Neuhoff v York Timbers Ltd

• Judge: Human J, Le Grange J and Ackermann J
• Judgment Date: 27 August 1981
• Citation: 1981 (4) SA 666 (T)
• Hearing Date: 05 August 1981
• Court: Transvaal Provincial Division

Ackermann, J.:

This is an appeal from a judgment of ELOFF J delivered on 8 February 1980 in which he granted summary judgment in favour of respondent (plaintiff in the Court a quo) against the appellant (the first defendant in the Court a quo) for:

"1.

Payment of the sum of R17 665,12.

2.

G Interest thereon at the rate of 9 per cent per annum as from 1 October 1979 to date of payment.

3.

Cost of suit on the attorney and client scale."

The second defendant in the Court a quo (one Breet) had previously been H given leave to defend the plaintiff's action and accordingly summary judgment was only sought and granted against appellant. For the sake of clarity I shall refer to appellant as "first defendant" and to respondent as "plaintiff".

In the papers presently before us there are certain documents amending the plaintiff's summons. It is clear however that such amendment was sought and effected after summary judgment had been granted against first defendant and we are therefore concerned with the plaintiff's claim as pleaded in its summons prior to the amendment thereof.

Ackermann J

Plaintiff's claim against first and second defendants is based on a written deed of suretyship dated 17 February 1978 in terms whereof first and second defendants, renouncing inter alia the benefits of excussion and A division, bound themselves jointly and severally as sureties and co-principal debtors to, inter alia, the plaintiff for the payment of all sums and the performance of all obligations which a company styled Transvaal Home Builders (Pty) Ltd owed to or became liable to perform to the plaintiff, it being further alleged in the plaintiff's summons that B Transvaal Home Builders (Pty) Ltd owes to plaintiff the sum of R17 665,12 being the balance owing by it to plaintiff in respect of the agreed purchase price of goods sold and delivered by the plaintiff to Transvaal Home Builders (Pty) Ltd at the latter's special instance and request during July 1979.

Before dealing with the merits of the appeal there are two preliminary C matters which I should like to dispose of. Despite the fact that, at the time when summary judgment was granted, neither the summons nor the notice of application for summary judgment contained a prayer for costs on the attorney and client scale, costs were in fact awarded on such scale by D ELOFF J. The learned Judge a quo did not however indicate in his judgment the reason or basis for making such an award.

In terms of clause 15 of the deed of suretyship the sureties agreed however that:

"In the event of any litigation arising out of this deed the creditor shall be entitled to claim all costs on the basis of attorney and client."

At the hearing of the appeal it was confirmed to us from the E Bar by Mr Fasser, who appeared for the plaintiff both in the appeal and in the Court a quo, that at the hearing of the application it was common cause that, on the strength of the undertaking in clause 15 of the suretyship above referred to, plaintiff, if successful in its application F for summary judgment, was entitled to an order for costs on the attorney and client scale. Mr Louw, who appeared for the first defendant on appeal but who did not represent him in the hearing before ELOFF J, accepted the position as stated by Mr Fasser. Although, in the notice of appeal, the appeal is directed against the whole of the order granted by ELOFF J, including the order as to costs, the first defendant's grounds of appeal G do not attack the order as to attorney and client costs as such. As I understand the notice of appeal it goes no further than to state, in regard to the order as to costs, that, inasmuch as leave should have been granted to first defendant to defend the action, costs should not have H been awarded against him. Inasmuch, however, as first defendant's counsel accepted the assurance given by Mr Fasser from the Bar, this matter is academic. On the basis of the assurance given by Mr Fasser Mr Louw agreed, in my view correctly, that if the application for summary judgment was correctly granted the Judge a quo correctly granted costs on the attorney and client scale.

First defendant's answering affidavit alleges the following facts against the background whereof his defence must be considered. He admits signing the deed of suretyship on 17 February 1978. He says that at that date he was the major shareholder in and a director of

