+(,121/,1(

Citation: 1996 Ann. Surv. S. African L. 272 1996 Content downloaded/printed from HeinOnline (http://heinonline.org) Thu Jun 13 09:40:53 2013 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at http://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: https://www.copyright.com/ccc/basicSearch.do? &operation=go&searchType=0 &lastSearch=simple&all=on&titleOrStdNo=0376-4605

MISCELILANEOUS CONTRACTS (CARRIAGE, DEPOSIT, DONATION, LOAN, PARTNERSHIP, SERVICE, SURETYSHIP)

PETER JORDI*

CARRIAGE LEGISLATION The Transport Advisory Council Abolition Act 9 of 1996 provides for the abolition of the Council and is deemed in terms of s 3 of the Act to have come into effect on 1 April 1995. The International Air Services Amendment Act 10 of 1996 provides, inter alia, for the further regulation of the operation of an international air service and the processing and granting of licences or permits concerning such a service. The rules of the air, air traffic services, search and rescue and overflight regulations were further amended in terms of s 22 of the Aviation Act 74 of 1962: GN R364 GG 17008 of 1 March 1996 (Reg Gaz 5645). International air service licences were issued or amended in terms of s 17(12) of the International Air Services Act 60 of 1993: General Notice 314 GG 17042 of 22 March 1996; General Notice 689 GG 17230 of 7June 1996 and General Notice 721 GG 17244 of 14June 1996. The correction factor applicable to the traffic service charges levied in terms of s 11 (5) of the Air Traffic and Navigation Services Company Act 45 of 1993 has been set at 6,84 per cent for the financial year 1996/97: General Notice 1532 GG 17517 of 1 November 1996. New rates for the conversion into South African currency of the sums in francs mentioned in s 22 of the schedule to the Carriage by Air Act 17 of 1946 have been set: GN Rl152 GG 17317 of 12July 1996 (Reg Gaz 5736). CASE LAW By Sea Carriage The MVProsperous:Cobam NV v Aegean Petroleum (UK) Ltd 1996 (2) SA 155 (A) and Nagos ShippingLtd v Owners, Cargo Lately Laden on Board the MINagos 1996 (2) SA 261 (D) are discussed in the chapter on Admiralty Law.
* BA LLB (Witwatersrand), Attorney, Senior Lecturer in Law, University of the Witwatersrand, Johannesburg.

HeinOnline -- 1996 Ann. Surv. S. African L. 268 1996

DEPOSIT AND DONATION

X73

DEPOSIT AND DONATION There was no legislation affecting these branches of the law during 1996, nor were any cases on deposit and donation reported. LOAN LEGISLATION The Integration of Usury Laws Act 57 of 1996, which came into operation on 1 November 1996, provides that the Usury Act 73 of 1968 shall apply in the national territories of the former Transkei, Bophuthatswana, Venda and Ciskei and in the areas of the former Gazankulu, KaNgwane, KwaNdebele, KwaZulu, Lebowa and Qwaqwa: GN 1757 GG 17533 of I November 1996. CASE LAW In Nedperm Bank Ltd v Lavarack 1996 (4) SA 30 (A) the appellant agreed to finance a sectional-title development undertaken by a corporation on the basis that the corporation had to make payment of monthly instalments in terms of a letter of advice and to pay all amounts received by it from the sale of units in the development to the appellant in terms of a separate agreement. The agreement between the parties was set out in various documents. The corporation's income accrued solely from the sale of units in the development. A dispute arose whether the monthly instalments had to be paid even where the sum paid by the corporation to the appellant arising from the proceeds of the sale of the units exceeded the amount of the monthly instalments due at that time. The appellant argued that the monthly instalments and the proceeds from the sale of units were separate obligations and that payment of the proceeds from the sales of units could not be used to discharge the corporation's obligation to pay monthly instalments. A further argument raised by the appellant was that as units were sold, they were released from the operation of a first mortgage bond passed over the development's premises, which had the effect of reducing the value of the security held by the appellant. For this reason the appellant desired the proceeds from the sale of units to be paid over to it so that its security was reduced in proportion to the outstanding capital, whilst the monthly instalments were payable so as to reduce the interest due on the outstanding capital. After considering the terms of the agreement the court rejected the appellant's arguments as the agreement provided that there would be two sources of income for

