Tesven CC and Another v South African Bank of Athens

• Jurisdiction: South Africa

Tesven CC and Another v South African Bank of Athens
2000 (1) SA 268 (SCA)

2000 (1) SA p268

Citation	2000 (1) SA 268 (SCA)
Case No	312/97; 523/97
Court	Supreme Court of Appeal
Judge	Mahomed CJ, Van Heerden DCJ, Smalberger JA, Howie JA, Farlam AJA
Heard	September 6, 1999
Judgment	September 28, 1999
Counsel	J I Zidel for the appellants.; A J Horwitz SC (with him K Schneid) for the respondent.

Flynote : Sleutelwoorde B

Mistake — Rectification of contract — Mistaken belief of parties not as to recorded terms in document, but as to effect of additional oral agreement on recorded terms — No authority for rule that parties' C mistake must relate to writing in document before rectification competent — Rectification permitted also where parties ad idem as to terms of written document, but mistaken as to effect of additional, contradictory oral agreement, ie where parties mistaken not about what recorded, but about effect thereof — Parol evidence of oral agreement admissible to justify rectification.

Practice — Judgments and orders — Summary judgment — Discretion of Court D to refuse summary judgment — Court having such discretion even where defendant's opposing affidavit not revealing material facts with sufficient particularity to enable Court to assess defendant's bona fides — Court exercising discretion in defendant's favour where doubt existing whether plaintiff's case unanswerable, ie where reasonable possibility existing that defendant's case good. E

Practice — Judgments and orders — Summary judgment — Opposing affidavit — Defendant's affidavit disclosing bona fide defence — Rule 32(3)(b) of Uniform Rules — Where defence based on facts (ie where defendant disputing facts alleged by plaintiff in summons or raising new facts in defence) Court not to determine balance of probabilities — Court only to determine F (a) whether defendant 'fully' disclosed nature and grounds of defence, and material facts upon which founded, and (b) whether, on facts disclosed, defendant having bona fide defence good in law — Word 'fully' requiring defendant to disclose defence and material facts upon which it is based with sufficient particularity and completeness to enable Court to decide whether affidavit disclosing bona fide defence. G

Headnote : Kopnota

The second appellant (second defendant), who was married to G, was the sole member of the first appellant (the first defendant), a close corporation. Both the second defendant and the first defendant executed deeds of suretyship in favour of the respondent bank (the plaintiff), ostensibly to secure the existing indebtedness of G to the H plaintiff. In addition, a mortgage bond was registered over certain immovable property owned by the first defendant, as continuing covering security for any indebtedness of the first defendant to the plaintiff. Because G was unable to discharge his indebtedness to the plaintiff, the plaintiff instituted action in a Local Division against the defendants, based on the two deeds of suretyship and the mortgage bond, I and in due course sought summary judgment against them. In her affidavit opposing summary judgment the second defendant claimed that both the deeds of suretyship and the mortgage bond had to be rectified. She ascribed the failure of the documents to reflect the common continuing intention of the parties to the fact that standard form documents had been used, which were not adapted to record correctly what had been J

2000 (1) SA p269

orally agreed before they were completed. As far as the deeds of suretyship were A concerned, she stated that it had been orally agreed between the plaintiff's representative and herself that the two deeds of suretyship would only come into operation if the principal debtor, ie G, were to become liable to the plaintiff in respect of a guarantee which the plaintiff had undertaken to issue on G's behalf; according to the second defendant, the plaintiff had never issued the guarantee, with the result that the liability in respect of B which the deeds of suretyship were to operate never came into existence. In regard to the covering mortgage bond, the second defendant averred that it had been orally agreed between the plaintiff's representative and the first defendant that the first defendant's liability under the mortgage bond was to be limited to securing the balance outstanding from time to time on an amount advanced by the plaintiff to the second defendant, with which she had purchased the member's interest in the first defendant. C

The Court a quo held that the remedy of rectification had no application where a document correctly reflected the words which the parties had intended to record, but those words incorrectly reflected the parties' prior agreement or common intention. In such a case, it was held, the parol evidence rule precluded proof of their prior agreement or common intention, if its effect would be to vary or alter D the written memorial of the transaction. Where the parties' mistake was merely in believing that the prior oral agreement would prevail over the writing which was in conflict therewith (as in casu), rectification was accordingly impossible. In the result, the Court a quo granted summary judgment as prayed. In an appeal, E

Held, that the Court a quo had erred in holding that rectification was excluded by the parol evidence rule. The parol evidence rule did not exclude evidence of a prior oral agreement or a common continuing intention, which a party sought to lead in support of a claim for rectification. (Paragraphs (13] and [14] at 274F - G/H.)

