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THE REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE DIVISION, CAPE TOWN)

Case number: 11540/16

In the matter between:

NAMIB MILLS (PTY) LIMITED                                                          Plaintiff/ Respondent

And

MARK LOUIS MAINGARD                                                                Defendant I Excipient

ABRIDGED JUDGMENT DELIVERED ON 17 MAY 2017

Having heard Counsel for the parties having read the papers filed of record I make the following findings and orders.

1.      Re: application for further amendment of the particulars of claim.

1.1.     No authority or justification has been established for the amendment of the particulars of claim during the exception stage and such procedural step cannot be allowed.

1.2.    The issues must be decided as they stand in the pleadings and exception.

1.3.    The Plaintiff's application for amendment is therefore dismissed with costs.

2.     Re: application for striking out

2.1.      The Plaintiff has failed to establish that the paragraphs and annexures complained of constitute inadmissible evidence.

2.2.      No allegation has been made by the Plaintiff that any prejudice will result if the impugned paragraphs are not struck out as required by Rule 23(2).

2.3.       The Plaintiff's application to strike out is accordingly dismissed.

3.. Defendants exception

3.1.     The new pleaded facts relied on by the Plaintiff in the amended particulars of claim in respect of the main claim, the first alternative claim and the second alternative claim cannot be accepted as correct as they are clearly manifestly untrue that they cannot possibly be proved.

3.2.     Defendants has succeeded in establishing that the amended particulars of claim do not disclose a cause of action and/or lack averments necessary to sustain a cause of action for the relief claimed in respect of the Plaintiff's main claim, the first and second alternative claims.

3.3.     In the result the Defendants exception is upheld with costs.

3.     Detailed judgment with full reasons to be furnished in due course.

LANGA AJ

THE REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE DIVISION, CAPE TOWN)

Case number: 11540/16

In the matter between:

NAMIB MILLS (PTY) LIMITED                                                         Plaintiff/ Respondent

And

MARK LOUIS MAINGARD                                                               Defendant I Excipient

REASONS FOR JUDGMENT

Introduction

1.        This application was heard on 25 April 2018 and on 17 May 2018 I made the orders in a summary judgment form and undertook to furnish the full reasons at a later stage. The following constitute the reasons for the said judgment and orders.

2.        The Excipient/Defendant excepts to the Respondent's/Plaintiff's amended particulars of claim on a number of grounds and contends mainly that they do not disclose a cause of action and/or lack the necessary averments to sustain a cause of action on the claims. For ease of reference I will refer to the Excipient and Respondent in this matter as the Defendant and Plaintiff respectively.

3.      The Plaintiff's main claim is based two credit agreements allegedly concluded with the Defendant personally for the sale and supply of goods to the Defendant. The Plaintiff avers that these agreements contain the terms of the sale and supply of goods on credit as pleaded in paragraphs 3 to 5 of the particulars of claim.

4.      The Plaintiff's first alternative claim in the amended particulars of claim is based on the negligent or fraudulent misrepresentation in which the Plaintiff alleges that the Defendant made false representations that the Plaintiff was contracting with an existing Close Corporation, alternatively, with a Close Corporation still to be incorporated and which upon incorporation would lawfully adopt the credit agreements concluded. The Plaintiff alleges that neither of this happened and that there was therefore a misrepresentation.

5.      The Plaintiff's second alternative claim is based on the purported contracts of suretyship in terms of which the Defendant is indebted to the Plaintiff for the debts of Ombeka Trading Enterprise CC, ("Ombeka") in the amount of N$2,208,998.74, which amount is owing, due and payable to the Plaintiff by the Defendant.

The Defendant's principal submissions

6.       The nub of the Defendant's exception is that:

6.1.       The defendant did not enter into the credit agreements with Plaintiff as alleged.

6.2.       No misrepresentation by Defendant has been established by the Plaintiff as alleged in the amended particulars of claim in respect of the first alternative claim.

6.3.       The purported suretyship agreements relied on in the amended particulars of claim in respect of second alternative claim are invalid and therefore unenforceable.

7.        Regarding the defence that the Defendant did not enter into the credit agreements personally, the Defendant argued that the annexures embodying the contracts do not support the contention that the Defendant, Mark Louis Maingard. entered into the credit agreements in his personal capacity but instead indicate that he was acting on behalf of Ombeka, a Close Corporation yet to be formed, of 11 River Street, Otjiwarongo, of which the Defendant will be the main member.