HeinOnline -- 1996 Ann. Surv. S. African L. 269 1996

274

ANNUAL SURVEY OF SA LAW

the discharge of the corporation's indebtedness - the monthly instalments and the payment of amounts received from the sale of units. What was primarily required of the corporation was that it pay at least a specified minimum amount per month, but in terms of the agreement it was entitled to pay more than that amount. The court noted (at 39C) that an overpayment will discharge or reduce the indebtedness so long as the debtor intends to make a payment on account of indebtedness and it is accepted by the creditor as such. Where the corporation received more than the specified minimum amount per month by way of payments of amounts received from the sale ofunits itwas required to payall such amounts to the appellant, as this was specifically provided for in terms of the agreement. As the complex agreement did not provide expressly for parity to be maintained between the value of the appellant's security and the amount outstanding to it by the corporation, the court was unwilling to read into the agreement a provision protecting the equilibrium between the appellant's security and the outstanding amount, even though it was hypothetically possible for the security to be extinguished whilst a portion of the debt remained outstanding should the corporation only pay the specified minimum amount per month. The court found that in any case the agreement envisaged a situation where parity between the security held by the appellant and the amount outstanding was upset. Considering that the corporation's sole income arose from the sale of units, the court found that the parties could not have contemplated that the corporation would be required to pay monthly instalments in addition to the proceeds of the sale of units. Accordingly the majority of the court dismissed the appeal. In S v InternationalComputerBroking and Leasing (Pty) Ltd & another 1996 (3) SA 582 (W) the accused were charged with 'stipulating' for finance charges in excess of the maximum permissible rate determined by notice in the Gazette in terms of s 2(1) (a) of the Usury Act 73 of 1968. The accused had entered into an oral agreement, which was subsequently reduced to writing, with a corporation to the effect that the corporation would pay interest at 10 per cent per month to the first accused on the outstanding amount due in respect of a credit facility granted to the corporation by the first accused. Although the facility was granted at the suggestion of the corporation, the court found that it did not matter who first suggested the interest rate as the first accused had agreed to that rate. Nor was it of significance that no interest was actually paid by the corporation in respect of its debt. The court referred to the meaning of 'stipulate' in s 24(a) of the Act, looking at both the English and Afrikaans versions of the text, and found that it should be given its ordinary

HeinOnline -- 1996 Ann. Surv. S. African L. 270 1996

PARTNERSHIP

meaning. The court rejected a defence premised on unsound advice given to the accused by an attorney, as the advice would have been rejected by a reasonable businessman and mens rea in the form of culpa was required in terms of the Act. The accused's conviction was upheld. PARTNERSHIP LEGISLATION Partnerships formed by qualified persons to carry on the profession of medical practitioner, dentist, psychologist or one of the supplementary health service professions contemplated in s 32 of the Medical, Dental and Supplementary Health Service Professions Act 56 of 1974 were designated as partnerships to which s 30(1) of the Companies Act 61 of 1973 does not apply: GN R1272 GG 17346 of 2 August 1996 (Reg Gaz 5744). CASE LAW Where a creditor becomes entitled in terms of the Magistrates' Courts Rules to attach an individual partner's assets in execution of a private debt, the creditor is entitled to attach the partnership assets, but can only dispose of the partner's interest in the partnership and cannot sell the assets of the partnership itself: Bothma v Windsor 1996 (2) SA 75 (T). A judgment was taken against one of two brothers carrying on a restaurant business in partnership. The sheriff attached certain movables at the premises of the partnership business. The court found that s 68(6) of the Magistrates' Courts Act 32 of 1944, which provides that '[w]here judgment is given
against a member of a partnership . . . in an action in which he individually was ... defendant, his interest in the partnership ...

may be attached and sold in execution', must take precedence over the procedure set out in Rule 40(1) and (2) of the Magistrates' Courts Rules, whereby the sheriff may be appointed as a receiver to receive moneys due to a judgment debtor arising from his interest in a partnership. The court rejected the approach set out in Liquidators of the Durban Roodepoort Mynpacht Syndicate v Blankfield 1922

TPD 173 and found that the Rules set out only an alternative method of execution to that set out in the statute.

