According
to the applicant, the background facts to this matter are as follows:
On
21 June 2010, the first respondent, represented by its Chief
Executive Officer, signed an acknowledgment of debt in favour of the
applicant in the sum of US$418,400=. The debt had arisen on account
of the supplies of the applicant's products at the request of the
first and second respondents. During the period 6 June 2010 and 1
September 2010 a further debt of US$267,260= was similarly incurred.
The total debt then became US$685,659=98 (inclusive of the amount
secured under the acknowledgment of debt).
The
respondents made payments to the tune of US$195,494= leaving a
balance of US$490,165=. A surety mortgage bond was then created to
cover this debt in which the second respondent was the mortgagor and
the applicant the mortgagee. In terms of clause 11 of the surety
mortgage, should the mortgagor fail to pay the amount when due after
demand and after seven days, the amount shall immediately become due
and payable. It was also provided in the bond that any debt that
would arise in future would still be subject to the security of the
bond.
The
debt has remained largely unpaid, and, despite demand, the respondent
has failed to pay the money owed to the applicant. For this reason,
the applicant has lodged this application seeking an order compelling
the respondent to pay the sum of US$490,165= failing which the
mortgaged property be declared specially executable. Further, the
applicant seeks that the respondent be ordered to pay interest at the
prescribed rate plus costs on the legal practitioner-client scale,
including 10% collection commission.
The
respondents agree that the facts are largely common cause. They do
not dispute the fact and extent of their indebtedness.
The
first respondent runs a bakery business. They aver that on 21 July
2010 it was agreed by the parties that the applicant would start
providing the first respondent with flour so that it would be able to
service its debt. The first respondent was expected, in terms of that
agreement, to make weekly repayments of US$30,000=. The applicants
then started supplying the first respondent with flour, confirmation,
according to the respondents, that the parties had entered an
acceptable arrangement. By this arrangement, the first respondent was
servicing both the old debt and the new debt. However, the applicant
stopped supplying flour as from 1 September 2010. As a result, the
first respondent's weekly payments stopped on 14 September 2010. No
explanation was proffered by the applicant as to why the flour
supplies had been stopped. For this reason, argue the respondents, it
was the applicant that breached the compromise and therefore the
first respondent is not obliged to pay this claim until such time as
the applicant would have purged its breach.
In
its answering affidavit, the applicant denies any breach of any
agreement with the respondents. It avers that it reached a compromise
with the respondents in order to assist the respondents out of
sympathy and the need to recover the debt by supplying the first
respondent with flour with which to make its products. The compromise
was made on condition the first respondent would repay the old and
the new debts at the acceptable rate of US$30,000= per week. When the
applicant made the first flour supply, the respondent did not pay
anything within the agreed fourteen days period. That was a breach of
the new agreement. The applicant avers that the respondents are not
being truthful in their narration of the events leading to the
cessation of flour supplies.
It
is common cause that the parties entered into a compromise agreement
in which the applicant would supply flour to the respondents and they
would, in turn, repay their debts at the rate of US$30,000= per week.
The US$30,000= was to be paid, at any rate, within fourteen days of
delivery of each batch of flour. It is also common cause that
although the offer of compromise was made in writing by the
respondents the applicant's acceptance is implied by way of its
conduct in resuming flour supplies along the lines and terms proposed
by the respondents.
The
applicant does not contend that it did not enter into a compromise
arrangement – rather, it argues that the respondents breached the
compromise arrangement.
According
to FARLAM & HATHAWAY
“A
Case Book on the South
African Law of Contract”…,:
“A
compromise agreement, once entered into, precludes an action on the
original debt, except where the compromise specifically, and by clear
implication, provides that the original claim shall revive in the
event of the non-performance of the terms of the compromise.”
See
also Hamilton
v Standard Chartered Finance
1998 (2) ZLR 488 (S).
It
follows from the above that the parties are bound by the terms of the
compromise agreement. Neither of them can resile from that agreement
as the applicant tries to do by arguing that the compromise agreement
was merely for the purposes of enabling the respondent to meet its
commitments under a previous agreement, and that, in doing so, the
applicant acted out of sympathy with the respondent. If that was what
the applicant had in mind it should have responded to the applicant's
offer of compromise accordingly. Instead, the applicant's conduct,
in resuming flour supplies as proposed by the respondent in return
for the US$30,000= per week repayment plan, bound itself to the
compromise agreement. As a result, the applicant can only sue in
terms of the compromise agreement and not in terms of the
acknowledgement of debt or any other previous arrangement.
Did
the respondents breach the compromise agreement?
The
respondents say they failed to meet the repayment plan because the
applicants had stopped (without notice) the flour supplies. The
applicant says it stopped supplies after the respondents had failed
to repay the US$30,000= which they were obliged to repay in terms of
the compromise.
Whether
the applicant or the respondents breached the compromise is a
question of fact.
There
is a dispute as to whether it was the applicant who breached the
agreement by failing to supply flour or the respondents by failing to
make repayments timeously. The respondents say that supplies of flour
ended on 1 September 2010 and payments stopped on 14 September 2010,
implying that it was the applicant who was in breach. The respondent
states that they had been paying at the rate of US$6,000= per day
every five day week, making a total of US$30,000= per week. These
figures are reflected in the reconciliation prepared by the
respondents and filed of record as Annexure “F”. The
reconciliation indicates both the new debts (after compromise) and
the old debts. The respondent says both the old and the new debts
were being serviced together.
The
factual dispute between the parties is one that cannot be resolved
without hearing viva
voce
evidence. The applicant ought to have foreseen the emergence of this
factual dispute. I am inclined to dismiss this application for this
and other reasons outlined above.
Accordingly,
it is hereby ordered as follows:
1.
That the application be and is hereby dismissed.
2.
That the applicant pays the costs.
