Botha (Now Griessel) and Another v Finanscredit (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Hoexter JA, Nestadt JA, Milne JA, Grosskopf AJA, Nicholas AJA
• Judgment Date: 19 May 1989
• Hearing Date: 13 March 1989
• Court: Appellate Division

Hoexter JA:

In the Transvaal Provincial Division Finanscredit (Pty) Ltd obtained a money judgment against Mrs C E Botha (now Griessel) and Verwoerdburg Beleggings (Pty) Ltd, jointly and severally, with costs (including the costs of two counsel on the scale as between attorney and J client). In what follows reference will be made to Finanscredit (Pty) Ltd as 'the plaintiff'; to Mrs C E Botha as 'the defendant'; and to

Hoexter JA

A Verwoerdburg Beleggings (Pty) Ltd as 'VBL'. With leave of the trial Judge (Human AJ) the defendant and VBL appeal against the whole of the judgment of the Court below.

The plaintiff's action was based upon two deeds of suretyship undertaken on 1 May 1973 by the defendant and VBL respectively. In B each deed of suretyship the principal debtor was a company known as Pretoria Aardwerke & Kontrakteurs (Edms) Bpk ('Aardwerke'). In each suretyship the surety bound herself or itself to the plaintiff as creditor, in solidum with Aardwerke

'... and all such other persons, who may be or become indebted or owe obligations to the creditor as a result of claims of whatever nature C acquired from the principal debtor/s (such other persons hereinafter referred to as the debtor/s) and in respect of which the principal debtor/s remain/s liable in any way, for the due and punctual payment of all amounts of whatever nature and/or the performance of any obligation, all of which may now or in future become owing by the principal debtor/s and/or the debtor/s for any reason whatsoever'.

Appended to this judgment as annexure A [*] is a copy of the deed of suretyship undertaken by the defendant ('the D 1973 suretyship'). It was signed by two sureties: the defendant herself and her then husband, one J C Botha ('Botha'). The deed of suretyship undertaken by VBL ('the VBL suretyship') was signed by three sureties: VBL and two companies respectively known as Hupert Lessors (Edms) Bpk ('Lessors') and Verwoerdburg Vervoer (Edms) Bpk ('VV'). Save as to E the identity of the sureties the terms of the VBL suretyship are identical with those set forth in the 1973 suretyship.

Whereas in the 1973 suretyship and in the VBL suretyship the principal debtor in each case was Aardwerke, the defendant and Botha had previously, on 28 July 1972, bound themselves as sureties to the plaintiff in solidum with Lessors as the principal debtor ('the F 1972 suretyship'). The identity of the principal debtor apart, the 1972 suretyship was in terms identical with those set forth in the 1973 suretyship.

To complete the picture of suretyship it should further be mentioned that there were cross-guarantees between Aardwerke and Lessors. It has already been noticed that in the VBL suretyship one of the G co-sureties for Aardwerke was Lessors. In turn Aardwerke was a surety for Lessor's debt to the plaintiff. On 28 July 1972 Aardwerke (as a co-surety with VV and VBL) had bound itself to the plaintiff as creditor in solidum with Lessor as principal debtor ('the Aardwerke cross-guarantee').

The defendant and Botha were married to each other in 1968, out H of community of property and with the exclusion of the marital power. They were divorced in 1982. In 1972 and 1973 the defendant and Botha were equal shareholders in and sole directors of Aardwerke en Lessors. VBL was an investment company in which the defendant and Botha were equal shareholders and sole directors.

I The business of Aardwerke was that of earth removal and road making. The equipment used by Aardwerke in its business was, in the main, leased to it by Lessors. The plaintiff was a financial house which granted J credit facilities to clients with adequate securities. In order to obtain the

Hoexter JA

A equipment for their business Aardwerke and Lessors required credit facilities. The plaintiff acquired equipment which it then sold, by way of hire-purchase, or leased to either Aardwerke or Lessors, as the case might be. In the main such contracts were entered into in the name of Lessors.

On 28 February 1974 a written contract of sale was concluded between the defendant and Botha as sellers and Aardwerke as purchaser in B terms whereof Aardwerke bought from the defendant and Botha their entire shareholding in Lessors and VV. On the same date a memorandum of agreement ('the Vanacht contract') was concluded between the defendant and Botha as sellers and a public company known as S M van Achterberg C Bpk ('Vanacht') as purchaser. In terms of the Vanacht contract Botha sold 10 %, being one-fifth of his shareholding, and the defendant sold her entire shareholding (ie the sellers sold 10 % + 50 % = 60 % of the issued share capital) in Aardwerke to Vanacht for R1,08 m. In this way Vanacht acquired control both of Aardwerke and its subsidiary, Lessors. D The Vanacht contract also provided for the issue of further shares at par to Botha and Vanacht; for the allocation of R200 000 of the purchase price payable by Vanacht in payment of debts owed by the defendant and Botha to Aardwerke; and for the appointment of Botha as the managing director of Aardwerke, subject to the control of Aardwerke's new board of directors, the majority of whom would be appointed by Vanacht. In the Vanacht contract Aardwerke is described as 'die maatskappy'. Clause E 6.1 of the Vanacht contract contained the following provision:

'6.1 Vrystelling van sekuriteit:

Die maatskappy sal:

-...

