Lazarus v Gorfinkel

• Jurisdiction: South Africa

Lazarus v Gorfinkel
1988 (4) SA 123 (C)

1988 (4) SA p123

Citation	1988 (4) SA 123 (C)
Court	Cape Provincial Division
Judge	Seligson AJ
Heard	October 28, 1986; October 31, 1986
Judgment	March 25, 1988

Flynote : Sleutelwoorde

B Principal and surety — Deed of suretyship — Rectification of by substituting name of correct creditor for incorrect name in deed — No reason in principle for rectification being refused — Not precluded by General Law Amendment Act 50 of 1956 s 6 — Signature of creditor not C required for deed to constitute a formally valid contract.

Headnote : Kopnota

Plaintiff instituted an action for rectification of a deed of suretyship by the substitution therein of his name for that of the creditor named therein. Defendant had signed the deed as surety and co-principal debtor. Plaintiff alleged that the true intention of the parties had been for him to be creditor.

Held, as s 6 of the General Law Amendment Act 50 of 1956 did not require D the signature of the creditor, that the plaintiff did not have to sign the deed of suretyship to constitute a formally valid contract.

Held, further, that in principle there was no reason why the doctrine of rectification should not be applied where a document wrongly recorded the identity of a party so as to give effect to the intent of the true parties in terms of a prior oral agreement or understanding between them: plaintiff's claim for rectification of the deed of suretyship was E therefore not precluded merely by reason of the provisions of s 6 of Act 50 of 1956.

Held, further, however, on the evidence, that plaintiff had not proved sufficient to discharge the onus on him of establishing the requisites for rectification, ie that it had been the common intention of both defendant and himself that he was to be the creditor. F

Case Information

Action for rectification of a deed of suretyship. The facts appear from the reasons for judgment.

K A B Engers for the plaintiff.

A P Blignault for the defendant.

Cur adv vult.

G Postea (25 March 1988).

Judgment

Seligson AJ:

In this action plaintiff, a businessman of this city, sues defendant, also a local businessman, on an agreement of suretyship. Plaintiff relies on a written deed of suretyship alleged to have been H signed by defendant at Cape Town on 20 August 1985, in which defendant undertakes liability as surety and co-principal debtor in favour of Norbren Investments CC (hereafter referred to as 'Norbren') as creditor, in respect of all sums of money which are or may become owing by Video Home (Pty) Ltd, the debtor ('Video Home'), to Norbren. In terms of the deed of suretyship defendant's liability is limited to the amount of I R35000.

Plaintiff's first claim is for rectification of the deed of suretyship by the substitution therein of plaintiff's name for that of Norbren. In support of this claim plaintiff's particulars of claim allege the following:

'4.

At the time the deed of suretyship was signed, it was the common J understanding and intention of the parties that defendant would

1988 (4) SA p124

Seligson AJ

A bind himself to plaintiff as surety and co-principal debtor with Video Home (Pty) Ltd (hereinafter referred to as "the debtor") for the due repayment by the debtor to plaintiff of all such sums of moneys which were then, or might thereafter, become owing by the debtor to plaintiff.

5.

B The deed of suretyship did not correctly reflect or give effect to the true intention of the parties, in that it reflected the creditor as "Norbren Investments CC", instead of plaintiff.

6.

Defendant signed, and plaintiff accepted, the deed of suretyship in the bona fide, but mistaken, belief that it correctly reflected their common understanding and intention.

7.

C In the premises, the deed of suretyship falls to be rectified by deleting the words "Norbren Investments CC" and substituting therefor the words "Ralph Leonard Lazarus".'

It is further alleged that the debtor, Video Home, is indebted to plaintiff in the sum of R30 000 in terms of an acknowledgement of debt dated 21 August 1985 and executed by Video Home in favour of plaintiff; D that under this acknowledgement such amount was repayable on 18 February 1986; that Video Home has not repaid it; that Video Home is unable to do so by reason of its being placed under provisional liquidation on 12 February 1986; and that defendant is accordingly liable to pay plaintiff the sum of R30 000, but fails to do so. Plaintiff consequently also E claims payment of this sum, interest a tempore morae and costs of suit.

