South Africa: Limpopo High Court, Polokwane

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Fedbond Nominees (Pty) Ltd v Warmbaths Property Development (Pty) Ltd and Another (7043/2020) [2022] ZALMPPHC 68 (2 December 2022)

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IN THE HIGH COURT OF SOUTH AFRICA,

LIMPOPO DIVISION, POLOKWANE.

CASE NO: 7043/2020

REPORTABLE: YES/NO

OF INTEREST TO THE JUDGES: YES/NO

REVISED.

2/12/2022

In the mater between:

FEDBOND NOMINEES (PTY) LTD Applicant

And

WARMBATHS PROPERTY DEVELOPMENTS (PTY)LTD

(Reg No 2001/018440/07) First Respondent

FRED VAN HEERDEN Second Respondent

(ID NO: [....])

JUDGMENT

This judgment was handed down electronically by circulation to the parties’ legal representatives by email. The date and time for handing down shall be deemed to be the 2^nd of December 2022.

LITHOLE AJ:

INTRODUCTION.

1. The Fedbond Nominees Pty Ltd (“the applicant”) claims a money judgment from Warmbaths Property Development (Pty) Ltd (the first respondent) and Fred Van Heerden (the second respondent) based on the loan agreement and consequent participation mortgage bond passed in the applicants ‘s favour by the first respondent. The participation bond provides security for the collective investments schemes as regulated by the Collective Investment Schemes Act 45 of 2002.

2. The applicant further seeks an order declaring the immovable properties hypothecated in terms of the two mortgages specifically executable for the payment of the sum claimed.

3. The respondents oppose this application on the ground that the certificate which is relied upon by the applicant as prima facie evidence is not sufficient proof as contended. The respondent further opposes this application on the ground that the applicant failed to discharge the onus to establish the amount of the indebtedness of the respondents. They seek dismissal of the application with costs.

4. The applicant’s relationship with the first respondent was formed by way of two loan agreements concluded on the 17 April 2012 for an amount of R30 millions and additional amount of R15 millions. The second loan agreement was concluded on the 17 October 2012 and the terms of the agreement largely mirrored those of the first loan agreement. as a security for the second loan, the first respondent declared to bind specially as participation mortgage bond, ranking pari pasu mortgage bond B28006/2012 for amounts of R30 000 000 (thirty million rands) passed by the first respondent in favour of the applicant (a reference to the first participation mortgage bond), its rights, title, and interest in the Transnet lease.

5. The applicant’s relationship with the second respondent is based on a deed of surety that the second respondent gave in favour of the applicant for the first respondent on the 7 and 13 November in respect of both loan agreements.

BACKGROUND FACT

6. The applicant approved two loan agreements in favor of the first respondent, the terms of both the first and second loan agreements were agreed to by the parties in terms of the contracts.

7. Both loans were issued subject to the first respondent having to provide real security in the form of participation mortgage bonds. The first participation bond contains an acknowledgement by the first respondent that it was indebted to the applicant for the principal amount of R30 million and an additional R 15 million. An undisputed fact in relation to the participation bond is that the first respondents’ interest in a deed of lease under lease number (K780/2007N) concluded between the first respondent and Transnet Ltd in respect of Portion 58 of the farm ‘Het Bad number 465, Northern Province constituted security for the capital and additional amount.

8. Among the terms agreed upon between the parties was that the first respondent would make payment on each loan to be paid monthly in advance on the first day of each month for the duration of the bond, the interest there on would be calculated in accordance with clause 5.1 of each bond agreement.

9. It was further agreed between the parties that on the 5^th anniversary of the date of the registration of each bond the outstanding capital and any other outstanding amount due would be paid by the first respondent to the applicant.

10. The applicant contended that the first respondent fell into arrears with payment of the interest due. It is further alleged that as of July 2020 the first respondent was in arrears for R 9 325 970, 77 in relation to the first loan and R 4 934 360, 12 in relation to the second loan. As a result of such default the applicant alleges that the Full indebtedness in terms of both bonds became immediately due and payable.

11. The applicant caused a letter of demand to be sent to the first respondent and the 21 July 2020 for payment of outstanding debts in relation to both loans in the amounts of R39 618 149, 80 and R18 503 360, 38.

12. The first respondent replied to such a demand on the 31 July 2020. In such response the respondent did not deny indebtedness, did not take issue with the amounts claimed but rather explained as to why they were having financial troubles.

