Standard Bank of SA Ltd v Neugarten and Others

• Jurisdiction: South Africa
• Judge: Goldblatt AJ
• Court: Witwatersrand Local Division

Goldblatt AJ:

In this matter the applicant applied for an order against the first, second and third respondents, jointly and severally, for payment of the sum of R2 755 242,31, together with interest and costs. The respondents are all sureties for Paul Vivaldi Fashions (Pty) Ltd (Vivaldi), which in turn was a surety for Neugarten Fashions (Pty) Ltd (Neugarten), which is indebted to the applicant. Accordingly it is C contended that the three respondents are similarly indebted to the applicant.

It was represented to the applicant that all the shareholders of Vivaldi had consented to it binding itself as surety for Neugarten. It is now contended in these proceedings that this representation was false and that accordingly that the suretyship given by Vivaldi for the debts D of Neugarten in favour of the applicant was and is invalid.

The following facts are either common cause or not disputed.

(a)

Neugarten enjoyed banking facilities and an overdraft with the applicant.

(b)

Vivaldi, on 28 September 1982, bound itself in writing as surety E for and co-principal debtor with Neugarten to the applicant for payment of Neugarten's debts to the applicant. This suretyship was in respect of 'all sums of money which the debtor may now or from time to time hereafter owe or be indebted to the Bank'.

(c)

The aforesaid deed of suretyship further provided that 'this guarantee shall remain in force as a continuing security F notwithstanding any intermediate settlement of account'.

(d)

The three respondents bound themselves to the applicant on 2 July 1982 as sureties for and co-principal debtors with Vivaldi for payment of Vivaldi's debt to the applicant.

(e)

Each of the deeds of suretyship contained the following term:

G 'The amount of the indebtedness of the debtor and of me/us/the company, hereunder to the Bank at any time (including interest and the rate of interest) shall be determined and proved by a certificate signed by any manager or accountant of the bank. It shall not be necessary to prove the appointment of the person signing any such certificate and such certificate shall be binding upon me/us/the H company and shall be conclusive proof of the amount of my/our/the company's indebtedness hereunder.'

(f)

Neugarten and Vivaldi were placed in provisional liquidation on 26 November 1985 and were placed in final liquidation on 14 January 1986.

(g)

I On 28 September 1982 the applicant was furnished with a document signed by the respondents and a Mr Hershowitz which read as follows:

'We, being all the members of the company, hereby consent to the company signing a guarantee for an unlimited amount in favour of the J Standard Bank of SA Ltd, Kiné Centre Branch, guaranteeing the

Goldblatt AJ

A obligations of Neugarten Fashions (Pty) Ltd in respect of such banking facilities as the Bank may in its sole discretion deem fit, either by way of a continuation of any existing facilities and/or provision of new or further facilities. We further consent to the company providing the Bank with such securities in support of the aforesaid guarantee as the directors may from time to time in their discretion deem fit.'

(h)

B As at 28 September 1982 the shareholders of Vivaldi were Michael Hershowitz Family Investments (Pty) Ltd (MHFI), the first respondent, the second respondent, the third respondent and S E Eagle.

(i)

C As at 28 September 1982 the shareholders of Neugarten were the first respondent, the second respondent, the third respondent and MHFI.

(j)

At all relevant times Neugarten was controlled by one or more directors or managers of Vivaldi within the meaning of s 226 of the Companies Act 61 of 1973, as amended.

D This matter originally came before Flemming J in the Motion Court. In those proceedings the applicant alleged that Neugarten was indebted to it in the sum set out in the notice of motion and accordingly that the respondents were jointly and severally indebted to it in such sum. The applicant relied upon a certificate from a Mr Henderson, the manager of E its Eloff Street Branch, in proof of the said indebtedness. The respondents set up various defences, which included the two defences which I was called upon to deal with in these proceedings. The first defence related to the amount of Neugarten's indebtedness, ie it was an attack on the validity of the certificate and the amount set out therein. The second defence was based on s 226 of the Companies Act 61 of 1973, as amended ('the Act').

F The respondents alleged that one of the members of Vivaldi, a certain S E Eagle, had not consented to Vivaldi providing security for the indebtedness of Neugarten to the applicant. Flemming J, in terms of Rule 6(5)(g), directed that oral evidence be heard on specified issues as provided for in such rule. In so doing, he limited the enquiry before this Court to the issues referred for decision after the hearing of oral G evidence and decided the other issues involved in this matter.

There was some debate before me as to whether or not I was bound by the decisions made by him. It is, however, not necessary for the purpose of this judgment to comment thereon, as I, in any event, agree with the H findings made by him and the reasons therefor.

For the sake of completeness I list hereunder the relevant findings made by Flemming J in his judgment:

(a)

A certificate issued pursuant to the deeds of suretyship is conclusive evidence of the facts stated therein, unless it can be shown that the certificate is tainted by fraud or, which is I really the same thing, the party relying thereon is aware of the fact that the certificate is incorrect.

(b)

Save in respect of the interest component of the certificates relied upon, there was no evidence that would entitle a Court to find that the amount of indebtedness as set out in the said J certificates was incorrect.

Goldblatt AJ

(c)

A MHFI consented to Vivaldi providing security to the applicant for the debts of Neugarten.

(d)

Consent in terms of s 226(2) of the Act, can effectively be granted to remedy a deficiency in the transaction previously invalidly concluded.

B On the basis of the aforegoing Flemming J made the following order:

'1.

Oral...