NORTH WEST HIGH COURT, MAFIKENG

					        				CASE 987/2010

In the matter between:	

GREGORY MARTIN WILSON						Applicant

and

PECANPROPS 43 CC							First Respondent 

MUGADI SAMUEL MNGOMEZULU					Second Respondent

ISAAC KABELO KUTU							Third Respondent

MMABATHO

KGOELE J.

DATE OF HEARING				:	23 SEPTEMBER 2010		
DATE OF JUDGMENT				:	24 FEBRUARY 2011

COUNSEL FOR APPLICANT				Advocate N. Redman
COUNSEL FOR RESPONDENT		:	Advocate B. Swart
__________________________________________________________________
JUDGMENT
__________________________________________________________________
KGOELE J

A.	INTRODUCTION 

[1]	This is an application wherein the applicant seeks judgment against the first, second and third respondents jointly and severally for:-

	1.1	payment of the sum of R1 889 017,29 together with interest thereon at a rate of 5% per month compounded daily from 6 March 2010 to date of final payment, alternatively interest thereon at the legal interest rate of 15,5% per annum a tempore morae to date of final payment;

1.2	an order declaring the immovable property described as ert 159 Pecanwood Extension 4 Township registration division JQ, North West province (“the property”) executable.

	1.3	 an order rectifying the written suretyship agreement, annexure GMW3 to the founding affidavit, by the substitution therein of the words “Pecanprops CC 2000/038088/23” with the words “Pecanprops 43 CC 2000/038088/23; and

	1.4	Costs of the application on the scale as between attorney and client

[2]	The applicant’s claim against the first respondent is based on a written mortgage loan agreement concluded between the applicant and the first respondent on the 3 August 2009.

[3]	The applicant’s claim against the second and third respondents is based on a suretyship agreement in terms whereof the second and third respondents bound themselves as surety and co-principal debtors in solidum with the first respondent for payment of all amounts due by the first respondent to the applicant.

[4]	Both the mortgage loan agreement and the suretyship contain certificate clauses in terms whereof the respondents agreed that a certificate signed by the applicant’s authorized representatives would be binding on the respondents and would constitute prima facie proof of the respondents’ indebtedness.

[5]	In terms of both the mortgage loan agreement and the deed of suretyship, the respondents agreed to pay any costs arising out of the agreement or in connection with the agreement on the scale as between attorney and client.

[6]	As surety for the loan, a further covering mortgage bond was registered in favour of the applicant over the property to the value of R1,8 million.
[7]	It is the applicant’s case that pursuant to the loan agreement, inter alia, the applicant lent and advanced the sum of R1,8 million to the first respondent on the dates recorded in the schedule annexed to the founding affidavit as annexure GMW4.

[8]	It is the applicant’s case that the first respondent failed to make payment of the interest on the principal debt on the last day of every month as required by the terms of the mortgage loan and also failed to pay the full balance of the loan on the 31 October 2009.

[9]	The applicant relies on a certificate of balance issued in accordance with the provisions of both the mortgage loan agreement and suretyship agreement as prima facie proof of the indebtedness of the three respondents.

[10]	Annexure GMW7 reflects an amount of R1 889 017,29 to be due, owing and payable by the respondents to the applicant.

[11]	The first and the third respodents did not opposed the application. 

B.	DEFENCE RAISED BY THE SECOND RESPONDENT

[12]	As a result of the second respondent abandoning the first defense it raised in opposition of this application, that of a minor mis-description of the name of the first respondent, prayer 1.3 of the applicant’s notice of motion was duly granted.  The second defense, that of fraudulent misrepresentation was the only one that remained to be argued between the parties.

Fraudulent Misrepresentation

[13]	The crux of the second respondent’s defense appears from paragraph 20 of his answering affidavit and it is couched as follows:-

		“When those documents were subsequently presented to me for the signature  by the applicant’s attorney on 3 August 2009, I was told by the applicant that the documents contained and reflected the aforesaid agreements and that by appending my signature thereto, I would, in effect, be doing no more than confirming what had already been agreed”  

[14]	The second respondent is adamant that, though the documents that purport to leave him indebted to the applicant do bear his signature, he nonetheless has a defense against them.  The defense is that he was induced into signing the agreements by a misrepresentation conveyed to him.  The second respondent in fact disputes some of the contents of the documents that he signed as not being what the parties agreed to prior signing, and submitted that the matter should be referred, on specific points, to oral evidence.

[15]	In particular, the following are material disputes according to the second respondent:-

15.1	a covering mortgage bond to the value of R1,8 million was registered in favour of the applicant over immovable property owned by the first respondent, for which the second and third respondents stood surety;

15.1.1	The applicant alleges that, with support of an authorization thereto and a deed report, part of the loan was intended to extinguish the mortgage bond obligations previously held by ABSA Bank Limited and establish the applicant as the first mortgage bond holder;

15.1.2	 By contrast, the second respondent, though admitting his signature to the relevant documents, denies that the extinguishing of the bond was in accordance with their prior oral discussions between the parties.

