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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 19263/14

DATE: 23 OCTOBER 2014

In the matter between:

THE SCRAPBOOK JHB CC.......................................................First Applicant

KENNETH HENRY RICE.......................................................Second Applicant

And

MOMENTUM PROPERTY INVESTMENTS (PTY) LTD.................Respondent

J U D G M E N T

KEIGHTLEY, AJ:

[1] This is an application to set aside a warrant of execution that the respondent caused to have issued after the respondent had secured a default judgment (“the default judgment”) against the applicants in an amount of some R118 921. 08.

[2] The first applicant was the lessee of certain premises that it leased from the respondent. The second applicant signed as surety in terms of the lease agreement. It is common cause between the parties that the first applicant was unable to meet its monthly rental obligations towards the respondent. Consequently, by the time the lease had run its course, which was in May 2010, the total indebtedness owed to the respondent amounted to a sum in excess of R460 000. 00 (“the total indebtedness”).

[3] It is also common cause that the respondent obtained the default judgment on 10 June 2010. The default judgment did not encompass the total indebtedness, and was limited to an amount of R118 921. 08. It was based on arrears owing up to a particular date, rather than for the whole lease period.

[4] The respondent proceeded to cause to have issued a writ of execution against the applicants and, as a result, property belonging to the second applicant to the value of approximately R8 000. 00 was attached. This occurred on 27 July 2010. For reasons that will become clear shortly, I will refer to this as “the original writ”. It is worth noting at this stage that the dispute between the parties does not concern the original writ. Rather it is the respondent’s re-issuing of that writ on 5 February 2014 (“the re-issued writ”) that forms the subject matter of this application.

[5] As I have indicated, none of this is in dispute.

[6] The dispute between the parties arises out of events that occurred after the attachment took place in terms of the original writ.

[7] On the same day on which the original writ was executed, the second applicant wrote a letter to the respondent’s attorney in the following terms:

“Dear Sir

re- Warrant of Execution Against Property-Reference MOM1/0014/MR C Marcou

We refer to our telephone conversation on the 27th July 2010 and your instruction that we should submit our proposal as to how we can repay the debt, which you would in turn submit to your client. At this stage we could make payment of ten thousand (per month). We will endeavor to increase this monthly amount as our circumstances improve, such as any extra monies made by the shop (which we are now re-locating to our house.) (sic) and any bonuses made in my personal capacity. Thanking you in anticipation.”

[8] Nothing seems to have come of this proposal until 8 November 2010, when the respondent’s attorney, Mr Marcou, wrote the following email to the second applicant:

“Dear Mr Rice

I refer to our telephone conversation on 2 November 2010. As discussed, I confirm that your proposal to settle your indebtedness to my client by means of monthly payments of R10, 000. 00 is acceptable to my client on the basis that such agreement will be reviewed every six months. As further discussed I confirm that all your monthly payments must be made directly to my client on or before the second day of each and every calendar month until all amounts payable to my client has been paid in full. Please note that this agreement has been entered into without prejudice to my client’s rights which remain strictly reserved. Accordingly, in the event that you fail to make payment as agreed our client reserves its rights to execute the Judgment granted against you and to take whatever other action it deems necessary and appropriate in the circumstances.” (emphasis added)

[9] Thereafter the second applicant made a number of monthly payments to the respondent, totaling an amount of R140 000. 00. The last of these payments was made in January 2012. This amount was in excess of the amount owed under the judgment debt, but was not sufficient to cover the total indebtedness.

[10] It was this that led the respondent to re-issue the writ in February 2014.

[11] The applicants seek to have the re-issued writ set aside on the basis that the debt covered by the judgment upon which the writ was issued (i.e. the R118 921. 08) has been fully paid, and the writ accordingly no longer has any force or effect.

[12] The crux of the dispute turns on what the parties agreed upon as a result of the discussions as recorded in the exchange of correspondence set out above.

[13] The applicants contend that what the parties agreed upon was that the monthly payments of R10 000 offered by the applicants was an offer in respect only of the judgment debt of R118 921. 08. The applicants say that it was never meant to constitute an arrangement in terms of which the applicants’ total indebtedness to the respondent would be paid off. Accordingly, so the argument for the applicants goes, the R140 000. 00 paid to the respondent wiped out the judgment debt, and the respondent was not lawfully entitled to re-issue the writ.

[14] The respondent on the other hand contends that the arrangement between the parties was that the monthly payments made by the applicants was an arrangement in respect of their total indebtedness to the respondent, and not only the judgment debt.

