The
facts giving rise to this matter may be summarised as follows.
By
letter dated 2 March 2010, Stanbic Bank Zimbabwe Limited (“the Bank”) offered a
loan facility to Birdland Trading (Private) Limited (“the Company”) which offer
the company accepted on that same day. Birdland Trading (Private) Limited
actually received from the bank a total of $794,860=54 in terms of the said
loan facility.
In
order to secure that loan, Neil William Rix, Francis Van Der Zee and a company
called Alco Forest Industries (Pvt) Ltd signed suretyship agreements binding
themselves as sureties and co-principal debtors for the due repayment of the
loan. As sureties, the three respondents meant that if Birdland Trading
(Private) Limited failed to pay the loan they undertook to do so themselves.
Birdland
Trading (Private) Limited did fail to pay the loan and the respondents were
expected to have come to its rescue and paid in terms of their undertakings as
sureties but they also were unable to do so.
The
Bank was left with no option but to institute action proceedings under case
number HC1252/11 against the company and the three respondents jointly and
severally the one paying the others to be absolved.
On
8 September 2011, the Bank applied for and was granted summary judgment against
the respondents and the company in the following terms:-
“It
is ordered that:-
(1)
Judgment with costs on the legal practitioners and client scale be and is
hereby entered against the four defendants, jointly and severally, the one
paying the others to be absolved for payment of US$794,860=54 together with
interest thereon at the rate of 31.8% per annum from 1 May 2011 to date of
payment.
(2)
Stand 16463 Bulawayo Township of Stand 13567 Bulawayo Township held by fourth
defendant under Deed of Transfer No.2103/2004 be and is hereby declared
specially executable.”
This
judgment is extant and has not been appealed against.
The
company and its three sureties have no complaints against that judgment and
ought to expect it to be executed one day or another. With that realization, the
company i.e. Birdland Trading (Pvt) Ltd, applied for and was granted an ex parte provisional order placing it under provisional
judicial management.
It
was only the company which applied for and was granted provisional judicial
management. The three respondents were not party to those proceedings, and
neither did they apply to be allowed to participate in the
proceedings. They do not intend to apply for provisional judicial
management. As natural persons, the first and second respondents would, of course,
not.
However,
paragraph 4 of the interim relief granted to the company provided that:-
“Pending
the return date, all actions and the executions of all writs, summons and other
processes against the company and its guarantors be and are hereby stayed and
shall not be proceeded without the leave of this court.”…,.
In
my view, the protection against all actions and proceedings and the execution
of all writs, summons and other processes should have been limited to Birdland
Trading Industries (Pvt) Ltd only as it was the one that sought to be placed
under provisional judicial management. There was no basis for extending
the protection to the sureties, who never sought to be placed on provisional
judicial management, and were not parties to those proceedings. The
extension of the protection to them was, in my view, a patent error.
The
respondents sought to benefit from the protection which they did not seek and
were not party to the proceedings wherein the company was granted that
protection. They had no legal basis for wanting to be associated to that
protection. Their claim to the protection is clearly mala fide.
Since
the extension of the protection granted to these mala fide
guarantors was a patent error, the Bank, in terms of order 49 Rule 449(1)(a)
and (b) filed a court application under HC3519/11 seeking the variation or
correction of the wording of paragraph 4 of the provisional judicial management
order. The three respondents opposed the application without
success. The order of the court was in these terms:-
“Order
(1)
Paragraph (4) of the provisional order issued by this court in HC2616/11, and
dated 21 September 2011, is amended by the deletion of “and its guarantors.”
(2) The
applicant is granted leave to execute on the judgment granted in its favour
against the 1st, 2nd and 3rd respondents which
was issued against the respondents on case number 2226/11 and dated 8
September, 2011.
(3)
The costs of this application shall be costs in the cause in HC1252/11 and
shall be paid by the respondents on the legal practitioner and client scale.”
The
respondents noted an appeal to the Supreme Court against the judgment of this
court.
The
Bank sought leave to execute on the judgment pending the appeal but the
respondents opposed the application.
At
the hearing, both parties referred this court to the case of South Cape Corporation
v Engineering
Management Services 1977 (3) SA 534 (A)…, where the court held
that:-
“The
court to which application for leave to execute is made has a wide general
discretion to grant or refuse leave and, if leave be granted, to determine the
conditions upon which the right to execute shall be exercised…,. In exercising
this discretion, the court should, in my view, determine what is just and
equitable in all the circumstances, and, in doing so, would normally have
regard, inter alia, to the following factors:-
(1)
The potentiality of irreparable harm or prejudice being sustained by the
appellant on appeal (respondent in the application) if leave to execute were to
be granted.
(2)
The potentiality of irreparable harm or prejudice being sustained by the
respondent on appeal (applicant in the application) if leave to execute were to
be refused.
(3) The
prospects of success on appeal, including, more particularly, the question as
to whether the appeal is frivolous or vexatious or has not been noted with the
bona fide intention of seeking to reverse the judgment but for some indirect
purpose, e.g. to gain time or to harass the other party; and
(4)
Where there is the potentiality of irreparable harm or prejudice to both
appellant and respondent the balance of hardship or convenience, as the case
may be.”
As
already observed in this judgment, the respondents executed suretyships and are
liable in solidium as co-principal debtors with Birdland Trading (Pvt)
Ltd. In simple terms, they undertook to pay the loan in full in the event
of Birdland Trading (Pvt) Ltd being unable to pay. In the result, no harm
or prejudice whatsoever would be sustained by the respondents if leave to
execute would be granted.
It
came out at the hearing of the matter that Birdland Trading (Pvt) Ltd has since
applied for and was granted a provisional liquidation order. The company
has made the already bad situation of the respondents worse. They can no
longer try to cling to the provisional judicial management which the company
must have abandoned as provisional judicial management cannot exist side by
side with provisional liquidation, in my view. It is therefore clear that
the company is unable to pay and its guarantors will have to do so.
It
was submitted by the Bank that it had suffered, and continued to suffer,
irreparable financial prejudice for as long as the respondents delayed the
execution of the writ against them. It pointed out that part of its business
was lending money to clients on specific repayment terms and the repayments
were used to on-lend to other clients. Consequently, the potentiality of
irreparable financial prejudice being sustained by the Bank, and which would
continue to be sustained by the Bank if leave to execute were to be refused, is
very obvious and beyond question.
In
this matter, this court specifically finds that the respondents bound
themselves as sureties and co-principal debtors with Birdland Trading (Pvt) Ltd
for the repayment of the bank loan. They failed to pay the bank loan and
the bank sought and was granted summary judgment against them in case number
HC2226/11 and they have not sought to appeal against the judgment. They
accept it as binding on them. They, therefore, know that the writ against
them would be executed ultimately. There is no lawful basis for them to
delay execution of the judgment against them in light of the fact that they are
bound jointly and severally with Birdland Trading (Pvt) Ltd for the repayment
of the bank loan.
The
outcome of the appeal against the judgment of this court in case number
HC2226/11 will have no bearing on their liability to satisfy to summary
judgment against them….,.
In
the result, I would grant the application in terms of the draft at page 1 of
this judgment.