HeinOnline -- 1996 Ann. Surv. S. African L. 271 1996

ANNUAL SURVEY OF SA LAW

SERVICE LEGISLATION The tariff of professional fees due to architects was further amended in terms s 7(3)(b) of the Architects' Act 35 of 1970: GN R177 GG 16969 of 9 February 1996 (Reg Gaz 5637). The tariff of professional fees due to professional engineers was further amended in terms s 6(1) (k) of the Engineering Profession of South Africa Act 114 of 1990: Board Notice 29 GG 17028 of 15 March 1996. The period of operation of the Recognition of Foreign Legal Qualifications and Practice Act 114 of 1993 was extended for one year with effect from I October 1996: Proc R56 GG 17456 of 30 September 1996 (Reg Gaz 5772). The tariff of professional fees due to dental technician contractors for dentists was further amended in terms of s 12(4) of the Dental Technicians Act 19 of 1979: Board Notice 122 GG 17640 of 6 December 1996. CASE LAW Accountants and Auditors Powertech IndustriesLtd v Mayberry & another 1996 (2) SA 742 (W) concerned an action by the plaintiff against the first defendant, the director of a company in liquidation, and the second defendant, the company's auditor, to have the defendants declared personally responsible for the debts of a company in liquidation in terms of s 424(1) of the Companies Act 61 of 1973. In deciding an application for absolution from the instance brought by the defendants the court commented on the functions and role of a company's statutory auditor (at 746A-I). The court commented that an auditor carries on the independent function of reporting to shareholders on the financial statements of the company, and by statute and the standards of the profession is required to perform certain functions before so reporting. The plaintiff submitted that by neglecting to report the continued trading of the company when there was no prospect of its paying its creditors the second defendant had enabled the company to continue trading and so had become party to its conduct. This argument was rejected by the court as it was founded on the reporting provisions set out in s 20 (5) of the Public Accountants' and Auditors' Act 80 of 1991. Section 20(5) (e) of the Act provided that subsec (5) could not be construed so as to confer any right of action against an auditor, which but for the provisions of the subsection the claimant would not have had. The court noted

HeinOnline -- 1996 Ann. Surv. S. African L. 272 1996

SERVICE

LI/

(at 750F-G) that the duty imposed on an auditor by the Public Accountants' and Auditors' Act does not make him a functionary of the company or require that he engage himself in its affairs, but imposes a duty on him as statutory auditor. The role of an auditor is fundamentally different from that of a director or company secretary. The court found that an auditor is not ordinarily a 'party' to the carrying on of a company's business for the purpose of s 424(1) of the Companies Act, although he would become such a 'party' by intentionally colluding with the company. Mere neglect by an auditor would be insufficient to expose him to liability as provided for in s 424(1) of the Companies Act. Attorneys and Advocates In the context where an attorney acted for both the purchaser and seller of immovable property, it was found in Ebersohn v Prokureursorde, Transvaal1996 (1) SA 661 (T) that when the purchaser failed to comply with the agreement to provide the guarantee for payment of the purchase price against registration of transfer, the attorney ought to have withdrawn as the representative of both of the parties due to a conflict of interest arising. Instead the attorney had accepted from the purchaser a guarantee of payment of a portion of the price and had arranged that the balance due would be secured by way of the cession to the attorney of the purchaser's fixed deposit at a bank. This arrangement eventually fell through when the bank claimed that it had taken cession of the fixed deposit to secure the payment of the purchaser's overdraft. The court found that the attorney had neglected to show the standard of conduct of the average attorney and confirmed the finding of the Law Society's disciplinary committee. Bertelsmann v Per1996 (2) SA 375 (T) is discussed in the chapter on the Administration ofJustice, Law Reform and Jurisprudence. Engineeringand Construction Where damages are calculated according to the cost of repairs or remedial work the date for the assessment of damages is the date when it became reasonable for the plaintiff to have begun the repairs: Rens v Coltman 1996 (1) SA 452 (A). The appellant, a quantity surveyor, admitted liability after he had incorrectly advised the respondent's attorney regarding the extent of the remedial work required to prevent the continued subsidence of the foundations of a house. As a result of the incorrect advice, the respondent settled the claim against the builder for a low amount, unaware that a substantial amount of work had to be done that would cost considerably

