THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Reportable
Case no: 287/06

In the matter between:

CITIBANK NA

Appellant

and

THANDROYEN FRUIT WHOLESALERS CC                      1st   Respondent
R & N FRESH PRODUCE CC

2nd Respondent
ISIVANDE (PTY) LTD

3rd Respondent
RONNIE THANDROYEN

4th Respondent
LOGARANI THANDROYEN

5th Respondent

Coram

:
SCOTT, NUGENT, HEHER, MAYA JJA et

HANCKE AJA

Date of Hearing
:
10 MAY 2007
Date of delivery
:
28 May 2007
Summary:  Confession to judgment in terms of Rule 31(1) must be founded on cause of
action contained in summons or notice of motion – severability of provision in
agreement relating to procedure for obtaining judgment in event of a breach ─
provision permitting creditor to sell property of debtor and keep any amount in excess
of agreed amount by which debt is to be deducted or bear the loss of any shortfall, not
contrary to public policy.

Neutral Citation: This judgment may be referred to as Citibank NA v Thandroyen Fruit
Wholesalers CC [2007] SCA 61 RSA.

SCOTT JA/…

SCOTT JA:
[1] On 7th February 2005 the appellant, to which I shall refer as
the Bank, sought and was granted judgment by Nicholson J in the
High Court, Durban, against the first, second, fourth and fifth
respondents in terms of a confession to judgment as contemplated
in Rule 31(1). The respondents (including the third respondent)
subsequently applied for the rescission of the judgment together
with certain ancillary relief. The Bank opposed the rescission and
filed a counter-application in terms of which (as amended) it
sought, first, that the judgment be varied by the substitution of a
lesser amount and, second, in the event of the judgment being
rescinded, that a fresh judgment be granted in the same (lesser)
amount. The matter came before Balton J who granted the
application for rescission of judgment and dismissed the counter-
application, with costs. The Bank appeals with the leave of the
court a quo.

[2] Before dealing with the issues raised in this court, it is
necessary to sketch the events forming the background to the
dispute. The facts are largely common cause.

[3] Some time prior to 4 December 2003 the first, second and
third respondents applied in the High Court, Durban, for an order
interdicting the Bank from instituting liquidation proceedings
against them. The matter was settled and on 4 December 2003 a
written agreement of settlement was entered into between the
Bank and all five respondents. The fourth respondent is Mr Ronnie
Thandroyen who is a member of the first and second respondents.

The latter are close corporations which carry on, or formerly
carried on, business in the fresh produce trade. The fifth
respondent is Ms Logarani Thandroyen who is a director of the
third respondent which is a private company.

[4] The terms of the agreement which are material for present
purposes were the following:

(a)      The first, second, fourth and fifth respondents (but not the
third respondent) acknowledged that they were jointly and
severally liable to the Bank in the sum of R2 175 000.
(b)
The Bank was authorised to sell certain immovable property
belonging to the fourth and fifth respondents. Pending transfer of
the property into the purchaser’s name, and as from 31 January
2004, the Bank was to pay the necessary rates and taxes and
other levies imposed on the property. The Bank was also to pay all
the costs of marketing the property.
(c)
Upon registration of transfer of the property into the name of
the purchaser, or upon the expiry of 38 months from the signing of
the agreement, whichever was the sooner, the debt was to be
reduced by the sum of R1 100 000.
(d)
Any amount realised from the sale in excess of the sum of
R1 100 000 would be for the benefit of the Bank and any shortfall
would be borne by the Bank.
(e)
The capital of the debt was repayable by way of instalments
of:

(i)
R20 000 on 31 December 2003;

(ii)
R20 000 on 31 January 2004;
(iii)
R150 000 on or before 29 February 2004;

(iv)
R25 000 per month thereafter.

All payments were to be paid into a specified account of the Bank.
(f)
The first, second, fourth and fifth respondents were all to sign
a ‘consent’ to judgment (in terms of Rule 31(1)) in respect of their
joint and several liability to the Bank for the capital amount. The
Bank would be entitled to take judgment in terms of the consent in
the event of their remaining in default ‘after receiving five court
days’ written notice to cure the breach’.
(g)
The Bank was to seek judgment only for the balance owing
as at the date of lodging the consent, notwithstanding the amount
specified in the consent.
(h)
In order for the Bank to obtain judgment by consent against
the fourth and fifth respondents, they consented to being joined in
the interdict proceedings.