15.2	The repayment of the loan, advanced in August 2009, fell due on the 31st of October 2009;

15.2.1	According to the applicant, this faithfully represents the orally negotiated position;

15.2.2	The second respondent indicates that such a short period of time for the repayment of the loan could not possibly reflect that which was agreed, given the size of the amount due for repayment and the consequent financial suffocation that would be visited upon him.

15.3	  The total loan amount was set at R1,8 million;

15.3.1	the applicant avers that the entire amount was properly advanced;

15.3.2	in opposition, the second respondent states that only a portion of the loan amount – a sum in the region of R590 129.60 – was advanced by the applicant.

 [16]	The second respondent sets out the following as constituting reasonable grounds to allow the matter to proceed to oral evidence in terms of Rule 6 (5) (g) as laid down in the case of Minister of Land Affairs and Agriculture above.

•	Importance of the evidence which the respondent proposes to elicit;

“If successful, the second respondent, in alleging that the applicant fraudulently misrepresented what the nature of the loan would be, would create an absolute defense defeating the applicant’s claim, since the contract would be rendered unenforceable”

•	Why the evidence is not available;

“No written evidence, attachable to an affidavit, of the negotiations prior to the conclusion of the contract may be led, as the negotiations were oral and never reduced to writing.”

•	Reasonable grounds for believing that the defense would be established;

“Where the second respondent to have genuinely agreed to the extinguishing of the first mortgage bond in favour of ABSA, that  have increased his bond servicing commitments from R30 000.00 over a period of three months to R1,8 million over the same period.  It is unlikely that the second respondent would have agreed to such an invidious position.”

[17]	The applicant’s reply is to the effect that the second respondent provides no particularity as to the terms of the “afore said oral agreements” or “what had already been agreed” to.  In addition, that the second respondent is vague and evasive as to the precise terms of the alleged misrepresentation.  The applicant quoted the following remarks as a basis for his submissions which remarks were made in the case of Odendaal v Ferraris 2009 (4) SA 313 (SCA) at page 326 A.

		“To conclude, a litigant who undertakes the burden to establish fraud, especially in motion proceedings, must ensure that both his allegations, and the facts on which he relies to underpin them, are clear and specific.  The respondent’s allegations are, in the main, vague, unspecified and devoid of sufficient evidential support”.

C.	DISPUTES OF FACT

[18]	The Court’s approach to a dispute of fact in motion proceedings was set out in Fakie v CCII System (Pty) Ltd 2006 (4) SA 326 (SCA) at 347 G – 8A-B as follows:-

“That conflicting affidavits are not a suitable means for determining disputes of fact has been doctrine in this court for more than 80 years.  Yet motion proceedings are quicker and cheaper than trial proceedings and, in the interest of justice, courts have been at pains not to permit unvirtuous respondents to shelter behind patently implausible affidavit versions or bald denials.  More than 60 years ago, this Court determined that a Judge should not allow a respondent to raise ’fictitious’ disputes of fact to delay the hearing of the matter or to deny the applicant its order.  There had to be a bona fide dispute of fact on a material matter.  This means that an uncreditworthy denial, or a palpably implausible version, can be rejected out of hand, without recourse to oral evidence.  In Plascon – Evans Paints Ltd v Van Riebeeck Paints  (Pty) Ltd, this Court extended the ambit of uncreditworth denials.  They now encompassed not merely those that fails to raise a real, genuine or bona fide dispute of fact but also allegations or denials that are so far-fetched or clearly untanable that the Court is justified in rejecting them merely on papers.

Practice in this regard has become considerably more robust, and rightly so.  If it were otherwise, most of the busy motion courts in the country might cease functioning.  But the limits remain, and however robust a court may be inclined to be, a respondent’s version can be rejected in motion proceedings only it if is ‘fictitious’ or so far-fetched and clearly untenable that it can confidently be said, on the papers alone, that it is demonstrably and clearly unworthy of credence”.

