IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No. 19449/11 
REPORTABLE

In the matter between:

and

COUNSEL FOR PLAINTIFF/APPLICANT:	Adv B Manca SC N Badenhorst	

INSTRUCTED BY:	Edward Nathan Sonnenbergs
(L Field)	
COUNSEL FOR DEFENDANT/RESPONDENT:	Adv F Sievers	

INSTRUCTED BY:	Hilgard Bell Attorneys (H Bell)
C/o Werksmans Attorneys (R Feenstra)	

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No. 19449/11 
REPORTABLE

In the matter between:

and

Court:	ROGERS AJ

Heard:	10 November 2011

Delivered:	14 November 2011

JUDGMENT

ROGERS AJ

Introduction

1.    The plaintiff asks for summary judgment against the defendant on various claims. The first claim, in the amount of Rl 115 933,44, is for money lent to the defendant on his personal bank account. The other claims, which total Rll 811 721,86, are based on suretyships the defendant executed in the plaintiffs favour for the debts of Golf Development International Holdings (Pry) Ltd ("GDI") and Winners-Circle 111 (Pty) Ltd ("WC"). Both GDI and WC are in liquidation.

2.The defendant delivered an opposing affidavit and was represented at the hearing by Mr Sievers. Mr Manca SC appeared for the plaintiff together with Ms Badenhorst.

Claim against defendant as principal debtor

6. Manifestly the defendant has not met this requirement. He has not explained how he could be the owner of the erven if he still needs to obtain transfer of them into his name. Mr Sievers submitted that under our system of ownership it is possible for a person to be the owner of immovable property without having registration in his name (for example where ownership is acquired through acquisitive prescription). That is so but none of the unusual circumstances in which this may occur have been alleged in this case. On the facts alleged by the defendant, one is simply dealing with the case of a purchaser who has met his obligations in full but has not yet taken transfer of the property.
7. The defendant has, furthermore, not explained how any actions by the plaintiff could have prevented him in law from obtaining transfer in circumstances where he has allegedly fulfilled all his obligations as purchaser. He does not say when and in what way the plaintiff has supposedly taken possession of the erven or what the nature of the security is that the plaintiff asserts. He does not even allege that the plaintiffs actions in relation to the erven have been unlawful. If the plaintiffs actions have been lawful the defendant naturally can have no claim against the plaintiff (though he may have a claim against PPR); if the plaintiffs actions on the other hand have been unlawful it is not apparent how the unlawful actions could be a bar to the defendant obtaining transfer of the erven and if necessary evicting the plaintiff. After all, the agreements were concluded in 2006. The defendant has had ample time to assert and pursue his rights. He does not explain what has happened in the six years since then or why he is only asserting the counterclaim at this stage.
8. Finally, the defendant has not explained how, if he is in fact the owner of the erven with a right to obtain transfer, the plaintiffs actions could have causedhim to suffer damages or how these damages have been calculated. The fact that he paid more than R3 million for the erven is neither here nor there because on his version he is the owner of the erven and/or has a right to take transfer of the erven.

Claims against defendant as surety
10. In regard to the very substantial claims against the defendant as surety for GDI and WC, the defendant's opposition rests on the fact that according to him applications have been issued to place GDI and WC under supervision and to commence business rescue proceedings in respect of them in terms of s 131(1) of the Companies Act 71 of 2008. Although GDI and WC are in liquidation it is permissible for a business rescue application to be made in respect of them, as is apparent from s 131(6).
11. The defendant's contention is that the institution of the business rescue application has caused business rescue proceedings in respect of the companiesto commence as contemplated in s 132(1 )(b) of the Act. If this is so, the defendant submits that summary judgment against the defendant as surety should be refused because [a] s 133(2) prohibits claims against parties who have executed suretyships in favour of a company undergoing business rescue proceedings [b] the defendant as surety can claim the benefit of the moratorium afforded to the companies (the principal debtors) by s 133(1) [c] that the amount of the principal debt is rendered uncertain by the fact that it may be compromised in terms of an approved business rescue plan as contemplated in s 150(2)(b)(ii) read with s 154(1).

Section 133(2)

"During business rescue proceedings, a guarantee or surety by a company in favour of any other person may not be enforced by any person against the company except with leave of the court and in accordance with any terms the court considers just and equitable in the circumstances. "
15. In its plain meaning this section refers to a suretyship furnished by the company to a creditor on behalf of a principal debtor. Mr Sievers argued that to give s 133(2) its plain meaning would render the sub-section tortologous, because s 133(1) already provides for a moratorium in respect of claims against the company, and a claim against a company in its capacity as a surety is simply one instance of the claims that would in any event fall within s 133(1). He thus contended that s 133(2) should be construed as providing that during business rescue proceedings a suretyship given by a person (A) in favour of another (B) for the indebtedness of the company may not be enforced by B against A without the court's leave.

