Nedbank (Swaziland) Ltd v Tibuke Investments (Pty) Ltd (920 of 2009) [2012] SZHC 6 (19 January 2012)









IN THE HIGH COURT OF SWAZILAND


JUDGMENT



Case No. 920/09



In the matter between



NEDBANK (SWAZILAND) LIMITED Plaintiff


and


TUBUKE INVESTMENTS (PTY) LIMITED 1st Defendant

DANIEL JACKSON MWAISENGELA 2nd Defendant



Neutral citation: Nedbank (Swaziland) Limited v Tubuke Investments

(920/09) [2012] SZHC 06 (19 January 2012)



CORAM Mamba J


Heard:


Delivered: 19 January 2012










[1] Following a written application by the first defendant for an overdraft facility to the plaintiff, the plaintiff and the first defendant entered into a written agreement whereby the plaintiff essentially agreed to extend the credit or overdraft facility to the first defendant on certain specified terms and conditions. The first defendant was duly represented by its managing Director, the 2nd Defendant herein. The terms of this agreement are common cause and are contained in a letter by the plaintiff to the first defendant dated 20th June, 2007 and signed and accepted by the 2nd defendant on behalf of the first defendant on the 12th July 2007. The rest of the terms of this agreement are as pleaded by the plaintiff in its declaration as against the first defendant.


[2] It is common cause further that in honouring its obligations under the said agreement the plaintiff lent and advanced to the first respondent the various amounts stated in the summons herein, the total of amount being inclusive of interest. None of the defendants has challenged the amount claimed. The first defendant has not filed any court process challenging these proceedings and judgment, I was advised at the beginning of this trial, has already been granted in favour of the plaintiff against the first defendant. This judgment therefore only relates or pertains to the liability or otherwise of the second defendant herein.


[3] Plaintiff’s case against the 2nd defendant is to be found in paragraph 3.1.2.6. of its amended declaration:

“…the payment of the first defendant’s indebtedness to the plaintiff would be secured, inter alia by :

3.1.2.6.1 the execution of an unlimited deed of suretyship by

the second defendant; and

3.1.2.6.2 the registration of a first mortgage bond in favour of the plaintiff over portion 65 (a portion of portion 35) of the Farm Tubungu No 300 situate in the District of Manzini, Swaziland of which the second defendant was the registered owner”

and at para 8.1 plaintiff alleges that

A written deed of suretyship was executed by the second defendant on or about the 5th day of March 2009…in terms whereof the second defendant

8.1.1 bound himself, jointly and severally, as surety and co-principal debtor in solidum for the payment on demand of all or any sum(s) of money, which the first defendant may then or from time to time thereafter owe to or be indebted to the plaintiff from any cause whatsoever.”

The Deed of suretyship is filed as annexure C. Plaintiff avers further that in August 2007 the second defendant caused a Mortgage Bond over his immovable property to be registered in favour of the plaintiff as security for the loan or overdraft facility extended to the first defendant. It is also alleged that the 2nd defendant renounced all the standard benefits of the legal exceptions that might be raised as per the Mortgage Bond. That in summary form is the case as pleaded by the plaintiff against the 2nd defendant.


[4] The 2nd defendant avers that he “never intended to stand as surety for the debts of the 1st Defendant – [and whilst he] admits executing a deed of suretyship, [it was] on the understanding that it was the pre condition to enable 2nd defendant to negotiate settlement terms by the 1st defendant of its indebtedness to the plaintiff. 2nd Defendant avers further that the handwritten words on this document together with the signatures of witnesses on this document were not there when he signed the document. His plea and his evidence in court is that he had to sign this document not as a means to bind himself to the plaintiff for the monies due by the first defendant but as a pre-condition to enable him to meet and negotiate with Mr Goodman Chakanyuka, a senior official at the plaintiff’s head office. He says this document was obtained by deceit. By this I understand him to be saying that the plaintiff deliberately misrepresented to him that the only object of signing this document was to enable him to meet, negotiate and plead the first defendant’s case with the said senior official. He stated that had the documents’ real contents been explained to him before he signed it, he would not have signed it. I examine this defence below. I must confess that, taking all the relevant particulars and circumstances of this case, at a glance this defence appears bizarre.