HeinOnline -- 1996 Ann. Surv. S. African L. 273 1996

278

ANNUAL SURVEY OF SA LAW

more. The appellant contended that the respondent was only entitled to what the remedial work would have cost when the respondent first had an opportunity to arrange for remedial work to be done in 1989, rather than the higher actual cost of performing the work in 1992. The court limited its approach to the question of the computation of the damages in contract. It was noted that damages will often be assessed with reference to the date when performance was due, but that damages may be calculated from some other date with a view to putting the claimant into the position he would have occupied had the contract been properly performed, since there was no fixed rule regarding the appropriate date for the assessment of damages. In building contracts it may be unfair to refer to the date when the work was performed since the breach may only show itself after a considerable period has passed. Since the court found the respondent's conduct in only performing the remedial work only in 1992 to have been reasonable, the court accepted that the damages due should be calculated from that later date, rather than from the time when the breach had occurred. In Guncrete (Pty) Ltd v ScharrighuisenConstruction (Pty)Ltd 1996 (2) SA 682 (N) the defendant accepted the plaintiff's tender to carry out certain work as the defendant's subcontractor. The plaintiff subcontractor agreed that it would be bound by the terms of the main agreement between the defendant and the employer. The main agreement provided that the employer was entitled to omit items of the work so as to vary its scope. A few days after the subcontract was entered into the employer required that the work to be performed under the subcontract be omitted entirely, with the result that the defendant contended that it was no longer under any obligation to the plaintiff. In order to decide the dispute between the parties the court was required to determine whether the employer was entitled to do away with the subcontract entirely. The clause in the main agreement entitled the employer's engineer to direct the defendant to 'alter, amend, omit, add to, or otherwise vary any of the contract works or their character, quality or kind' and required the contractor to carry out such 'variations'. The court found that the clause gave extensive powers to the engineer. One reading of the clause would allow the engineer to order that an aspect of the work be left out, but on the other hand the reference to a variation suggested that the engineer could modify an aspect of the work but not leave it out entirely. However, the other words of the clause covered situations involving a limited modification and to avoid tautology the court found that the power to omit an aspect of the works should be read in its broadest meaning. Nevertheless, this did not grant to the engineer the power to alter the works in a way which substantially

HeinOnline -- 1996 Ann. Surv. S. African L. 274 1996

SERVICE

changed the character of the works. As the court decided that the subcontract was a relatively minor part of the works as a whole, it concluded that the engineer's power to order omissions included the power to leave out the plaintiff's work under the subcontract. In any case the court found that the plaintiff had failed to prove its damages and granted absolution from the instance. A clause in a contract had to be interpreted by the court to establish whether it had the effect of limiting the second defendant's liability in respect of defective materials and workmanship only to claims in respect of defects which appeared within the first year of completion of the work, or whether the plaintiff was nevertheless entitled to rely on remedies provided for by the common law where the defects arose more than three years after the completion of the work: Bellville Municipality vJD Reitz & Geithner & another 1996 (2) SA 729 (C). The clause in question stated that the 'contractor shall guarantee to the principal the material, apparatus and workmanship delivered by him for a period of 12 months'. It referred to material and the like 'delivered' by the contractor and 'faulty materials and workmanship', and covered both latent and patent defects. As such the clause could not relate to defects which appeared at a later stage, as workmanship could only be faulty when it was performed. The works were completed when the engineer certified the works to be satisfactory. It was noted by the court that where a contract provides for the work to be executed to the satisfaction of an engineer appointed by the owner the approval of the engineer is the paramount indication of the sufficiency of the work. The court found that the clause prevented the plaintiff from claiming relief in terms of the common law in respect of defects which appeared after the expiry of the guarantee period and upheld the second defendant's exception to the plaintiff's claim. In Minister of Public Works and Land Affairs v Group Five Building Ltd 1996 (4) SA 280 (A) the question arose whether a claim for damages for the breach of a building contract had prescribed. The court noted (at 288E-H) that for debts to be reciprocal an immediate correlation between them is required. It is not sufficient that the debts arise from the same contract between the same parties. Health Professions Friedman v Glicksman 1996 (1) SA 1134 (W) is discussed in the chapters on the Law of Persons and Family Law, the Law of Delict, and General Principles of Contract.

HeinOnline -- 1996 Ann. Surv. S. African L. 275 1996

ANNUAL SURVEY OF SA LAW

SURETYSHIP CASE LAW Surety's LiabilityforJudgmentDebts In Bulsara v Jordan and Co Ltd (Conshu Ltd) 1996 (1) SA 805 (A) the court had to interpret a deed of suretyship in order to establish whether it was wide enough to render the surety liable for a judgment debt obtained against a principal debtor. The original cause of action was for goods sold and delivered to the principal debtor, in respect of which the creditor subsequently took a judgment against the principal debtor. More than three years after the claim for goods sold and delivered arose, summons was served on the surety claiming payment of the judgment debt due by the principal debtor. For further facts of the case see the 1992 Annual Survey 132, which discusses the decision of the court a quo cited as Jordan and Co Ltd v Bulsara1992 (4) SA 457 (E). On appeal the court accepted that the parties intended the suretyship to cover both the original cause of debt as well as ajudgment taken in respect of it. The surety's liability in respect of the judgment debt arose when judgment was delivered and summons in respect of the judgment debt was served on the surety well within the applicable three-year prescription period. The court therefore accepted the creditor's contention that the claim against the surety was based on a new and independent cause of action, being the judgment taken against the principal debtor, in respect of which prescription ran independently of the cause of action for goods sold and delivered. Termination of a Surety's Liability The appellants in Tsaperas & others v Boland Bank Ltd 1996 (1) SA 719 (A) had entered into identical deeds of suretyship with the respondent which provided that the suretyships and the sureties' liabilities flowing from them could 'only be terminated by the [respondent] bank's written consent'. The court stated (at 724D) that the object of such a provision was to protect the creditor by enabling it to rely on the deeds of suretyship to determine its rights. The appellants alleged that at a meeting with the bank's representatives it was agreed orally that the bank would release them from their unlimited suretyships. It was argued for the appellants that the provision only dealt with the unilateral termination of the deed by the surety, not with its termination with the consent of the creditor. The court rejected this approach on the ground that the provision dealt with the termination of both the suretyship and the sureties'

