South Africa: North West High Court, Mafikeng

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J.E.M and Another v G.P.J.V.N (1791/2021) [2023] ZANWHC 190 (18 October 2023)

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IN THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION MAHIKENG

CASE NO: 1791/2021

Reportable: YES/ NO

Circulate to Judges: YES/ NO

Circulate to Magistrates: YES/ NO

Circulate to Regional Magistrates: YES/ NO

J[...] E[...] M[...] FIRST PLAINTIFF

H[...] G[...] M[...] SECOND PLAINTIFF

and

G[...] P[...] J[...] V[...] N[...] DEFENDANT

ORDER

(i) Judgment is entered in favour of the plaintiffs for:

(a) Payment in the amount of R957 070.24

(b) Payment in the amount of R8640. 67

(ii) Interest on the aforesaid amounts at a rate of 7% per annum a tempore morae.

(iii) Costs of suit.

JUDGMENT

Reddy AJ

Introduction

[1] This first and second plaintiff (“the plaintiffs”), pray for summary judgment to be entered against the defendant for the payment of two amounts, R 957 070.24 and R8640.67, plus legal interest on both amounts at 7% a tempore morae. The plaintiffs further seek a postponement, sine die, of the prayer declaring the immovable property described as Hoewe1 Lindequesdrift Landbouhoewes, Registration Division IQ, North-West, Province, measuring 23173 hectares, held under Title Deed NO T[...] (“the immovable property”) specially executable. The relief sought is opposed by the defendant.

[2] The plaintiffs are pensioners who are married, reside at 1[...] K[...] Street, SE 3, Vanderbijlpark, Gauteng. The defendant, G[...] P[...] J[...] V[...] N[...], is married to the biological daughter of the plaintiffs. The defendant and his wife are presently engaged in divorce proceedings. The defendant is the registered owner of the immovable property as fully described in paragraph [1] supra.

Background

[3] During January 2018 and at or near Lindequesdrift, the plaintiffs and defendant, in their personal capacities concluded an oral loan agreement (“the agreement”). The material express alternatively implied tacit terms of the agreement was that the plaintiffs would lend and advance monies to the defendant up to an amount of R1 000 000.00 (one million rand). In turn, the defendant would use the monies lent and advanced to build a second home on his immovable property for the plaintiffs to reside in. The plaintiffs would have the right of habitation of the second home for an indefinite period.

[4] In the event of the plaintiffs terminating their right of habitation for any number of reasons, the capital sum lent and advanced to the defendant would become repayable on the plaintiffs vacating the property, alternatively within a reasonable period of the vacating of the iimmovable property.

[5] The defendant was in terms of the agreement, to cause a covering mortgage bond (“the mortgage bond”) to be registered over the immovable property to serve as security for the payment of the monies lent and advanced to him, by the plaintiffs.

[6] During the period February 2018 to August 2020, the plaintiffs acting in terms of the oral agreement lent and advanced an amount of R957 070.24 (nine hundred and fifty-seven thousand and seventy rand and twenty-four cents) to the defendant. The plaintiffs pursuant to the agreement, took occupation of the second home during March 2018.

[7] During or about 13 July 2018, the defendant caused a mortgage bond to be registered over his immovable property in favour of the plaintiffs under mortgage bond number B[...]. The mortgage bond contained certain material, alternatively implied, alternatively tacit terms. A material term of the mortgage bond was that it was to serve as continuing security in respect of the capital amount lent to the defendant. A further relevant term of the mortgage bond was that the defendant was to insure the property for an amount of not less than one million rand. In the event of the defendant failing to insure the property or failing to pay the insurance premiums, the plaintiffs (as the mortgagees) would be entitled to insure the property and to pay t he premiums on behalf of the defendant. In the event of the plaintiffs securing insurance and payment of the instalments on behalf of the defendant, the defendant would be liable to refund the plaintiffs within 30 (thirty) days of such payment being made on behalf of the defendant.

[8] The plaintiffs contend that the defendant breached this agreement by failing to pay the insurance and the mortgage bond agreement by failing to repay to the plaintiffs the amount R 957 070.24, upon the plaintiffs vacating the property. The amount R 8 640.67, being the total amount of the insurance paid by the plaintiffs for the period September 2020 to May 2021 is also due and payable. Notwithstanding demand, the defendant has failed, refused, or neglected to pay the amounts so due.