The section 133(1) moratorium in respect of the principal debtor

19. I thus conclude that the statutory moratorium in favour of GDI and WC does not avail the defendant.

Potential compromise of principal debt
20. A business rescue plan may provide for the company to be released in whole or in part from its debts (s 150(2)(b)(ii)). If the business rescue practitioner puts forward a plan with such a feature and if the plan is approved by the requisite 75% majority in terms of s 152 and if the plan is then implemented in accordance with its terms and conditions, an affected creditor may in terms of s 154(1) lose the right to enforce his claim (whether in whole or in part). I am prepared to assume in the defendant's favour (without so deciding) that if all of these events were to occur a surety for the company would not be liable to the creditor for more than so much of the claim as survives the implementation of the business rescue plan.
21. However, at this stage it is pure conjecture whether any of these events will occur. Indeed, one does not even know whether an order placing GDI and WC under business rescue will be granted, and without such an order none of the further conditions which may result in the compromising of claims by way of a business rescue plan have any prospect of occurring. The defendant has not alleged facts to show that the granting of a business rescue order is likely. He has also not alleged facts to show that if a business rescue order is granted it is reasonably likely that a plan involving a reduction of the plaintiffs claims against GDI and WC will be proposed or approved. If the plaintiff is the largest creditor of these companies (and on the papers the plaintiffs claim against them is at least as large as the plaintiffs claims against the defendant as surety), it does not seem probable that the plaintiff would agree to any plan that would jeopardise its claim against the defendant.
22. But even if the defendant had alleged facts from which one could infer that it was at least a reasonable possibility that the companies would be placed under business rescue proceedings and that a plan involving a reduction of the plaintiffs claims against them would be approved and implemented, this would still not disclose a defence. At this stage the plaintiffs claims against GDI and WC are unimpaired. Whenever a creditor sues a surety there is a possibility that at some stage in the future that creditor may compromise with the principal debtor or for that matter that the principal debtor may even discharge the debt by payment. These possibilities, whether likely or unlikely, do not permit the surety to ward off enforcement if at the time he is sued the principal debt is in existence. If the creditor takes judgment against the surety and the principal debt is later reduced or discharged before execution is levied against the surety, the latter could claim the benefit of the discharge or reduction. If the creditor were to recover from the surety in full, the right to consider a compromise against the principal debtor would pass to the surety because the creditor would fall out of the picture and the surety would take the creditor's place by virtue of his right of recourse against the principal debtor.
23. Mr Sievers argued that it would disturb the intended functioning of business rescue proceedings if midway through such proceedings the original creditor were to fall out of the picture and be replaced by a surety under the latter's right of recourse. Even if this were so, I do not see how it could affect the position. If the lawmaker had intended to prohibit creditors from enforcing their claims against sureties of companies undergoing business rescue proceedings it would have said so. Such a prohibition would be a drastic interference with the rights of creditors and would require clear language. Here there is no language at all on which to rest the supposed prohibition.
24. In any event I do not see why the enforcement of claims against sureties should disturb business rescue proceedings. The company undergoing business rescue proceedings would face either the original creditor or the surety as its creditor, depending on whether or not the surety had discharged his obligations to the original creditor. If anything, it might be better from the company's perspective that its creditor should be the surety under his right of recourse rather than the original creditor. This is so for the reason that the original creditor might be disinclined to support a compromise of his claim against the company if it would jeopardise his claim against the surety. On the other hand, if the surety has discharged his obligations to the original creditor his only recourse is against the company itself and he would thus be inclined to look more favourably on a compromise that would yield a better dividend for him than in liquidation.

Conclusion
25. These reasons are sufficient for the conclusion that the plaintiff is entitled to summary judgment. I merely add that the terms of the suretships themselves, to which the parties did not refer in argument, suggest that the defendant can hardly complain of the outcome. Clauses 3.2, 6.2, 8.1 and 12 of the suretyships, which are in identical form, make plain that the plaintiffs rights against the defendant are unaffected by the insolvency, liquidation or judicial management of the principal debtors and that the plaintiff can give time to, release, discharge or compound or make any other arrangements with the companies without in any way prejudicing its rights against the defendant. (There is no reference in the suretyships to business rescue proceedings, since the suretyships were executed before the enactment of the 2008 Companies Act.)
26. The application for summary judgment is granted. The defendant is ordered to pay the plaintiff:

(a) Rl 115 933,44 plus interest thereon at the plaintiffs prime interest rate minus 1% from 30 July 2011 to date of final payment, calculated daily and compounded monthly;
(b) R154 099,15 plus interest thereon at the plaintiffs prime interest rate minus 2% from 30 July 2011 to date of final payment, calculated daily and compounded monthly;
(c) R9 221 386,62 plus interest thereon at the plaintiffs prime interest rate plus 0.5% from 30 July 2011 to date of final payment, calculated daily and compounded monthly;
(d) R2 436 236,09 plus interest thereon at the plaintiffs prime interest rate minus 1% from 3 August 2011 to date of final payment, calculated daily and compounded monthly;

The plaintiffs costs of suit.

ROGERS AJ

14 NOVEMBER 2011