THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Not reportable
Case No: 1113/2016

In the matter between:

AUGUST NTHAKO NDUBU
FIRST APPELLANT
JOAO MANUEL VICENTE DA ENCARNACAO
SECOND APPELLANT
QUANTUM LEAP INVESTMENTS 221 (PTY) LTD
THIRD APPELLANT
TUBE-MECH SERVICES (PTY) LTD
FOURTH APPELLANT

and

FIRST RAND BANK LIMITED

t/a WESBANK
RESPONDENT

Neutral citation:
Ndubu v First Rand Bank (1113/2016) [2017] ZASCA 61
(26 May 2017)

Coram:                 Lewis, Tshiqi, Majiedt and Swain JJA and Coppin AJA
Heard:
5 May 2017
Delivered:
26 May 2017

Summary: Suretyship: release of surety due to alleged prejudicial conduct of
creditor in not accepting offers that would eliminate or reduce surety’s liability:
onus on surety to prove defences: surety failed to discharge onus: appeal
dismissed.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Gauteng Local Division of the High Court, Johannesburg
(Monama J sitting as court of first instance):
1 The appeal is dismissed.
2 The appellants are to pay the costs of the appeal jointly and severally, the
one paying the others to be absolved.
______________________________________________________________

JUDGMENT
______________________________________________________________

Coppin AJA (Lewis, Tshiqi, Majiedt and Swain JJA concurring):

[1] This appeal relates to the liability of the appellants, as sureties, to the
respondent, First Rand Bank Limited, trading as Wesbank (Wesbank). In a trial
action, the Gauteng Local Division of the High Court, Johannesburg, granted
judgment against the appellants as sureties for the indebtedness of Sizwe
Personnel Service (Pty) Ltd (Sizwe), arising out of four instalment sale
agreements, in respect of two trucks and two trailers. The appellants were
ordered to pay the shortfall on the sale of these assets by public auction at the
instance of Wesbank. The total sum amounted to some R694 042 and they
were ordered to pay that plus interest. The appeal is before this court with the
leave of the court a quo. The issue before this court is whether there is any
foundation for the various defences that the appellants raised as sureties.

Factual matrix
[2] Broadly outlined, the common cause facts are the following. On
17 October 2007 Wesbank entered into four separate instalment sale
agreements (credit agreements) with Sizwe in terms of which it sold and

delivered two trucks and two interlink trailers (the vehicles) to Sizwe. On the
same date the appellants bound themselves jointly and severally, in solidum
and as co-principal debtors, in favour of Wesbank in respect of Sizwe’s liability
arising from, or incidental to, the four credit agreements.

[3] The first appellant was a director of Sizwe and at all material times the
second appellant was its managing director. The second appellant was also
managing director of the third appellant and sole director of the fourth
appellant. I shall, for ease of reference, refer to the fourth appellant as
Tube-Mech.

[4] On 6 April 2010 Sizwe was placed under voluntary liquidation by way of
a special members’ resolution. Messers Oelofsen and Kharivhe were
appointed as liquidators on 6 July 2010, having served as the provisional
liquidators until then. Prior to Sizwe’s liquidation, Mr Oelofsen had been
consulted by the second appellant and his attorney, Mr Prinsloo, in connection
with its liquidation.

[5] From the outset and throughout the process, the appellants,
represented mainly by the second appellant, acting with the assistance of the
appellants’ bookkeeper, Mrs Viviers, had been in frequent contact with Mr
Oelofsen and Wesbank regarding Sizwe’s indebtedness in respect of the
vehicles. Various attempts were made by the appellants to reduce the
indebtedness, and from about April 2010 to about January 2011, monthly
instalments due in terms of the credit agreements were paid by certain of the
appellants.

[6] Despite Sizwe’s liquidation, the vehicles were not delivered forthwith to
either the liquidators or Wesbank. But soon after it was placed in liquidation the
second appellant, through Mrs Viviers, sought from Wesbank settlement
figures for the indebtedness under the credit agreements. And during this
period, Tube-Mech, which was owned and controlled by the second appellant,
sought finance to purchase the vehicles.