The issues

[9] The defendant disputes the existence of the agreement in toto. The defendant asserts that the very formulation of the cause of action of the plaintiffs makes it indisputable that the facta probanda is incorrect and improbable when considered against the alleged agreements. The defendant elucidates this contention, with reference to the timelines provided by the plaintiffs.

[10] According to the plaintiffs, the oral agreement was concluded in January 2018, that the house would be built on the immovable property of the defendant. The plaintiffs aver that they took occupation of the house which was to be built for them by the defendant in March 2018. This leads to the ineluctable conclusion that by March 2018, two months after the oral agreement was concluded, the defendant had already completed the building of the house. This implies that the plaintiffs between January 2018 and March 2018, had already lent and advanced the monies agreed upon, to the defendant. This maintains the defendant is fallacious given the definitive timeline relied on by the plaintiffs, that monies were lent and advanced to the defendant during February 2018 to August 2020, for the specific purpose of building the house.

[11] Notwithstanding this difficulty with the plaintiff’s case, they allege that they effectively persisted with the lending and advancing of monies to attain a purpose which had already been achieved. Further, according to the pleadings, monies were still being lent and advanced to the defendant on the date on which the plaintiffs vacated the property. In the affidavit, deposed to in support of the application for summary judgment, the plaintiffs now contend that they occupied the property from March 2018 to August 2020. Pursuant to the factual improbabilities within the version of the plaintiff coupled with the defendant’s denial of the existence of the oral agreement, this raises triable issues regarding the existence of the agreement. The dates standing independently, are self-contradictory.

[12] Turning to the breach of the mortgage bond, the plaintiffs plead that in compliance with the agreement the defendant caused a mortgage bond to be registered over the property. The defendant admits the terms of the mortgage bond. The defendant, however, pleads that the agreement relating to this mortgage bond is a credit agreement as defined in Section 8(1) of the National Credit Act 34 of 2005 (“the NCA”); notwithstanding the plaintiffs expressing a contrary opinion. The defendant specifically contends that the agreement constitutes a “credit transaction” as defined in section 8(4) of the NCA; and as the plaintiffs were never registered as credit providers the bond is consequently unlawful and void having regard to the provisions of Section 40(1) read with Section 89(2) of the NCA. No obligations therefore arise from an unlawful and void mortgage bond.

[13] In essence therefore the defendant asserts that the entire version of the plaintiffs which is based on the oral agreement and the mortgage bond, speaks to a credit agreement in terms of the definition of a credit agreement in the NCA. The plaintiffs counter this contention with submissions of the interpretation of what constitutes a credit agreement according to the definition of a credit agreement in the NCA.

[14] The nub of the differing contentions is that the defendant contends that if regard is had to the version of the plaintiffs, the loan agreement and the mortgage bond constitute the agreement between the parties. The combination of both the latter constitutes the indebtedness of the defendant as evinced by the certificate of balance. Further, the defendant asserts that the damages suffered by the plaintiffs does not constitute a liquidated amount for which summary judgment can be entered. The plaintiffs on the other hand contend that in the light of the fact there is no charge, fee or interest, or material gain, there is no credit agreement.

Plaintiffs’ submissions

[15] Mr Carstens for the plaintiffs contends that the defendant’s plea amounts to nothing more than a bare denial. The defences raised can be categorized as technical. Mr Carstens submits that section 4(1) of the NCA, applies to every credit agreement between parties dealing at arm’s length and made within or having an effect within the Republic, save for certain exceptions. To make short shrift of this point of the contentions, Mr Carstens submits that the NCA does not apply to credit agreements concluded between parties who are not dealing at arm’s length.

[16] Mr Carstens opined that the plaintiffs agreed to advance an amount of up to R1 million, interest free, to the defendant in terms of the loan agreement. This was founded on a familial relationship that existed between the plaintiffs and defendant. The covering mortgage merely serves as security for the payment of the monies loaned.

[17] Mr Carstens in elaboration submits that the NCA, does not find application for the following reasons:

(i) The loan agreement was not concluded at arm’s length. The parties are not independent from one another, and the plaintiffs did not strive to obtain the utmost possible advantage.

(ii) The loan agreement is not a credit facility as no charge, fee or interest is payable to the plaintiffs in respect of a deferred amount or an amount billed or payable over time as contemplated in section 8(3)(b) of the NCA.

(iii) The loan agreement is not a credit transaction as contemplated in section 8(4)(f) as no charge, fee or interest was payable in terms of the agreement.

