loan amount was R1 750 000.00. The application was launched on 13 August 2020 after the respondents failed to comply with the letter of demand dated 24 July 2020. Astek seeks to enforce the agreement.

[5]          Astek contends that Crypton breached the agreement by failing to pay the agreed monthly instalments of R49 583.00 as and when they became due and payable. The last payment made was on 20 January 2020. It contends that the failure to pay the instalments is an event of default in terms of the loan agreement. Based on this, Astek contends that it is entitled to claim the repayment of the full amount of the loan, plus interest. It relies on a calculation based on the schedule attached to the founding affidavit by Mr Craig Baker.  

 

 

Background

[6]          The loan agreement is common cause. Mr Craig Baker and Mr Georgiev have been friends over many years. They had business dealings with one another. Mr Georgiev represented Mr Baker and his wife in certain legal matters. When Mr Georgiev traded as Style & Comfort CC t/a Dejan Custom Furniture Design, his company supplied Astek with furniture for its construction projects.

[7]          Mr Georgiev obtained the loan from Astek to purchase a property used to conduct his business. He could not obtain a 100% mortgage bond from financial institutions. Even though he admits the loan agreement, he opposes the application based on an oral agreement he alleges was struck with Astek around June 2013.

[8]          I distil from Mr Georgiev’s answering affidavit, filed on behalf of both respondents, that the alleged oral agreement entailed that Astek would:

(a)      Advance the said sum of R1 750 000.00 without the need to register a mortgage bond over the property.

(b)      Astek would order furniture from Style & Comfort CC t/a Dejan Custom Furniture Design.

(c)       Mr Georgiev would represent Astek and provide legal services to it. 

(d)      The amount owing for the furniture and legal services would be set-off against the loan amount.

(e)      The loan would be paid off in two years.

[9]          Despite the written loan agreement, Mr Georgiev claims that it was concluded to ensure that the repayment of the loan amounts was not construed as a donation, hence why Crypton made nominal payments. He claims that the written agreement was for the purpose of Astek’s financial records. In reality, the loan was to be repaid by means of a set-off envisaged in the oral agreement. He also claims that the payment sought constitutes contractual damages. He disputes the interest due, on account that the loan schedule does not demonstrate when the event of default occurred.

[10]       Mr Georgiev also contends that there is a patent dispute of facts which cannot be adjudicated on the papers. He argues that Astek failed to disclose the details of the oral agreement. Given the context of the oral agreement and the historic relationship between the parties, he argues that the case should have been brought by way of action proceedings.

[11]       Lastly, Mr Georgiev contended that Mr Baker lacks the authority to bring the application. The procedure to challenge authority is outlined in Rule 7(1) of the Uniform Rules of Court.[1] It is not necessary to belabour the issue because the challenge to Mr Baker’s authority is not one brought in terms of Rule 7 of the Uniform Rules.[2]

[12]       In its reply, Astek vehemently disputed the oral agreement of set-off as a fabrication. It claimed instead that the respondents were in such a state of default that Astek’s auditors cautioned that the loan could be construed as a donation, leading to it incurring additional tax of 20%. Astek contends, amongst others, that:

(a)      The oral agreement preceded/predated the written loan agreement.

(b)      Specific clauses of the agreement are wholly inconsistent and incongruent with the terms of the oral agreement.

(c)       It had attempted to enforce the repayment, and Mr Georgiev made undertakings without a reference to the set-off he now claims.

[13]       The specific clauses and terms of loan agreement relevant to the dispute are that:

'6. REPAYMENT OF CAPITAL AND INTEREST

6.1 Subject to earlier payment in terms of 7 or arising in terms of an Event of Default, the Borrower shall be obliged to repay the Loan by way of monthly instalments of R49 583-00 (forty- nine thousand five hundred and eighty three rand) each, the first instalment to be made on or before the 5^th day of January 2014 and thereafter on or before the fifth day of each and every succeeding month until the Loan is paid in full.

6.2 All payments to be made by the Borrower in terms of this agreement shall be made in cash, free of exchange and bank commission and without deduction, set-off or demand into a bank account nominated in writing by the Lender from time to time.

6.3 The Borrower shall have no right to defer, withhold, set-off or adjust any payment due to the Lender arising out of this agreement without the Lender's written consent.

