NBS Bank Ltd v Badenhorst-Schnetler Bedryfsdienste BK and Another

• Jurisdiction: South Africa
• Judge: Stegmann J
• Judgment Date: 05 September 1997
• Citation: 1998 (3) SA 729 (W)
• Docket Number: 97/019379
• Hearing Date: 04 September 1997
• Counsel: JF Steyn for the applicant PL Carstensen for the respondents
• Court: Witwatersrand Local Division

Stegmann J:

This is an opposed application for summary judgment. The outcome turns on the question whether, A in the case of a moneylending contract which is not the special case of a contract between banker and customer relating to an overdraft on a current account, the moneylender can validly stipulate for, and from time to time exercise, the power to vary the rate of interest applicable to the loan unilaterally. B

On the facts of the present case, if a moneylender can validly stipulate for and exercise that power, the first defendant was and is in arrears with instalments payable under a loan; and the plaintiff was entitled to foreclose on the mortgage bond securing the loan and should be granted summary judgment against the first defendant. The C plaintiff should also be granted summary judgment against the second defendant who is bound as a surety. But, if a contract which purports to give such a power to a moneylender to exercise unilaterally is in that respect invalid or unenforceable, the first defendant is not in arrears and the plaintiff was not and is not entitled to foreclose on that ground.

On 3 February 1995 Mrs Badenhorst-Schnetler, who has been sued as the second defendant, signed two D relevant documents. The first she signed in her capacity as the sole member of Badenhorst-Schnetler Bedryfsdienste BK ('the first defendant'). This document was a power of attorney authorising the execution and registration of a mortgage bond on behalf of the first defendant. In terms of the intended bond the first defendant E was to hypothecate erf 236, Kempton Park Extension, in favour of NBS Bank Ltd ('the plaintiff') as security for the sum of R200 000, 'being money lent and/or to be lent' by the plaintiff to the first defendant, and for a further sum of R50 000 to secure the payment of costs and disbursements.

The second document was one which Mrs Badenhorst-Schnetler signed in her personal capacity. It was a deed F of suretyship, in terms of which she bound herself to the plaintiff as surety for the due payment by the first defendant of any amount which it might owe to the plaintiff, then or later, including specifically the loan of R200 000 to be secured by the bond, and also the further sum of R50 000. G

On 27 February 1995 the bond contemplated by the parties, having been duly executed, was registered by the Registrar of Deeds at Pretoria under number B15769/1995. In terms of the bond the first defendant was to repay the capital sum of R200 000, together with interest on that sum and on the reducing balance, in monthly instalments. The instalments were to be of R2 821 each. Payments were to begin on 1 April 1995. H

The provisions of the bond which are relevant are these:

'The aforesaid payments shall continue to be made thereafter on the 1st, but in no case later than the 7th, day of each and every month . . . until such time as all the mortgagor's indebtedness hereunder shall be fully discharged. Each I payment shall be appropriated first to interest accrued in terms of this bond and the balance, if any, of such payment shall thereafter be appropriated in reduction of the capital sum, notwithstanding any allocation by the mortgagor of such payment. The interest as aforesaid shall be at the rate of 16,25% per annum (hereinafter referred to as the original rate) or at such other rate as the bank may determine from time to time as provided in special condition 14 hereof, reckoned J

Stegmann J

and calculated from the 1 July 1995 to the last day of that month, provided that if the loan or any portion thereof is paid out A prior to the last-mentioned date the interest shall be reckoned and calculated from the dates of such payments to the last days of the months in which such payments are made, and thereafter the interest shall be reckoned and calculated as provided in special condition 19 hereof.' B

The following special conditions of the bond are also relevant:

'7.

The capital sum or balance thereof . . . shall forthwith ipso iure, without the mortgagor having been specially placed in default, become immediately due and repayable, whether the due date thereof shall have arrived or not, in case of failure by the mortgagor to make any payment in terms of this bond. . . . A certificate purporting to be C signed by a manager for the time being of the bank or any person acting in such capacity showing the amount owing to the bank in respect of capital and interest . . . shall be sufficient and satisfactory proof of the facts stated therein for the purpose of obtaining judgment or provisional sentence under this bond . . . and it shall rest with the mortgagor to prove that such amount is not owing to the bank, or that any such fact is incorrect. . . . D

8.

The mortgagor may at any time make payments in addition to the regular monthly instalments required to be paid in terms hereof in reduction of the indebtedness under this bond, provided that should the mortgagor make such additional payments within 12 months of the date of registration of the bond . . . the bank may charge a premium of E 1% of such additional payments in lieu of the interest that would otherwise have accrued to the bank thereon.

. . .

13.

By agreement with the mortgagor the bank may at any time rearrange, vary or alter any of the conditions of this bond or any of the conditions for repayment of the capital, or any further sums advanced by the bond in terms hereof, or interest, either as regards the amount of any instalment payable in respect thereof or the dates of F payment or otherwise, provided. . . .

14.

Notwithstanding anything to the contrary herein contained the bank may at any time and from time to time increase or decrease the rate of interest per annum on all amounts owing to or claimable by the bank in terms of this bond to the rate determined by the bank as payable for the class of bonds into which this bond falls, provided that the G rate as...