[18] Mr Carstens opines that even if this Court were to find that the NCA finds application, the loan agreement does not fall within the ambit of section 8(3) or 8(4) of the NCA as the plaintiffs did not levy a charge or fee and no interest was payable in respect of the monies loaned and advanced to the defendant.

[19] Mr Carstens contends that the defendant has not disclosed a bona fide defence, by disclosing with sufficient particularity the nature and grounds of his defence and the material facts upon which his defence is based. Reliance is placed on Maharaj v Barclays Ltd 1976(1) SA 418(A), Standard Bank South Africa Ltd v Friedman 1999 (2) SA 456 (C) at 462G, Gulf Steel (Pty) Ltd v Rack Hire BOP (Pty) Ltd 1998(1) SA 679 (O) at 683.

[20] It is pointed that significantly, the defendant refrains from addressing whether the monies had been received by him or not. Yet, against this backdrop, somewhat peculiarly the defendant concedes to concluding the mortgage agreement. The mortgage agreement could on no occasion have been a stand-alone agreement as it only served as security for an underlying obligation. As a final point, Mr Carstens submits that the loan agreement is neither a credit facility nor a credit transaction as defined in section 8(3) and section 8(4) of the NCA and as such is not a credit agreement in terms of which the plaintiffs were required to register in terms of section 40 of the NCA.

Defendant’s submissions

[21] Mr Bruwer for the defendant submits that the oral agreement relied on by the plaintiffs is being denied and given the allegations surrounding the agreement, this constitutes sufficient matter for a triable issue. In accentuating the period during which the monies were lent and advanced vis-à-vis the date on which the plaintiffs averred to have taken occupation of the home, he contends that the inescapable conclusion to be drawn was that the house the plaintiffs were to occupy had been built by March 2018, and notwithstanding the house being built, the plaintiffs continued to loan and advance monies to the defendant.

[22] Mr Bruwer contends that the agreement concluded is a credit agreement in terms of the NCA, which agreement is regulated by the NCA. To that end, in terms of the NCA, as the pleadings stand, there is no cause of action, as the preliminary notices as required in terms of section 129 and 130 were not served on the defendant. Mr Bruwer maintained that the plaintiffs did not plead that the agreement relied on is exempt from the provisions of the NCA. In fact, no reference was made to the NCA. For the plaintiffs to circumvent the application of the NCA, it was incumbent on the plaintiffs to plead facts, that predicate a conclusion that the agreement on which the plaintiffs rely, falls within the exclusion as provided for in section 4(1) of the NCA. The plaintiffs did not do so. Mr Bruwer points out that in the affidavit in support of the application the plaintiffs affirm, that the provisions of the NCA do not find application because:

“24. The agreement that is pleaded, ex facie the particular of claim, is not an agreement made at arm’s length. It is an agreement between family members in which the aim was not to secure maximum profit. In fact-the applicants loaned the amount to the respondent interest free and the applicants received no advantage out of the transaction. See also section 4(2)(b)(iv) of the Act.

25. The agreement therefore does not fall within the ambit of the Act and the provisions thereof are not applicable to the agreement.”

[23] Mr Bruwer relying on Beets v Swanepoel (2150/09) [2010] ZANCHC 55 (5 October 2010), contends that since the plaintiffs were not registered as credit providers, it therefore follows axiomatically that in terms of the provisions of section 89(2)(d) of the NCA, the agreement concluded between the plaintiff and the defendant was an unlawful agreement, which is void in terms of section 89 of the NCA.

[24] Mr Bruwer ultimately moves for an order that summary judgment be refused and that the defendant be granted leave to proceed with the defence of the matter. In respect of costs, it was avowed that the plaintiffs be ordered to pay the costs incurred by the defendant to oppose the application for summary judgment, which costs are to be taxed on a scale as between attorney and client.

The applicable legal principles

[25] It is pertinent to consider the principles governing the grant or refusal of summary judgment. The purpose of summary judgment was identified in Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture, 2009 (5) SA 1 (SCA) paragraph 31 by Harms DP as follows:

“So too in South Africa, the summary judgment procedure was not intended to “shut (a defendant) out from defending”, unless it was very clear indeed that he had no case in the action. It was intended to prevent sham defences from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights.”