13. ASSIGNMENT

13.1 …

13.2 Neither this agreement nor any part, share or interest therein nor any rights or obligations hereunder may be ceded, assigned, or otherwise transferred by the Borrower without the prior written consent of the Lender

18. MISCELLANEOUS

18.1 Entire Agreement

This agreement contains all of the express provisions agreed on by the parties with regard to the subject matter hereof and the parties waive the right to rely on any alleged express provision not contained herein.

18.2 No Representations

Neither party may rely on any representation which allegedly induced that party to enter into this agreement, unless the representation is recorded in this agreement.'

[14]       Confronted with Astek’s replying affidavit, in particular the facts presented to oppose the respondent’s contentions, the respondents sought the Court’s leave to file a further supplementary affidavit in terms of Rule 6(5).[3] In the alternative, he sought an order striking out paragraphs 14, 15, 17, 18, 22, 26, 27, 28, 29, 30, 33, 52, 53, 60, 61, 78, 79, 83, 86, 88, 94, 95, 96, 109, 102.3, 110.3, 113 to 113.8 and all subparagraphs inclusive, and paragraphs 115, 116, and 117. Astek opposed the application.

[15]       Accordingly, I deal with the interlocutory applications first.

Supplementary affidavit and striking out

[16]       Ms Bhabha (for the respondents) argued that Astek’s replying affidavit, which bolsters Astek’s case, precipitated the need to file a further affidavit. She complains that it contained new information not set out in the founding affidavit. It was argued that the factual allegations made 'go far and beyond' what is required in a reply, and that the plethora of additional facts were included without the full context and background. Ms Bhabha argued that the issues the respondents seek to raise are relevant to their defence. The Court would be constrained in adjudicating the matter without the further affidavit.

[17]       On the other hand, Ms Stevenson (for Astek), contended there was no proper and satisfactory explanation and/or exceptional circumstances necessitating the filing of a further affidavit. There is no explanation as to why the respondents did not include the information in the papers filed in October 2020. She argued that, to succeed, the respondents must show that the information they seek to adduce was not available to them at the time.

[18]        A further bone of contention is that the supplementary affidavit was filed at the last minute, when it should have been clear to the respondents in October 2020 what the facts in the case were. In Transvaal Racing Club v Jockey Club of South Africa,[4] the court dealt with its discretion in allowing the filing of further affidavits, stating as follows:

'…if there is an explanation which negatives mala fides or culpable remissness as the cause of the facts or information not being put before the Court at an earlier stage, the Court should incline towards allowing the affidavits to be filed. As in the analogous cases of the late amendment of pleadings or the leading of further evidence in a trial, the Court tends to that course which will allow a party to put his full case before the Court. But there must be a proper and satisfactory explanation as to why it was not done earlier, and, what is also important, the Court must be satisfied that no prejudice is caused to the opposite party which cannot be remedied by an appropriate order as to costs.'

[19]       I observe that Astek’s replying affidavit was in the possession of the respondents in October 2020. More than three months had lapsed before the respondents took action. It was only in February 2021, when placed on terms by Astek to file Heads of Argument, that the respondents intimated a need to file a supplementary affidavit. Dies to do so lapsed on 2 February 2021. Despite the extension of time granted by Astek to the respondents, and an undertaking to do so, Astek had to launch an application to compel the respondents to file Heads of Argument.

[20]       Even though the respondents were aware of the need to file a supplementary affidavit in February 2021, for which they now seek condonation, they only did so on 9 April 2021. The application had been set down for hearing on 26 April 2021. While I take account of Mr Georgiev’s view that once the order to compel was granted by Nkosi AJ, the undertaking was altered by the court order, I am not persuaded. The Heads of Argument were filed on a Saturday when the hearing was allocated for the Monday, impinging on the Court’s ability to prepare.

[21]       In considering the contents of the supplementary affidavit, and whether it justifies the filing thereof, the words of the court in Transvaal Racing Club v Jockey Club of South Africa[5] are  apposite:

'It was contended in argument that I really had no discretion on the question of the admission of these affidavits because authority had decided that a further set of affidavits can only be admitted, firstly, if they are necessary to answer new matter raised in the applicant's affidavits, or, secondly, if the information or evidence was not available to the respondent when the first set of affidavits was filed. No new matter was raised in the answering affidavits of the applicant nor was it sought to answer only alleged new matter. Secondly, it was contended, the information or evidence was at all time available to the respondent in its records. The fact that it was not present to the minds of or known to the officials presently dealing with the matter, did not constitute a compliance with the second or alternative requirement to be satisfied before fresh affidavits could be filed. In my view the authorities do not restrict the discretion of the Court in the manner suggested.'