[5] In pursuance of the agreement, the first, second, fourth and
fifth respondents   signed   the consent   to   judgment   in   the
sum   of
R2 175 000 plus interest calculated from the date of payment and
costs of suit. The consent also made provision for the fourth and
fifth respondents to be joined in the interdict proceedings. Some 10
months after the conclusion of the agreement, the property was
sold and the capital debt was reduced by R1 100 000 as provided
for in the agreement. In the event, the property realised R1 400
000 and the excess of R300 000 accrued to the Bank.

[6] The Bank received no payments. On 6 December 2004 it
caused written notice to be given to the first, second, fourth and

fifth respondents informing them that they were in arrears with their
repayments and giving them five court days within which to remedy
their breach, failing which judgment would be taken in terms of the
consent. The respondents’ attorneys responded by insisting that
the instalments had been paid by electronic transfer and forwarded
to the Bank certain computer print-outs to substantiate their
contention. They also called on the Bank to check its records. The
Bank advised that it had done so and called on the respondents to
provide confirmation from their Bank that the transfers had not
been returned. This was not forthcoming. After two months and the
exchange of much correspondence the Bank finally lost patience
and on 7 February 2005 took judgment in terms of the consent. It
subsequently transpired that the transfers had indeed been
returned and this, it was said, had not been noticed by the third
respondent which, although not liable, had been the party effecting
the transfers. The reason for the returns was said to be an
incorrect clearing code on the part of the third respondent’s
bankers. Although initially in dispute, it was common cause in this
court that the respondents’ failure to pay amounted to a breach of
the settlement agreement. For the sake of completeness, it should
be mentioned that the Bank sought and obtained judgment in the
full amount of R2 175 000 notwithstanding the sale of the property.
The warrant of attachment issued in pursuance of the judgment
was, however, for an amount which took into account the
deduction of R1 100 000.

[7] On 17 February 2005 the respondents launched an
application as a matter of urgency for the rescission of the
judgment granted on 7 February 2005 and for a stay of the warrant

of execution pending the finalisation of the application for the
rescission. The Bank agreed to the stay but resisted the rescission
of judgment. As previously indicated, the Bank filed a counter-
application in which, as subsequently amended, it sought (a) a
variation of the amount for which judgment had been granted and
(b), in the event of the rescission being granted, a fresh judgment
based on the acknowledgment of debt contained in the settlement
agreement. The amount for which judgment was sought was the
sum of R1 049 960 which took into account the deduction of R1
100 000 for the property as well as two subsequent payments.

[8] The court a quo, as I have said, granted the rescission and
dismissed the counter-application. Although the Bank sought and
obtained leave to appeal against both orders, counsel for the Bank
in their heads of argument filed in December 2006 conceded that
the rescission had been correctly granted. The concession was
well made. Rule 31(1) provides that a defendant may confess in
whole or in part ‘the claim contained in the summons’. In terms of s
1 of the Supreme Court Act 59 of 1959 ‘civil summons’ is defined
as including, inter alia, a notice of motion. But in motion
proceedings the confession, in order to comply with Rule 31(1),
must be to the claim contained in the notice of motion. If the claim
is founded not on the relief claimed in the summons or notice of
motion but on a settlement agreement, Rule 31(1) cannot be
applied. The position is different if the settlement provides that its
breach entitles the plaintiff or applicant to take judgment in terms of
the original cause of action contained in the summons or notice of
motion. See Barbour v Herf 1986 (2) SA 414 (N). But in the
present case, the judgment sought was founded on the cause of

action
contained
in
the
settlement
agreement,
viz
the
acknowledgment of debt, not the cause of action contained in the
interdict proceedings.

[9] I turn to the counter-application. In rejecting it, Balton J said
the following:

‘The [Bank] seeks judgment against the first, second, fourth and fifth
applicants for an amount of R1 049 960. This in effect entails an amendment
and or variation to the judgment granted by Nicholson J. The judgment cannot
be rectified since the jurisdictional basis for the existence of the judgment in
terms of Rule 31(1) does not exist. The judgment therefore falls to be set
aside and cannot be amended. The [Bank] would be entitled to institute the
necessary proceedings to recover any amount due to it against the applicants
concerned.’

It would seem from this passage that the learned judge
misunderstood what the Bank was claiming. The notice of motion
makes it clear that the variation to the judgment was sought only in
the event of the rescission not being granted. The claim for a fresh
judgment based on the acknowledgment of debt in the settlement
agreement was conditional on the rescission being granted. It was
not dependant on the rectification of the judgment granted by
Nicholson J.

