In the matter between:
TWEE JONGE GEZELLEN (PROPRIETARY) LIMITED First Applicant
NICOLAS CHARLES KRONE Second Applicant
and
THE LAND AND AGRICULTURAL DEVELOPMENT
BANK OF SOUTH AFRICA t/a THE LAND BANK First Respondent
MINISTER OF JUSTICE AND CONSTITUTIONAL
DEVELOPMENT Second Respondent
FOUNDING AFFIDAVIT IN APPLICATION FOR LEAVE TO APPEAL
I, the undersigned,
NICOLAS CHARLES KRONE,
declare the following under oath:
1. I am an adult businessman residing at Twee Jonge Gezellen Farm, Tulbagh, Western Cape.
2. The contents of this affidavit are within my own knowledge, except where the context indicates otherwise, and are true and correct. Where I make legal submissions I rely upon the advice of the First Applicant’s and my legal representatives, which advice I verily believe to be correct.
3. I am the Second Applicant in this application, and was the second defendant in provisional sentence proceedings instituted by the First Respondent, as plaintiff, under case number 19694/2008, which proceedings have resulted in this application.
I am also a director of the First Applicant (the first defendant in the provisional sentence proceedings) and am duly authorised to depose to this affidavit on the First Applicant’s behalf.
The parties
4. The First Applicant is Twee Jonge Gezellen (Proprietary) Limited, a private company with limited liability duly incorporated in accordance with the company laws of the Republic of South Africa, with its principal place of business situated at Twee Jonge Gezellen Farm, Tulbagh, Western Cape.
5. I am the Second Applicant.
6. The First Respondent is The Land and Agricultural Development Bank of South Africa trading as The Land Bank, a juristic person established originally in terms of Act No. 18 of 1912, and which continues to exist in terms of Act No. 15 of 2002, having its principal place of business at 52-54 Queen Victoria Street, Cape Town.
7. The Second Respondent is the Minister of Justice and Constitutional Development, cited in his official capacity as such, of 120 Plein Street, Cape Town.
The Second Respondent was joined in the proceedings in the Court a quo by virtue of certain constitutional issues that were raised, as will appear from what follows.
The purpose of this application
8. This is an application for leave to appeal against the judgment and order (including the order as to costs) of the Honourable Justice Desai handed down on 24 November 2009 in the Western Cape High Court, Cape Town, in so far as the Court held the common-law remedy of provisional sentence, as embodied in Rule 8 of the Uniform Rules of Court, to be constitutionally valid in its current form. A copy of the judgment, including the order, is annexed hereto, marked ‘NCK1’.
9. An application for leave to appeal was refused on 25 March 2010, as is evident from the copy, annexed hereto marked ‘NCK2’, of the judgment delivered by the Honourable Justice Desai in the Western Cape High Court.
10. The Applicants subsequently made application to the Supreme Court of Appeal for leave to appeal to that Court. The application was, however, dismissed on 24 June 2010. I annex, marked ‘NCK3’, a copy of the order made by the Honourable Justices Ponnan and Pillay.
11. As will appear from the contents of this affidavit, the Applicants’ application for leave to appeal centres only on questions of law, as the Applicants do not seek leave to appeal against the Court a quo’s findings on the merits of the Applicants’ defence to the provisional sentence proceedings. The legal questions will be dealt with in more detail below.
Background
12. During 2008 the First Respondent (as plaintiff) claimed, by way of provisional sentence summons, the sum of R37 914 027.01 from the Applicants (as defendants) jointly and severally. The claim was based upon an acknowledgement of debt signed by me both in my personal capacity and on behalf of the First Applicant on 6 June 2005.
13. I did not deny the authenticity of my signature on the acknowledgement of debt and the First Applicant did not deny either the authority of its agent (being me) or the authenticity of my signature on the document. The Applicants, furthermore, did not
place the fulfilment of any condition contained in the acknowledgement of debt in dispute.