[19] Moreover, in Khumalo v Director-General Co-operation and Development and Others 1991 (1) SA 158 at 167G-J  it was noted that, when considering the referral of a matter to oral evidence:-

		“As a matter of interpretation, there is nothing in the language of Rule 6 (5) (g) which restricts the discretionary power of the Court to order the cross-examination of a deponent to cases in which a dispute of fact is show to exist.  The illustration of ‘genuine’ disputes of fact given in the Room Hire case at 1163 do not – and  did not purport to – set out the circumstances in which cross-examination under the relevant Transvaal Rule of Court could be authorized.  They a fortiori do not determine the circumstances in which such relief should be granted in terms of the present Rule 6 (5) (g).  Without attempting to lay down any precise rule, which may have the effect of limiting the wide discretion implicit in this Rule, in my view oral evidence in one or other form envisaged by the Rule should be allowed if there are reasonable grounds for doubting the correctness of the allegations concerned.  In reaching a decision in this regard, facts peculiarly within the knowledge of an applicant, which for that reason cannot be directly contradicted or refuted by the opposite party, are to be carefully scrutinized”. 

[20]	It is abundantly clear that this court is requested to adjudicate whether there are real disputes of facts in this matter that warrants the matter to be referred to oral evidence in terms of Rule 6 (5) (g) on the following principal question:-

-	Firstly, whether the applicant misrepresented to the second respondent that the first covering mortgage was to be extinguished;

-	Secondly, whether the applicant misrepresented to the second respondent that the due date for payment for the full amount of the loan was to be 31 October 2009;

-	Thirdly, whether the applicant indeed advanced the agreed sum of R1,8 million, or the lesser of R590 129,60 to the first respondent.

[21]   In Novick and Another v Comair Holdings Ltd and Others 1979 (2) SA 116 (W) at 149 D-H and 150 A-B, Coleman J set out what a party seeking to avoid a contract on the ground of misrepresentation must prove, namely:-

	  	“(a)	That the representation relied upon was made”.
21.1	In order to establish that a representation was made, it would have been necessary for the second respondent to allege and prove that a prior oral agreement had been reached.  One would have also expected the second respondent to have alleged the exact terms of the misrepresentation to enable the Court to determine whether such misrepresentation had been made.  In this matter, there is no such terms.

		“(b)	That it was representation as to a fact”.
		21.2	In this case, even if it was established that the representation set out in paragraph 20 of the answering affidavit was made, the second respondent has not established that it constitutes a misrepresentation as to a fact.  In reaching a decision in this regard, facts peculiarly within the knowledge of the second respondent, which for that reason cannot be directly contradicted or refused by the applicant, are to be carefully scrutinized by this court.  One will have expected the second respondent to have stipulated he terms as indicated in the previous paragraphs, the circumstances giving rise to the agreement when the agreement was reached etc. This court is therefore left with nothing to scrutinize. 

		“(c)	That the representation was false”.
		21.3	Without alleging an oral agreement and the terms thereof the court cannot be also in a position to determine whether the alleged representation was false.

		“(d)	That it was material, in the sense that it was such as would have influenced a reasonable man to enter into the contract in issue”

		(e)	That  it was intended to induce the person to whom it was made to enter into the transaction sought to be avoided”.

		“(f)	That the representation did induce the contract”.

	21.4	In this matter, the second respondent did not allege anything in as far as as (d) (e) and (f) above is concerned.  I need not say anything in as far as these points are concerned.

[22]	If the Court finds that on a balance of probabilities, the second respondent has established a misrepresentation then the second respondent must establish that the misrepresentation was made fraudulently.

[23]	An essential allegation required when relying on a fraudulent misrepresentation is that the person making the representation “knew it to be false”.  See Ruto Flour Mills (Pty) Ltd v Moriates and  Another 1957 (3)  SA 113 (T) at 116 A-B; Odendaal v Ferraris 2009 (4) SA 313 (SCA) at 323B.

[24]	The second respondent has failed to allege that the applicant knew that the representation was false.

[25]   The papers before court clearly indicates that the second respondent has not established the necessary allegations to sustain a defense based on an alleged fraudulent misrepresentation.

[26]	It is extremely difficult to ascertain from the second respondent’s answering affidavit and from his counsels submission in court the precise nature of the alleged fraudulent misrepresentation upon which they rely to escape liability on the written agreements.  The second respondent’s counsel, was during the submissions in court in pains to concede to the fact that there was no prior oral agreement alleged by the second respondent in its answering affidavit and ultimately contended that the misrepresentation that the documents recorded were the discussions between the parties.
  
[27]	In fact, from the papers before me, the second respondent is not only vague and evasive as to the precise terms of the alleged misrepresentation, but does not at all provides any particularity as to the terms of the aforesaid agreement or what had already been agreed to as far as all the three issues he disputes, except to only say that he would not have agreed to those terms in the agreement had he read the agreements before signing.  As an example, as far as the duration of the loan agreement is concerned, he could have provided at the least the duration of months and/or years that they orally discussed /negotiated about i.e. 6 or 12 months.