[10] In this court counsel for the respondents did not attempt to
rely on the reasoning of the court a quo but instead sought to
justify the dismissal of the counter-claim on two further grounds.
The first related to the question of severability. He pointed out that
the conditional relief claimed was premised on the finding that the

settlement agreement was invalid at least to the extent that it
entitled the Bank to seek judgment on the basis of the consent
signed by the respondents. He submitted that the Bank was
accordingly obliged to make out a case in its counter-application
that the unenforceable provisions of the agreement were severable
from the remaining provisions and that the Bank had failed to do
so. He submitted further that the invalid provisions were in any
event not severable, particularly as the right to place the
respondents in mora was conjoined with the invalid right to obtain
judgment on the strength of the consent.

[11] In Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 16B
Smalberger JA, quoting with approval Botha J in Vogel NO v
Volkersz 1977 (1) SA 537 (T) at 548F, formulated the inquiry into
the question of severability as follows:

‘The “fundamental and governing principle” with regard to severability is “to
have regard to the probable intention of the parties as it appears in, or can be
inferred from, the terms of the contract as a whole”.’

It is true that there is no express reference to the question of
severability in the counter-application. But what the Bank was
claiming was judgment by way of a procedure other than in terms
of Rule 31(1). It was therefore implicit in the relief sought that the
Bank was relying on the severability of the provisions relating to
judgment by consent. Moreover, the settlement agreement, from
which the probable intention of the parties must be inferred, was
before the court, as were the circumstances in which the
agreement came to be concluded. In my view, there is accordingly

no merit in the contention that the Bank was obliged to allege more
in its papers before being entitled to argue the severability issue.

[12] As to the severability of the so-called invalid provisions, it
must be borne in mind that these provisions concern no more than
the procedure which the Bank was entitled to adopt when seeking
judgment in the event of a breach. Had it been legally possible for
the Bank to obtain judgment by consent it would not have been
precluded, had it so wished, from instituting action by way of a
simple summons and obtaining judgment by default in terms of
Rule 31(5). The only consequence would have been to render it
liable for the additional costs incurred. In this regard, Beyers JA in
Montesse Township and Investment Corporation (Pty) Ltd v
Gouws NO 1965 (4) SA 373 (A) at 380 in fine said the following:

‘I am not aware of any general proposition that a plaintiff who has two or more
remedies at his disposal must elect at a given point of time which of them he
intends to pursue, and that, having elected one, he is taken to have
abandoned all others. Such a situation might well arise where the choice lies
between two inconsistent remedies and the plaintiff commits himself
unequivocally to one or other of them.’

(See also Total South Africa (Pty) Ltd v Bekker NO 1992 (1) SA
617 (A) at 626 I-J.) Counsel for the respondents argued, however,
that the provision was of fundamental importance to the Bank as it
enabled the Bank to take judgment without the prospect of lengthy
litigation. I
pause to observe that given the acknowledgment of debt contained
in

the agreement it is difficult to suppose what would have given rise
to such litigation. Counsel made no suggestion as to the defence
that could have been raised nor, I might add, did the respondents
seek to rely on it. But, be that as it may, I am unpersuaded that
there is merit in counsel’s contention. It strikes me as highly
improbable that the Bank when confronted with the offer of a
written acknowledgment of debt would have declined to accept it
unless it could obtain judgment by consent in the event of a
breach. It follows that in my view the provisions in question are
severable from the remainder of the agreement and the first
ground advanced in support of the court a quo’s decision must
therefore fail.

[13] The
second
ground
advanced
by
counsel
for
the
respondents to justify the dismissal of the counterclaim was that
the provisions in the settlement agreement authorising the Bank to
sell the property owned  by  the  fourth and fifth respondents and to
reduce the debt by R1 100 000, regardless of what the property
realised, had the effect of rendering the settlement agreement
unenforceable. In elaboration, he submitted that although the
provisions did not strictly speaking constitute a pactum
commissorium or permit a parate executie their similarity to both
was enough to categorise them as contrary to public policy. A
pactum commissorium, shortly stated, is an agreement in terms of
which property pledged or mortgaged may be kept by the creditor
in the event of a future default by the debtor, regardless of the
amount of the debt or the value of the property. Such an
agreement is prohibited by law and is void. See Graf v Buechel
2003 (4) SA 378 (SCA) paras 9-13. An agreement permitting

parate executie (immediate execution) without recourse to the
court, or, after default, to the debtor in the case of immovable
property, is similarly void : Iscor Housing Utility Co v Chief
Registrar of Deeds 1971 (1) SA 613 (T), Bock v Duburoro
Investments (Pty) Ltd 2004 (2) SA 242 (SCA) para 7. In my view,
none of the features of a pactum commissorium or parate executie
which render them void are to be found in the provisions of the
settlement agreement which counsel contends are contrary to
public policy. The parties agreed at the time of entering into the
settlement agreement that the Bank would sell the property and
the debt would be reduced by a specified amount or, failing a sale
within a specified period, the debt would in any event be reduced
by that amount.  Although the agreement was not one of sale of
the property by the respondents to the Bank, its effect was similar.
Once the parties had agreed upon the amount by which the
existing debt was to be reduced it was up to the Bank to find a
buyer. The Bank was responsible for the costs of marketing the
property and for all rates, taxes and other levies imposed on the
property pending its sale. Had the property not realised the agreed
amount, the Bank would have borne the loss. In the event, it
succeeded in selling the property for more than the agreed
amount. The result would have been no different had the
respondents sold the property to the Bank and the Bank, in turn,
had resold it.

