The
facts that are common cause between the parties are the following. In January
2005, the applicant was one of the shareholders in an entity called Continental
Bakeries (Pvt) Ltd…,. On 14 January 2005 Continental Bakeries (Pvt) Ltd placed
an order with the first respondent for the supply by the latter to Continental
Bakeries (Pvt) Ltd of 142.74 metric tons of baking flour for a unit price of
Z$3.4 million per ton making a total of Z$485,316,000=.
For
the due payment of the cost of flour the first respondent required that Continental
Bakeries (Pvt) Ltd provide security.
The
applicant, in the hope of doing business in future with the first respondent
then put up his immovable property as security for the debt. In the event, a
mortgage bond was registered by the applicant over his immovable property in
favour of the first respondent on 28 January 2005.
On
2 February, the applicant 'parted company' with the company and set up his own
bakery business after an exchange of shareholding between himself and his
co-shareholders in Continental Bakeries (Pvt) Ltd. The applicant ceased all
participation in the business of Continental Bakeries (Pvt) Ltd after he gave
up his shareholding therein. After his departure however, Continental Bakeries
(Pvt) Ltd disposed of all its assets and liabilities to Harambe Holdings (Pvt)
Ltd on 17 March 2005.
Later
that year, the applicant received summons from the first respondent wherein it
claimed payment of the monies in respect of which the applicant had given
security for the due payment of the debt by Continental Bakeries (Pvt) Ltd. He
defended the matter all the way to the Supreme Court but decided not to proceed
with the appeal. On 22 March 2007, on his instructions, his legal practitioners
addressed a suitable letter to the first respondent's legal practitioners
offering to settle the debt in full together with accrued interest. A cheque in
the sum of Z$970,632,000= representing the amount of $485,316,000= as the
capital debt and an equal sum as accrued interest accompanied the accompanied
the letter. Although the court had ordered that the applicant pay costs on a
legal practitioner client scale, he did not pay the costs when the cheque for
settlement of the debt was sent to the legal practitioners for the respondent,
presumably on the advice of his own legal practitioners. It also appears that
the respondent, on its part, has not given the applicant a computation of the
amount of costs owing to it.
The
payment made by the applicant was accepted on a without prejudice basis, and
the applicant was informed that the respondent reserved the right to sue for
further accrued interest in an amount equal to the amount of the cheque that
had been sent to its legal practitioners. No further action was taken by the
respondent or its legal practitioners at the time.
On
21 August 2007 the applicant instructed his legal practitioners to demand, in
writing, the cancellation of the mortgage bond.
The
respondent's legal practitioners responded to the letter on 5 September 2007 by
a letter which was to the following effect -
“Thank you for your
letter to us dated 21st August 2007. As you are aware our client
disputes the fact that your client has liquidated its debt to ours due to the
fact that his defence to our summons was mala fide. This is noted in the
Honourable Mr Justice HLATSHWAYO's judgment and is corroborated by the fact
that you have now withdrawn your Notice of Appeal which proves that it was only
noted to delay matters. Our client requires that your client pays the capital
owed plus accrued interest to date. As you are well aware public policy cannot
protect your client who has used the court's procedure to unnecessarily delay
finalization in this matter. Please may we have payment within the course of
the next 10 (ten) days.”
No
payment was made, and, as a result, the respondent, on 3 August 2009, caused
summons to be issued against Continental Bakeries (Pvt) Ltd, the applicant, and
Harambe Holdings (Pvt) Ltd, wherein it claimed damages in the sum of US$148,800=
representing the cost of two hundred and forty metric tons of flour together
with interest on the said sum at the applicable rate in the courts of the United
States with effect from 1 November 2008 to date of payment.
The
respondent obtained judgment on 9 September 2009 and issued a writ of execution
against Continental Bakeries (Pvt) Ltd and the applicant.
The
applicant contends, further, that he has paid in full what he owed the
respondent except for costs. He contends, further, that the issue of costs
should not be a reason for the respondent to continue holding onto his Deed of
Transfer and the refusal to cancel the mortgage bond granted in its favour.
The
respondent opposes the granting of the relief being sought by the applicant.
The
opposing affidavit was deposed to by the respondent's Managing Director who
states that the applicant had mistaken the import of the claim for damages. He
avers that the claim is predicated on the loss caused to the respondent by the
deliberate delay on the part of the applicant to settle his indebtedness
timeously which payment, when it finally came, was insufficient to meet the
cost of the flour supplied to Continental Bakeries (Pvt) Ltd.
In
respect of the mortgage bond the contention by the respondent is that it
provided security for money owing or claimable by it from 'any cause or debt
whatsoever' and that in the event the respondent was entitled to retain the Title
Deeds and to decline to cancel the bond until such time as the court determines,
in Case No HC3518/09, whether or not there are any monies owing to the
respondent. The deponent states, further, that were this court to grant the
relief sought any judgment under the damages claim in the respondent's favour
would be a brutum fulmen. The respondent's view is that the applicant stood
surety for flour worth almost US$150,000= but has paid less that $100= towards
the debt.
In
his answering affidavit, the applicant contends that he has not misunderstood
the import of the damages claim and maintains that what the respondent, in that
matter, seeks, is payment for the cost of the flour - albeit in United States
dollars. He contends further that he has discharged his indebtedness to the
respondent, and, as he is a businessman, he cannot await the determination of
the damages claim and he requires the return of his Title Deeds.