HeinOnline -- 1996 Ann. Surv. S. African L. 276 1996

SURETASHIP

accrued liability. In any case, the sureties had no common-law right to terminate their accrued liabilities without the consent of the creditor. The requirement of the creditor's 'consent' to the termination of the sureties' liabilities referred to a consensual cancellation in the sense of a voluntary agreement. As the appellants had not established that they had been released from their indebtedness by the bank, their appeal was dismissed. Fry & anotherv FirstNational Bank of South Africa Ltd 1996 (4) SA 924 (C) is an interesting case because it considers the validity of the rule that a surety is discharged where the creditor's dealings with the principal debtor have the effect of prejudicing the surety. The appellants had entered into identical suretyships in favour of the respondent to secure the indebtedness of a company to whom the respondent had lent money on overdraft. The company had given the respondent notice that all documents signed on its behalf had to bear the signatures of any two of three named persons. In breach of that arrangement a servant of the respondent advanced money on overdraft to the company on the request of only one of the named persons, who then transferred the money to himself to use for his own private purposes. The court found that the advance was made contrary to the company's instruction to the bank and not in the ordinary course of the company's business, with the result that the appellants were prejudiced as sureties. The respondent submitted that the basis of the rule that irregular conduct by the creditor discharges the surety lay in an invalid application of the exceptio doli generalis and equitable principles which could no longer be regarded as good law in the light of Bank of Lisbon andSouth Africa Ltd vDe Ornelas 1988 (3) SA 580 (A). After reviewing the position in England and America the court nevertheless decided (at 931G-H) that the rule in South Africa is not founded on an equitable discretionary power and that, although the rule accords with equitable principles, it has been 'firmly embedded' for a long time as part of the law itself. The court further noted that the 'law does not require a surety in a case such as this to quantify his prejudice flowing from the conduct of the creditor' (at 936B). For the respondent it was also argued that the signing arrangement was concluded two years prior to the suretyships having been entered into and that the terms of the suretyships provided that the respondent could determine the nature, extent and duration of the overdraft facilities granted to the company, as a result of which the failure to follow the company's instructions regarding the number of signatories did not impact on the sureties' liability. The court rejected this contention since the suretyships postulated a relationship between the debtor and the creditor which was incorporated into the suretyship by

HeinOnline -- 1996 Ann. Surv. S. African L. 277 1996

ANNUAL SURVEY OF SA LAW

implication. It was further submitted by the respondent that the circumstances under which the money was advanced had no bearing on the liability imposed by the suretyships. The court's view was that the rule regarding the discharge of a surety on account of prejudice arising from the creditor's conduct took into account the nature of the principal debt and the creditor's conduct. Accordingly the respondent's claims against the appellants was dismissed. Cession of Actions In Barlows TractorCo (Pty) Ltd v Townsend 1996 (2) SA 869 (A) the respondent surety sought a declarator that he was discharged from his liability as surety on account of the manner in which the creditor had pursued its claim against the principal debtor, a corporation which was placed in liquidation, which he claimed had the effect of prejudicing his interests as surety. The appellant's claim against the principal debtor arose after the appellant sold equipment to the corporation on credit, although it reserved its ownership. Once the corporation was placed in liquidation, the appellant lost its ownership in the equipment in terms of s 84(1) of the Insolvency Act 24 of 1936, but obtained instead a hypothec over the equipment in terms of which the amount due to it was secured, so that it was entitled to be paid out of the proceeds resulting from the disposal of the equipment as a preferent creditor. The appellant then disposed of the equipment by private treaty and paid the net proceeds to the liquidator. (Because of the approach taken to the matter by the respondent, the court did not have to consider whether the appellant's failure properly to comply with the requirements of s 83 of the Insolvency Act resulted in the appellant's loss of its secured claim.) The appellant lodged a claim as a secured creditor against the corporation's estate, which it subsequently withdrewjust before it was to be interrogated regarding its claim. Thereafter the appellant gave notice of its intention to enforce its claim against the corporation by instituting action against it, whereupon the respondent launched the proceedings of the case under discussion. The respondent alleged that by withdrawing its claim from proof the appellant had lost its security and it was therefore unable to cede to the surety the benefit of its secured claim against the estate. As there was no likelihood of a dividend being paid to the concurrent creditors, the surety alleged that he had been prejudiced by the creditor's conduct and was therefore discharged. Nestadt JA, for the majority of the court, found that a surety's renunciation of the benefit of cession of actions entitled the surety to cession of actions once he had discharged his liability to the