- daarbenewens sy bes probeer om alle waarborge en sekuriteite wat deur mev Botha (the defendant) vir die doeleindes van die besigheid van F die maatskappy of die filiale gegee of beskikbaar gestel is oor te neem en/of die vrystelling van mev Botha ten opsigte daarvan te bewerkstellig.'

Subsequent to the conclusion of the Vanacht contract, and during the period June - September 1974, Vanacht bound itself on three separate occasions to the plaintiff as surety in solidum for Lessors as G the principal debtor. On 21 June 1974 Vanacht so undertook a suretyship to a limit of R300 000; on 23 July 1974 Vanacht so undertook a suretyship to a limit of R150 000; and on 23 September 1974 Vanacht so undertook a suretyship to a limit of R1 m. The last-mentioned deed of suretyship recorded that it was in substitution for

H '... alle vorige waarborge onderteken deur S M van Achterberg Bpk, verskaf aan Finanskrediet (Edms) Bpk, vir fasiliteite toegestaan aan Hupert Lessors (Edms) Bpk'.

During 1976, however, Vanacht was placed in liquidation. Thereafter, and during November 1976, Botha concluded a contract with the I provisional liquidators of Vanacht in terms whereof Botha bought Vanacht's entire shareholding in Aardwerke for R150 000.

During the period March 1979 - April 1980 Aardwerke bought vehicles and equipment from the plaintiff under 43 separate hire-purchase agreements which provided for payment of monthly instalments over periods stretching from 12 to 36 months. The total purchase price under J the 43 hire-purchase agreements was R2 906 637,30. During October

Hoexter JA

A 1978 the plaintiff and Aardwerke concluded three separate agreements of lease in terms whereof the plaintiff leased to Aardwerke one payloader and two tractors at monthly rentals payable, in the case of each lease, over a period of 36 months. The total rentals payable under the three leases was R103 022,28.

B On 4 November 1980, and during the currency of the aforementioned hire-purchase and lease agreements, Aardwerke was placed under judicial management; but its judicial manager elected to continue with each of the said hire-purchase and lease agreements. Aardwerke thereafter breached each of the aforesaid hire-purchase agreements by failing to pay the instalments thereunder on due date or at all; and the plaintiff by reason thereof lawfully cancelled each such hire-purchase C agreement. Aardwerke likewise breached each of the aforesaid three lease agreements by failing to pay the rental due thereunder on due date or at all; and the plaintiff similarly cancelled each such lease agreement.

During June 1982 the estate of Botha was sequestrated. In July D 1982 Aardwerke was placed in liquidation.

In November 1982 the plaintiff instituted its action against the defendant and VBL. In its particulars of claim the plaintiff averred that in consequence of Aardwerke's breaches of the hire-purchase agreements it had suffered damages amounting in all to R1 241 916,66 (reduced during the trial to R1 203 555)'... representing the difference between what the plaintiff would have received from the principal debtor (Aardwerke) had the latter honoured all its obligations under the hire-purchase agreements and what the plaintiff in fact received from the principal debtor in terms of the hire-purchase agreements together with the value of the subject-matter of the hire-purchase agreements'.

F In respect of the lease agreements breached by Aardwerke the plaintiff averred that at the date of their cancellation the total rentals due but unpaid totalled R43 898,90 (reduced during the trial to R42 543); in addition to which sum the plaintiff claimed damages in the sum of R9 157, 48 (reduced during the trial to R8 874)'... being the difference between the amount which the plaintiff would have received had the principal debtor honoured all of its obligations under the lease agreements and not breached the lease agreements and the amount that it in fact received...'.

The particulars of claim set forth that the aforementioned H amounts (respectively representing (1) damages in respect of the hire-purchase transactions; (2) arrear rentals in respect of the lease transactions; and (3) damages in respect of the lease transactions) were owed by Aardwerke to the plaintiff; and, on the strength of the suretyships by the defendant and VBL, the plaintiff accordingly claimed from the defendant and VBL, jointly and severally, payment of the aforesaid three amounts; interest thereon; and costs...