8.      The Defendant further argued in this regard that the only interpretation of pages 10 to 12 of these annexures is that the Defendant was only binding himself in his personal capacity as surety as required by the Plaintiff and that this constitutes evidence that the Plaintiff did not regard the Defendant as acting in his personal capacity. The Defendant further relies on the Plaintiffs pleadings in both the Namibian as well as the South African case, wherein the first defendant was named as Ombeka and the Defendant, Mark Louis Maingard, cited as the second Defendant. This constitutes an irreconcilable contradiction in the Plaintiffs pleadings and a clear indication that the Defendant acted on behalf of the Close Corporation.

8.1.      Lastly the Defendant further argued on this point that although clause 14 of the annexures states that the conditions of the credit agreements "form the basis of the conditions of sale in respect of all or any goods purchased by the applicant from the Supplier" , the Plaintiff does not allege, as required by Rule 18(6), when, where and by whom any sales agreements were concluded and further failed to annex any sales agreements that were entered into by the Defendant acting in his personal capacity.

9.      It is on the basis of these averments that the Defendant excepts to the facts pleaded in paragraphs 3 to 8 of the Plaintiff's amended particulars of claim and contends that they should not be accepted as they do not disclose a cause of action and/or lack the averments necessary to sustain a cause of action for the relief claimed in respect of the Plaintiff's first claim 

10.   Regarding the alleged misrepresentation the Defendant argued inter alia that the evidence illustrates that Ombeka was incorporated on 02 April 2014 and that the certificate of incorporation was annexed to the Defendant's opposing affidavit dated 25 August 2016 in respect of the summary judgment application (Annexure MLM 1) long before the impugned amended particulars of claim were signed on 13 March 2017.

11.    The Defendant further argued that there could not have been any misrepresentation as it is pleaded in the Plaintiff's own pleadings that during the period January 2014 to April 2015 Ombeka purchased and accepted delivery of goods from the Plaintiff as reflected in Annexure "C" of the Plaintiff's papers. This is further clear in paragraphs 12.1 and 16 of the Namibian particulars of claim where the Plaintiff specifically and expressly pleaded that Namib Mills sold and delivered goods to the first defendant (Ombeka) during the period January 2014 to April 2015. These same facts were pleaded in the original South African particulars of claim in the current action.[1]

12.  Apropos the second alternative claim the Defendant contends that the Suretyship agreements in Annexures A and Bare invalid and unenforceable as they do not meet the requirements for a valid suretyship agreement. The Defendant's argument of invalidity is based mainly on the contention that the principal debtor is also the surety in the purported suretyship agreements and that this is contrary to the legal principles on surety.

The Plaintiffs principal submissions

13.    The Plaintiff's response to the argument that the Defendant did not enter into the credit agreement with Plaintiff is that this is a matter of interpretation which may be aided with evidence at the trial and further that there are strong indicators that the agreements were entered into with the Defendant personally.

14.     The Plaintiff argued further that all that is necessary to allege in this instance is that the credit agreement were concluded for the sale and supply of goods and that it is therefore unnecessary to plead the details of each and every order or sale in order to comply with Rule 18(6) as the credit agreements contained both the credit conditions and the terms of sales.

15.      The Plaintiff's reasoning in respect of the alternatives seems to be that in any event if it is found that the agreements were not concluded with the Defendant personally, the alternatives claims come into play. This argument is also repeated in the Plaintiff's application to strike out the "evidence" presented in the exception and the Defendant's heads.

16.      Regarding the misrepresentation the Plaintiff contends that although the Defendant represented to it that it was entering into such agreements with an existing close corporation by the name of Ombeka Trading CC, alternatively, with a close corporation still to be incorporated and which will lawfully adopt the aforementioned credit agreements, that never happened as no entity by the name of Ombeka existed at the time, alternatively, that no close corporation by such name was subsequently incorporated.

17.      As regards the Defendant's argument that the pleadings are contradicted by the Plaintiff's own Namibian pleadings and original South African pleadings, the Plaintiffs response is that the only applicable pleadings is the amended particulars of claim and its annexures and suggests that the other pleadings constitute extraneous evidence which is inadmissible.

18    Lastly, concerning the suretyship agreements, whereas the Plaintiff acknowledges the correctness of the legal principle relied on by the Defendant it however, argued that this is not a matter that can be determined during an exception. The Plaintiff furthermore argued that if it is found that the principal agreement was concluded between the Plaintiff and the Defendant personally, the suretyships will not be relied upon.

