Botha NO and others v Lego Boerdery CC and another

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Reinders J
• Judgment Date: 04 September 2023
• Citation: 2023 JDR 3324 (FB)
• Hearing Date: 25 May 2023
• Docket Number: 5856/2022
• Court: Free State Division, Bloemfontein

Reinders J:

2023 JDR 3324 p2

Reinders J

[1]

On 14 April 2022 the third applicant, Agri-Com Co-Operative Ltd (in liquidation) [Agri-Com] was placed under final liquidation by this court at the behest of The Land and Agricultural Development Bank of South Africa (Land Bank). In an urgent application heard on 9 February 2023 the first and second applicants, acting in their capacities as the joint liquidators of Agri-Com, obtained on an ex parte basis an interim order in terms whereof it be entitled to perfect various securities granted in favour of Agri-Com by the first respondent, Lego Boerdery CC (Lego Boerdery). The interim relief was granted under Part A of the notice of motion and the rule nisi was extended by agreement between the parties. The applicants now move for confirmation of the rule nisi as well as the relief claimed under Part B against Lego Boerdery and the second respondent (a member of the first respondent) jointly and severally, the one paying, the other to be absolved. Under part B the applicants claim payment in the amount of R 2 717 854.90 together with interest thereon.

[2]

Lego Boerdery and the second respondent (duly authorised to act on behalf of the first respondent) oppose the relief sought by the applicants and pray for discharge of the rule nisi and dismissal of the relief sought under Part B. In its answering affidavit the applicants’ locus standi to perfect the security under the notarial bonds (numbers BN8214/2023; BN8662/2014; BN2906/2016; BN5535/2016) are disputed by the respondents. The contention is firstly that there was an out-and-out cession by Agri-Com to Land Bank of Agri-Com’s claim against Lego resulting therein that Agri-Com has no further locus standi to claim from Lego Boerdery – put differently the contention being that Land Bank should have enforced the claim herein. The second contention is that there is no underlying causa for perfection of these bonds, as first respondent’s indebtedness to Agri-Com has been extinguished and, whereas the security held under the notarial bond is accessory to the existence of the principle debt, the applicants are not entitled to an order for the perfection of security. Moreover, so the opposition goes, based on the aforementioned grounds of opposition a material dispute of facts exists which cannot be resolved on the papers.

2023 JDR 3324 p3

Reinders J

[3]

That the third applicant and the first respondent entered into five credit agreements from November 2013 to February 2018, is common cause. Four of the five agreements entailed summer production loans, whilst one was a loan for the purchase of lime (the liming loan). The applicants allege that the respondents are indebted to the third applicant (jointly and severally) in the amount as claimed under Part B in respect of these loans and, more in particular, the fifth loan agreement being a reconciliation loan.

[4]

During January 2011 Land Bank and Agri-Com entered into a deed of cession (annexed as “DB5” to the founding papers – the deed) which formed the Land Bank’s security for monies lent and advanced to Agri-Com. Agri-Com ultimately ceded its book debts to Land Bank, which included the five credit agreements between itself and Lego Boerdery. The nature of this cession and the concomitant consequences flowing therefrom is in dispute between the parties.

[5]

The deed defines Agri-Com as “the cedent” and Land Bank as “the cessionary”, and the more important clauses for purposes of this judgment are quoted:

“1.3

The Cessionary requires from the Cedent to furnish security to it for the due and punctual:

1.3.1

repayment to the Cessionary of the aforementioned cash credit accounts (working capital overdraft facilities) or installments

. . .

2.2

The Cedent hereby cedes to the Cessionary in securitatem debiti, all its right, title and interest in all to all amounts which the Debtors may be owing to or in future become owing to the Cedent, together with all rights or action which Cedent may have or obtain in respect of or against the Debtors (hereinafter jointly referred to as “the Ceded Amounts”) as security for the due and punctual compliance by the Cedent of all its obligations to the Cessionary under indebtedness.

2.3

The Cessionary, by its signing of this Deed of Cession at the end hereof, accepts the Cession in securitatem debiti, subject to the terms and conditions contained herein.

2023 JDR 3324 p4

Reinders J

2.4

It is hereby recorded and agreed that, notwithstanding anything to the contrary elsewhere contained in this Deed of Cession, the Cessionary shall be entitled, in its sole discretion, at any time during the currency of this Deed of Cession, to elect to convert any one or more of the cessions in securitatem debiti referred to in clause 2.2, into out-and-out security cessions in favour of the Cessionary, in which event:

2.4.1

The Cessionary shall inform the relevant Cedent in writing of its decision to do so:

2.4.2

The Cessionary shall authorize the relevant Cedent to collect all ceded amounts for and on behalf of the Cessionary on such conditions as the Cessionary deems appropriate; and

2.4.3

The Cessionary shall not be entitled to cede its rights or delegate its obligations in terms of this Deed of Cession to any third, other than a successor bank of the Cessionary, should the Cessionary cease to exist for whatever reason.

. . .

5.1

The Cedent hereby undertake and warrants that the Cedent has not entered into any agreements restricting or excluding the transferability of the Ceded Amounts;

. . .

5.3

If the Cedent has, contrary to the warrant in terms of clause 5.1, already ceded the Ceded Amounts to another party, then this Deed of Cession shall operate as a cession of the Cedent’s reversionary rights to the Cessionary, including all rights of action against the prior Cessionary.

6.

For the duration of this Deed of Cession and until the cessionary notifies the Cedent in writing that its authority is revoked, the Cedent is authorized to:

6.1

Collect all monies due or to become due and payable to the cedent under the ceded amount, in its own name and to issue valid receipt thereof;

6.2

Take, either itself or through the nominees or agents, all the requisite steps to collect the ceded amounts when they become due and payable from the debtors, including the institution of appropriate legal proceedings against those debtors, in any court of law which has jurisdiction.”

. . .

7.2

The Cessionary is entitled at any time and irrespective of whether the Cedent is in breach with any provisions of the Deed of Cession, to revoke the

2023 JDR 3324 p5

Reinders J

authority given to the Cedent in terms of clause 6 above, pursuant whereto the Cessionary will have the irrevocable authority to, in rem suam perform the actions in terms of clause 6 above.”

[6]

The respondents contend the true nature and implementation of the cession to be inconsistent with its ostensible form and to be, on a purposeful and contextual interpretation thereof, not a true cession in securitatem debiti, but rather an out-and-out cession. Relying on Engen Petroleum Ltd v Flotank Transport (Pty) Ltd (876/20) [2022] ZASCA 98 (21 June 2022) for the distinction between the two aforementioned cessions, it was submitted by counsel for the respondents that the cession catered for in the deed, constitutes an act of transfer rendering the claim which is ceded to not fall within the insolvent estate.

[7]

Counsel for applicants placed specific reliance on clause 6 pertaining to the collection of ceded amounts in terms whereof the parties agreed that Agri-Com is authorized to collect. It was submitted that, as the liquidators are therefore entitled to recover and administer the claims of the third applicant when it was placed in liquidation, they have the necessary locus...