1996AnnSurvSAfricanL272

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Citation: 1996 Ann. Surv. S. African L. 272 1996

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MISCELILANEOUS CONTRACTS (CARRIAGE,DEPOSIT, DONATION, LOAN, PARTNERSHIP,

SERVICE, SURETYSHIP)

PETER JORDI*

CARRIAGE

LEGISLATION

The Transport Advisory Council Abolition Act 9 of 1996 providesfor the abolition of the Council an d is deemed in terms of s 3 of theAct to have come into effect on 1 April 1995. The International Air

Services Amendment Act 10 of 1996 provides, inter alia, for thefurther regulation of the operation of an international air serviceand the processing and granting of licences or permits concerningsuch a service.

The rules of the air, air traffic services, search an d rescue andoverflight regulations were further amended in terms of s 22 of theAviation Act 74 of 1962: GN R364 G G 17008 of 1 March 1996 (RegGaz 5645). International air service licences were issued oramended in terms of s 17(12) of the International Air ServicesAct 60 of 1993: General Notice 314 GG 17042 of 22 March 1996;General Notice 689 GG 17230 of 7June 1996 an d General Notice 721GG 17244 of 14June 1996. The correction factor applicable to thetraffic service charges levied in terms of s 11 (5) of the Air Trafficand Navigation Services Company Act 45 of 1993 has been set at6,84 per cent for the financial year 1996/97: General Notice 1532GG 17517 of 1 November 1996. New rates for the conversion intoSouth African currency of the sums in francs mentioned in s 22 ofthe 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

Carriage By Se a

The MVProsperous: Cobam NV v Aegean Petroleum (UK) Ltd 1996 (2)SA 155 (A) and Nagos Shipping Ltd v Owners, Cargo Lately Laden onBoard the MINagos 1996 (2) SA 261 (D) are discussed in the chapteron Admiralty Law.

*

BA LLB (Witwatersrand), Attorney, Senior Lecturer in Law, University of theWitwatersrand, Johannesburg.

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


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DEPOSIT AN D 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 intooperation on 1 November 1996, provides that the Usury Act 73 of1968 shall apply in the national territories of the former Transkei,Bophuthatswana, Venda and Ciskei and in the areas of the formerGazankulu, KaNgwane, KwaNdebele, KwaZulu, Lebowa andQwaqwa: GN 1757 GG 17533 of I November 1996.

CASE LAW

In Nedperm Bank Ltd v Lavarack 1996 (4) SA 30 (A) the appellantagreed to finance a sectional-title development undertaken by acorporation on the basis that the corporation had to make paymentof monthly instalments in terms of a letter of advice an d to pay allamounts received by it from the sale of units in the development tothe appellant in terms of a separate agreement. The agreementbetween the parties was set out in various documents. The corpora-tion's income accrued solely from the sale of units in the develop-ment. A dispute arose whether the monthly instalments had to bepaid even where the sum paid by the corporation to the appellantarising from the proceeds of the sale of the units exceeded theamount of the monthly instalments du e at that time. The appellantargued that the monthly instalments an d the proceeds from the saleof units were separate obligations an d that payment of the proceedsfrom the sales of units could no t be used to discharge the corpora-tion's obligation to pay monthly instalments. A further argumentraised by the appellant was that as units were sold, they were releasedfrom the operation of a first mortgage bond passed over the develop-ment's premises, which had the effect of reducing the value of thesecurity held by the appellant. For this reason the appellant desiredthe proceeds from the sale of units to be paid over to it so that itssecurity was reduced in proportion to the outstanding capital, whilstthe monthly instalments were payable so as to reduce the interestdue on the outstanding capital. After considering the terms ofthe agreement the court rejected the appellant's