The
applicant states, further, that the fact that the security provided in the bond
was in respect of indebtedness arising from any cause or debt whatsoever did
not mean that the quantum of the indebtedness was without limit. He stated that,
in fact, the mortgage bond limited his indebtedness to Z$500,000,000= together
with interest thereon and that clause 1(d) of the mortgage bond provided for a
limit of Z$125 million for securing the bond and that, therefore, his
indebtedness was Z$650 million excluding interest. He stated that he had paid
the capital debt in full and that the respondent had no justification to
continue holding on to his Title Deeds.
In
this application the applicant seeks relief in the following terms-
1.
That the first respondent be and is hereby ordered and directed to cancel the
registration of Mortgage Bond No. 911/2005 dated 28 January 2005 registered in
the second respondent's registry by the applicant in favour of the first
respondent within thirty (30) days of the granting of this order.
2.
That the first respondent be and is hereby ordered and directed, within thirty
(30) days of the granting of this order, to return and surrender to the
applicant Deed of Transfer No. 2942/2003 dated 23 May 2003 relating to a
certain piece of land situate in the district of Salisbury called Stand 91 Park
Meadowlands of subdivision B of Makavusi and that the said Deed of Transfer be
free of the endorsement of the mortgage bond referred to in (1) above.
3.
That the first respondent pays the costs of this application.
In
order for me to grant the relief sought by the applicant in terms of the draft
order I would have to be satisfied that indeed the applicant has paid his
indebtedness to the respondent.
The
respondent had, out of caution, insisted on the applicant granting it security
in the form of a mortgage bond to put the applicant and Continental Bakeries
(Pvt) Ltd on terms to pay the debt. The applicant did not pay when called upon
to do so and even after he was hauled to court for an order for him to pay the
debt he defended his obligation to pay taking the matter on appeal which was
then abandoned more than two years after the debt would have been due. It
cannot be denied that the applicant resisted any attempt to make him pay and
only paid when it seemed convenient to him. Although he acknowledges that an
amount of $125 million was due and payable for securing the mortgage, it
appears that even that has not been paid. The costs ordered against him by
HLASTSHWAYO J were not paid. His explanation is that he or his legal
practitioners were never appraised of the amount of those costs. It seems to me
that in order for him to satisfy this court that he has settled his
indebtedness and that he has attempted to pay the costs but that the
respondent's legal practitioners refuse to divulge the sum of the costs. There
is no letter from either the applicant or his legal practitioners demanding a
breakdown of those costs and an offer to settle them.
The
essence of the right in a mortgage bond is that the mortgagee is able to retain
his hold or security over the mortgaged property until the obligation is discharged
when due, and, where it is not so discharged, to have the property sold and
from the proceeds to recover the money owed by the mortgagor. The mortgagor, on
the other hand, has the right to have his property freed from the mortgage upon
payment of the monies owed in respect of the mortgage bond. A valid mortgage
confers a jus in re aliena on the mortgagee who may retain his security as long
as his debt remains unpaid. See National Bank of SA Ltd v Cohen's Trustee 1911
AD 235. This right is effective not just against the mortgagor but also his
creditors.
A
mortgage is extinguished when the debt secured by the mortgage bond is
satisfied in full together with interest and the costs for cancellation of the
bond. A partial payment does not satisfy the obligations of the debtor to pay
the debt in full. Thus, the duty of the creditor is to cancel his bond and the
duty of the debtor is to pay the amount due and the authorities are agreed that
the duties are reciprocal and cancellation should take place pari passu with
payment. See Nulliah v Harper 1930 AD 141.
It
is correct, as contended by the applicant, that he had, by executing the
mortgage bond in favour of the respondent, undertaken the obligation of surety
and co-principal debtor with Continental Bakeries (Pvt) Ltd, and, further, that
this obligation was for the due payment of costs related to the purchase of
flour by Continental Bakeries (Pvt) Ltd. In Trans-Drakensberg Bank Ltd v Guy
1964 (1) S.A. 790 MILLER J put the obligations of a surety thus-
“It
is of the essence of a contract of suretyship that it is “accessory to the main
contract;” the surety undertakes that the obligation of the principal debtor
will be discharged, if not by the principal debtor, by himself. (Corrans v
Transvaal Government 1909 T.S. 605 AT P 612). Where the surety concludes a
contract of suretyship with the creditor in respect of a particular obligation,
he undertakes to discharge that obligation and no other:
'Where
the surety has expressed what sum or what cause he engages, his obligation only
extends to the sum or to the cause which is expressed…,.'”
On
the basis of this authority it is the contention of the applicant that he did
not undertake to discharge any other claims by the first respondent save for
the contractual obligation arising out of the purchase of the flour, and that
in the event, the first respondent's claim for damages was therefore outside
the purview of what the applicant bound himself to perform.
The
contention by the first respondent, however, is to the effect that the
applicant has not discharged his indebtedness. The first respondent argues,
further, that the damages claim is covered by the mortgage bond executed by the
applicant in that it covers-
“…,
arising from and being monies lent and advanced by the mortgagee to the
mortgagor, acts of suretyship or from any other cause of debt whatsoever and as
continuing security for money which may hereafter be lent and actually paid or
become owing to or claimable from any cause whatsoever…,.”
The duration of a surety's liability depends on
the terms of the Deed of Suretyship. In general, a Suretyship Agreement is
meant to cover a single credit and transaction but others, referred to as
continuing guarantees, are meant to cover a series of transactions. In the absence
of a clear indication to the contrary a continuing guarantee is terminable by
the guarantor on notice to the creditor that he will not be responsible for any
liability incurred after receipt of the notice or the guarantee will relate to
a particular obligation, in which case it will continue until the obligation is
fully discharged. See Lennard Clothing Manufacturers (Pvt) Ltd v Van Rhyn
Interiors (Pvt) Ltd 1974 (1) RLR 207.