Ackermann J

Transvaal Home Builders (Pty) Ltd, the principal debtor described in the deed of suretyship and to which I shall refer as "the company". At the A time of signing the suretyship plaintiff agreed to deliver certain goods to the company. First defendant states in his affidavit that on 30 March 1978 he sold the majority of his shares to various purchasers. This allegation is not factually correct. From the relevant written agreement which first defendant annexed to his affidavit it appears that prior to the conclusion of this agreement the company had an authorised share B capital of 4 000 ordinary shares of R1 each, of which only two shares had been issued, one each to first and second defendants. The agreement provided, inter alia, that a further 98 shares were to be allotted and issued, increasing the issued share capital of the company to 100 shares. Of these 98 shares 20 each were to be allotted to first and second C defendants, the balance to various parties described in the agreement as "the purchasers". Upon allotment of these shares first defendant would be the owner of 21 per cent of the share capital, second defendant the owner of 21 per cent and the purchasers jointly the owner of the remaining 58 per cent. On performance of the agreement first and second defendants D therefore jointly still owned 42 per cent of the company's issued share capital. It would be more correct to say that, whereas first defendant previously owned 50 per cent of the issued share capital in the company, he would on performance of the agreement only own 21 per cent. On 25 September 1978 first defendant tendered his resignation in writing as a director of the company as from such date. In this letter of resignation E addressed to the directors and shareholders of the company he further states the following;

"Kindly further take notice that I have informed all trade creditors and suppliers of my resignation and as from date of this letter I do not accept any responsibility or liability for the activities of the company."

F It is clear from first defendant's affidavit that plaintiff first supplied goods to the company in February 1978. First defendant states however that all goods which were supplied by plaintiff to the company from February to September 1978 while first defendant was a director of the company were paid for by the company. He does not dispute, however, that, at the time of issue of summons the company was indebted to plaintiff in G the sum of R17 665,12, the amount claimed in the summons, in respect of the purchase price of goods sold and delivered by plaintiff to the company at the latter's special instance and request during July 1979. First defendant's defence is based on the fact that he has been sued as a surety in respect of an obligation incurred by the company, as principal debtor, H to the plaintiff in July 1979, some ten months after his resignation as a director of the company. In regard to this defence first defendant states the following in his answering affidavit:

"2.3

Tot met September 1978 het die eiser wel weer op 'n paar geleenthede goedere aan Transvaal Home Builders gelewer waarvoor almal betaal is. Toe ek as direkteur van Transvaal Home Builders bedank het, het ek verteenwoordigers van die eiser meegedeel dat ek bedank het en dat ek nie vir enige skulde wat na my bedanking ontstaan het aanspreeklik sou wees nie. Die eiser was verder ook bewus daarvan dat ek nie meer in beheer van die maatskappy is nie aangesien alle reëlings met hulle toe

Ackermann J

deur die nuwe aandeelhouers van die maatskappy getref is. Reeds voor my bedanking as direkteur en voor ek Transvaal Home Builders verlaat het, het die eiser reeds met die nuwe aandeelhouers geskakel en reëlings met hulle getref.

2.4

A Nòg die eiser nòg ekself het ooit bedoel dat die borgakte van toepassing sou wees op enige skuld ander dan dié wat aangegaan is terwyl ek nog in beheer van die maatskappy was en ook die grootste aandeelhouer was.

2.5

Om en by Julie 1979 het Transvaal Home Builders blykbaar finansiële moeilikheid begin ondervind en dit is my respekvolle submissie dat die eiser nou 'n borgakte gebruik wat 15 maande voordat die goedere waarvoor hy eis, geteken is in 'n poging om my aanspreeklik te hou vir skulde wat 15 maande ná die ondertekening van die borgakte B ontstaan het en wat verder ontstaan het nadat die eiser daarvan bewus geword het dat ek nie meer 'n direkteur in die maatskappy is en dat die grootste deel van die aandeelhouding deur ander persone opgeneem is.

2.6

Dit is my respekvolle submissie dat die eiser die wye bewoording van die borgakte gebruik ten einde die regte wat dit aanvanklik gekry het C te misbruik om my aanspreeklik te maak vir nuwe transaksies wat aangegaan is in Junie 1979 met die maatskappy wat toe onder nuwe beheer was en van welke omstandighede die eiser terdeë bewus was.

2.7

Nòg ek, nòg die eiser het in Februarie 1979 bedoel dat ek in sulke veranderde omstandighede vir nuwe skuld van Transvaal Home Builders aanspreeklik sou wees. Toe goedere in Julie 1979 gelewer is, is die saak ook hoegenaamd nie met my bespreek nie."

D On appeal before us it was contended by Mr Louw that the existence of the exceptio doli generalis had been established in our law, that we should accept the formulation of the exceptio doli generalis as laid down in Rand Bank Ltd v Rubenstein 1981 (2) SA 207 (W) and that first defendant has made out a proper...