[26] A defendant resisting summary judgment is required to disclose fully the nature and grounds of his defence in his opposing affidavit. In Maharaj v Barclays National Bank 1976 (1) SA 418 (A) at 426A-C, the legal principles applicable in summary judgment applications were stated as follows:

“[One] of the ways in which a defendant may successfully oppose a claim for summary judgment is by satisfying the Court by affidavit that he has a bona fide defence to the claim. Where the defence is based upon facts, in the sense that material facts alleged by the plaintiff in his summons, or combined summons, are disputed or new facts are alleged constituting a defence, the Court does not attempt to decide these issues or to determine whether or not there is a balance of probabilities in favour of the one party or the other. All that the Court enquires into is: (a) whether the defendant has “fully” disclosed the nature and grounds of his defence and the material facts upon which it is founded, and (b) whether on the facts so disclosed the defendant appears to have, as to either the whole or part of the claim, a defence which is both bona fide and good in law. If satisfied on these matters the Court must refuse summary judgment, either wholly or in part, as the case may be.”

[27] What constitutes a ‘bona fide defence’ was re-affirmed in Nedbank v Maredi, [2014] ZAGPPHC 43 paragraph [14] as follows:

“...a bona fide defence, which means a defence set up bona fide or honestly, which if proved at the trial, would constitute a defence to the plaintiff’s claim.”

[28] In Tumeleng Trading CC v National Security and Fire (Pty) Ltd [2020] ZAWCHC 28, 2020 (6) SA 624 (WCC) at paragraph [22], the court explained the effect of the amended Rule 32(b) as follows:

“What the amended rule does seem to do is to require of a plaintiff to consider very carefully its ability to allege a belief that the defendant does not have a bona fide defence. This is because the plaintiff’s supporting affidavit now falls to be made in the context of the deponent’s knowledge of the content of a delivered plea. That provides a plausible reason for the requirement of something more than a “formulaic” supporting affidavit from the plaintiff. The plaintiff is now required to engage with the content of the plea to substantiate its averments that the defence is not bona fide and has been raised merely for the purposes of delay.”

[29] It is trite that a court seized with a summary judgment application must be careful to guard against injustice to the defendant who is called upon at short notice and without the benefit of further particulars, discovery, or cross-examination, to satisfy it that he has bona fide defence. See Breitenbach v Fiat SA (Edms) Bpk 1976 (2) SA 226 (T) at 227 D – H; Marsh v Standard Bank of SA Ltd 2000 (4) SA 94 (W) at 950 A – B.

[30] A court will therefore only come to the assistance of a plaintiff in summary application proceedings, in a clear case where the defendant, on papers, does not demonstrate a bona fide defence, but simply resists the summary judgment to delay the case. See: Maisel v Strul 1937 CPD 128, Skead v Swanepoel 1949 (4) SA 763 (T) at 767; Standard Bank of SA Ltd v Naude 2009 (4) SA 669 (E) at 672C – 676D.

Discussion

[31] The requirements for the defendant to successfully stave off a summary judgment application have been expounded upon supra. The defendant must firstly, disclose the nature and grounds of his defence and the facts upon which it is founded. Secondly, the defendant must show that the defence disclosed is bona fide. It is not necessary at this stage for this Court to consider the credibility of what is averred on the papers. It is sufficient if prima facie, the defendant raises a defence the facts of which, if proven at trial, constitutes a defence to the claim. See: Meredith v Moodley (25339/2020) [2023] ZAGPJHC 176 (21 February 2023).

[32] In my view, the defendant has not disclosed a bona fide defence. The plea of the defendant strategically raises technical statutory arguments with reference to the NCA and latches onto the timeframes relied on by the plaintiffs, which he alleges are irreconcilable, to avert the real facts on which the plaintiffs claims are based.

[33] The defendant blows hot and cold in pleading that the oral agreement is denied, but in the event that the plaintiffs allegation in this regard is proven that an oral agreement as alleged by the plaintiffs was concluded, then the defendant relies on various provisions of the NCA, to argue the unlawfulness of the agreement. The contention that monies were lent and advanced to the defendant calls for a simple response; either it was lent and advanced or it was not. This the defendant deliberately avoids by giving his own interpretation of the time period relied on by the plaintiffs. This speaks to the bona fides of the defendant.

[34] Turning to the mortgage bond, the defendant admits that it was registered, but again vacillates between section 8(1), 40(1) read with section 89(2)(b) of the NCA, to contend that the mortgage bond agreement was a “credit transaction.” That being the case the plaintiffs are not registered as credit providers and the mortgage bond is consequently unlawful and in conflict with the provisions of the NCA.

[35] The defendant fails to deal with the rationale behind the mortgage bond which was registered at the behest of the plaintiffs, which confirms the indebtedness of the defendant to the plaintiff in an amount of R1 000 000.00 (one million rand). The defendant’s plea in this regard has no merit and does not constitute a bona fide defence.