[5] Whilst there is evidence that at around the time that the suretyship agreement was signed by the 2nd defendant, the 2nd was making attempts to negotiate terms on how to repay the debts due to the plaintiff by the first defendant, there is no evidence, other than his say so, that 2nd defendant was required, as a pre-condition to such talks, to execute any document or deed. The 2nd defendant was a long standing customer of the bank (plaintiff). He previously had signed some bank documents relating to or in connection with the loan agreement between the plaintiff and the first defendant. He is a grown up man who though employed, was a businessman in his own right. The various correspondences exhibited in court bear testimony to this. He is educated and holds a doctorate degree. He has vast experience working in the textile industry both here and abroad. He has a very good command of the English language and is very articulate in it. He was able, quite deliberately to waffle a bit and give long-winded and incoherent answers where it obviously suited him under cross examination. He did not say that he read this document other than to say that the words inserted in handwriting therein were not there when he signed it. According to him, there were indications on the document where he was expected to append his signature and that is where he did so. He however did not find it necessary to enquire why he had to sign this document on so many places. On the top right hand corner, the word suretyship appears in bold capitals. Its had to believe that the defendant did not see and understand this word.


[6] I accept that the document was presented to the 2nd Defendant under the circumstances described by the two bank witnesses and that the 2nd defendant signed it on the bonnet of a motor vehicle. That notwithstanding, does not in my judgment detract from the fact that he knew the true nature of the document he was signing and what the consequences thereof were. He was binding himself as a surety and co-principal debtor for the debts of the 1st defendant to the plaintiff. This court would not accept that the 2nd defendant did not read the document before signing it. Even if he thought or believed he was signing a document to enable him to have access to Mr. Chakanyuka, he would have read it before signing it, more so because it is not a simple and short document that one would expect in arranging for an appointment. But even so, a businessman would be expected to read a document that sets out the conditions on his future dealings with his bank. The 2nd defendant’s defence in this regard pertaining his signing of the suretyship agreement is disingenuous and is hereby rejected.


[7] The fact that the suretyship agreement was signed about two years after the grant of the loan it was meant to secure and just before the issue of the summons herein, does not detract from the real meaning and import of the document and its binding nature on the parties herein. That the plaintiff wanted to have the document signed at that stage may perhaps be indicative of the fact that it had realised that the loan or overdraft facility did not have the security agreed upon. I can find no evidence of decent or undue influence by the plaintiff herein.


[8] I accept without hesitation the evidence of the witnesses for the plaintiff that when the suretyship form was dispatched to the 2nd defendant for signature the words in manuscript had already been inserted therein by the plaintiff. (As to the law on the nature and definition of suretyship in general, see SA GENERAL ELECTRIC CO. (PTY) LTD v SHARFMAN AND OTHERS NNO, 1981(1) SA 592 (W), TRANSAFRICA CREDIT AND SAVINGS BANK LTD v UNION GUARANTEE & INSURANCE CO. LTD, 1963 (2) SA 92 (C) TRUST BANK OF AFRICA LTD v FRYSCK, 1977 (3) SA 562 (A) AND ORKIN LINGERIE CO. (PTY) LTD v MELAMED & HURWITZ, 1963 (1) SA 324 (W).

I therefore hold that the 2nd defendant executed the suretyship full knowing what it was and bound himself as surety and co-principal debtor for the debt(s) due to the plaintiff by the 1st defendant. He is liable to the plaintiff as pleaded.


[9] I now examine the issue of the mortgage bond. One of the conditions or terms of the offer of the overdraft facility to the first defendant was

“4.2 Registration of 1st mortgage bond for E2 000 000-00 over portion 65 (a portion of portion 35) farm 300 Matsapha (see page 25 of the Book of Pleadings). The plaintiff avers that the 2nd Defendant complied with this requirement by causing annexure D (starting at page 39 of the Book of Pleadings) to be registered in favour of the plaintiff. Plaintiff accepts that annexure D does not state that it was in respect of a debt due to the plaintiff by the 1st defendant. Plaintiff avers that this Bond was erroneously filled in or completed but the parties were, at the time it was completed and registered, at ad idem as to what its purpose was; namely, a mortgage Bond as envisaged in the overdraft agreement as per clause 4.2 of that agreement. The plaintiff argues that because both parties intended the Bond to be a security for the loan facility granted to the 1st defendant, the failure to mention this in the bond, does not destroy its validity and or efficacy.