Held, further, that the view that, for a claim for rectification to be competent, the mistake relied on had to relate to F the writing in the document, and that a Court could not have regard to any other kind of mistake, was supported neither by authority nor by principle. (Paragraph [15] at 274G/H - H/I.)

Held, further, that to allow the words the parties actually used in the documents to override their prior agreement or the common intention which they had intended to record was to enforce what was not agreed and so to overthrow the basis on which contracts rested in our law. The application of no contractual theory led to such a result. (Paragraph [16] at 274I - J.) G

Held, further, that where parties have entered into a written contract, as well as an oral agreement which was not incorporated into the written contract, but which was intended to operate in conjunction therewith, then, even if parol evidence of the oral contract contradicted the written contract, it was permissible to rectify the latter where the parties' mistake was not about H what was recorded, but about its effect. (Paragraph [17] at 275A/B - C, paraphrased.)

The dictum in Mouton v Hanekom 1959 (3) SA 35 (A) at 39H - 40A followed.

Held, further, that in the present matter the parties were not mistaken about what was contained in the documents signed by the I second defendant. The mistake which the second defendant said that she and the plaintiff had made was in thinking that, despite the contents of those documents, the preceding oral agreements would still be operative. That mistake was clearly capable of rectification. (Paragraph [18] at 275C - D/E.)

Held, further, that the contention by the plaintiff that, even if the Court a quo's approach was wrong in law, the order made was correct because the second defendant's affidavits did not establish that she and the first defendant had J

2000 (1) SA p270

bona fide defences to the plaintiff's claims could not be upheld. In A terms of Rule 32(3)(b) of the Uniform Rules of Court, one of the ways in which a defendant could successfully oppose a claim for summary judgment was by satisfying the Court on affidavit that he had a bona fide defence to the claim. Where the defence was based on facts, in the sense that material facts alleged by the plaintiff in his summons were disputed, or new facts constituting a defence were B alleged, the Court did not attempt to decide the issues or to determine whether or not there was a balance of probabilities in favour of the one party or the other. All that the Court enquired into was (a) whether the defendant had 'fully' disclosed the nature and grounds of his defence and the material facts upon which it was founded, and (b) whether on the facts so disclosed the C defendant appeared to have, as to either the whole or part of the claim, a defence which was both bona fide and good in law. If satisfied on those matters, the Court had to refuse summary judgment. The word 'fully' as used in the context of the Rule connoted that, while the defendant did not have to deal exhaustively with the facts and the evidence relied upon to substantiate them, he D had at least to disclose his defence and the material facts upon which it was based with sufficient particularity and completeness to enable the Court to decide whether the affidavit disclosed a bona fide defence. (Paragraphs [19] and [22] at 275D/E - E/F and 275H - 276E, paraphrased.)

The dictum in Maharaj v Barclays National Bank Ltd 1976 (1) SA 418 (A) at 426A - E applied.

Held, further, on the facts, that the second defendant's E allegations relating to the common continuing intention of the parties, and the error made by the plaintiff and herself, were just enough to comply with the requirements of Rule 32(3) of the Uniform Rules of Court. (Paragraph [25] at 277F - G.)

Held, further, with regard to the particularity of all material facts relied upon by the second defendant, more especially the F arrangement under which the plaintiff was to issue a guarantee on behalf of G, that the affidavits fell short of what was required by Rule 32(3) to enable the Court to assess the defendants' bona fides. (Paragraph [25] at 277G - H.)

Held, further, however, that...