REPORTABLE

Case No: 85/98

IN THE SUPREME COURT OF APPEAL OF

SOUTH AFRICA

In the matter between:

INTERCONTINENTAL EXPORTS
(PTY) LTD
APPELLANT

and

F T FOWLES
RESPONDENT

CORAM: MAHOMED
CJ,
SMALBERGER,
HOWIE,
PLEWMAN JJA and FARLAM AJA

DATE OF HEARING: 9 MARCH 1999

DELIVERY DATE:
23 MARCH 1999

Suretyship - formal validity - rectification - costs.
________________________________________________________

JUDGMENT
________________________________________________________

. . . SMALBERGER JA

SMALBERGER JA:

[1] The appellant applied in the Witwatersrand Local Division for
default judgment in terms of rule 31(2)(a) read with rule 31(4) of the
Uniform Rules of Court in respect of an action instituted by it against the
respondent to rectify a deed of suretyship (Athe suretyship@), payment of
the amount claimed to be due by the respondent in terms of the (rectified)
suretyship, interest on such amount and costs on the attorney and client
scale.
[2] The matter came before Malan J who refused the application.
Leave to appeal was also refused but was subsequently granted by this
Court on petition to the Chief Justice.  At the hearing of the appeal there
was no appearance on behalf of the respondent.
[3] The suretyship, ineptly adapted from a form apparently used by a

commercial bank, describes the parties as follows in clause 1:
A1.1.  Intercontinental Exports (Pty) Ltd, its successors-in-
title and assigns (hereinafter referred to as >I.C.E.=)
1.2.  Mr Frank Fowles and Mrs. Linda Fowles c/o 113 Smit
Street, Braamfontein, Johannesburg (hereinafter referred to
as >the Debtor=)
and
1.3.  The party executing this suretyship as surety and co-
principal debtor or each party executing this suretyship as a
surety and co-principal debtors, as the case may be
(hereinafter referred as >the Surety=).@

[4] In the preamble (clause 2) it is recorded:
Athat this suretyship is furnished in consideration of I.C.E.
allowing the Debtor or any third party all or any part of
whose present or future indebtedness to I.C.E. has been or
will be guaranteed by the Debtor such banking facilities as
I.C.E. may in its sole discretion deem fit (either by way of
the continuation of any existing facilities or by the
provision of new or further facilities or both).@

[5] In terms of clause 3:
AThe Suretyship [the word used] binds and interposes

himself as surety and co-principal debtor in solidum for the
Debtor=s indebtedness generally to I.C.E. howsoever arising
including . . .@

The suretyship is signed at its end by the respondent whose name is
given in full as AFrank Turner Fowles@.
[6] The appellant=s particulars of claim alleged, inter alia, that:
a)
A company, Security Depot (Proprietary) Limited (Athe company@), was
indebted to the appellant in the sum of R2 178 844,43 in respect of goods
ordered by the company from the appellant between the first quarter of 1996
and April 1997;
b)
During or about April 1997 the respondent bound himself in terms of the
suretyship as surety and co-principal debtor for the company=s indebtedness
to the appellant;
c)
The suretyship incorrectly reflected the agreement between the appellant and
the respondent in the following respects:
A4.1
In clause 1.2 thereof Defendant [respondent] is described as

the debtor, whereas the debtor is the company.
4.2
Plaintiff [appellant] never carried on business as a bank and it
was never the intention of the parties that the >suretyship is
furnished in consideration of ICE allowing the Debtor . . .
banking facilities=, as set out in clause 2 thereof.
4.3
It was never the intention that Defendant would bind himself
as surety and co-principal debtor for his own indebtedness to
Plaintiff.@;

d)
It was the intention of the parties that the respondent would bind himself to
the appellant as surety for the company=s indebtedness to the appellant;
e)
The incorrect description in the suretyship of the debtor as the respondent
instead of the company and the incorporation of clause 2 were occasioned by
a common error;
f)
The appellant was accordingly entitled to rectification of the suretyship by
substituting the words ASecurity Depot (Proprietary) Limited@ for the words
AMr Frank Fowles and@ where they appear in clause 1.2, and the deletion of
clause 2.
[7] Section 6 of the General Law Amendment Act 50 of 1956 (Athe Act@)
provides:

ANo contract of suretyship entered into after the commencement of
this Act, shall be valid, unless the terms thereof are embodied in a
written document signed by or on behalf of the surety . . .@

[8] The Aterms@ contemplated in section 6 as essential to the validity of a contract
of suretyship include the identities of the creditor, the principal debtor and the surety
(Fourlamel (Pty) Ltd v Maddison 1977(1) SA 333 (A) at 345A - D).
[9] In Magwaza v Heenan 1979(2) SA 1019 (A) this Court held that a contract
for the sale of fixed property which is formally invalid (and consequently a nullity)
for want of compliance with section 1(1) of the General Law Amendment Act 68 of
1957, cannot be rectified (at 1029A - C read with 1026A - D).  This principle would
apply equally to a contract of suretyship lacking in essential terms.  The purpose of
the governing statutory enactment in each case, namely, to achieve certainty as to the
true terms agreed upon and thus avoid or minimize the possibility of perjury or fraud
and unnecessary litigation, is the same (Fourlamel (Pty) Ltd v Maddison (supra) at
343A).
[10] That it is not competent to rectify a contract that is invalid for non-
compliance with statutory formalities must therefore be taken to be established law

despite the criticism that has been directed at this view (see eg De Wet en Van Wyk:
Die Suid-Afrikaanse Kontraktereg en Handelsreg:  5th Ed: Vol 1:  323 ff; Tager:
ARectification of Invalid Contracts@ (1977) 94 SALJ 8).  On the other hand, where
such formalities have been complied with, rectification is permissible if the
requirements for rectification have been satisfied (cf Litecor Voltex (Natal) (Pty) Ltd
v Jason 1988(2) SA 78 (D & CLD); Lazarus v Gorfinkel 1988(4) SA 123(C)).  There
are therefore two separate and distinct enquiries in a matter such as the present.  The
first relates to the formal validity of the deed of suretyship; the second to whether the
requirements for rectification have been satisfied.  The factual allegations relevant to
the second enquiry should not be allowed to impinge on the first.
[11] Rectification is a well established common law right.  It provides an equitable
remedy designed to correct the failure of a written contract to reflect the true
agreement between the parties to the contract.  It thereby enables effect to be given to
the parties= actual agreement.  The requirement of formal validity in the case of a
deed of suretyship flows from the Legislature=s perceived need to provide safeguards
in such matters.  To the extent that the need to satisfy the latter may preclude

recourse to the former, tension will inevitably exist between the two.  While care
must be taken not to defeat the object of the Act, the formality requirements must not
be allowed to become an unnecessary stumbling-block to rectification and,
consequently, to giving effect to the true intention of the contracting parties.
[12] The undisputed averments made by the appellant in its particulars of claim
would permit of rectification of the suretyship provided the requirements of section 6
of the Act have been complied with.  The only issue on appeal is, therefore, whether
the suretyship identifies a creditor, principal debtor and surety and is formally valid
on that account.  If it is, it is capable of rectification in the respects claimed by the
appellant as its substantive validity is not in issue.  If not, the appeal must fail.  This
judgment is confined to that issue.
[13] The formal validity of a suretyship agreement must be determined ex facie the
document embodying the suretyship undertaking.  In Spiller and Others v Lawrence
1976(1) SA 307 (N) Didcott J, in explaining the difference between a contract which
is void for want of compliance with essential formalities, and one which is invalid for
some other reason, said the following (at 312B - D):

AThe two situations are fundamentally different.  In the one . . ., when
the question of validity relates to the substance of the transaction and
not its form, nullity is an illusion produced by a document testifying
falsely to what was agreed.  In the other . . . the cause of nullity is
indeed to be found in the transaction=s form.  When it is said to
consist of a failure to observe the law=s requirement that the
agreement be reflected by a document with particular characteristics,
the document itself is necessarily decisive of the issue whether the
stipulation has been met; for it has been only if this emerges from the
document.@

(My emphasis.)