[10] The second defendant’s plea on this issue is that the bond was registered not for a debt due to the plaintiff by the 1st defendant but as security for a prospective loan by himself which he was negotiating with the plaintiff. (See para. 11.1 to 11.3 of the plea at 51 of the Book). His evidence in court is slightly different though. He said he was advised to register a mortgage Bond in favour of the plaintiff “… to make it easier for me to get my personal loan …as I was applying for a general funding of loans from them, it would have been useful” (page 155-156 of the Book). There is, however, no evidence of any such negotiation for such a loan or that it was ever granted by the Bank. I find it quite remarkable and highly improbable that the Bank would have advised the 2nd defendant to register a mortgage bond in its favour for a personal loan that was still being negotiated by the 2nd defendant. At the end of the day his property was bonded or encumbered in favour of the plaintiff but no personal loan was extended to the 2nd defendant. He did not question this at all, he would want the court to believe. I am unable to do so.


[11] It is not insignificant that the offer of credit by the plaintiff to the first defendant was accepted by the latter on 12th July, 2007 and the power of attorney to pass the Bond in question was signed on 18th July, 2007. Both documents were signed by the 2nd defendant.


[12] It is plain to me that the Mortgage bond was passed in favour of the plaintiff by the 2nd defendant as security for the debt owed by the 1st defendant to the plaintiff. With such a bond, both parties, (plaintiff and 2nd defendant) intended to pass the bond for this purpose and not for the purpose alleged by the 2nd defendant. On the totality of the evidence before me, I am satisfied that the plaintiff has, on a balance of probabilities established that the mortgage bond in question was passed by the 2nd defendant in favour of the plaintiff as security for the debt due to the plaintiff by the first defendant. The bond was erroneously completed in that it fails to name the 1st defendant as the principal debtor and only mentions the 2nd defendant. This is clearly an error that is contrary to the intentions of both parties.


[13] As to the effect of the said error in the mortgage bond, Counsel for the plaintiff referred the court to THIENHAUS NO v METJE & ZIEGLER LTD & ANOTHER, 1965 (3) SA 25 (A) and submitted that the error in question is not so serious as to destroy the actual validity of the bond as a deed of hypothecation. The headnote in that case reads, in part:

“If a defect in form is such that it renders the obligation to be secured under the bond non-existent, then of course the hypothecation itself could be effected. Accordingly, where, the mortgagor and mortgagee were fully ad idem in regard to the essentials of a bond, it was registered in respect of the correct suretyship obligation of the mortgagor, rightly stating the total amount, it was registered against the title of the correct property of the surety company, and it set out the correct type of debt due by the person whose liabilities to the mortgagee were being so guaranteed, but by a slip of the conveyancer’s pen, the identity of the latter person was incorrectly stated, that did not preclude a jus in re in the mortgaged property passing to the mortgagee on registration, entitling the mortgagee to a preferent claim on the subsequent insolvency of the mortgagor.”

I, with due respect, accept this statement of the law as the correct position in our jurisdiction. The 2nd defendant of course, did not challenge the validity of the bond. He merely contended that it did not relate or pertain to the debt that is under consideration in this case.


[14] For the above reasons, I find that the plaintiff has proven its case in respect of both the suretyship and the mortgage bond. In the result the following order is granted against the 2nd defendant.

(a) He is ordered to pay to the plaintiff the sum of E2 480 547.77 being in respect of monies lent and advanced in June 2007 on overdraft by the plaintiff to the first defendant on the latter’s special request and instance and for which debt or monies the 2nd defendant agreed to stand as surety and co-principal debtor.


(b) 2nd defendant is ordered to pay interest on the above sum at the applicable bank rate plus 3% per annum with effect from 1st March 2009 to date of final payment.


(c) He is ordered to pay the costs of suit on the scale as between attorney and own client, including collection commission and the costs of Counsel to be duly certified in terms of the applicable rules of this court.


(d) The mortgaged property, being portion 65 (a portion of portion 35) of farm Number 300 (Tubungu) situate in the District of Manzini, Swaziland is hereby declared executable.



MAMBA J

(Delivered in open court on this 19th day of January 2012).



FOR Plaintiff Adv. R. Wise SC


FOR 1st Defendant No appearance


FOR 2nd Defendant P. Flynn

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