[22]       I have carefully considered the supplementary affidavit. It addresses facts pertaining to the mechanics of the oral agreement of set-off, which are disputed in Astek’s replying affidavit. Mr Georgiev claims that Mr Baker requested that the set-off transaction invoices be made out to Astek, even though the work and legal services rendered were for different entities. The import of the allegation is that Mr Baker was passing off personal expenses and those relating to other entities through to Astek.  

[23]       There is no doubt that the applicant’s replying affidavit is voluminous compared with the founding affidavit, which succinctly sets out the applicant’s case and cause of action in four pages.[6] The novel introduction in the replying affidavit is a resolution authorising Mr Craig Baker to bring the proceedings. The bulk of the replying affidavit is occupied by details of facts of the interactions and transactions between the parties and the companies. It has details of the orders and services rendered by Mr Georgiev. I find that the facts introduced germinate from the respondents’ answering affidavit, which necessitated the bulky reply. They are not new matter as alleged. The applicant’s cause of action has not been altered.

[24]       When juxtaposed with the supplementary affidavit, it is evident that Mr Georgiev seeks to introduce the unrecorded context and history of the relationship to establish the set-off. Significantly, for the first time, he claims that the loan agreement does not reflect the common continuing intention of the parties as it existed at the time of the oral agreement. He now seeks rectification. He relies on a common mistake at the time of the drafting of the agreement.  

[25]       At the heart of the supplementary affidavit is the materiality of the facts sought to be introduced to the respondents’ defence. I have considered the facts in the overall context of the pleadings, the applicant’s cause of action and the initial answer proffered by the respondents.

[26]       The question of the introduction of the set-off defence is quintessentially a legal one. I deal with this fully later in the judgment. As already stated, the facts dealing with the set-off arrangement are stated in the respondents’ answering affidavit. The replying affidavit is based on information adduced by the respondents in their answer.

[27]       A novel and material issue in the supplementary affidavit is the rectification the respondents now seek. It is contrived to seek rectification of the agreement after the fact, when they did not do so in the answering affidavit. I agree with Ms Stevenson that the respondents ought to have known and dealt with this at the outset. The impression is that the respondents are tailoring their case to address the unassailable facts produced in Astek’s replying affidavit to bolster their defence.

[28]       When challenged about this, Ms Bhabha argued that the meat of the respondents’ defence goes beyond the rectification. I deal with those arguments later in the judgment. I am of the view that Astek would be prejudiced if the supplementary affidavit is allowed. The nature of the prejudice is not one that can be ameliorated by a cost order.

[29]       I decline the respondents' application for leave to file a further affidavit, as well as the alternative relief to strike out portions of the replying affidavit. There is nothing vexatious, scandalous or irrelevant in Astek’s replying affidavit. The legal points raised by Astek are germane to the defence raised Crypton and Mr Georgiev. They are not impermissible. They emphasise the cogency and the legal basis of the respondents’ claims. There can be no prejudice to them because they are the source of the factual allegations made.  

Main application

[30]       The essence of the defence on the merits is that the oral agreement must be read in conjunction with the written agreement. The argument is that the Court must take account of this context on policy grounds, as the parties acted in terms of the agreement at all times.

[31]       The defence evokes the question whether the respondents can rely on an oral agreement of set-off which predates the conclusion of the written loan agreement and deed of suretyship, with contractual terms that fundamentally vary from the terms of the written agreement. The second issue is whether there is a genuine dispute of facts necessitating a referral to trial.

[32]       To support the set-off claimed, the respondents rely on, amongst others, a transaction involving R300 000 in 31 March 2015. They claim that the amount was to have been paid by Astek to Style & Comfort CC t/a Dejan Custom Furniture Design for goods manufactured, advanced and installed for Astek comprising 10 kitchenettes and 40 vanities. It was credited towards the loan instead.

[33]       In so far as the provision of legal services, Mr Georgiev relied on the instances set out below as examples of where he rendered legal services on behalf of Mr Baker, his wife and certain entities, namely:

(a)          When Mr Baker had problems with his brother, he provided legal advice without debiting fees.

(b)          In the case involving Craig Baker v John Richter there was a legal bill of R527 563.00 incurred.

(c)          Mrs Dominique Baker was in litigation against Two Rivers. Legal fees of R129 927 were generated in November 2019.

(d)          Old Town Investments had a claim against ACS Sandblasting CC for arrears in the amount of R500 000.