In further particulars to the particulars of claim, as amended, plaintiff avers, in relation to the claim for rectification, that plaintiff and defendant, alternatively one Sydney Kahn, whose acts on behalf of defendant were ratified by defendant's signature of the suretyship, had the alleged common intention and understanding.

F In para (a) of plaintiff's reply to defendant's request for particulars for trial, as amended, plaintiff amplified his allegations as to the basis of his claim for rectification as follows:

'(a)

At some time prior to 19 August 1985, one Sydney Kahn, acting on G behalf of Video Home (Pty) Ltd, requested plaintiff to lend that company an amount of R30 000 on the security of a suretyship to be furnished by defendant.

Plaintiff, having reassured himself as to defendant's financial soundness, agreed to lend the money.

Plaintiff then prepared an appropriate suretyship, and handed H this suretyship to Kahn for signature by defendant. Either plaintiff, in error, inserted the name "Norbren Investments CC" instead of his own name as creditor, or Kahn redid the suretyship and, in error, inserted the name "Norbren Investments CC" instead of plaintiff's name as creditor.

I Defendant then signed the suretyship, intending it to be security for the loan being made by plaintiff.

The suretyship was delivered to plaintiff on 21 August 1985 by Kahn at the same time as plaintiff delivered a cheque for R30 000 to Kahn, and the acknowledgement of debt was signed by Kahn on behalf of the said company.'

J In the salient parts of his plea, defendant:

1988 (4) SA p125

Seligson AJ

(a)

A states that he has no recollection of having signed the original deed of suretyship and accordingly denies the allegation that he signed the deed of suretyship in question;

(b)

denies in any event that he was ever made aware of the terms of the deed of suretyship or that he ever intended to be bound thereby;

(c)

B denies paras 4 - 7 of the particulars of claim quoted above;

(d)

denies that Video Home was indebted to plaintiff in the sum of R30 000 and that defendant is liable to plaintiff in that amount.

In short, the plea denies virtually every one of plaintiff's allegations with the exception of the fact that Video Home was placed under provisional liquidation on 12 February 1986, which is admitted.

C In further particulars for trial, defendant admits that the signature on the deed of suretyship 'is not unlike defendant's signature', but repeats that he has no recollection of signing the deed of suretyship, does not admit that it is his signature and requires proof thereof.

It will be observed that Norbren is not cited as a party in this action. Inasmuch as that entity features as the creditor on the deed of D suretyship relied on by plaintiff and which is sought to be rectified, it has a material interest in the relief sought. In order to deal with this situation, by agreement between counsel, at the trial I directed that an affidavit be filed with the Court in which Norbren consented to be bound by the judgment of the Court notwithstanding the fact that it has not been cited as a party to the action. This affidavit was E eventually filed some months after the hearing. In it Norbren agrees to be bound by the Court's judgment in this action.

In support of plaintiff's case two witnesses were called, one David Rosenzweig and plaintiff himself. Rosenzweig, who is a chartered accountant practising in Cape Town, testified that his firm acts for F defendant and that he had known defendant for some time. He described defendant as a property investor and developer. He identified the signature on the last page of the original deed of suretyship as that of defendant. He stated that he was familiar with defendant's signature and had seen it on several occasions in the past. Rosenzweig also confirmed that his own signature appeared on the last page of the deed of G suretyship as witness No 1. He stated that he did not recall signing the document but was satisfied that it was his signature. He would not have signed as a witness if he had not been satisfied that defendant had signed.

Cross-examined, Rosenzweig testified that he had no independent H recollection of signing the document, nor of the underlying transaction. He stated that the signature of witness No 2 appeared to be that of Sydney Kahn. He could not say whether he was actually present when defendant signed or whether he had appended his signature as witness later, after defendant had signed. He would not, however, have accepted Kahn's 'say-so' that defendant has signed unless he knew that defendant I was due to sign the document. Kahn had been subsequently sequestrated by Rosenzweig's firm. Kahn had departed from South Africa during February 1986 leaving debts running into many millions of rands, and had been found to be thoroughly dishonest. According to the witness, Kahn had misappropriated the sum of R34 000 from his (the witness's) firm by J forging a signature. Kahn had signed a suretyship document in favour of

1988 (4) SA p126

Seligson AJ

A a bank on behalf of Rosenzweig, binding him in the capacity of surety. He had done this by signing as agent on behalf of Rosenzweig without...