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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

 

(1)      REPORTABLE: NO

(2)      OF INTEREST TO OTHER JUDGES: NO

(3)      REVISED.

CASE NO: 41564/2018

DATE: 2019-08-29

 

IN THE MATTER BETWEEN:

 

PECANWOOD 1338 INVESTMENTS (PTY) LTD                             1^st APPLICANT

EFPRAXIA NATHTANAEL                                                                   2^ND APPLICANT

EFPRAXIA NATHTANAEL N.O.                                                          3^RD APPLICANT

 

AND

 

PETRUS JOHANNES JACOBUS DRY                                                   1^st RESPONDENT

MARK NICO HATTINGH N.O.                                                              2^ND RESPONDENT

 

INRE

 

PETRUS JOHANNES JACOBUS DRY

 

AND

 

PECANWOOD 1338 INVESTMENTS (PTY) LTD                                1^st RESPONDENT

EFPRAXIA NATHTANAEL                                                                     2^ND RESPONDENT

EFPRAXIA NATHTANAEL N.O.                                                            3^RD RESPONDENT

MARK NICO HATTINGH N.O.                                                              4^TH RESPONDENT

JUDGMENT

Klein. A.J.

[1]          This matter concerns an application by the Applicants seeking to set aside a settlement agreement which was made an order of court by agreement between the parties on 4 December 2018. Put in other words, the Applicants are seeking an order rescinding the court order granted 4 December 2018.

[2]          Perhaps a very short summary is necessary to put all role-players into the picture: Peaconwood Investments {Pty) Ltd borrowed money from Mr. Dry. An attorney, Mr Hattingh, was instrumental in bringing lender and borrower together. However, as the amount totalled R3.5 million, Me Nathanael, the director and shareholder of the company, signed as surety. The Nathanael Trust also stood surety. (The primary asset of the Trust is a valuable immovable property.) The trustees of the Trust were Me Nathanael and Mr Hattingh.

[2]          The immediate question would be, why would parties agree to a settlement made an order of court and later come and ask for it to be rescinded? Surely as at date of settlement the court who made the order, would have made sure that it was a genuine settlement.

[3]          The Applicants based its legal premises for asking for relief, on three grounds. Ground one: the settlement was signed as a result of duress, alternatively "due to the assertiveness of Hattingh and information that if the Acknowledgement of Debt and Surety is not signed, the primary asset of the trust will be sacrificed."

[4]        The second ground is based on the interest rate charged which are excessive to the point that it is contra boni mores, unfair and unenforceable. The third point is that the trust did not have the required authority to enter into the deed of suretyship and is therefore null and void.

[5]       Another point introduced during argument, is that Mr Hattingh deposed to an affidavit as follows: At some stage in this ordeal, an urgent application was brought against Mr. Dry, he opposed it, he filed an affidavit but the opposing answering affidavit was signed by Mr. Hattingh as having personal knowledge of the facts. Also, another affidavit, opposing the rescission, was signed by Mr. Hattingh. Keep in mind that Mr Dry had an attorney firm namely Froneman , Roux, Streicher Attorneys acting for him, not Mr Hattingh.

[6]       A deponent is not required to have the authority of a party to make an affidavit. The Honourable Streicher JA can be quoted:[1]

'There is no merit in the contention that Oosthuizen AJ erred in finding that the proceedings were duly authorised. In the founding affidavit fil d on behalf of the respondent Hanke said that he was duly authorised to depose to the affidavit. In his answering affidavit the first appellant stated that he had no knowledge as to whether Hanke was duly authorised to depose to the founding affidavit on behalf of the respondent, that he did not admit that Hanke was so authorised and that he put the respondent to the proof thereof. In my view, it is irrelevant whether Hanke had been authorised to depose to the founding affidavit. The deponent to an affidavit in motion proceedings need not be authorised by the party concerned to depose to the affidavit. It is the institution of the proceedings and the prosecution thereof which must be authorised. In the present case the proceedings were instituted and prosecuted by a firm of attorneys purporting to act on behalf of the respondent."

[7]          Ground one: the settlement was signed as a result of duress, alternatively "due to the assertiveness of Hattingh... " The Supreme Court of Appeal has ruled that where a party to a contract asks the Court to set aside the contract on the ground of undue influence by the other party, the following must be proved: (i) that the other party exercised an influence over him; (ii) that this influence weakened his powers of resistance and made his will pliable; and (iii) that the other party exercised this influence in an unscrupulous manner in order to induce him to consent to a transaction (a)which is to his detriment and (b) which he, with normal free will, would not have concluded.[2] Similar rulings were made by a full bench where a person seeks to set aside a contract, or resist the enforcement of a contract, on the ground of duress based upon fear, the following elements must be established:

(i)        The fear must be a reasonable one.

(ii)     It must be caused by the threat of some considerable evil to the person concerned or his family.

(iii)      It must be the threat of an imminent or inevitable evil.

(iv)      The threat or intimidation must be unlawful or contra bonos mores.