[34]       The respondents claim that, on a proper reconciliation, the total amount of R790 034 should have been set-off. They argue that Astek failed to include this amount in the loan schedule.  

[35]       When the above contentions are considered against the averments in the replying affidavit, the loan schedule reveals that, on 28 February 2014 and 30 April 2014, the respondents paid the full instalment of R49 583. The payment was followed by a substantial cash payment of R300 000 in March 2015. An extract from Astek’s bank statement reveals the cash payment of R300 000 to Astek was on behalf of the respondents. On confirmation of the receipt of the payment, Astek followed up with a request for further payment of the loan to bring the arrears up to date. WhatsApp exchanges, dated 6 December 2017, show that Mr Georgiev undertook to make payment of the outstanding loan instalments and had requested bank details to do so.

[36]       On the other hand, after Style & Comfort CC t/a Dejan Custom Furniture Design sent a quotation of R304 148.35 and invoices for the furniture and work done totalling R401 156.65, Astek paid the amount. It is evident from the replying affidavit that each of the invoices sent by Style & Comfort CC t/a Dejan Custom Furniture Design to Astek were paid and no amounts were set-off.

[37]       The legal fees relied on, due to Schoonees, Belling & Georgiev, relate to different entities and parties. The connection between the entities and parties with Astek, a registered company, is not disclosed. Curiously, the draft invoice to Mrs Dominique Baker shows that an incorrect rate of VAT at 15% was levied. Yet, the legal fees were incurred in 2016. The increase in the VAT rate came into effect in April 2018. This raises the question whether the invoices were contrived. As said, the invoice is addressed to Mrs Baker and not to Astek.

[38]       In so far as the Richter case, the version by Mr Baker is that the agreement was that he would pay counsel’s fees and Schoones Belling & Georgiev’s bill would be settled out of the cost award. Counsel’s costs were duly paid. There was no demand or request for further payment. The costs were awarded by the court on an attorney and client scale and these costs were retained by Mr Georgiev’s law firm.

[39]        Contrary to what Mr Georgiev states, the facts depicting the flow of payments and invoices do not support the set-off. Curiously, on his version, the loan agreement was to be have been paid off in two years, yet the amounts he relies on the prove the set-off do not extinguish the loan debt. Some of the amounts involve transactions beyond the two-year payment period.   

[40]       The papers indicate that Astek consistently followed up with Mr Georgiev on all the outstanding payments from the time the respondents fell into arrears in April 2014 and thereafter. Emails were sent in July 2014 and August 2014. There were emails in May 2015, February 2016, August 2017 to follow up on payments of the loan, and between 2018 up to 2020, which included meetings and telephone calls to recover the amount. The conduct is inconsistent with the defence and version advanced.

[41]       The argument was also advanced that Astek seeks contractual damages, hence why action proceedings were best suited to resolve the dispute. The amount of R1 996 839.04 claimed is not a liquidated amount in money. As I understand it, the respondents partly premise this view on the definition of the 'event of default', the date of its reckoning and the reference to a 9.00% rate of interest in the Notice of Motion. He claims that the loan schedule does not demonstrate the date of the 'event of default'. The argument is difficult to comprehend. Astek attached a schedule which shows that a capital sum of R1 750 000.00 was advanced in terms of a written loan agreement, which is not disputed. The agreement fixed the amount, the instalments and the applicable rate of interest. As I have it, Astek seeks to enforce a contractual claim. To construe the cause of action and the amount claimed, as damages, deliberately obfuscates the issue.       

[42]       Now, turning to the legal position, Ms Stevenson argued that the oral agreement is vitiated by the parol evidence rule. The rule determines the extent to which extrinsic evidence may be adduced to explain a written contract. It entails, as held in Union Government v Vianini Ferro­Concrete Pipes (Pty) Ltd, that:[7]

'…when a contract has been reduced to writing, the writing is, in general, regarded as the exclusive memorial of the transaction and in a suit between the parties no evidence to prove its terms may be given save the document or secondary evidence of its contents, nor may the contents of such document be contradicted, altered, added to or varied by parol evidence….'

[43]       The above position was iterated in KPMG Chartered Accountants (SA) v Securefin Ltd & Another,[8] when Supreme Court of Appeal stated that:

'If a document was intended to provide a complete memorial of a jural act, extrinsic evidence may not contradict, add to or modify its meaning (Johnson v Leal 1980 (3) SA 927 (A) at 943B). Fourth, to the extent that evidence may be admissible to contextualise the document (since "context is everything") to establish its factual matrix or purpose or for purposes of identification, "one must use it as conservatively as possible" (Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 455B - C).'