[28]	I fully agree with the quotation that was referred to by counsel of the applicant which stems from the Odendaal v Ferraris case above.  In order to escape the consequences of the written agreements on the basis of a fraudulent misrepresentation, the second respondent was required to not only establish the precise nature of the misrepresentation, but that the applicant acted fraudulently and  further that the second respondent was induced by such misrepresentation. Unfortunately the second respondent did not provide anything in as far as this and therefore fails abysmally in all respects.

[29]	In the absence of a  prior oral agreement concluded between the parties, it is then patently clear that the written agreements constitutes the sole recordal of the terms of the agreement between the parties and therefore the principle of caveat subscriptor is applicable.  The second respondents will unfortunately be bound by the terms thereof.

[30]	In as far as the loan amount is concerned, it is important to note that on the date of signing the agreement, the respondent also signed a number of other documents to secure the loan to wit:-

*	The second and third respondent signed a deed of suretyship binding themselves as sureties and co-principal debtors with the first respondent (See annexure GM3, p 40)
*	The second respondent signed a power of attorney to pass a mortgage bond over the immovable property in an amount of R1,8 million (See annexure GM2, pp 38-39);
*	The second respondent signed a resolution on behalf of the first respondent authorizing the registration of a mortgage bond in an amount of R1,8 million over the property (See annexure RA8, p 142)
*	The second respondent signed a bond cancelation information sheet authorizing the payment of any refund from ABSA upon the cancellation of the ABSA bond (being the first bond over the property) (See annexure RA9, p 143).
*	The second respondent signed an authority for payment authorizing the payment of the proceeds of the loan to various parties including:-

**	Turnbull and Associates, who acted on behalf of Lorenzo Pavoncelli and INtellento; and
**	ABSA bank, to settle the first bond over the property (See annexure RA5, pp 134 – 135)

(The authority for payment was initialed by the second respondent alongside each of the payments authorized in accordance with said document.)

	*   		The second respondent signed an acknowledgement of receipt of a cheque in an amount of R528 569,60 (See annexure RA10, p 144).

[31]	As to how the second respondent managed to append his signature in all these other documents without reading or checking what they related to is totally inexplicable. 

[32]	Another important consideration to take note of is that, although the respondent admits the fact that he signed all these documents referred to above, he denies having knowledge of them,  selectively and conveniently so, only admits knowledge of the one that refers to the direct payment that was to be made to him of R528 569,60.  This is so because there is also a copy of the cheque that bears his signature attached to the papers in court as proof that he received the amount, which fact he could not escape easily.

[33]	What compounds the circumstances in this matter is the fact that, the second respondent, after having appended his signature on all the documents relating to the whole agreement is concerned without reading, further sits back and relax and not at his leisure time read the agreement to check whether it purports with the prior negotiations between the parties.  I am saying this because it is patently clear that he only discovered now after an expiration of eight months and when the proceedings started in this matter that the agreements “according to him does not reflect what the prior negotiations were”.  This court will also  not loose sight  of the fact  that the third respondent did not oppose the application by the applicant nor even filed a confirmatory affidavit in support of the second respondent’s version.

[34]	I find that the second respondent’s version that he was unaware of the payment to Pavonceli and Absa Bank and had not agreed thereto, is palpably far fetched, and clearly untenable, flies in the face of the documentations in the file and this court can confidently be justified in rejecting it merely on papers.

[35]	I am of the view that all the three issues raised by the second respondent in this matter are not only “fictitious” disputes of fact, but  does not at all raise a real, genuine or bona fide dispute of fact.  They are uncreditworthy denials and or palpably implausible versions which this court is justified in rejecting them merely on papers alone without any recourse to oral evidence.

[36]	Consequently, I come to the conclusion that the second respondent’s defense falls to be dismissed and the applicant is entitled to the relief as set out in the notice of motion.

D.	ORDER

[37]	The following order is thus made:-

37.1	Judgment is granted against the first, second and third respondents jointly and severally the one paying the other to be absolved for:-

37.1.1	Payment of the sum of R1 889 017,29;
37.1.2	Interest on the aforesaid amount at the rate of 15.5% per annum (a temporae morae) to date of final payment;
37.1.3	An order declaring the immovable property described as erf 158 Pecanwood Extension 4 Township, registration division J.Q. North West Province executable
37.1.4	An order rectifying the written suretyship agreement, annexure GMW3 to the founding affidavit, by the substitution therein of the words “Pecanprops CC 2000 /038088/23 with the words “Pecanprops 43 CC 2000 /038088/23”
37.1.5	Costs of the application on the scale as between attorney and client.

				
A.M. KGOELE
JUDGE OF THE HIGH COURT

Attorneys for Applicant		:	Minchin & Kelly Inc.
							Kelgor House
							14 Tillard Street
							MAFIKENG

Attorneys for Respondent		:	Nienaber & Wissing Attorneys
							10 Tillard Street
							MAFIKENG