arguments as theagreement provided that there would be two sources of income for



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274 ANNUAL SURVEY OF SA LAW

the discharge of the corporation's indebtedness - the monthlyinstalments and the payment of amounts received from the sale ofunits. What was primarily required of the corporation was that it payat least a specified minimum amoun t per month, but in terms of theagreement it was entitled to pay more than that amount. The courtnoted (at 39C) that an overpayment will discharge or reduce theindebtedness so long as the debtor intends to make a payment onaccount of indebtedness and it is accepted by the creditor as such.Where the corporation received more than the specified minimumamount per month by way of payments of amounts received fromthe sale ofunits itwas required to payall such amounts to the appellant,as this was specifically provided for in terms of the agreement. Asthe complex agreement did no t provide expressly for parity to bemaintained between the value of the appellant's security and theamount outstanding to it by the corporation, the court was unwillingto read into the agreement a provision protecting the equilibriumbetween the appellant's security and the outstanding amount, eventhough it was hypothetically possible for the security to be extin-guished whilst a portion of the debt remained outstanding shouldthe corporation only pay the specified minimum amount permonth. The court found that in any case the agreement envisageda situation where parity between the security held by the appellantand the amount outstanding was upset. Considering that the corpora-tion's sole income arose from the sale of units, the court found thatthe parties could no t have contemplated that the corporation wouldbe required to pay monthly instalments in addition to the proceedsof the sale of units. Accordingly the majority of the court dismissedthe appeal.

In S v International Computer Broking an d Leasing (Pty) Ltd & another1996 (3) SA 582 (W) the accused were charged with 'stipulating' forfinance charges in excess of the maximum permissible rate deter-mined by notice in the Gazette in terms of s 2(1) (a) of the UsuryAct 73 of 1968. The accused had entered into an oral agreement,which was subsequently reduced to writing, with a corporation tothe effect that the corporation would pay interest at 10 pe r cent permonth to the first accused on the outstanding amount due in respectof a credit facility granted to the corporation by the first accused.Although the facility was granted at the suggestion of the corpora-tion, the court found that it did no t matter who first suggested theinterest rate as the first accused had agreed to that rate. Nor was itof significance that no interest was actually paid by the corporationin respect of its debt. The court referred to the meaning of 'stipu-

late' in s 24(a) of the Act, looking at both the English and Afrikaansversions of the text, an d found that it should be given its ordinary



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PARTNERSHIP

meaning. The court rejected a defence premised on unsound advicegiven to the accused by an attorney, as the advice would have beenrejected by a reasonable businessman and mens rea in the form of

culpa was required in terms of the Act. The accused's conviction wasupheld.

PARTNERSHIP

LEGISLATION

Partnerships formed by qualified persons to carry on the profes-sion of medical practitioner, dentist, psychologist or one of thesupplementary health service professions contemplated in s 32 of

the Medical, Dental and Supplementary Health Service ProfessionsAct 56 of 1974 were designated as partnerships to which s 30(1) ofthe Companies Act 61 of 1973 does not apply: GN R1272 GG 17346of 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 ofa private debt, the creditor is entitled to attach the partnership

assets, but can only dispose of the partner's interest in the partner-ship and cannot sell the assets of the partnership itself: Bothma vWindsor 1996 (2) SA 75 (T). A judgment was taken against one oftwo brothers carrying on a restaurant business in partnership. Thesheriff attached certain movables at the premises of the partnershipbusiness. The court found that s 68(6) of the Magistrates' CourtsAct 32 of 1944, which provides that '[w]here judgment is givenagainst a member of a partnership . . . in an action in which heindividually was ... defendant, his interest in the partnership ...may be attached and sold in execution', must take precedence overthe procedure set out in Rule 40(1) and (2) of the Magistrates'Courts Rules, whereby the sheriff may be appointed as a receiver toreceive moneys due to a judgment debtor arising from his interestin a partnership. The court rejected the approach set out in Liqui-dators of the Durban Roodepoort Mynpacht Syndicate v Blankfield 1922TPD 173 and found that the Rules set out only an alternative methodof execution to that set out in the statute.