The legal principles

19.      In Nedbank Ltd v Van Zyl [2] the court referred to the Roman-Dutch law writers[3] and Modern South African writers[4] and stated that under our law it is essential for the existence of a suretyship that there should be a principal obligation in respect of which someone (principal debtor) other than the surety is the debtor. Notably the court held that a person cannot stand as surety for his own debt. In Croxon's Garage (Pty) Ltd v Olivier [5] the court referred with approval to Standard Bank of SA Ltd v Lombard and Another [6] and confirmed the principle that an undertaking in a contract whereby a person purports to stand as surety for his own debt is not legally enforceable.

20.     In Inventive Labour Structuring (Pty) Ltd v Corte [7] the Supreme Court Appeal restated these principles in respect of suretyship as follows:

"[8] Bearing in mind that at this stage one is confined to looking only at the document constituting the suretyship to see if it contains the necessary formalities, I am of the view that the present suretyship does, on its face, identify the creditor, the principal debtor and the surety. However, it is clear that the names of the surety and the principal debtor are the same and they are names of a natural person. This renders the suretyship capable of at least two possible interpretations. The first is that the surety and the principal debtor are one and the same person. The second is that they are two parlies with identical names.[8] The first interpretation would certainly lead to non-compliance with the necessary formal requirements, because in our Jaw a person cannot stand surety for his or her own debt (Nedbank Ltd v Van Zy/ [1990] ZASCA 12; 1990 (2) SA 469 (A) at 475E - I). On this interpretation the suretyship would fail to identify the principal debtor and the surety as two distinct parties."

Discussion

21.    Before I deal with the exceptiont I will briefly examine the Plaintiffs application to strike out certain paragraphs   and annexures of the Defendant's notice of exception as well as the application for further amendment of the particulars of claim during the hearing of the exception.

22.   The Plaintiff argued that these paragraphs and annexures constitute inadmissible and irrelevant matter which should be struck out. In support of the application to strike out, apparently on the basis of Rule 23, the Plaintiff relies ostensibly on the decision in Cultura 2000 and Another v Government of the Republic of Namibia and Others[9]. This case is however, not on point as it deals with an application for the striking out of inadmissible hearsay evidence and or scandalous or irrelevant matter. The court remarked that Rule 6(15) does not find application in respect of the striking out of hearsay statements in affidavits and further that the test applicable to Rule 6(15) is not the same as the test prevailing when the application is made to strike out on the grounds of hearsay. It further held that as the effect of striking out can be far-reaching an applicant should clearly state what is to be struck out and why he wishes to strike out such a matter.

23.   In my view the paragraphs and annexures which the Plaintiff seeks to strike out do not constitute inadmissible hearsay evidence but instead consist of the Plaintiff's own averments in the Namibian default judgment application. In my view there is no justification for the striking out of the relevant paragraphs and annexures as extraneous inadmissible evidence on the basis of the provisions of Rule 23. I deal with the importance and relevance of the Namibian judgment in paragraphs 37-40 below. Furthermore the Plaintiff has in my view failed to make the necessary allegation that the refusal of the application will result in prejudice and therefore Rule 23 cannot, in my view, be invoked. In the result the application for the striking out should be dismissed with costs.

24.   Regarding the application for the further amendment of paragraphs 12 and 20 of the amended particulars of claim the Plaintiff argued that Rule 28(10) allows the court to amend the particulars at any stage before judgment. This argument cannot, with due respect, be correct. The amendment of the particulars of claim at any time before judgment could not, in my view, have been intended to include the amendment of the amended particulars of claim which constitute the subject matter of an exception.

25.   It is trite that in an exception the issues must be decided on the particulars of claim as they stand which in this instance are the amended particulars of claim. As was stated in Natal Fresh Produce Growers' Association and Others v Agroserve (Pty) Ltd[10] the general principle is that an exception must be confined to the grounds stated therein and the court must also take the pleading as it stands.[11]

26.   In the light of the above I find no authority for the further amendment of particulars of claim to be effected during exception stage and no justification has been established by the Plaintiff for the sanctioning of such a procedural step in this matter. In the result I find that the application for the amendment of the amended particulars of claim should similarly be dismissed with costs.

27.1 now come to the Defendant's exception which I will, for convenience sake, deal therewith under the following headings:

27.1.    That the Defendant did not enter into the credit agreements with Plaintiff.

27.2.    That no misrepresentation has been established as alleged in first alternative claim.

27.3.     That the suretyship agreements relied on in second alternative claim are invalid and therefore unenforceable.

28.   The determination in respect of the first two is essentially a factual one and based on the evidence I am of the view that the argument that the facts alleged in the Plaintiff's first claim are manifestly false or improbable has merit, especially when the following are considered.

