Sealed Africa (Pty) Ltd v Kelly and Another

• Jurisdiction: South Africa
• Judge: Epstein AJ
• Judgment Date: 06 July 2005
• Citation: 2006 (3) SA 65 (W)
• Docket Number: 04/3957
• Hearing Date: 06 July 2005
• Counsel: J M Suttner SC (with him J Blou) for the applicant. N A Cassim SC (with him R M Pearse) for the respondents.
• Court: Witwatersrand Local Division

Epstein AJ:

[1] The respondents are sued in this matter as guarantors in respect of a loan made by the applicant to Airshield Holdings (Pty) Ltd G (Holdings). The amount claimed is R5 million together with interest at the rate of 4% per annum from 20 November 2003 until date of payment.

[2] The applicant instituted its claim by way of motion proceedings. The cause of action is founded upon a loan agreement (the H loan agreement) entered into by the applicant and Holdings in terms whereof the applicant agreed to lend to Holdings the sum of R5 million repayable on or before 28 February 2005. A guarantee was signed by the first and second respondents on the same date as the loan agreement. It is not disputed that the loan agreement was entered into and that the guarantee was furnished. Further, it is common cause that the amount of R5 million was advanced to Holdings in terms of the I loan agreement and that the loan has not been repaid.

[3] The founding affidavit consists of some eight pages with about 37 pages of annexures. This is followed by an answering affidavit to which the applicant replied. This in turn is followed by: (i) a supplementary J

Epstein AJ

affidavit filed on behalf of the applicant, (ii) an answer by the respondents to the applicant's replying affidavit, A and (iii) a further replying affidavit from the applicant to the respondents' answer to the first replying affidavit. In addition, issues relating to authentication in terms of Rule 63 of the Uniform Rules of Court were raised by the respondents, which resulted in further supplementary affidavits. In total, the affidavits in this matter run to 669 pages. B

[4] The filing of further affidavits after the replying affidavit has been filed is a matter for the discretion of the Court. In the absence of leave being granted by the Court for the filing of such affidavits, parties are not entitled simply, by their own arrangement, to file as many affidavits as they wish. See Union C Finance Holdings Ltd v I S Mirk Office Machines II (Pty) Ltd and Another2001 (4) SA 842 (W). To allow the parties themselves to determine how many affidavits can or should be exchanged in a particular matter may, and often will, lead to an abuse of motion procedure, particularly in those cases where trial procedure was from the outset the appropriate choice. Parties who refuse to adhere D strictly to the principles enunciated in Union Finance (supra) run the risk of having adverse and punitive costs orders awarded against them. I considered making a punitive costs order in this matter but the parties seem equally responsible for creating the voluminous affidavits exchanged and I have decided, in the circumstances of this matter, to refrain from making such order. E

[5] The answer to the founding affidavit contains evidence extraneous to the loan agreement and the guarantee, which evidence the applicant contends is inadmissible.

[6] The loan agreement specifies the purpose of the loan. It states: F

'The borrower shall use the proceeds of the loan to acquire the airothene business of Kohler Versapak, a division of Kohler Packaging Ltd ("Kohler"), pursuant to an agreement in respect of the Purchase and Sale of Business between the borrower and Kohler dated August 20, 2001 (the "Kohler Transaction").' G

[7] The loan agreement provides that the loan shall be evidenced by a promissory note and that the loan shall be due and payable on 28 February 2002 provided that, if the Kohler Transaction shall not have been consummated prior to the close of business on 31 August 2001, the loan agreement shall thereupon become immediately due and payable. H

[8] It is relevant that the loan agreement is signed not only by the applicant and by the first respondent on behalf of Holdings, but also by the first and second respondents as 'guarantors'. Moreover, in s 5 of the loan agreement, both 'the borrower and the guarantors jointly and severally' furnish certain warranties to the applicant. The significance of this will become apparent later in this I judgment.

[9] Also relevant is para (e) of s 7 of the loan agreement, which provides as follows:

'This agreement and the other credit documents set forth the entire understanding of the parties with respect to the subject-matter hereof and thereof.' J

Epstein AJ

[10] The guarantee records the agreement of loan and also records that the respondents are shareholders of the borrower, Holdings. A The guarantee provides that the respondents jointly and severally undertake that whenever Holdings does not pay any amount due under or connection with the loan agreement, the respondents shall, jointly and severally, forthwith on demand by the applicant, pay that amount as if the respondents, instead of Holdings, were expressed to be the principal obligor under the loan agreement. B

[11] The crux of the respondents' argument is the contention that the nature of the agreement between the applicant and Holdings was far wider than a simple loan agreement. It is contended that there was a broader transaction to which I could and should have regard and, further, that the terms of this broader transaction are C admissible. It is the respondents case that this broader transaction was the acquisition by Holdings of the Airothene business of Kohler Versapak, Airothene being the brand name of Kohler's polyethylene foam product in the protective packaging industry. The respondents contend that the applicant had made it clear that it D was only prepared to...