[7] On 31 May 2011, Mr Visage, the sales manager of a truck dealership
where the vehicles were kept, Truck-World (Pty) Ltd (Truck-World), made a
written offer on its behalf to the liquidators to purchase three of the four
vehicles, namely, two trucks and one interlink trailer (the first offer) The first
offer was to purchase the two trucks for R513 000 (including VAT) each and
one interlink trailer for R250 800 (including VAT).The offer stated that it was
final and the offeree was requested to confirm acceptance of the offer ‘as soon
as possible’, because the offeror needed to prepare the vehicles for sale.
However, on 14 June 2011 the first offer was withdrawn in writing by Mr
Visage. His letter withdrawing the offer addressed to Oelofsen, stated the
following:
‘Ons aanbod om te koop gerig aan u op die Sizwe voertuie was me[t] inbegrepe dat dit binne n
redelike tydperk aanvaar sou word. Hierdie aanbiedinge is nie aanvaar nie en word dus
teruggetrek.
Hoop u vind die bogenoemde in orde’.1

[8] The second offer came a few days later, on 23 June 2011, from
Tube-Mech. It made a written offer, addressed to Mr Oelofsen, to purchase
one truck for R681 379.33 (including VAT), the other truck for R680 869.39
(including VAT) and the two components of one interlink trailer for R328 622.38
(including VAT) each. This offer, which was apparently made after settlement
figures had been obtained from Wesbank, was, in total, more than the first offer
by approximately R370 000, but was subject to Tube-Mech obtaining finance
for the purchase. Tube-Mech had difficulties in securing the necessary finance.

[9] On or about 27 July 2011, Mr Oelofsen, who was aware of Tube-Mech’s
difficulty in securing finance, instructed Wesbank to repossess the vehicles.
The appellants contended that their retention of the vehicles until then was with
the knowledge, or acquiescence, of the liquidators and Wesbank and that they
delivered them to Wesbank as soon as they were required to do so.

1 Own translation: ‘It was implicit in our offer that was addressed to you, to purchase the Sizwe vehicles,
that it would be accepted within a reasonable time. Since the offer was not accepted, it is thus withdrawn.
I hope you find the above in order.’

[10] By 18 August 2011, Tube-Mech was still struggling to obtain finance to
purchase the vehicles. As a result, on 2 September 2011 Mr Oelofsen, who
testified to the effect that he acted in this matter with the concurrence of his co-
liquidator, informed Wesbank that it was authorised to sell the vehicles.
However, Wesbank did not proceed to do so immediately and by
13 September 2011 was still considering Tube-Mech’s application for
financing. Wesbank decided not to finance Tube-Mech in the light of various
factors that were canvassed in evidence at the trial, but which need not be
traversed here.

[11] By 27 September 2011, Wesbank had cleared the vehicles for sale by
public auction. On 12 October 2011, which was long after the second meeting
of creditors, the vehicles were sold at a public auction.

[12] On 18 October 2011, a written offer dated 10 October 2011, made by
PF Business Services (Pty) Ltd, and addressed to Mr Oelofsen, was brought to
Mr Oelofsen’s attention by the appellants’ attorney. The offer was for the
purchase of the two trucks for R680 869.39 (including VAT) each, and the two
interlink trailers for R361 323 (including VAT) each (the third offer).

[13] The amount realised for the vehicles at the auction was subsequently
paid by Wesbank to the liquidators. As mentioned, the full extent of Sizwe’s
indebtedness was not extinguished at the auction, resulting in a shortfall of
approximately R700 000. Wesbank consequently instituted action proceedings,
in the court a quo, against the appellants, as sureties of Sizwe, for the shortfall
after it had received its dividend from the liquidators in respect of each credit
agreement.

The appellants’ defences
[14] Before us, as in the trial court, the appellants, essentially, adopted a
shotgun approach in defending themselves against Wesbank’s claims. Some
of their defences were inserted in their plea by way of an amendment shortly
before the trial commenced. The appellants sought to be released entirely from
their respective obligations under the suretyship. As a basis for that they

alleged firstly, as a main ground of defence, that Wesbank had refused to
accept, or had declined the three offers; that such conduct amounted to a
breach of obligations which Wesbank had in terms of the credit agreements, or
the suretyship agreement, or generally. Further, that as a result of such
conduct the appellants were prejudiced, in that they were still liable to make
payment to Wesbank, whereas acceptance of the said offers, according to
them, would have extinguished their indebtedness under the suretyship, or
reduced it substantially.