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ANNUAL SURVEY OF SA LAW

SERVICE

LEGISLATION

Th e tariff of professional fees du e to architects was furtheramended 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 ofprofessional fees du e to professional engineers was furtheramended in terms s 6(1) (k) of the Engineering Profession of SouthAfrica Act 114 of 1990: Board Notice 29 GG 17028 of 15 March 1996.The period of operation of the Recognition of Foreign LegalQualifications and Practice Act 114 of 1993 was extended for oneyear with effect from I October 1996: Proc R56 GG 17456 of 30 Sep-tember 1996 (Reg Gaz 5772). The tariff of professional fees du e todental technician contractors for dentists was further amended interms of s 12(4) of the Dental Technicians Act 19 of 1979: BoardNotice 122 GG 17640 of 6 December 1996.

CASE LAW

Accountants and Auditors

Powertech Industries Ltd v Mayberry & another 1996 (2) SA 742 (W)

concerned an action by the plaintiff against the first defendant, thedirector of a company in liquidation, and the second defendant,the company's auditor, to have the defendants declared personallyresponsible for the debts of a company in liquidation in terms ofs 424(1) of the Companies Act 61 of 1973. In deciding an applica-tion for absolution from the instance brought by the defendants thecourt commented on the functions an d role of a company's statu-tory auditor (at 746A-I). Th e court commented that an auditorcarries on the independent function of reporting to shareholders

on the financial statements of the company,an d by statute an d the

standards of the profession is required to perform certain functionsbefore so reporting. Th e plaintiff submitted that by neglecting toreport the continued trading of the company when there was noprospect of its paying its creditors the second defendant had en-abled the company to continue trading an d so had become party toits conduct. This argument was rejected by the court as it wasfounded on the reporting provisions set ou t in s 20 (5) of the PublicAccountants' and Auditors' Act 80 of 1991. Section 20(5) (e) of theAct provided that subsec (5) could no t be construed so as to confer

any right of action against an auditor, which bu t for the provisionsof the subsection the claimant would no t have had. The court noted



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SERVICE LI/

(at 750F-G) that the duty imposed on an auditor by the PublicAccountants' and Auditors' Act does not make him a functionary ofthe company or require that he engage himself in its affairs, but

imposes a duty on him as statutory auditor. The role of an auditoris fundamentally different from that of a director or companysecretary. The court found that an auditor is not ordinarily a 'party'to the carrying on of a company's business for the purpose ofs 424(1) of the Companies Act, although he would become such a'party' by intentionally colluding with the company. Mere neglectby an auditor would be insufficient to expose him to liability asprovided for in s 424(1) of the Companies Act.

Attorneys and Advocates

In the context where an attorney acted for both the purchaserand seller of immovable property, it was found in Ebersohnv Prokureurs-orde, Transvaal 1996 (1) SA 661 (T) that when the purchaser failedto comply with the agreement to provide the guarantee for paymentof the purchase price against registration of transfer, the attorneyought to have withdrawn as the representative of both of the partiesdue to a conflict of interest arising. Instead the attorney hadaccepted from the purchaser a guarantee of payment of a portionof the price and had arranged that the balance due would be

secured by way of the cession to the attorney of the purchaser's fixeddeposit at a bank. This arrangement eventually fell through whenthe bank claimed that it had taken cession of the fixed deposit tosecure the payment of the purchaser's overdraft. The court foundthat the attorney had neglected to show the standard of conduct ofthe average attorney and confirmed the finding of the Law Society'sdisciplinary committee.

Bertelsmann v Per 1996 (2) SA 375 (T) is discussed in the chapteron the Administration ofJustice, Law Reform and Jurisprudence.

Engineering and ConstructionWhere damages are calculated according to the cost of repairs or

remedial work the date for the assessment of damages is the datewhen it became reasonable for the plaintiff to have begun the repairs:Rens v Coltman 1996 (1) SA 452 (A). The appellant, a quantitysurveyor, admitted liability after he had incorrectly advised therespondent's attorney regarding the extent of the remedial workrequired to prevent the continued subsidence of the foundations ofa house. As a result of the incorrect advice, the respondent settled the

claim against the builder for a low amount, unaware that a substan-tial amount of work had to be done that would cost considerably