13. It is undisputed that two loans were taken by the first respondent and the first respondent fell into arrears, is thus indebted to the applicant.

14. The trite principle of law in motion proceedings is that affidavits constitute both evidence and pleadings. It was stated by Harams JA, in the National Director of Public Prosecutions vs Zuma, 2009 (2) SA (SCA), at paragraph 26, that:

“Motion proceedings, unless concerned with interim relief, are all about the resolution of legal issues based on common cause facts. Unless the circumstances are special they cannot be used to resolve factual issues because they are not designed to determine probabilities. It is well established under the Plascon-Evans rule that where in motion proceedings disputes of fact arise on the affidavits, a final order can be granted only if the facts averred in the applicant’s (Mr Zuma’s) affidavits, which have been admitted by the respondent (the NDPP), together with the facts alleged by the latter, justify such order. It may be different if then respondent’s version consists of bald or uncreditworthy denials, raises fictitious disputes of fact, is palpably implausible, far-fetched or so clearly untenable that the court is justified in rejecting them merely on the papers.”

15. It is against this legal principle that this application should be adjudicated. There common cause facts and those facts that the respondents cannot dispute are set out briefly below.

16. From the assessment of the facts before this court and the argument presented, what is clear and undisputed is that two loans were taken by the first respondent first respondent fell into arrears and is thus indebted to the applicant the point of contention lies in the amount that is owed.

17. The respondents have not disputed indebtedness to the applicant at all but have raised defenses which relate to the interest rates charged as well as the VAT charged to the late payment interest fees.

18. The respondent has not disputed that the full capital amount of both the first and second loans are now due and payable, nor has it been disputed that the first respondent over the duration of the bonds has paid only a portion of the agreed contractual interest and the associated fees and charges and that no portion of the capital loans have been repaid. The respondent has thus fallen into arrears in respect of both loans.

19. The first respondents’ failure to adhere to the terms of the loan agreements entitles the applicant to enforce the right to claim accelerated payment of the full amounts due and owing. The respondents do not dispute that the applicant is entitled to orders declaring the mortgaged properties to be specifically executable for payment of the sums due and lastly that despite demand neither of the respondents have cured the first respondent default.

20. The respondents have not disputed indebtedness to the applicant at all but have raised technical defenses which relate to the certificate of indebtedness not necessarily to the agreement between them or the fact of indebtedness.

THE FURTHER AFFIDAVIT

21. In the answering affidavit of the respondents, an attack was launched at the evidence in proof of indebtedness of the respondents to the applicant that being the certificate of indebtedness. The respondents raised objections to the said certificate, those being that:

21.1. The first objection was that the applicant was not entitled to charge late payment fees VAT inclusive as it had done.

21.2. The applicant did not exercise its discretion to adjust the rate of interest to be in line with the reductions of the prime interest rate in the period of April to July 2020.

22. The applicant did concede that it had erroneously charged VAT to the late payment interest fee, and thus elected to recalculate the amount it claims is outstanding and annex a new certificate of indebtedness. In its recalculation of the outstanding amount, the applicant is levying in respect of all defaults a penalty interest rate of 2% and has been calculated VAT excluded.

23. The applicant annexed a new certificate of indebtedness, in terms of which the respondents are owing more than the amount claimed, however the applicant has further indicated that it is willing to forgo the excess so as not to prejudice the respondents.

24. The respondents contend that by virtue of the recalculation of the outstanding amounts, and annexing of a new certificate it amounts to a new version on the following grounds:

24.1. The recalculation of late payment interest fees has increased the amounts from R 724 200. 12 to R 1 336 132. 22 in respect of the first account and from R 393 534. 77 to R 621 023.15 in respect of the second loan, notwithstanding the fact that the VAT has been removed.

24.2. The total amount in the calculation schedule differs from the claimed amount in the notice of motion.

24.3. No explanation was offered for the increase from R59 256 236.87 to R59 873 820. 25 in the recalculation schedule.

24.4. The recalculation schedule increased the late payment interest under circumstances where it is common cause that the statements did not contain any item with such description.

25. The claim of the applicant is proved by a certificate of indebtedness which the applicant has annexed to its heads after having recalculated that which it claims is truly owed to it.

26. In terms of the agreement entered by the parties, a certificate of indebtedness shall serve as prima facie proof of the outstanding amount. There is no requirement upon the applicant to show manner of calculation of the outstanding amount. Simply put, the mere production of the certificate serves as prima facie proof of the debt.