[15] Secondly, the appellants alleged that since Wesbank’s claims were for
damages, it had failed to mitigate its losses by not accepting the offers. The
appellants, thirdly, raised what they described as a constitutional point, namely,
that they (as sureties) ought to be released from their obligations on the basis
of public policy because of Wesbank’s conduct in respect of the offers. They
were essentially contending for the development of a ‘long-stop’ defence, if all
else failed.

[16] Fourthly, the appellants relied on miscellaneous points, the more
prominent of which was that Wesbank could not rely on s 83 of the Insolvency
Act2 because Wesbank had not complied with s 83 or s 84 of that Act. I shall
show later that those provisions have no application in this case. Another
miscellaneous point, which was accorded even less attention by the
appellants, was that the sale of the vehicles was invalid. Not much needs to be
said of the latter defence. The buyer of the vehicles was not cited, or joined in
the proceedings and obstacles, such as, for example, that posed by s 157(1) of
the Insolvency Act,3 were overlooked and not dealt with by the appellants in
their pleadings or at the trial.

[17] But for the points dealing with the Insolvency Act, all the other defences
of the appellants had a common denominator, or foundation, namely, the three

2Insolvency Act 24 of 1936 (the Insolvency Act).
3Section 157(1) provides that ‘…(1) [n]othing done under this Act shall be invalid by reason of a formal
defect or irregularity, unless a substantial injustice has been thereby done, which in the opinion of the
court cannot be remedied by any order of the court.’

offers made to purchase the vehicles. This was also conceded by counsel for
the appellants.

[18] The appellants had the onus of proving their defences, in particular, that
they ought to be released as sureties because of the alleged breaches by
Wesbank of its obligations.4 In light of the circumstances of this case it is not
necessary to go beyond the factual substratum of the defences and to deal
with the legal position regarding the discharge of sureties on the grounds of
prejudice.5

The defences relating to the offers
[19] Counsel for the appellants correctly conceded in this court that the
appellants’ contentions regarding the first and second offers did not withstand
scrutiny and were to be rejected. The first offer was withdrawn before it could
be accepted or rejected by the liquidator or Wesbank. The letter withdrawing
the offer, which is quoted earlier in this judgment, is totally inconsistent with the
hearsay evidence that the appellants relied upon to the effect that Mr Oelofsen
would have said to Mr Fitchett, a clerk of the appellants’ attorneys, that
Wesbank had rejected the first offer. Mr Oelofsen denied the allegation that he
had rejected the offer. There is no reliable evidence that Wesbank or the
liquidator had rejected the offer. The letter of withdrawal does not imply that the
offer was rejected and the fact that the offer had to be withdrawn puts beyond
doubt that it was not rejected. The rejection of an offer made to a specific
person results in the termination of that offer and it is no longer open for
acceptance.6 Mr Visage would not have withdrawn an offer that had been
rejected.

[20] The second offer was subject to Tube-Mech obtaining finance. It could
not obtain the necessary finance and that offer accordingly fell away. It was not
rejected by either the liquidator, or Wesbank. Much of the trial court’s time was

4See Absa Bank v Davidson [2000] 1 All SA 355 (SCA); 2000 (1) SA 1117 (SCA) para 19; Bock & others
v Duburoro Investments (Pty) Ltd [2003] 4 All SA 103 (SCA) ; 2004 (2) SA 242 (SCA). In respect of the
mitigation of damages: See Dominion Earthworks (Pty) Ltd v M J Greef Electrical Contractors (Pty) Ltd
1970 (1) SA 228 (A).
5See Absa Bank v Davidson supra; Bock & others v Duburoro Investments (Pty) Ltd supra.
6See R H Christie and G B Bradfield Christie’s The Law of Contract in South Africa 6 ed (2011) at 52.

taken up by the appellants’ futile challenge to Wesbank’s bona fides in refusing
Tube-Mech’s application for finance. The evidence overwhelmingly supports
the genuineness, rationality and reasonableness of Wesbank’s decision in that
regard.