[44]       Despite the possibility alluded above, the Supreme Court of Appeal’s decision in Beijers v Harlequin Duck Properties 231 (Pty) Ltd t/a Office Space Online[9] makes it clear that an oral agreement cannot stand alongside a written agreement in circumstances where the oral agreement was concluded before, and contains terms contrary to the written agreement. I find that the alleged set-off is at variance with the terms of the written agreement. The argument cannot stand. In addition, I am fortified by the court’s decision in Affirmative Portfolios CC v Transnet Limited t/a Metrorail,[10] where the court held that—

'The appellant is precluded from relying on the alleged oral agreement by virtue of the so-called "parol" evidence or "integration" rule. The oral agreement for which it contends would have been entered into before the signing of the written agreement and also contains terms which are at variance therewith. It is a well-established principle that where the parties decide to embody their final agreement in written form the execution of the document deprives all previous statements of their legal effect.'

[45]       Ms Bhabha sought to persuade the Court to consider the Shifren principle based on policy grounds. The principle is set out in Brisley v Drotsky[11] as follows:

‘…contracting parties may validly agree in writing to an enumeration of their rights, duties and powers in relation to the subject-matter of a contract, which they may alter only by again resorting to writing….’

[46]       There can be a departure from this principle if public policy informs it.[12] I find there are no policy reasons justifying the argument or the alteration of the legal position. By contrast, Mr Georgiev, is a practising attorney and an officer of the court. He drafted the loan agreement. I therefore hold him to a higher standard.

[47]       Turning to the alleged dispute of fact, the courts have consistently held that if a respondent intends disputing a material fact, they must show that there are material issues in which there is a bona fide dispute requiring oral evidence.[13] The requirement is that the disputed issues must be  direct and obvious. In Wightman t/a JW Construction v Headfour (Pty) Ltd and Another,[14] it was stated:

'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 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.'

[48]       As held in Buffalo Freight Systems (Pty) Ltd v Castleigh Trading (Pty) Ltd and Another,[15] a court is enjoined to undertake an objective analysis of the alleged disputes when required to do so. As demonstrated above, an analysis of the facts does not support the set-off alleged and its implementation. Furthermore, it is wholly untenable to suggest that Astek could not rely on the written loan agreement, but some other unrecorded oral arrangement. In the opinion of the Court, the respondents' allegations are far-fetched and clearly untenable. The Court is justified in rejecting them merely on the papers. 

Costs

[49]       Costs must no doubt follow the result. Curiously, the loan agreement envisages that proceedings would be brought before the Magistrate’s Court. Yet the capital amount of the loan was beyond the jurisdiction of that court. In any event, the clause does not exclusively preserve jurisdiction for that court. The impression is that the clause was drafted to benefit the respondents.

[50]       The manner in which the respondents mounted the defence warranted a hearing before this Court. However, the overall approach to the litigation leaves much to be desired and warrants the Court’s censure. The costs are awarded on an attorney and client scale as a demonstration of the Court’s displeasure. 

Therefore, the following order is made:

1.            Leave to file the supplementary affidavit is refused.

2.            The alternative application by the respondents to strike out portions of the replying affidavit is dismissed.

3.            The respondents, jointly and severally, the one paying the other to be absolved, are ordered to pay to the applicant the sum of:

3.1.       R1 996 839.04;

3.2.       plus interest thereon at the rate of 9% per annum from 5 July 2020 to date of payment;

4.            The respondents are to pay the costs of the application (including the costs of the application for leave to file a supplementary affidavit) on the attorney and client scale.

 

T SIWENDU

JUDGE OF THE HIGH COURT

GAUTENG LOCAL DIVISION, JOHANNESBURG

 

This judgment was handed down electronically by circulation to the parties’ and/or parties’ representatives by email and by being uploaded to CaseLines. The date and time for hand-down is deemed to be 10h00 on 25 May 2021.

Date of hearing:                                          26 April 2020

Date of judgment:                                      25 May 2021

Appearances:

Counsel for the applicant:                          Adv. R Stevenson

Attorney for the applicant:                        Truter Jones Inc

Counsel for the respondents:                    Adv. B Bhabha        

Attorney for the respondents:                   Schoonees Belling & Georgiev

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