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more. The appellant contended that the respondent was onlyentitled to what the remedial work would have cost when therespondent first had an opportunity to arrange for remedial workto be done in 1989, rather than the higher actual cost of performingthe work in 1992. The court limited its approach to the questionof the computation of the damages in contract. It was noted thatdamages will often be assessed with reference to the date whenperformance was due, but that damages may be calculated fromsome other date with a view to putting the claimant into the positionhe would have occupied had the contract been properly performed,since there was no fixed rule regarding the appropriate date for theassessment of damages. In building contracts it may be unfair torefer to the date when the work was performed since the breach mayonly show itself after a considerable period has passed. Since thecourt found the respondent's conduct in only performing the re-medial work only in 1992 to have been reasonable, the courtaccepted that the damages due should be calculated from that laterdate, rather than from the time when the breach had occurred.

In Guncrete (Pty) Ltd v Scharrighuisen Construction (Pty) Ltd 1996 (2)SA 682 (N) the defendant accepted the plaintiff's tender to carryout certain work as the defendant's subcontractor. The plaintiffsubcontractor agreed that it would be bound by the terms of themain agreement between the defendant and the employer. The mainagreement provided that the employer was entitled to omit items ofthe work so as to vary its scope. A few days after the subcontract wasentered into the employer required that the work to be performedunder the subcontract be omitted entirely, with the result that thedefendant contended that it was no longer under any obligation tothe plaintiff. In order to decide the dispute between the parties thecourt was required to determine whether the employer was entitledto do away with the subcontract entirely. The clause in the mainagreement entitled the employer's engineer to direct the defendantto 'alter, amend, omit, add to, or otherwise vary any of the contractworks or their character, quality or kind' and required the contractorto carry ou t such 'variations'. The court found that the clause gaveextensive powers to the engineer. One reading of the clause wouldallow the engineer to order that an aspect of the work be left out,but on the other hand the reference to a variation suggested thatthe engineer could modify an aspect of the work but not leave it outentirely. However, the other words of the clause covered situationsinvolving a limited modification and to avoid tautology the courtfound that the power to omit an aspect of the works should be read

in its broadest meaning. Nevertheless, this didnot

grant to theengineer the power to alter the works in a way which substantially



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SERVICE

changed the character of the works. As the court decided that thesubcontract was a relatively minor part of the works as a whole, itconcluded 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 itsdamages and granted absolution from the instance.

A clause in a contract had to be interpreted by the court toestablish whether it had the effect of limiting the second defendant'sliability in respect of defective materials and workmanship only toclaims in respect of defects which appeared within the first year ofcompletion of the work, or whether the plaintiff was neverthelessentitled to rely on remedies provided for by the common law wherethe defects arose more than three years after the completion of thework: BellvilleMunicipality vJD Reitz & Geithner & another 1996 (2)SA 729 (C). The clause in question stated that the 'contractor shallguarantee to the principal the material, apparatus and workman-ship delivered by him for a period of 12 months'. It referred tomaterial and the like 'delivered' by the contractor and 'faultymaterials and workmanship', and covered both latent and patentdefects. As such the clause could not relate to defects which appearedat a later stage, as workmanship could only be faulty when it wasperformed. The works were completed when the engineer certifiedthe works to be satisfactory. It was noted by the court that where acontract provides for the work to be executed to the satisfaction ofan engineer appointed by the owner the approval of the engineeris the paramount indication of the sufficiency of the work. The courtfound that the clause prevented the plaintiff from claiming relief interms of the common law in respect of defects which appeared afterthe expiry of the guarantee period and upheld the second defen-dant's exception to the plaintiff's claim.

In Minister of Public Works and Land Affairs v Group Five BuildingLtd 1996 (4) SA 280 (A) the question arose whether a claim fordamages for the breach of a building contract had prescribed. Thecourt noted (at 288E-H) that for debts to be reciprocal an immedi-ate correlation between them is required. It is not sufficient that thedebts arise from the same contract between the same parties.

Health Professions

Friedman v Glicksman 1996 (1) SA 1134 (W ) is discussed in thechapters on the Law of Persons and Family Law, the Law of Delict,and General Principles of Contract.