[21] The third offer was also never rejected by either Wesbank, or the
liquidator. It was submitted to the liquidator, to whom it was addressed, and
who was the person in authority, after the vehicles had been sold on
12 October 2011. In respect of this offer though, the appellants’ tack was to
blame a Wesbank employee, Mrs Zelda Mafune for the fruitlessness of the
offer. They contended that when Mrs Viviers contacted Mrs Mafune on
10 October 2011 to enquire about the person to whom she had to submit this
offer, Mrs Mafune, on some undisclosed basis, had a duty to inform Mrs Viviers
of the date of the sale.

[22] In light of the evidence, these contentions are ill-founded. It is clear that
Mrs Viviers was negligent in not timeously communicating the offer to the
liquidator. Ms Viviers’ explanation that she did not know whom to contact about
the third offer was a ruse, or excuse, for her own negligence. If she was in
possession of the third offer on 10 October 2011, there could have been no
justifiable reason for her not submitting it to Mr Oelofsen. It was addressed to
him. So, logically, he would have been the one to contact in respect of it. Mrs
Viviers was familiar with Mr Oelofsen, and with his office. The evidence puts
this beyond contention. She was the one who engaged Mr Oelofsen and
Wesbank since the inception of the liquidation regarding the financing issues,
the takeover of the vehicles and the other offers.

[23] Mrs Viviers’ evidence under cross-examination that she did not contact
Mr Oelofsen because he had not been particularly responsive regarding the
previous offers, can be rejected out of hand. Not knowing whom to contact and
not contacting someone deliberately, are two entirely different, irreconcilable
versions. But for Mrs Viviers’ contradictory evidence, there is nothing to show
that Mr Oelofsen had been unresponsive in respect of the previous offers.

[24] In any event, it is also not conceivable how Mrs Mafune could have had
an obligation, let alone a legally enforceable one, to inform Mrs Viviers of the
date of the auction, when she was not specifically asked about it. Mrs Mafune
rightly referred Mrs Viviers to Mr Oelofsen. In any event, Mrs Mafune testified
that even if she had been asked about the date, she would not have been able
to disclose it to Mrs Viviers, because of Wesbank's rules of confidentiality.

[25] Despite the fact that Mrs Mafune had on 10 October 2011 referred
Mrs Viviers to Mr Oelofsen, to whom the offer was addressed and despite the
alleged urgency of the measures to be taken to ensure a beneficial outcome
for the appellants relating to the sale of the vehicles, as testified to by the
second appellant, Mrs Viviers did not act commensurately. Instead, she only
sent the offer to Mr Prinsloo, the appellants’ attorney, on 12 October 2011, with
a covering letter requesting him to send the offer to Mr Oelofsen. Nothing was
alluded to that prevented Mrs Viviers from herself sending the offer directly to
Mr Oelofsen, or to his office and to have done so on time.

[26] Before this court counsel for the appellants attempted to make
something of the evidence of Mr Moore, Wesbank's Corporate Asset Manager,
and that of Mr Oelofsen, to the effect that they, respectively, would have looked
favourably at the third offer if it had been brought to their attention timeously.
But that exercise was futile since those views, in the light of all the other
evidence, are irrelevant. The fact is that the third offer was submitted too late,
because the vehicles had already been sold.

[27] That concludes the consideration relating to the offers and accordingly,
the determination of the fate of the bulk of the appellants’ defences that are
premised on the offers.

The defence invoking s 83 and s 84 of the Insolvency Act
[28] Wesbank did not rely on s 83 for its claims. Section 83 deals with the
realization of securities for claims, and is essentially for the protection of the
creditors. The section is referred to in Wesbank’s particulars of claim, in the
context of its payment to the liquidators of the proceeds of the sale of the

vehicles. The allegation in each of its claims is that ‘[t]he plaintiff, as it was
obliged to do in terms of the provisions of section 83 …, duly paid the amount
of…’ to the liquidators.

[29] Reference was clearly being made to s 83(10) of the Insolvency Act,
which requires a creditor, who has realised his security, to pay the net
proceeds of the realisation to the trustee (or liquidator), or to the Master, if
there is no trustee. The relevant part of the section provides:
‘Whenever a creditor has realized his security as hereinbefore provided he shall
forthwith pay the net proceeds of the realization to the trustee, or if there is no trustee,
to the Master …’ (Emphasis added.)