28.1.   That although the application forms were completed by the Defendant and his name reflected on page 2 as the applicant, there are many clear indicators that Defendant was acting on behalf of Ombeka, a company still to be formed.

28.1.1 For example in the preamble of the declaration the Defendant makes it clear that he makes the declaration and acceptance on behalf Ombeka. This view is further reinforced by the recording of the names and addresses of Ombeka and the Defendant separately as "Ombeka Enterprizes, 11 River Str, Otjiwarongo" and "33 Binnekant Street, Paarl, RSA" respectively.

28.1.2 It is further evident from pages 10 to 12 of Annexures A and B that the Defendant was only binding himself in his personal capacity as a surety for the payment of the debt as required by the Plaintiff. That the Plaintiff insists that the Defendant is also liable as surety in my view constitutes another unambiguous indicator that the Plaintiff also recognized that the Defendant was acting as surety and not in his personal capacity. This issue of surety, particularly whether or not one can stand as surety for his/her own debt, is dealt with further in paragraphs 33 to 36 below.

28.1.3    It is furthermore evident from the papers that these amended particulars of claim are contradicted by the Plaintiff's pleadings in the Namibian as well as the South African case. In both cases the Plaintiff cited the first Defendant as Ombeka and Defendant, Mark Louis Maingard, as the second Defendant. However most notably the Plaintiff also expressly pleaded in these cases that Mark Louis Maingard acted on behalf of Ombeka in his acceptance of the applications to supply credit. It is furthermore pleaded in both cases that the sale of goods as well as the delivery thereof was made to Ombeka and not to the Defendant personally.

29     Based on these facts I find that it cannot possibly be proved that the Defendant entered into the credit agreements in his personal capacity as it is evident that he was acting on behalf of Ombeka. In the result I am satisfied that the facts pleaded in paragraphs 3 to 8 of the Plaintiff's amended particulars of claim do not disclose a cause of action or alternatively lack the averments necessary to sustain a cause of action for the relief claimed. These facts cannot therefore be accepted.

30      Concerning the first alternative to the amended particulars of claim, I find that the Defendant has established that it cannot possibly be proved that there was a misrepresentation in this case and that the particulars of claim therefore do not disclose a cause of action or alternatively lack the averments necessary to sustain a cause of action for the relief claimed particularly when the following are taken into account:

30.1     That according to Annexure MLM1, Ombeka Trading Enterprise CC was in fact incorporated (on 2 April 2014) a day after Annexure B was signed on the Plaintiff's behalf by its financial manager on 1 April 2014. In addition, the Certificate of Incorporation was also annexed to the Defendant's opposing affidavit dated 25 August 2016 filed in the Namibian summary judgment application. The Plaintiff should therefore have been fully aware of the incorporation at least before the amended particulars of claim were signed on 13 March 2017.

30.2     Furthermore, Ombeka continued doing business for the period January 2014 to April 2015 by purchasing and accepting delivery of goods from the Plaintiff and these transactions were duly recorded in the open account or loan account.[12]It is further evident from paragraphs 12.1 and 16 of the particulars of claim in the Namibian case that the Plaintiff specifically pleaded that one of the terms of the agreements was that it would sell and deliver goods to the first defendant Ombeka, and that it in fact sold and delivered goods to the first defendant (Ombeka) during the period of January 2014 to April 2015. The same facts were pleaded in paragraph 11 of the original South African particulars of claim in the current action.

31      Based on the above facts, the Plaintiff was evidently aware at all material times that it was doing business with Ombeka. The allegations in this regard are therefore untrue as they are contradicted by the same documentary evidence relied upon by the Plaintiff. In my view the Plaintiff has not established any misrepresentation on the part of the Defendant.

32      In the result I am satisfied that the facts pleaded in the first alternative claim set out in paragraphs 12 to 18 of the amended particulars of claim, are palpably untrue or so improbable that they cannot be proven and accordingly cannot be accepted. The exception should therefore also be dismissed on this ground.

Suretyship

33      The determination of the exception to the second alternative claim to the particulars of claim is a legal question based on the suretyship allegedly entered into between the Defendant and the Plaintiff. It is trite that a suretyship agreement is one in which the surety bins himself to a creditor for the debts of a third party, the principal debtor. (See Astill v Lot 54 Falcon Park CC[13], in which the court set out the requirements of a suretyship contract). The essence of the agreement is that once it is concluded there are two parties liable for the same debt, the principal debtor and the surety. The real purpose of a surety agreement is to limit the creditor's potential loss which may result if the principal debtor fails to pay in which event the surety becomes liable for the payment of the debt. The principal debtor however, always remains liable for his obligations in terms of the agreements and the surety's obligations commences only if the principal debtor fails to fulfil its obligations.