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SURETYSHIP

CASE LAW

Surety's Liability or Judgment Debts

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 establishwhether it was wide enough to render the surety liable for a judg-ment debt obtained against a principal debtor. The original causeof action was for goods sold and delivered to the principal debtor,in respect of which the creditor subsequently took a judgmentagainst the principal debtor. More than three years after the claim

for goods sold and delivered arose, summons was served on thesurety claiming payment of the judgment debt due by the principaldebtor. For further facts of the case see the 1992 Annual Survey 132,which discusses the decision of the court a quo cited as Jordan andCo Ltd v Bulsara 1992 (4) SA 457 (E). On appeal the court acceptedthat the parties intended the suretyship to cover both the originalcause of debt as well as ajudgment taken in respect of it. The surety'sliability in respect of the judgment debt arose when judgment wasdelivered and summons in respect of the judgment debt was servedon the surety well within the applicable three-year prescription

period. The court therefore accepted the creditor's contention thatthe claim against the surety was based on a new and independentcause of action, being the judgment taken against the principaldebtor, in respect of which prescription ran independently of thecause of action for goods sold and delivered.

Termination of a Surety'sLiability

The appellants in Tsaperas & others v Boland Bank Ltd 1996 (1) SA719 (A) had entered into identical deeds of suretyship with therespondent 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 byenabling it to rely on the deeds of suretyship to determine its rights.The appellants alleged that at a meeting with the bank's repre-sentatives it was agreed orally that the bank would release them fromtheir unlimited suretyships. It was argued for the appellants that theprovision only dealt with the unilateral termination of the deed bythe surety, not with its termination with the consent of the creditor.The court rejected this approach on the ground that the provisiondealt with the termination of both the suretyship and the sureties'



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SURETASHIP

accrued liability. In any case, the sureties had no common-law rightto terminate their accrued liabilities without the consent of thecreditor. The requirement of the creditor's 'consent' to the termina-

tion of the sureties' liabilities referred to a consensual cancellationin the sense of a voluntary agreement. As the appellants had notestablished that they had been released from their indebtedness bythe bank, their appeal was dismissed.

Fry & another v First National Bank of South Africa Ltd 1996 (4) SA924 (C) is an interesting case because it considers the validity of therule that a surety is discharged where the creditor's dealings withthe principal debtor have the effect of prejudicing the surety. Theappellants had entered into identical suretyships in favour of the re-spondent to secure the indebtedness of a company to whom the

respondent had lent money on overdraft. The company had giventhe respondent notice that all documents signed on its behalf hadto bear the signatures of any two of three named persons. In breachof that arrangement a servant of the respondent advanced moneyon overdraft to the company on the request of only one of thenamed persons, who then transferred the money to himself to usefor his own private purposes. The court found that the advance wasmade contrary to the company's instruction to the bank and not inthe ordinary course of the company's business, with the resultthat the appellants were prejudiced as sureties. The respondentsubmitted that the basis of the rule that irregular conduct by thecreditor discharges the surety lay in an invalid application of the ex-ceptio doli generalis and equitable principles which could no longerbe regarded as good law in the light of Bank of Lisbon and South AfricaLtd vDe Ornelas 1988 (3) SA 580 (A). After reviewing the position inEngland and America the court nevertheless decided (at 931G-H)that the rule in South Africa is not founded on an equitable discre-tionary power and that, although the rule accords with equitableprinciples, it has been 'firmly embedded' for a long time as part ofthe law itself. The court further noted that the 'law does not requirea surety in a case such as this to quantify his prejudice flowing fromthe conduct of the creditor' (at 936B). For the respondent it wasalso argued that the signing arrangement was concluded two yearsprior to the suretyships having been entered into and that the termsof the suretyships provided that the respondent could determinethe nature, extent and duration of the overdraft facilities grantedto the company, as a result of which the failure to follow the com-pany's instructions regarding the number of signatories did notimpact on the sureties' liability. The court rejected this contentionsince the suretyships postulated a relationship between the debtorand the creditor which was incorporated into the suretyship by



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implication. It was further submitted by the respondent that thecircumstances under which the money was advanced had no bearingon the liability imposed by the suretyships. The court's view was that

the rule regarding the discharge of a surety on account of prejudicearising from the creditor's conduct took into account the nature ofthe principal debt and the creditor's conduct. Accordingly therespondent's claims against the appellants was dismissed.