(v)       The moral pressure used must have caused damage.[3]

 

[8]          One cannot conclude that undue influence or the duress of a co-trustee could be of such proportion that the Applicants were weakened in their powers of resistance, if there was fear, then it was the fear of facing the facts that monies were due and that sureties could be called upon to perform. The averments in the affidavits are not of such measure that there was a reasonable fear, that Mr Hattingh, who at same stage was the hero for getting the parties together, now is a villain.

[9]        Second ground: The interest rate charged are excessive to the point that it is contra boni mores, unfair and unenforceable: The Honourable Ponnan JA dealt with a similar matter and concluded as follows:[4]

 

"I turn now to consider- as the High Court should have done - whether the CC has discharged the onus resting upon it of showing that the applicable interest rate was usurious, in the sense that it amounted to extortion or oppression, or something akin to fraud. To once again borrow from Innes CJ (Reuter v Yates at 858):

'It comes then to this -     in deciding whether the defence of usury has been sustained, and whether the lender has taken such an undue advantage of the borrower, has so practised extortion and oppression, that his conduct, being akin to fraud, disentitles him to relief, the Court will examine all the circumstances of the case. It will not only look at the scale at which interest has been stipulated for, but will have regard to the ordinary rate prevalent in similar transactions, to the security offered and the risk run, to the length of time for which the loan was given, the amount lent, and the relative positions and circumstances of the parties.' "

 

[10]      In the said case the interest rate was 5% per month, thus 60% per annum. The amount involved was RS million. The Supreme Court of Appeal said:[5]

"We are thus left in the dark as to what the prevailing industry norm is for a loan of the kind encountered here. The effect of such failure is that the High Court called in aid an inapposite yardstick, namely the rate fixed by the legislature, in its determination of the matter. After all, as is evident from the judgment of the Constitutional Court in Barkhuizen v Napier if evidence is required to determine whether a contract is in conflict with public policy or whether its enforcement would be so, the party who attacks the clause at either stage must establish the facts."

 

[11]          Therefore, this court cannot fault the interest rate nor can the court rule that this agreement was contra bones mores, especially by looking at what the Supreme Court of Appeal said namely:[6]

 

"What we do know from the papers is that the money was required urgently, and what Bezuidenhout does tell us in his answering affidavit is that African Dawn was willing to and did in fact advance the moneys to the CC prior to the mortgage bonds being registered. Further, according to Bezuidenhout: .....

The cost of such loan, in the form of the interest rate charged, in order to justify the high risk assumed by the bridging financier, is accordingly also high....

Bridging financiers are accordingly required to fund the loans through equity and loan capital, the cost of which is high."

 

[12]         It is thus clear to the court that the Supreme Court of Appeal sanctioned the high interest rate in the particular set of facts, which is similar to those before the court, although with a higher interest rate, but based on the same principals.

[13]           The Supreme Court of Appeal goes a step further in explaining why high interest rates could be charged from a "risk assessment perspective the fact that the first applicant was a first time borrower increased the risk of the loan as there was no prior trading history between the respondent and the first applicant whereby the respondent was able to assess the creditworthiness, performance and general risk profile of the first applicant."[7] The Supreme Court of Appeal concluded that all of those were weighty considerations.[8]

[14]           This is exactly what this court concludes, no particular circumstances showed that the transaction was not an ordinary one, in the circumstances of high risk loans. Under those circumstances no facts were disclosed which ought to have induced the court to afford the relief sought.

[15]         This court takes from the Supreme Court of Appeal the warning that courts should not interfere with a bargain, in this case an opportunity to borrow, deliberately entered into by two parties dealing at arm's length with each other merely because it subjectively believes that the rate of interest stipulated was unfair. The parties are all conversant with business. The rate of interest no doubt is high, but it may not be incommensurate with the risk that Mr Dry ran in advancing his money.

[16]              One should not forget that the money was borrowed on two different occasions, first R3 million, later a further R500 000, which also shows that the Applicants were satisfied with the "deals".

[17]              The last point to look at is the premise that “the absence of a resolution authorising the trust to set security for the indebtedness of the first applicant as no benefit is derived by the trust or any beneficiary of the trust." It is common cause that both trustees took the decision to bind the trust, it obviously did it with full knowledge of the risks and consequences, it was not Mr Dry who put their trust, a separate entity, at risk. He might have been under the impression that the said amount is small for the trust.

[18]              There is also a more serious point one has to look at, this point concerns the nature of a settlement. Once again the Supreme Court of Appeal assist in this regard, it held that:

"An agreement of compromise, in the absence of an express or implied reservation of the right to proceed on the original cause of action, bars the bringing of proceedings based on such original cause of action....Not only can the original cause of action no longer be relied upon, but a defendant is not entitled to go behind the compromise and raise defences to the original cause of action when sued on the compromise:”[9]

 

[19]              The court has to consider the cost order, the normal order is that costs follow the result, however, in the circumstances the court has to consider the fact that a settlement agreement was entered into between the parties, pacta sunt servanda, yet the applicants came to court and delayed payment further by applying for rescission on grounds that were wavering. The court will order accordingly.

 

In the result, the following order is made:

1.   The application for rescission of the settlement agreement and the court order granted 4 December 2018, is refused and dismissed.

2.    Costs to be paid by the applicants on an attorney and client scale.

 

 

 

Klein, M

Acting Judge of the High Court of South Africa.

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