[14] The above passage from Spiller=s case was referred to with apparent approval
by this Court in Headermans (Vryburg) (Pty) Ltd v Ping Bai 1997(3) SA 1004 (SCA)
at 1010F - H.  It also appears to be in accordance with the approach adopted by this
Court in other cases to the effect that one is basically confined to looking at the
particular suretyship agreement to see if it contains the required essentialia (cf
Société Commerciale de Moteurs v Ackermann 1981(3) SA 422 (A) at 438B - 440H;
Du Toit en >n Ander v Barclays Nasionale Bank Bpk 1985(1) SA 563 (A) at 570B to
571E).
[15] The learned judge a quo found, inter alia, that in the suretyship the identity of

the surety Ais left in blank@ and that a space where the name of the principal debtor
should have been entered was also left blank.  I do not propose to review the
provisions of the suretyship in detail.  Clause 1.2 of the suretyship, to which I have
referred, clearly identifies AMr Frank Fowles@ as the principal debtor.  The failure to
refer to him again as such in the space left blank cannot detract from the fact that the
suretyship identifies a principal debtor.  In clause 1.3 the surety has been identified as
the party executing the suretyship.  That party, below his signature, is described as
AFrank Turner Fowles@.  The identity of the surety is therefore also established ex
facie the suretyship.  I accordingly disagree with the findings of the judge a quo in
this regard.  That the suretyship identifies the creditor (I.C.E.) has never been in
dispute.
[16] It was conceded by Mr Engelbrecht, who argued the appeal on behalf of the
appellant, that where it appears conclusively from a deed of suretyship that the
principal debtor and the surety are the same person or legal persona, the deed would
be invalid for want of an essential term, because the person or legal persona could be
either the principal debtor or the surety, but not both, as one cannot stand surety for

one=s own debt (Forsyth and Pretorius: Caney=s The Law of Suretyship: 4th Ed: 40).
One of the necessary parties to a suretyship would therefore be lacking.  The position
would be the same as if the identity of either the principal debtor or the surety were
missing.  A case in point is Republican Press (Pty) Ltd v Martin Murray Associates
CC and Others 1996(2) SA 246 (N), where in the deed of suretyship ARepublican
Press (Pty) Ltd@ featured as both principal debtor and creditor.  Hurt J, delivering the
majority judgment, held (at 251G - H) that:
AIn this case there is no question of the >Republican Press (Pty) Ltd=
cited as the principal debtor, being a different entity to the creditor.@

The finding was clearly justified as there cannot be more than one registered
company with the same name.  In the result it was found that the deed of suretyship
lacked formal validity.  There is no reason to doubt the correctness of the majority
decision in that case.
[17] The present situation differs factually from the one with which the court was
confronted in the Republican Press case (supra).  The principal debtor is referred to
in clause 1.2 of the suretyship as AMr Frank Fowles@.  The name of the surety is

reflected as AFrank Turner Fowles@.  The names, though similar, are not identical, and
ex facie the suretyship do not necessarily refer to the same person.  Even if the two
names were identical, it would not follow as a matter of course that they referred to
the same person.  The parties might, for instance, be father and son who happen to
have the same names, a not uncommon occurrence.  In those circumstances, and a
fortiori in the present, a deed of suretyship would be capable of being construed ex
facie the document itself as reflecting a creditor, principal debtor and surety and
would accordingly be formally valid on that score.
[18] This approach follows a line similar to that taken in exceptions.  An exception
ought not to be upheld unless Aupon every interpretation which the pleading in
question, and in particular the document on which it is based, can reasonably bear, no
cause of action or defence (as the case may be) is disclosed@ (Sun Packaging (Pty)
Ltd v Vreulink 1996(4) SA 176 (A) at 183E - F).  Likewise a deed of suretyship, in
my view, ought not be held to be formally invalid where ex facie the document it is
reasonably capable of an interpretation consistent with validity.
[19] In the Republican Press case (supra) Hurt J, confronted with the argument