[14] The respondents’ real complaint is that the Bank made a
profit of R300 000. But, as pointed out by Innes CJ  in Eastwood v
Shepstone 1902 TS 294 at 302, when determining whether a
contract is contrary to public policy or not:

‘What we have to look to is the tendency of the proposed transaction, not its
actually proved result.’

(See also Sasfin (Pty) Ltd v Beukes, supra, at 8J-9A.) In the
present case the Bank could just as well have lost on the
agreement  had  it  been  unable to sell the property for as much
as      R1 100 000. In that event the respondents would hardly
have complained. In the Sasfin case Smalberger JA at 9B
emphasized that no court should shrink from the duty of declaring
a contract contrary to public policy when the occasion so demands.
By the same token, he warned, however, that the power to declare
contracts contrary to public policy should be ‘exercised sparingly
and only in the clearest of cases’. The present is manifestly not
such a case.

[15] It follows that the appeal against the dismissal of the counter-
application must succeed. This brings me to the question of costs.
As previously indicated, counsel for the Bank conceded in their
heads of argument that the rescission of the judgment given in
terms of Rule 31(1) was correctly granted. Nonetheless, by
succeeding in its counter-application the Bank achieved substantial
success and is entitled to its costs of appeal, including the costs of
the application for leave to appeal. As far as the costs in the court
below are concerned, the order as to costs of the main application
will remain undisturbed, but the appellant is entitled to the costs of
the counter-application.

[16] The following order is made:

(a)(i) The appeal against the order of the court a quo in respect of
the main application is dismissed.
(ii) The appeal against the order of the court a quo in respect of
the counter-application is upheld.
(iii)
The respondents are ordered to pay the appellant’s costs of
appeal jointly and severally (including the costs of the
application for leave to appeal), such costs to include the
costs of two counsel.
(b) The order of the court a quo in respect of the counter-
application is set aside and the following order is substituted:
(i)
Thandroyen Fruit Wholesalers CC, R & N Fresh
Produce CC, Logarani and Ronnie Thandroyen are
directed jointly  and  severally to pay Citibank NA the
sum of
R1 049 960.
(ii)
Thandroyen Fruit Wholesalers CC, R & N Fresh
Produce CC, Logarani and Ronnie Thandroyen are
directed jointly and severally to pay Citibank NA
interest on the sum of R1 049 960 at the rate of
15,5% per annum calculated from the date of
judgment (26 August 2005) to the date of payment in
full.
(iii)
The applicants in the main application are directed to
pay the costs of the respondent’s counter-application.

_________________

D G SCOTT
JUDGE OF APPEAL

AGREE:

NUGENT JA
HEHER JA
MAYA JA
HANCKE AJA
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
MAY 2007
Status:
Immediate

Please note that the media summary is intended for the benefit of
the media and does not form part of the judgment of the Supreme
Court of Appeal

CITIBANK NA v THANDROYEN FRUIT WHOLESALERS CC

The Supreme Court of Appeal today upheld an appeal against a judgment of the High
Court, Durban, which had declined to grant judgment in favour of Citibank NA based
on an acknowledgment of debt signed by Mr Ronnie Thandroyen and Ms Logarani
Thandroyen both in their personal capacities and on behalf of two close corporations
of which each was a member.

It was argued in the SCA that it would be contrary to public policy for the court to
enforce the agreement embodying the acknowledgment of debt in view of one of its
provisions. The provision in question authorised the Bank to sell certain immovable
property belonging to the Thandroyens and to reduce the debt by an agreed amount of
R1 100 000. It was specifically agreed that if the property realised more than this
amount the Bank could keep the difference but if it realised less, the Bank would have
to bear the loss. In the event, the Bank sold the property for R1 400 000, making a
profit of        R300 000.

The SCA held that there could be no objection to such a provision. Both the bank and
the debtors had an equal chance of gaining or losing on the deal and the situation
would have been no different had the bank purchased the property at an agreed price
and then resold it. In that event there clearly could be no objection.
--ends--