34       Therefore an undertaking in a contract, in terms of which a person purports to stand as surety for his or her own debt, is invalid and not legally enforceable. In Nedbank Ltd v Van Zyl [14] supra, the court held that for a suretyship to come into being, there must be a principal obligation in terms of which someone other than the surety is the debtor. The Court further stated that a person cannot stand as surety for his own debt and that where this happens it can be

argued that such a contract is a nullity.[15](See also Croxon's Garage (Pty) Ltd v Olivier supra, and the cases referred to therein).

35      In Inventive Labour Structuring (Ply) Ltd v Corte supra, the SCA referred with approval to the Nedbank case supra, and held that a suretyship contract does not comply with the law if on its face, the principal debtor and the surety are the same person "because in our law a person cannot stand surety for his or her own debt"[16]

36      It is evident from Annexures A and B as well as the Plaintiffs averments that the Defendant is professed to be both the principal debtor and surety in respect of both credit agreements. Based on the legal principles espoused in the above cases I find that the two suretyship agreements relied on by the Plaintiff are invalid and cannot therefore be enforced. In the result I find that the exception should succeed on this ground as well.

Namibian Judgment

37      Notwithstanding the findings above, I am nevertheless of the view that the consequence of the Namibian High Court judgment cannot be ignored in this determination. It is common cause that based on the facts pleaded by the Plaintiff, default judgment was granted by the Namibian High Court against Ombeka Enterprises CC, the Defendant and other sureties on 21 May 2015. It is important to also note that the judgment against the Defendant was specifically in his capacity as surety.

38      It is however, also significant to note that when this default judgment was obtained against the Defendant, the suretyship agreements relied on by the Plaintiff did not identify the principal debtor and the surety as two distinct and separate parties but recorded the Defendant as being both the surety and the principal debtor.

39       Although the Plaintiff has subsequently abandoned the Namibian Court order in respect of the Defendant, it is common cause that this order was never set aside by any court with competent jurisdiction. The Defendant's argument that the order stands as it has not been properly set aside by court is in my view therefore correct. In Bezuidenhout v Patense Sitrus Beherend Bpk[17] the court stated that "An order of a court of Jaw stands until set aside by a court of competent jurisdiction. Until that is done the court order must be obeyed even if it may be wrong." The court held further that it "is not aware of a rule of our Jaw that allows a court (other than a competent Appellate Court or Court of review) to disregard, or to ignore or to set aside the order of another court, in a matter that comes before it in respect of a claim for the same relief between the same parties (compare Garment Workers Union, Western Province, and Another v Industrial Registrar and Another 1967 (4) SA 316 (T) at 317-F). Nor was I referred to any such rule or authority by counsel."

40      In my view the suggestion by the Defendant's counsel, Mr Dorsten, that the factual findings in the Namibian case cannot be ignored in the determination of the validity of the Plaintiff's particulars of claim is also correct[18] By accepting that the Namibian judgment is still alive, as indeed it is, one has to also accept that the new and alternative facts alleged by the Plaintiff in the amended particulars of claim are contradicted by the facts which were accepted as correct by the Namibian High Court when the default judgment was granted. Therefore to the extent that they are contradicted by the facts in the Namibian High Court, the amended particulars of claim are so improbable that they cannot be proved and should in my view be disregarded.

41       As stated in Natal Fresh Produced Growers and Others v Agroserve (Pty) Ltd and Others[19] a Court is not obliged to stultify itself by accepting allegations of fact which are manifestly false and so divorced from reality that they cannot possibly be proved. These facts must therefore be excluded and the inevitable consequence thereof is a conclusion that the Plaintiff's amended particulars of claim do not disclose a cause of action for any of the relief claimed. Based on this conclusion the Defendant's exception should succeed.

42      In the result I make the following orders:

43      The Plaintiff's application to amend the particulars of claim is dismissed with costs.

44      The Plaintiff's application to strike out is dismissed with costs.

45     That Defendants exception is upheld with costs.

Appearances:

For the Excipient/Defendant: Adv J van Dorsten

Instructed by: Michalowsky Geldenhuys & Humphries (A Geldenhuys)

For the Respondent/Plaintiff: Adv R Totemeyer SC and Adv G Dicks

Instructed by: Edward Nathan Sonnenbergs (A Symington/A Spies)

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