[36] I now turn to the issue of the applicability of the NCA to the agreement. The purpose of the NCA, set out in section 3, is “to promote and advance the social and economic welfare of South Africans’ in order to achieve ‘a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.”

[37] The plaintiffs contend that the agreement pleaded ex facie the particulars of claim, is not an agreement at arm’s length, it is an agreement between family members in which the aim was not to secure maximum profit. The contention goes that the amount lent and advanced by the plaintiffs to the defendant was interest free and that the plaintiffs received no benefit. This assertion is predicated on section 4(2) of the NCA and consequently, the plaintiffs avow that the provisions of the NCA do not find application.

[38] The NCA generally finds application in every credit agreement between a consumer and credit provider dealing at arm’s length within the Republic of South Africa. The NCA does not define the concept at arm’s length. To provide some framework to it, the relevant parts of section 4(2)(b) provide as follows:

“4(2) For greater certainty in applying subsection (1) –

(b) In any of the following arrangements, the parties are not dealing at arm's length:

(i) a shareholder loan or other credit agreement between a juristic person, as consumer, and a person who has a controlling interest in that juristic person, as credit provider;

(ii) a loan to a shareholder or other credit agreement between a juristic person, as credit provider, and a person who has a controlling interest in that juristic person, as consumer;

(iii) a credit agreement between natural persons who are in a familial relationship and- (aa) are co-dependent on each other; or (bb) one is dependent upon the other; and

(i) any other arrangement-

(aa) in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction; or

(bb) that is of a type that has been held in law to be between parties who are not dealing at arm's length.”

[39] In Heydenrych v Forsyth 2022 JDR 1655 (GJ) paragraph [19], the Full Court noted that although the NCA does not define dealing at arm’s length, it is apparent that the legislature intended credit agreements between natural persons who are: (a) in a familial relationship, and who are co-dependent on each other or where the one is dependent upon the other, and (b) any agreement where each party is not independent of the other and does not strive to obtain the utmost advantage out of the transaction, not to be within arm’s length and not susceptible to the provisions of the NCA.

[40] In Hicklin v Secretary for Inland Revenue 1980 (1) SA 481 (A) at 495 A-B, the following is stated regarding the arm’s length criterion:

‘It connotes that each party is independent of the other and, in so dealing, will strive to get the utmost possible advantage out of the transaction for himself.’ (emphasis added)

Conclusion

[41] In my view, the parties were not independent of each other. From the particulars of claim, I cannot find that they strived to gain the maximum benefit out of the transaction (agreement in toto). The parties assisted each other. The sum of R957 070.24 was lent and advanced to the defendant during January 2018, for which the defendant on 13 July 2018, registered a mortgage bond against his immovable property in favour of the plaintiffs. Notwithstanding the passage of time, the plaintiffs claim is for the same sum of monies lent and advanced to the defendant. Additionally, and tellingly, no charge, fee or interest was payable to the plaintiffs in respect of a deferred amount, or an amount billed or payable over time as contemplated in section 8(3) of the NCA. The agreement was not a credit transaction as contemplated in section 8(4)(f) as no charge, fee or interest was payable.

[42] The defendant’s defences to the application for summary judgment are not bona fide, are predicated on a technical legal stratagem and is not sustainable. There are no triable issues. Resultantly, I am of the view that the NCA does not apply to the agreement and the plaintiffs are entitled to the relief sought by way of summary judgment.

Costs

[43] Regarding costs, there is no basis to deviate from the normal order, that costs generally follow the result.

Order

[44] I accordingly, make the following order:

(i) Judgment is entered in favour of the plaintiffs for:

(a) Payment in the amount of R957 070.24

(b) Payment in the amount of R8640. 67

(ii) Interest on the aforesaid amounts at a rate of 7% per annum a tempore morae.

(iii) Costs of suit.

A REDDY

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION, MAHIKENG

APPEARANCES:

Plaintiffs Counsel:	Adv W C Carstens
Plaintiffs Attorneys:	Venter & Von Abo Attorneys
	c/o Smit Neethling Inc
	29 Warren Street
	Golf View
	Mahikeng
Defendant’s Counsel:	Adv AP Bruwer
Defendant’s Attorneys:	Maree & Maree Attorneys
	11 Agate Avenue
	Riviera Park
	Mahikeng
Date of Hearing:	21 June 2023
Date of Judgment:	18 October 2023