27. The onus lies on the respondent to cast doubt on the evidential value of the certificate. The respondent has pointed out in the answering affidavit that there are some material errors in the calculation of the indebtedness done by the applicant, thus substantially affecting that which is claimed. The respondent has however failed in its answering affidavit to tender any amount which it alleges it owes.

28. The applicant has in reply admitted to only having erred by charging VAT on the late payment interest fees, and has done a recalculation, which recalculation instead of decreasing the amount owed increased the amount from a total of R59 256 236, 87 to R63 645 880. 45.

29. As alluded, the applicant counsel has argued that the recalculation amount has increased but the applicant is willing to forgo that which is more than that which is claimed. The applicant explained that the difference is brought about by the fact that a proper recalculation from when the loans were taken was done and all factors considered the applicant found that the respondent was indebted for more.

30. The question that the court must now deal with is, whether there was a need under the circumstances for the respondent to file a further affidavit.

31. The general rule is clear, only three sets of affidavits should be filed in any application, however as the respondent correctly stated, the court has the discretion to allow for further affidavits to be filed where necessary. The court is not bound to only permit the three affidavits as some flexibility should also be permitted.

32. The question is, has something unexpected arisen from the applicant’s replying affidavit to which the respondent should have the opportunity to answer to, and the answer is in the negative.

EVIDENTIAL VALUE OF THE CERIFICATE OF INDEBTEDNESS

33. The claim of the applicant is proved by a certificate of indebtedness which the applicant has annexed to its heads after having recalculated that which it claims is truly owed to it.

34. In terms of the agreement entered by the parties, a certificate of indebtedness shall serve as prima facie proof of the outstanding amount. There is no requirement upon the applicant to show manner of calculation of the outstanding amount. Simply put, the mere production of the certificate serves as prima facie proof of the debt.

35. The onus lies on the respondent to cast doubt on the evidential value of the certificate. The respondent has pointed out in the answering affidavit that there are some errors in the calculation of the indebtedness done by the applicant

36. The applicant conceded in reply that it had made such errors. The applicant then sat down and recalculated that which is owed minus the addition VAT and excess interest rate. Although the applicant has stated that on the recalculation amount has increased but the applicant is willing to forgo that which is more than that which is claimed.

37. The question now is, has the respondent managed to disturb the prima facie evidential value of the certificate so much so that it is no longer sufficient proof of the indebtedness of the respondent.

38. Does the initial calculation at the incorrect interest rate and the inappropriately added VAT render the certificate undependable to the court. Not losing sight of the fact that the errors have been corrected.

39. The respondents do not dispute that the certificate of indebtedness produced and attached to the founding affidavit that it complies with the requirements of the two participations. The challenges to the certificate raised by the respondents arises from the terms of the bonus themselves. The respondents have not introduced any factual evidence in rebuttal of the prima facie status of the certificate of indebtedness.

40. In Nedbank Ltd V Schoeman No obo Maluti Trust 2016 JDR 1146(GJ) the court said:

“The respondent makes each of these claims and raises each of the factual dispute by asserting that the certificate of balance contains a mistake and is therefore not sufficiently reliable as proof of any indebtedness. Yet they rely on the same certificate as a prima facie indication that any debt owing to the bank was ceded to the third party. …. Confronted by this challenge the bank explained the in the replying affidavit that reference to the green house in the certificate was inconsequential mistake and out of caution, the bank produced and attached another ‘fresh certificate’, confirming and updating the first.”

41. There is undoubtedly a conflict between the two certificates presented to the court. The question however is, is the conflict so severe that it is sufficient to destroy or detract from the evidential value.

42. If that which was complained of in the initial certificate has been removed and the interest rate upon which the respondent is charged is even less than that which is agreed, the proper calculation on such beneficial terms amounting to more than what was hoped for does not conceivably amount to a disturbance of the value on the document.

43. The allegation that interest is charged at 11.28% as opposed to 12.20% is a prejudice that is suffered and accepted by the applicant. If the prejudice were suffered by the respondent, the court would have a different view on the issue.

44. The certificate in its original form and in the corrected form comply with the prerequisite for a certificate of indebtedness in terms of the contractual agreement between the parties, all allegation that ought to be made are made. Save for the administrative or clerical error, which was then remedied by the second certificate, no other mistake was noted.