Cession of Actions

In Barlows Tractor Co (Pty) Ltd v Townsend 1996 (2) SA 869 (A) therespondent surety sought a declarator that he was discharged fromhis liability as surety on account of the manner in which the creditor

had pursued its claim against the principal debtor, a corporationwhich was placed in liquidation, which he claimed had the effect ofprejudicing his interests as surety. The appellant's claim againstthe principal debtor arose after the appellant sold equipment to thecorporation on credit, although it reserved its ownership. Oncethe corporation was placed in liquidation, the appellant lost itsownership in the equipment in terms of s 84(1) of the InsolvencyAct 24 of 1936, but obtained instead a hypothec over the equipmentin terms of which the amount due to it was secured, so that it wasentitled to be paid out of the proceeds resulting from the disposalof the equipment as a preferent creditor. The appellant then dis-posed of the equipment by private treaty and paid the net proceedsto the liquidator. (Because of the approach taken to the matter bythe respondent, the court did not have to consider whether theappellant's failure properly to comply with the requirements of s 83of the Insolvency Act resulted in the appellant's loss of its securedclaim.) The appellant lodged a claim as a secured creditor againstthe corporation's estate, which it subsequently withdrewjust beforeit was to be interrogated regarding its claim. Thereafter the appel-lant gave notice of its intention to enforce its claim against thecorporation by instituting action against it, whereupon the respon-dent launched the proceedings of the case under discussion. Therespondent alleged that by withdrawing its claim from proof the ap-pellant had lost its security and it was therefore unable to cede tothe surety the benefit of its secured claim against the estate. As therewas no likelihood of a dividend being paid to the concurrentcreditors, the surety alleged that he had been prejudiced bythe creditor's conduct and was therefore discharged.

Nestadt JA, for the majority of the court, found that a surety'srenunciation of the benefit of cession of actions entitled the suretyto cession of actions once he had discharged his liability to the



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SURETNSHIP

creditor, butprevented the surety from delayingpayment to the creditorof the amount due under the suretyship on account of the creditor'sfailure to effect the cession of actions (at 877E-F). The court

accepted that the surety would be discharged where the 'creditor byhis own act makes it impossible for himself to cede his security tothe surety' (at 878D-E). Thus the court had to establish whether theappellant's conduct regarding the proof of its claim resulted inthe loss of its security, in which case the surety would be discharged.The court found that the appellant had two ways in which toestablish its secured claim: it could either submit a claim for proofin the estate or it could launch proceedings to enforce its claimagainst the corporation. The issue was whether the action institutedby 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 preventa creditor from instituting action prior to the rejection of its claimto proof in the estate (at 879G-I). A creditor therefore is entitled toinstitute proceedings to enforce a claim against the corporation inliquidation after withdrawing a claim it has submitted to proof inthe estate, even before it has been rejected from proof in the estate.Regarding the requirement in s 359(2) (a) of the Companies Act 61of 1973, that notice must be given to the liquidator of one's intentionto institute or continue with litigation against a company (or, readwith s 66 of the Close Corporations Act 69 of 1984, against acorporation) in liquidation to enforce a claim against the company(or corporation), the court referred to Umbogintwini Land andInvestment Co (Pty) Ltd (in Liquidation) v Barclays National Bank Ltd1987 (4) SA 894 (A), and decided that such a notice was not requiredfrom the appellant before it instituted action. Accordingly, the courtrejected the respondent's contention that the appellant's failure togive such notice precluded its action against the corporation. Suc-cess in the litigation would result in the appellant, despite its lateproof, retrospectively ranking as a creditor in the first liquidationand distribution account with a claim under s 78(3) of the Insol-vency Act. This provision would deem the appellant's claim settledby ajudgment to be proved and admitted against the estate, and theappellant would rank as a secured creditor. The court noted thatthe appellant had previously submitted a claim in proper formagainst the estate and thus, even if one accepted the somewhatdoubtful proposition that a claim had to have been tendered at themeeting of creditors, that requirement had been fulfilled. By with-drawing its claim from proof in the estate the appellant did not loseits right to proceed against the estate, but merely did so as a first stepto the institution of litigation, which did not negate its earliersubmission of its claim to proof in the estate. Thus if the appellant