[15] Furthermore, contends the respondent, in terms of clause 28 of the lease agreement, the respondent was entitled, at its absolute discretion, to appropriate any amounts received from the applicants towards the payment of any debt owing by the lessee, regardless of when the debt arose. The respondent asserts that it exercised its discretion under this clause in electing to allocate or appropriate the amounts received in terms of the arrangement between the parties towards repayment of the applicants’ general indebtedness to it, rather than allocating them specifically towards payment of the arrears covered by the judgment debt. Accordingly, the respondent argues, the debts covered by the default judgment are still outstanding, and it is entitled to re-issue the warrant in execution of the judgment debt.

[16] Which of these competing contentions is the more probable on the evidence before me?

[17] Mr Nel, on behalf of the applicants, highlighted the fact that the letter from the second applicant, which contained the initial proposal for monthly payments to the respondent was expressly headed “Warrant of execution against property …”. He also pointed to the fact that this letter followed a conversation with Mr Marcou, and that both the conversation and the sending of the letter took place on the same day as the original writ was executed. The thrust of his submissions was that these facts support the conclusion that the second applicant’s offer to settle the debt by way of monthly payments of R10 000 was clearly linked to the applicants’ indebtedness under the default judgment, and original writ, only. In other words, his submission was that the exchange of correspondence demonstrates that the second applicant never offered to pay off the applicants’ total indebtedness by way of the monthly payments: it was strictly limited to an arrangement in terms of which the debt of R118 921. 08 would be paid off.

[18] It is so that the second applicant’s letter bears a heading expressly linking the proposal to the judgment debt and warrant. However, this is by no means conclusive. For one thing, this letter does not stand on its own: it is no more than, in its express terms, “a proposal” of how the debt may be settled. The letter does not record the agreement between the parties. It is no more than an offer requiring a response from the respondent. Accordingly, the nature of the consensus between the parties must be determined by taking into account the response from the respondent.

[19] In addition, as Mr Dobie for the respondent submitted, it is also necessary to take into account what was known to the parties, and hence, in their minds, when concluding the arrangement.

[20] The following facts are relevant in this regard:

[20.1] It is not in dispute that the applicants and the respondent were all aware that the judgment debt did not represent the applicants’ total indebtedness, which amounted to over R460 000. 00.

[20.2] The arrangement between the parties was concluded some months after the second applicant’s conversation with Mr Marcou, and his original letter. This detracts substantially from the inference sought to be drawn by Mr Nel that the timing of the proposal from the second applicant pinned the arrangement to the judgment debt and writ of execution only.

[20.3] The confirmation and recordal of the arrangement between the parties is to be found in Mr Marcou’s email of 8 November 2010. This email records specifically that: “I confirm that your proposal to settle your indebtedness to my client by monthly instalments … is acceptable to my client… ” and “monthly payments must be made … until all amounts payable to my client has been paid (sic) in full” (emphasis added). There is no hint in the use of this language that the arrangement was limited to the judgment debt only. On the contrary, the language expressly evidences that the arrangement would cover all the amounts payable to the respondent.

[20.4] In addition, the email of 8 November 2010 contained a reservation of rights. This would have covered the respondent’s right under clause 28 of the lease agreement to allocate the amounts paid under the arrangement to any of the outstanding debts due. The email also expressly reserved the respondent’s right to execute the judgment already granted.

[21] Taking all of these facts into account, it seems to me to be clearly demonstrated on the evidence that there was no intention to limit the payment arrangement to the applicants’ indebtedness under the judgment debt. The intention was that the applicants’ total indebtedness was to be paid off by way of the monthly payments.

[22] I conclude furthermore that there is no evidence to support the conclusion that the respondent agreed to a novation of the parties’ rights and obligations under the lease agreement by entering into the payment arrangement. The fact that the respondent expressly reserved all its rights points in the other direction.

[23] As such, the respondent retained its right under clause 28 of the lease agreement to allocate payments at its discretion towards the payment of any of the debts owed. Thus, the respondent was under no obligation to allocate the R140 000. 00 in payments to the debt due in respect of the default judgment.

[24] This being the case, I conclude that although the applicant’ made payment of an amount that exceeded the judgment debt, this did not have the effect of settling those debts: the respondent elected to exercise its rights to allocate these payments against the balance of the applicants’ indebtedness. In the circumstances, the respondent was entitled to re-issue the warrant to execute against the judgment debt.

[25] In the circumstances, I make the following order:

1. The application is dismissed with costs.

R KEIGHTLEY

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

Date Heard: 14 October 2014

Date of Judgment: 23 October 2014

Counsel for the Applicants: Adv. CJC Nel

Instructed by: Reon Maris Attorneys

Counsel for the Respondent: Adv. J G Dobie

Instructed by: Rooseboom Attorneys

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