that where a father and son, both having the same initials (or names), are respectively
stated to be principal debtor and creditor (or surety) in a suretyship undertaking, the
undertaking could not be presumed to be formally invalid simply because the
principal debtor and creditor were not identified by two different names, said the
following (at 251D - G):
AIt seems to me that there are two conclusive answers to this
proposition.  The first is that if there are indeed two parties to the
suretyship undertaking who have identical names, there will be no
need for a rectification of the document and those parties would
presumably be cited, and separately identified, in any proceedings in
which the document and the question of its enforceability may come
before the Court.  If it were pleaded, in such a case, that the document
was invalid for non-compliance with s 6, that plea could be disposed
of by a replication to the effect that the identical names referred to
two different juristic personae.  The second is that evidence would be
admissible for the limited purposes of identification of the parties to
the undertaking, provided always that the evidence does not encroach
into the prohibited territory demarcated by the parol evidence rule.
(See Sapirstein and Others v Anglo African Shipping Co (SA) Ltd
1978(4) SA 1 (A) at 12D.)  It seems to me that such evidence would
be admissible ante omnia in any situation where there is doubt as to
whether the document refers to three separate parties to the contract
of suretyship.@

[20] With regard to the first answer, it seems to proceed from the premise that the

suretyship undertaking is formally valid.  With regard to the second, the envisaged
evidence would be admissible not to establish the document=s formal validity, but to
give effect to an otherwise valid suretyship.  It would, for example, permit extrinsic
evidence to be led to identify the actual creditor, principal debtor or surety, as the
case may be, from among a group of such named in the written document (see
Sapirstein=s case referred to in the above quotation at 12E - H; cf Federated Timbers
(Pretoria) (Pty) Ltd v Fourie 1978(1) SA 292 (T) at 298F - H).  To that extent the
quoted passage is not inconsistent with the views expressed above.  If by the last
sentence is meant that evidence could be led to show, contrary to what appears ex
facie the document, that a suretyship undertaking lacks formal validity (eg to show
that two of the parties are the same) I would respectfully disagree.  It is for that
reason that regard cannot be had to the undisputed allegation in paragraph 4.1 of the
Particulars of Claim that the respondent is the person described in the suretyship as
the principal debtor in determining the issue of formal validity.
[21] In the result I am of the view that the suretyship was formally valid and that
the appellant is entitled to rectification and default judgment as prayed.

[22] The appellant asks for attorney and client costs both in the court a quo and on
appeal.  It relies in this respect on clause 5 of the suretyship which provides, inter
alia, for unlimited liability on the part of the surety (respondent) and Acosts of
recovery on the attorney and client scale@.  This raises the question whether a court is
obliged to give effect to such an agreement or whether it retains a residual discretion
with regard to costs.
[23] In Claude Neon Lights (SA) Ltd v Peroglou 1977(1) SA 575 (C) it was held
(at 578C) that parties cannot by agreement deprive a court of the discretion it has in
regard to costs.  However, reliance for that proposition appears to have been placed
on a decision where that was assumed, not decided.  In Western Bank Ltd v Meyer;
De Waal; Swart and Another 1973(4) SA 697 (T) the Full Court proceeded on the
premise that agreement could not deprive it of its discretion as to costs (at 701C - G).
In Santam Bank Bpk v Kellerman 1978(1) SA 1159 (C), after a review of the
relevant authorities, the Full Court (per Grosskopf J) pointed out (at 1162A) that
there existed A`n mate van onsekerheid... of die Hof `n residuêre bevoegdheid oorhou
om te weier om so `n ooreenkoms af te dwing@.  The learned judge added:

APersoonlik vind ek dit moeilik om `n beginselgrondslag vir so `n bevoegdheid te
vind@.
[24] In Sapirstein=s case (supra, at 14E - F) this Court left open the question of
whether or not a court retains a residual discretion in the face of an agreement with
regard to costs.  Earlier in the judgment (at 14A - D) it had been said:
AGenerally speaking, awards of costs are, of course, in the discretion
of the Court and that discretion must be judicially exercised whenever
the need arises.  But, accepting this to be the position, I am of the
view that there can be no objection, in principle, to a Court giving
effect to an agreement between parties concerning their liability for
legal costs arising out of a dispute between them.  It is commonplace
for parties to enter into agreements of this sort - for example, parties
often agree that each party shall pay his own costs, or that no award
as to costs shall be made, or that a party=s liability for costs shall be
limited to a particular amount, and so on  - and for the Courts to make
awards in terms of such agreements.  In the present instance the
plaintiff, in stipulating that costs should be paid on the attorney and
client basis, obviously wanted to ensure that it would not be out of
pocket in respect of any legal costs incurred in connection with
disputes arising out of the agreement.  The purpose of an award of
costs is to indemnify a party >for the expense to which he has been put
through having been unjustly compelled either to institute or defend
litigation, as the case may be= (per Innes CJ in Texas Co (SA) Ltd v
Cape Town Municipality 1926 AD 467 at 485) and, if a contracting