HeinOnline -- 1996 Ann. Surv. S. African L. 278 1996

SURETNSHIP

creditor, butprevented the surety from delayingpayment to the creditor of the amount due under the suretyship on account of the creditor's failure to effect the cession of actions (at 877E-F). The court accepted that the surety would be discharged where the 'creditor by his own act makes it impossible for himself to cede his security to the surety' (at 878D-E). Thus the court had to establish whether the appellant's conduct regarding the proof of its claim resulted in the loss of its security, in which case the surety would be discharged. The court found that the appellant had two ways in which to establish its secured claim: it could either submit a claim for proof in the estate or it could launch proceedings to enforce its claim against the corporation. The issue was whether the action instituted by the appellant to enforce its claim was viable. A reading of s 44(3) of the Insolvency Act indicated to the court that it did not prevent a creditor from instituting action prior to the rejection of its claim to proof in the estate (at 879G-I). A creditor therefore is entitled to institute proceedings to enforce a claim against the corporation in liquidation after withdrawing a claim it has submitted to proof in the estate, even before it has been rejected from proof in the estate. Regarding the requirement in s 359(2) (a) of the Companies Act 61 of 1973, that notice must be given to the liquidator of one's intention to institute or continue with litigation against a company (or, read with s 66 of the Close Corporations Act 69 of 1984, against a corporation) in liquidation to enforce a claim against the company (or corporation), the court referred to Umbogintwini Land and Investment Co (Pty) Ltd (in Liquidation) v Barclays National Bank Ltd 1987 (4) SA 894 (A), and decided that such a notice was not required from the appellant before it instituted action. Accordingly, the court rejected the respondent's contention that the appellant's failure to give such notice precluded its action against the corporation. Success in the litigation would result in the appellant, despite its late proof, retrospectively ranking as a creditor in the first liquidation and distribution account with a claim under s 78(3) of the Insolvency Act. This provision would deem the appellant's claim settled by ajudgment to be proved and admitted against the estate, and the appellant would rank as a secured creditor. The court noted that the appellant had previously submitted a claim in proper form against the estate and thus, even if one accepted the somewhat doubtful proposition that a claim had to have been tendered at the meeting of creditors, that requirement had been fulfilled. By withdrawing its claim from proof in the estate the appellant did not lose its right to proceed against the estate, but merely did so as a first step to the institution of litigation, which did not negate its earlier submission of its claim to proof in the estate. Thus if the appellant