45. This court agrees with Bester AJ As he held in the FirstRand Bank LTD 2018 JDR 2038, that:

“It is not a new case in reply to relinquish a portion of the interest claimed. The introduction of the certificate in reply is therefore not an attempt to introduce new material that ought to have been in the founding affidavit, rather it simply constitutes prima facie evidence of what the amount of the debits are if the lower interest rate is applied. The applicant is entitled to forsake the additional interest and then claim the lesser amount in the circumstances the application to strike out must fall.”

46. The applicant herein has similarly not gone and introduced new material but have simply done the calculation as it ought to have been done from the start. Evidently the applicant forgoes the excess and maintains a claim for that prayed for in the notice of motion.

47. This court therefore find that the additional affidavit is not permissible in the premisses, find that the applicant has not introduced a new matter in reply.

QUANTIFICATION OF THE CLAIM

48. The capital amount that is owed to the applicant it's common cause between the parties, that which places in at odds is the interest rate payable on the late payment interest.

49. The respondent has raised an issue, that being the refusal of the applicant to exercise its discretion to reduce the interest rate on the bonds in accordance with the alterations on the repo rate.

50. What the respondents failed to acknowledge or understand is that the manager and behalf of the applicant has discretion as to whether to increase or decrease the rate of interest in terms of Clause 5.1.1of the bonds. The manager exercised his discretion and decided not to decrease the rate of interest even considering the lowered repo rate.

51. There is absolutely nothing that forces the manager to reduce the interest rate because of the dropping repo rate. The manager acted within his powers and information available to him to decide not to reduce the interest rate.

52. There is further no duty for the applicant to explain to the respondent at the time of or any time after informing them that the interest rate shall not be reduced in line with the repo rate. The applicant performed its part by fore warning the respondent that no reduction should be expected, if the respondent had any complaint regarding such a decision, the complainant ought to have raised it at the time they were formally informed of the decision.

53. The respondent clearly understood the terms of the agreement between them and the applicant at the time they accepted the applicant’s decision to exercise it discretion as communicated. It cannot conceivably serve as a defense to the applicant’s claim for judgment against the respondent now, given the fact that it was a term agreed to.

54. This application is heard together with the matter between applicant and Import export 2020 and Fred Van Heerden under case number 7042/2020. It was accepted by both counsel that what is decided on the matter under case no 7042/2020 will then have to be the order in this matter. Facts of the case are the same only the first respondent is different from the other matter.

FINDINGS

55. This court, therefore, find that the applicant has presented sufficient evidence to prove it entitlement to the monies so claimed.

56. The respondents have failed to put forward any amount which they claim is owed to the applicant. They have admitted indebtedness yet failed to state the extent thereto.

57. The applicant has a duty to prove that the respondent is indebted to it and for how much. The applicant has presented to the court a certificate of indebtedness which in terms of the agreement between the parties shall be prima facie proof of the debt.

58. In the premises, the applicant has proven its entitlement to the prayers so listed in paragraph 1 to 4, of the notice of motion with costs, including the costs of senior counsel.

Order

1. The respondents’ application for leave to introduce a further affidavit is dismissed with costs, the costs shall include the costs of senior counsel.

2. The Applicant’s claim against the Respondent succeeds and the following order is made:

2.1. Payment of the sum of R 59 256 236,87 which amount is to be paid by the first and second respondents jointly and severally, the one paying the other to be absolved;

2.2. Interest on the amount of R 59 256 236,87 at the rate of 10,28% per annum;

2.3. Declaring that the first respondent’s right, title and interest in and to the Notarial Deed of Lease K780/2007L concluded between Transnet Limited and the first respondent in respect of the property situated at Portion 58 (portion of portion 2) of the farm Het Bad number 465 Registration Division K.R. Northern Province measuring 3,1743 hectares is specially executable for payment of the aforesaid sums;

2.4. Costs of suit on the attorney and client scale.

TC LITHOLE

ACTING JUDGE

LIMPOPO DIVISION OF THE HIGH COURT

POLOKWANE

APPEARANCES

On behalf of the Applicant:

with: Adv A R G MUNDELL SC

Instructed by: CARVAHO Inc ATTORNEYS .

On behalf of the 2^nd respondent: Adv H F OOSTHUIZEN SC

Instructed by: FRONEMAN ROUX AND STREICHER ATTORNEYS .

DATE OF HEARING : 17 AUGUST 2022

DATE OF JUDGMENT : 02 December 2022