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ultimately obtained a judgment against the corporation in liquida-tion, it would be deemed retrospectively to rank as a secured creditorin the first liquidation and distribution account. Accordingly, the

appellant was not prevented from giving the respondent a propercession of actions and the respondent's contention that he had beendischarged 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 aroseprior to liquidation as the cause of the claim was the conclusion ofthe instalment sale agreement, even though the amount only becamedue on account of the liquidation of the corporation (a t 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 ofthe failure to give the notice referred to in that provision. Th eminority found that s 359 (2 ) of the Companies Act was inapplicablesince it found that the claim arose upon the granting of the finalwinding-up order. In any case, a court could excuse the appellant'sfailure to give timeous notice and only when a court had pronouncedon the issue could the respondent show that the creditor ha d lostits secured claim. Accordingly, the appellant's failure to give thenotice referred to in s 359(2) of the Companies Act was irrelevant.It was also considered by the minority of the court that the respon-dent had launched the proceedings prematurely as no account hadyet been lodged with the Master, an d s 366(2) of the Companies Acthas the effect of excluding a claim from the benefit of a distributionto creditors if the claim was proved after the liquidation and distribu-tion account was lodged. As no account had been lodged when theappellant withdrew its claim from proof, it was possible for the appel-lant again to prove a claim an d to obtain a share in the distributionunder the account. Further, a distribution of the proceeds of thesale of the hypothecated goods to other creditors who had provedclaims under the account would no t be possible, since the liquidatorcould not show these proceeds as available for distribution to creditorsuntil the appellant's action against the corporation in liquidationhad been finalized. Thus the security had not been lost, as theproceeds from the sale of the hypothecated goods were not availablefor distribution to creditors.

Rectification of a Deed of Suretyship

In Republican Press (Pty) Ltd v Martin Murray Associates CC & others1996 (2 ) SA 246 (N) a deed of suretyship mistakenly described theplaintiff to be the principal debtor as well as the creditor. When



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SURETYSHIP

the plaintiff (as creditor) sued the defendants for payment thesecond defendant, a surety, contended that the plaintiff's applica-tion 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 asa point in limine. The majority of the court rejected the plaintiff'scontention that courts generally favour rectification of a contractover 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 mustcomply with statutory formalities required, first, an investigationwhether 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 togive effect to parties' agreements and to respect the legislature'sintention, but that must be resolved by giving effect to the statutorilyimposed requirements. The majority applied what it described as'the strict approach to the test of whether the document ostensiblycomplies with the statute' (at 255F) and found that the plaintiff hadfailed to show that the deed complied ostensibly with the require-ments of s 6 of the General Law Amendment Act 50 of 1956 as faras identifying the parties to the contract was required. As the firststage of the test was not met, the court found that the suretyshipcould not be rectified and found in favour of the second defendant.See further the discussion of this case in the chapter on GeneralPrinciples of Contract.

LITERATUREBusiness Transactions Law. 4 ed . By Robert Sharrock. Cape Town: Juta &

Co Ltd. 1996.ExtinctivePrescription.By M M Loubser. Cape Town: Juta & Co Ltd. 1996.Hocklyse Insolvensiereg.By Robert Sharrock, Elmarie de la Rey, Kathleen van

der Linde and Alastair Smith. Cape Town: Juta & Co Ltd. 1996.Hockly'sInsolvency Law. 6 ed . By Robert Sharrock, Elmarie de la Rey, Kath-leen 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.

SouthernCross: CivilLaw and CommonLaw in South Africa. Edited by ReinhardZimmermann an d DanielVisser. Cape Town: Juta & Co Ltd. 1996.