[30] Latching on to the words in the section ‘…as hereinbefore provided …’,
the appellants apparently used the abovementioned allegation in Wesbank’s
particulars of claim as a springboard, essentially arguing that Wesbank could
not rely on s 83 because the sale took place after the second meeting of
creditors and that Wesbank had not complied with the preceding provisions of
s 83. They read s 83(10) to mean that the subsection could be complied with
only if there was compliance with the other (preceding) provisions of s 83.
Their interpretation of that subsection is wrong. In Venter NO v Avfin (Pty ) Ltd7
this court held that reference in s 83(10) ‘to the preceding provisions was
intended to be no more than a general reference to the realisation of securities
as contemplated in the earlier subsections of s 83. It was not intended to
import into s 83(10) a requirement of compliance with those subsections as a
precondition to the obligation of the creditor to pay over the proceeds of his
security to the trustee’.8

[31] The appellants’ contentions also did not take into account the facts of
this case. Sizwe’s was a voluntary winding up by its members. In such a case
creditors do not have to prove their claims. The liquidators simply had to settle

7Venter NO v Avfin (Pty) Ltd 1996 (1) SA 826 (A). See also Robert Sharrock et al Hockly’s Insolvency
Law 9 ed (2012) at 178-179.
8Ibid at 843A-B.

all debts, realise the assets and submit their liquidation and distribution
account to the Master.9

[32] Section 84(1) of the Insolvency Act provides that where goods were
delivered to a debtor in terms of an ‘instalment sale agreement’10 upon the
sequestration of the debtor’s estate, such a transaction shall be regarded as
creating a hypothec over such goods in favour of the creditor, whereby the
amount still due to the creditor in terms of the transaction shall be secured.
Even though a hypothec had been created in favour of Wesbank, as
contemplated in terms of s 84 of the Insolvency Act, Wesbank was not in
possession of the vehicles until the Master instructed it towards the end of
August 2011 to repossess them. The vehicles were also only sold on the
instruction and authorisation of the liquidators. Mr Oelofsen explained in detail
the modalities for the keeping and sale of assets and the reasons why the sale
occurred as it did.

[33] In any event, s 157 of the Insolvency Act provides that nothing done in
terms of the Act shall be invalid because of a formal defect or irregularity,
unless a substantial injustice has been thereby done, which, in the opinion of
the court, cannot be remedied by any order of the court. The appellants did not
only fail to prove any defect or irregularity as contemplated, but failed to prove
that if there were any, that they could not have been excused as contemplated
in s 157. The appellants were not creditors and they had no right to a notice of
the sale. In any event, the duty to provide such notice to creditors rests on the
liquidator.11

[34] I have earlier dealt with the untenability of the appellants’ contentions
regarding the validity of the sale. The appeal, accordingly, stands to be
dismissed.

[35] Regrettably, the court a quo did not furnish reasons for granting the
appellants leave to appeal to this court. In this matter there was no reasonable

9Ibid Robert Sharrock et al Hockly’s Insolvency Law at 252.
10 As defined in the National Credit Act 34 of 2005.
11See s 83(9) of the Insolvency Act.

prospect of success and no compelling, or other justifiable reason, for leave to
appeal to have been granted, is discernible.12 It has been pointed out in
previous, reported, decisions that the inappropriate granting of leave to appeal
to this court increases a litigant’s costs and results in cases involving greater
difficulty and which are truly deserving of the attention of this court to compete
for a place on this court’s roll with a matter which is not.13

[36] In the result the following order is made:
1 The appeal is dismissed.
2 The appellants are to pay the costs of the appeal jointly and severally, the
one paying the others to be absolved.

______________________
P Coppin
Acting Judge of Appeal

12See s 17(1)(a) of the Superior Courts Act 10 of 2013.
13See Shoprite Checkers (Pty) Ltd v Bumpers Schwarmas CC & others [2003] 3 All SA 123 (SCA); 2003
(5) SA 354 (SCA) para 23 (separate concurring judgment of Marais JA). See also: S v Monyane & Others
2008 (1) SACR 543 (SCA) para 28.

APPEARANCES:
For the Appellants:
R J De Beer
Instructed by: Rossouw & Prinsloo Inc, Vereeniging

Rosendorff Reitz Barry, Bloemfontein

For the Respondent:
K Meyer

Instructed by: Smit Jones and Pratt, Johannesburg

Symington & De Kock, Bloemfontein