|During 2009, Mackintosh (“the First Respondent”) and Mabili Search & Selection (Pty) Ltd (“the Second Respondent”) concluded an oral loan agreement for the amount of R2million (“the Agreement”). Subsequent to the conclusion of the Agreement, the parties signed a written acknowledgement of debt (“AOD”) wherein the Second Respondent, as the debtor, acknowledged its indebtedness to the First Respondent. During October 2012 and pursuant to the AOD the Second Respondent undertook to settle its indebtedness whereas it was a term of the AOD that the sum of R2million (“the Capital Amount”) would attract interest of R50,000.00 and that the Capital Amount was payable over a period of twelve months. It was further agreed in the AOD that should the Second Respondent make a part payment of the Capital Amount; the monthly interest would be reduced in proportion to the balance of the amount owing.
As a result of the subsequent payment default by the Second Respondent and its liquidation, the First Respondent sued the Appellants in terms of clause 5 of the AOD as they were enjoined as sureties in terms thereof for the debts of the Second Respondent.
The First Respondent alleged that the AOD arose as a result of a loan granted to the Second Respondent and not to the Appellants during 2009. In addition, it was argued by the First Respondent that the effect of clause 5 of the AOD was to constitute the Appellants as sureties for Second Respondents indebtedness. It was further contended by the First Respondent that the AOD was a credit guarantee as defined in the National Credit Act 34 of 2005 (“NCA”) and was excluded from the operation of the NCA by Section 8(5), because it was a credit guarantee in respect of an AOD which is not envisaged by the NCA.
On the other hand, the Appellants argued that the AOD was a separate credit agreement falling within the scope of the NCA and that clause 5 did not constitute them as sureties because they became parties to the AOD as co-principal debtors in respect of the admitted debt as defined in clause 2.1.1 of the AOD. In support of their argument, they relied on clause 2.1.3 which described them and the Second Respondent as “the Debtors”. They further contended that the AOD between them and the First Respondent was not a credit guarantee, but a credit transaction as defined in s 8(4)(f) of the NCA and that there had been no compliance by First Respondent with his obligations under the NCA. The Appellants further alleged that the failure of the First Respondent to register as a credit provider in terms of the NCA rendered the AOD between them void.
|In view of the amount involved and the Second Respondent’s turnover, it was common cause that, insofar as Second Respondent was concerned, the AOD fell outside the area of operation of the NCA. Essentially, the question before the Court was whether the dispute between the parties was governed by the NCA.
The Court emphasised that the Second Respondent, and only the Second Respondent, was the debtor in respect of the AOD. The loan was granted pursuant to an oral agreement which was concluded between the Second Respondent and the First Respondent.
The Court held that the purpose of the AOD, which the Appellants signed, was to arrange how the amount owing to the First Respondent was to be repaid and accordingly the Appellants undertook to settle the acknowledged debt.
The First Respondent was not a credit provider in terms of Section 40 of the NCA. The First Respondent was not in the business of providing credit. The Agreement was a once-off transaction and not falling with the scope of the NCA.
In addition thereto, the Court held that Section 4(2)(c) of the NCA specifies that the NCA shall apply to a credit guarantee only to the extent that the NCA applies to a credit facility or credit transaction.
Further, it was held that the AOD could not have been a credit guarantee and a credit transaction in terms of Section 8(4)(f) of the NCA.
Finally, the Court established that the AOD was in fact a credit guarantee. However, due to the fact that the Agreement fell outside the scope of the NCA so too would the AOD as provided by Section 4(2)(c) of the NCA.
The appeal was dismissed with costs.
An AOD wherein a third party is enjoined as surety of a principal debtor cannot be regarded as a new or “separate” credit transaction as defined by Section 8(4)(f) of the NCA. Further, if the NCA does not apply to a credit transaction it follows that it shall not apply to the underlying credit guarantee or suretyship.
Written by Lindokuhle Mashilo and Ntobeko Maphanga