HeinOnline -- 1996 Ann. Surv. S. African L. 279 1996

284

ANNUAL SURVEY OF SA LAW

ultimately obtained a judgment against the corporation in liquidation, it would be deemed retrospectively to rank as a secured creditor in the first liquidation and distribution account. Accordingly, the appellant was not prevented from giving the respondent a proper cession of actions and the respondent's contention that he had been discharged was rejected. The minority of the court concurred in the outcome of the case, but differed on the question of when the appellant's claim arose. The majority of the court found that the appellant's claim arose prior to liquidation as the cause of the claim was the conclusion of the instalment sale agreement, even though the amount only became due on account of the liquidation of the corporation (at 879D-F). As s 359(2) of the Companies Act applies to a claim arising before liquidation, the majority of the court had to consider the effect of the failure to give the notice referred to in that provision. The minority found that s 359 (2) of the Companies Act was inapplicable since it found that the claim arose upon the granting of the final winding-up order. In any case, a court could excuse the appellant's failure to give timeous notice and only when a court had pronounced on the issue could the respondent show that the creditor had lost its secured claim. Accordingly, the appellant's failure to give the notice referred to in s 359(2) of the Companies Act was irrelevant. It was also considered by the minority of the court that the respondent had launched the proceedings prematurely as no account had yet been lodged with the Master, and s 366(2) of the Companies Act has the effect of excluding a claim from the benefit of a distribution to creditors if the claim was proved after the liquidation and distribution account was lodged. As no account had been lodged when the appellant withdrew its claim from proof, it was possible for the appellant again to prove a claim and to obtain a share in the distribution under the account. Further, a distribution of the proceeds of the sale of the hypothecated goods to other creditors who had proved claims under the account would not be possible, since the liquidator could not show these proceeds as available for distribution to creditors until the appellant's action against the corporation in liquidation had been finalized. Thus the security had not been lost, as the proceeds from the sale of the hypothecated goods were not available for distribution to creditors. Rectification of a Deed of Suretyship In Republican Press (Pty) Ltd v Martin Murray Associates CC & others 1996 (2) SA 246 (N) a deed of suretyship mistakenly described the plaintiff to be the principal debtor as well as the creditor. When

HeinOnline -- 1996 Ann. Surv. S. African L. 280 1996

SURETYSHIP

the plaintiff (as creditor) sued the defendants for payment the second defendant, a surety, contended that the plaintiff's application for rectification of the deed, so that the name of the first defendant appeared as principal debtor, was bad in law. Accordingly, the question whether the deed could be rectified was adjudicated as a point in limine. The majority of the court rejected the plaintiff's contention that courts generally favour rectification of a contract over its invalidity due to non-compliance with statutory formalities (at 253A-B). They referred to Magwaza v Heenan 1979 (2) SA 1019 (A) and found that the test it applied to a contract which must comply with statutory formalities required, first, an investigation whether the contract complied with the statute and, secondly, whether rectification should be granted in the light of the parties' actual agreement. This may result in a tension between a desire to give effect to parties' agreements and to respect the legislature's intention, but that must be resolved by giving effect to the statutorily imposed requirements. The majority applied what it described as 'the strict approach to the test of whether the document ostensibly complies with the statute' (at 255F) and found that the plaintiff had failed to show that the deed complied ostensibly with the requirements of s 6 of the General Law Amendment Act 50 of 1956 as far as identifying the parties to the contract was required. As the first stage of the test was not met, the court found that the suretyship could not be rectified and found in favour of the second defendant. See further the discussion of this case in the chapter on General Principles of Contract. LITERATURE Business Transactions Law. 4 ed. By Robert Sharrock. Cape Town: Juta & Co Ltd. 1996. Extinctive Prescription.By M M Loubser. Cape Town: Juta & Co Ltd. 1996. Hockly se Insolvensiereg.By Robert Sharrock, Elmarie de la Rey, Kathleen van der Linde and Alastair Smith. Cape Town: Juta & Co Ltd. 1996. Hockly's Insolvency Law. 6 ed. By Robert Sharrock, Elmarie de la Rey, Kathleen van der Linde and Alastair Smith. Cape Town:Juta & Co Ltd. 1996. Regsbeginsels van Kontrakte en Verhandelbare Dokumente. By M A Fouch , J Coetzee, K 0 Chetty, D C Theunissen, P Fisher and HJ van As. Durban: Butterworths. 1996.
Southern Cross: CivilLawand Common Law in South Africa.Edited by Reinhard

Zimmermann and Daniel Visser. Cape Town: Juta & Co Ltd. 1996.
The Law of Contractin South Africa. 3 ed. By R H Christie. Durban: Butter-

worths. 1996.
Speculative and ContingencyFees. Working Paper 63 of the South African Law

Commission: Project 93. 1996.

