Cession of rights, title and interest in immovable property as security for a loan
In the case of Coetzee N.O v Total Auctioneering Services and Sales CC t/a Consolidated Auctioneers and another [2019] JOL 41493 (GJ), one of the respondents had ceded all his rights, title and interest in an immovable property as security for a loan. The loan was not repaid and the applicant sought to enforce the cession and take transfer of the relevant property. The applicant was successful and the aforementioned respondent was ordered to transfer the property.
Interesting aspects of the case are:
- The loan agreement (in terms of which the property was ceded) was reduced to writing but was not signed by the lender, only the borrower. The court found that the written loan agreement was none the less binding as all parties performed in terms thereof;
- The respondents argued that after the loan agreement was entered into, an oral agreement was entered into between the parties which eliminated the respondents’ obligations in terms of the loan agreement. This was disputed by the applicant, who also relied on a non-variation clause contained in the loan agreement, even though the loan agreement was never signed by the lender. The Court discredited the further oral agreement seeing that the Court was of the view that the written loan agreement (therefor including the non-variation clause) was binding and that such an oral agreement would constitute a waiver of rights on the part of the lender, which the respondents’ failed to prove.
Compiled by: Lucas Theron ((B. Com Law, LL. B, Dipl. Fin. Plan); source: https://www.lexisnexis.co.za/
LEXISNEXIS MINI SUMMARY:
Corporate and Commercial Law: loan agreement
Coetzee N.O v Total Auctioneering Services and Sales CC t/a Consolidated Auctioneers and another
[2019] JOL 41493 (GJ)________________________________________
Case Number: 13166 / 2017
Judgment Date: 25 / 02 / 2019
Country: South Africa
Jurisdiction: High Court
Division: Gauteng, Johannesburg
Bench: SE Weiner J
________________________________________
Keywords: Corporate and Commercial – Loan agreement – Security for loan – Calling up of security
Mini Summary:
The applicant was the executor of a deceased estate. In 2014, the deceased (Botha) entered into a loan agreement with the respondents. In terms of the loan agreement, Botha lent and advanced R2,5 million to the first respondent (“Total”). As security for the repayment of the loan, the second respondent (Da Silva) ceded in favour of Botha his right, title and interest in certain immovable property. Da Silva warranted that he was the sole owner of the property and that he had not previously alienated or encumbered it. He further warranted that the property was freely owned by him and capable of transfer. He undertook not to sign any documentation alienating or encumbering the property from the date of signature of the loan agreement. The loan agreement was not signed by Botha, but it was signed by Da Silva on behalf of Total and in his personal capacity.
When the loan was not repaid despite demand, the applicant launched the present application for an order that Total pay the amount due.
The respondents’ defence was that the original agreement was superseded by a subsequent agreement and they therefore denied any liability to the deceased estate. In terms of the alleged oral agreement, Botha acquired a 50% member’s interest in a close corporation (Consolidated Pretoria)) of which Da Silva was a member for the purchase consideration of R2.5 million, thus extinguishing the debt to be repaid to Botha. That was disputed by the applicant, who contended that Botha did not purchase any member’s interest in any close corporation as alleged by the respondents. The applicant also relied on a non-variation clause which required any alterations to the agreement to be reduced to writing and signed by all the parties thereto. Da Silva argued that the loan agreement was not signed by Botha and therefore the non-variation clause did not apply.
Held that the respondents could not dispute the conclusion of the loan agreement as all parties acted upon it, Botha by paying out the loan amount and the respondents by accepting same. Thus, the non-variation clause was enforceable and the oral agreement relied upon by the respondents could be of no force and effect.
The respondents also contended that the enforcement of the non-variation clause would be contrary to public policy, as Botha had waived the reliance on the loan agreement by accepting the 50% member’s interest in the close corporation in lieu of the repayment of the loan. There is a factual presumption that a party is not likely to be deemed to have waived his rights, and that clear and unequivocal evidence of a waiver is required. The respondents failed to prove a waiver of rights by Botha, and such waiver would be contrary to the non-variation clause.
Satisfied that Da Silva had provided security for the repayment, and that once Total failed to pay on the due date, Da Silva’s liability arose and the security fell to be realised, the court ordered Da Silva to transfer the property into the deceased estate.