party wants to ensure that he is fully indemnified against such
expenses, there is, in my view, no reason why he should not be
entitled to stipulate that such costs, if incurred, should be paid on the
attorney and client scale.@

[25] The basic rule is that, statutory limitations apart, all costs awards are in the
discretion of the court (Kruger Bros & Wasserman v Ruskin 1918 AD 63 at 69, a
decision which has consistently been followed).  The court=s discretion is a wide,
unfettered and equitable one.  It is a facet of the court=s control over the proceedings
before it.  It is to be exercised judicially with due regard to all relevant
considerations.  These would include the nature of the litigation being conducted
before it and the conduct of the parties (or their representatives).  A court may wish,
in certain circumstances, to deprive a party of costs, or a portion thereof, or order
lesser costs than it might otherwise have done, as a mark of its displeasure at such
party=s conduct in relation to the litigation.  Is it to be precluded by agreement from
doing so? A court should not be obliged to give its imprimatur to an order of costs
which, in the circumstances, it considers entirely inappropriate or undeserved.  In my
view, as a matter of policy and principle, a court should not, and must not, permit the

ouster of its discretion because of agreement between the parties with regard to costs.
[26] Because a court exercises its discretion judicially, not capriciously, it would
normally be bound to recognise the parties= freedom to contract and to give effect to
any agreement reached in relation to costs.  But good grounds may exist, depending
upon the particular circumstances, for following a different course.  This might
result, on a proper exercise of discretion, in a party being deprived of agreed costs, or
being awarded something less in the way of costs than that agreed upon.
[27] As pointed out in Sapirstein=s case (supra) at 14C, the purpose of an award of
costs is to indemnify a party.  By stipulating for attorney and client costs a party
seeks even greater indemnity for costs incurred through having to pursue a claim in
court.  In the present instance the appellant, in order to obtain judgment against the
respondent, was obliged to come to court in order to have the suretyship rectified.
This was occasioned by its own ineptitude in using an inappropriate form for the
deed of suretyship and then having it completed in respects which did not properly
reflect what had been agreed upon.  While there might have been some fault on the

respondent=s part in signing the suretyship in that form, it was of a much lesser
degree than that of the appellant.  The respondent did not oppose either the relief
sought in the court below or the appeal.  It was through no fault of the respondent
that the court a quo found against the appellant on an issue which, largely through its
own doing, it was obliged to take to court and thereafter on appeal.  In the
circumstances good grounds exist, in the exercise of our discretion, for not giving
effect to the agreement in the suretyship relating to attorney and client costs, and for
awarding costs only on the party and party scale.
[28] The following order is made:
1)
The appeal is allowed with costs.
2)
The order of the court a quo is set aside and there is substituted in  its stead
the following:
AThere will be judgment in favour of the plaintiff against the
defendant for:
(a)
An order rectifying the deed of suretyship, annexure >WL1' to the
particulars of claim, by the substitution of the words >Security Depot
(Proprietary) Limited= for the words >Mr Frank Fowles and= where
they appear in clause 1.2 thereof and by the deletion of clause 2
thereof in its entirety;

(b)
Payment of the amount of R2 178 844,43;
(c)
Interest at the rate of 24% per annum on the amount of R2 178 844,43
from 1 August 1997 to date of payment;
(d)
Costs of suit on the party and party scale.@

____________________

J W SMALBERGER

JUDGE OF APPEAL

MAHOMED CJ
)concur
HOWIE JA

)
PLEWMAN JA
)
FARLAM AJA
)