HeinOnline -- 1996 Ann. Surv. S. African L. 281 1996

286

ANNUAL SURVEY OF SA LAW

Arbitration: A Draft InternationalArbitration Act for South Africa. Discussion Paper 69 of the South African Law Commission: Project 94. 1996. Speculative and Contingency Fees. Report of the South African Law Commission: Project 93. 1996. 'Partnerschaftsgesellschaft. The New German Form of Company and Business Association.' By H Christian A W Schulze. (1996) 29 CILSA 141. 'Cohabitation Relationships Revisited: Is It Not Time for Acceptance?' By Divya Singh. (1996) 29 CILSA 317. 'The Legal Position of Domestic Workers - A Historical Perspective.' By Elize Delport. (1996) 37 (2) Codicillus 27. 'RepublicanPress (Pty) Ltd v MartinMurray Associates CC and Others 1996 2 SA 246 (N).' By NJ Grov6. (1996) 29 (2) DeJure 401. 'Lillicrap, Lloyd's, Lost Legacies and Law Lords: Re-examining the Possible Impact of English Law on the Concurrent Professional Liability of Attorneys.' By Andrew Henderson. 1996 DeRebus 769. 'Legal Constraints on the Termination of Fixed-Term Contracts of Employment: An Enquiry into Recent Developments.' By Marius Olivier. (1996) 17 IndustrialLawJournal1001. 'There Is a Code, You Know: Parallel Importation of Electronic Equipment: A New Consumer Code.' By Richard Plaistowe. (1996) 4JutasBusiness Law 19. "It's Delicious, It's Delightful, It's De-Lovely": A Void Clause Ousting the Court from a Franchise Agreement.' By Alastair Smith. (1996) 4Juta's Business Law 31. 'The Transport Contractor, the Frolicking Thief, and the Good Samaritan: The Theft of a Wrongly Delivered Consignment.' By Alastair Smith. (1996) 4Juta's Business Law 64. 'Franchising: The Basics Explained.' By Mike von Seidel. (1996) 4Juta's Business Law 70. 'Warsaw Concerto: Airline Agreement Likely to Lead to Increased Insurance Premiums.' By Danie le Roux. (1996) 4Juta'sBusiness Law 155. 'A Creditor Left to "Dree His Weird": Rectification of a Deed of Suretyship.' By Rochelle le Roux. (1996) 4Juta'sBusiness Law 157. 'Dead, but Not Buried: Suretyship: The Effect on a Deceased Estate.' By Graham Charnock and Alfie Bester. (1996) 4Juta'sBusiness Law 159. 'Attorney and Client Costs Ex Contractu.' By A M van Pletzen. (1996) 31 The Magistrate65. 'The Rectification of a Suretyship Agreement: Republican Press (Pty) Ltd v Martin Murray Associates CC 1996 2 SA 246 (N).' By M Lamprecht. (1996) 31 The Magistrate115. 'The Doctor's Dilemma: Duty and Risk in the Treatment of Jehovah's Witnesses.' By Michael Katz. (1996) 113 SALJ484. 'A Void Clause in a Franchise Agreement; and a Sidelight on the History of Arbitration Clauses in the English Common Law.' By Alastair Smith. (1996) 8 SA Merc LJ103. 'Die Wet op die Veilige Bewaring van Effekte.' By Maria Vermaas. (1996) 8 SA Merc LJ 190.

HeinOnline -- 1996 Ann. Surv. S. African L. 282 1996

SUREMSHIP

287

'Hospital Consent Forms.' By Neil van Dokkum. (1996) 7 Stellenbosch Law Review 249. 'Caveat Subscriptor- Beware the Hidden Suretyship Clause: Diners Club SA (Pty) Ltd v Livingstone 1995 4 SA 493 (W).' ByJ B Cilliers and S M Luiz. (1996) 59 THRHR 168. 'Verpanding van Vorderingsregte: Twiggs v Millman 1994 1 SA 458 (K); Millman v Twiggs 1995 3 SA 674 (A).' By Susan Scott. (1996) 59 THRHR 319. 'Cession of Future Rights: FirstNationalBank ofSA Ltd v Lynn 1996 2 SA 339 (A).' By Susan Scott. (1996) 59 THRHR 689. 'Die Borgkontrak, Aksessoriteit en Verjaring: Bulsara vJordan and Co Ltd (Conshu Ltd) 1996 1 SA 805 (A).' By C Louw. (1996) 59 THRHR 715. 'Strafregtelike Aanspreeklikheid van Verbande.' By J M T Labuschagne. (1996) 21 (1) TRW44. 'The Sequestration of Partnership Estates: Joint Ventures with Corporate Partners and Other Issues Concerning Susceptibility.' ByJJ Henning. (1996) 21 (2) TRW68. 'A Salutory Statutory Dispensation for Small Businesses.' By E Snyman and JJ Henning. (1996) 21 (2) TRW132. 'Belgiese Verbruikerskrediet: 'n Vergelykende Studie (Deel iii).' By J M Otto. 1996 TSAR 105. 'Saldosertifikaat-Bedinge.' By A L van der Colf. 1996 TSAR 125. 'Die Toepassing van die Wet op Kredietooreenkomste op Passasiersbusse.' ByJ M Otto. 1996 TSAR 538.

HeinOnline -- 1996 Ann. Surv. S. African L. 283 1996