The Law of Contract n South Africa. 3 ed. By R H Christie. Durban: Butter-worths. 1996.

Speculativeand

ContingencyFees. Working Paper 63 of the South African Law

Commission:Project 93. 1996.



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Arbitration: A Draft International Arbitration Act fo r South Africa. DiscussionPaper 69 of the South African Law Commission: Project 94. 1996.

Speculative and Contingency Fees. Report of the South African Law Commis-sion: Project 93. 1996.

'Partnerschaftsgesellschaft. he New German Form of Company and BusinessAssociation.' By H Christian A W Schulze. (1996) 29 CILSA 141.

'Cohabitation Relationships Revisited: Is It Not Time fo r Acceptance?' ByDivya Singh. (1996) 29 CILSA 317.

'The Legal Position of Domestic Workers - A Historical Perspective.' ByElize Delport. (1996) 37 (2) Codicillus 27.

'Republican Press (Pty) Ltd v Martin Murray Associates CC and Others 1996 2 SA246 (N).' By NJ Grov6. (1996) 29 (2) DeJure 401.

'Lillicrap, Lloyd's, Lost Legacies an d Law Lords: Re-examining the PossibleImpact of English Law on the Concurrent Professional Liability ofAttorneys.' By Andrew Henderson. 1996 DeRebus 769.

'Legal Constraints on the Termination of Fixed-Term Contracts of Employ-ment: An Enquiry into Recent Developments.' By Marius Olivier. (1996)17 Industrial Law Journal 1001.

'There Is a Code, You Know: Parallel Importation of Electronic Equipment: ANew Consumer Code.' By Richard Plaistowe. (1996) 4 Ju ta s Business Law 19.

"It's Delicious, It's Delightful, It's De-Lovely": A Void Clause Ousting theCourt from a Franchise Agreement.' By Alastair Smith. (1996) 4Ju ta ' sBusiness Law 31 .

'The Transport Contractor, the Frolicking Thief, and the Good Samaritan:

The Theft of a Wrongly Delivered Consignment.' By Alastair Smith.(1996) 4 Ju ta s Business Law 64.

'Franchising: The Basics Explained.' By Mike von Seidel. (1996) 4Ju ta ' sBusiness Law 70.

'Warsaw Concerto: Airline Agreement Likely to Lead to Increased Insur-ance Premiums.' By Danie le Roux. (1996) 4 Ju ta ' s Business Law 155.

'A Creditor Left to "Dree His Weird": Rectification of a Deed of Suretyship.'By Rochelle le Roux. (1996) 4Juta 's Business Law 157.

'Dead, bu t Not Buried: Suretyship: Th e Effect on a Deceased Estate.' ByGraham Charnock and Alfie Bester. (1996) 4 Ju ta ' s Business Law 159.

'Attorney and Client Costs Ex Contractu.' By A M van Pletzen. (1996) 31 TheMagistrate 65.

'The Rectification of a Suretyship Agreement: Republican Press (Pty) Ltd vMartin Murray Associates CC 1996 2 SA 246 (N).' By M Lamprecht. (1996)31 The Magistrate 115.

'The Doctor's Dilemma: Duty an d Risk in the Treatment of Jehovah'sWitnesses.' By Michael Katz. (1996) 113 SALJ484.

'A Void Clause in a Franchise Agreement; and a Sidelight on the Historyof 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) 8SA Merc LJ 190.



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SUREMSHIP 287

'Hospital Consent Forms.' By Neil van Dokkum. (1996) 7 Stellenbosch La wReview 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 THRHR319.

'Cession of Future Rights: First National Bank 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 CorporatePartners and Other Issues Concerning Susceptibility.' ByJJ Henning.(1996) 21 (2) TRW68.

'A Salutory Statutory Dispensation for Small Businesses.' By E Snyman andJJ Henning. (1996) 21 (2) TRW132.

'Belgiese Verbruikerskrediet: 'n Vergelykende Studie (Deel iii).' By J MOtto. 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.

Documents

1996AnnSurvSAfricanL272