14. We did however oppose the granting of provisional sentence on two grounds:
14.1. First, we contended that the common-law remedy of provisional sentence is inconsistent with the Constitution of the Republic of South Africa, 1996 (‘the Constitution’), more particularly with sections 9 and 34 thereof;
14.2. Secondly, we contended that the First Respondent was not entitled to enforce the terms of the acknowledgement of debt against us, by reason of the fact that the amount of the First Respondent's claim had been novated to an amount of R20 million by way of an oral agreement between the parties, and in any event that we (the Applicants) had been afforded an extension of time within which to restructure our finances so as to make payment to the First Respondent of the said amount of R20 million. This amount would not be called up without reasonable notice to the Applicants. Such reasonable notice would, given the considerable sum involved, not be less than three months. Notice had not been given and the proceedings were, therefore, premature.
15. The defence relating to the merits of the matter (paragraph 14.2 above) is relevant for the purposes of this application only in so far as it is the Applicants’ contention that our liability to pay the First Respondent is a triable issue. The constitutional
objection (paragraph 14.1 above), however, was raised in the light of the fact that, so the Applicants averred, the First Respondent had since signature of the acknowledgement of debt been acutely aware of the fact that the Applicants were in no position to pay the debt reflected in the acknowledgement in a lump sum, should judgment be taken against us. As I explained in the main answering affidavit filed on the Applicants’ behalf in the provisional sentence proceedings, payment of the instalments as reflected in the acknowledgment of debt had not been achievable due to the fact that the First Applicant’s cash-flow was insufficient to sustain its business activities and simultaneously to meet its commitments in terms of the acknowledgment of debt. That situation had resulted in protracted, but largely unsuccessful, negotiations that followed over the course of four years.
16. The First Respondent at all material times knew full well that, in the event of the Applicants failing to secure replacement capital then or at any stage in the future, it was highly unlikely that we would be able to pay the debt by way of a lump sum.
Accordingly, should provisional sentence be granted, the Applicants would be unable to comply with the provisions of Rule 8(10) in order to enter into the principal case, even though we might have a bona fide defence and believe that oral evidence should be heard in order to allow for the proper determination of the matter.
17. In the circumstances, from the outset of these proceedings the First Respondent knew that once provisional sentence had been granted, that would be the end of the road for the Applicants as far as the action was concerned. In the circumstances, in instituting
provisional sentence proceedings instead of proceeding by way of a summons in the normal course, the First Respondent knowingly took a step that would close the doors of the court to the Applicants, in so far as the proper ventilation of the triable issues was concerned. The First Respondent was entitled to do so. The closure of the court doors resulted from the current form in which Rule 8 is cast, and the manner in which the rule has historically been interpreted.
18. The Court a quo dismissed the Applicants’ contentions both on the merits and on the constitutional issue, and granted provisional sentence as prayed.
The grounds of appeal
19. The Applicants do not question the Court a quo’s finding on the merits. In other words, the Applicants accept that the Court a quo correctly found that they had failed, having regard to the onus, to satisfy the Court that the probabilities of success in the principal case are against the First Respondent. Nevertheless, triable issues on the merits had been raised, which were not so far-fetched or untenable that they could be rejected on the papers. Because the Applicants are obliged to pay the amount of the judgment of the provisional sentence and taxed costs in order to prevent the judgment on provisional sentence from becoming a final judgment, and because they are unable to do so, it follows that the triable issues cannot now be tested by way of oral evidence.
20. It is the Applicants’ contention that Rule 8 in the circumstances operates in an unconstitutional manner.
21. I am advised that the common law, including as embodied in the Uniform Rules of Court, must be interpreted through the prism of the Bill of Rights (sections 1(c), 2 and 39(2) of the Constitution; Investigating Directorate: Serious Economic Offences and others v Hyundai Motor Distributors (Pty) Ltd and others: in re Hyundai Motor Distributors (Pty) Ltd and others v Smit NO and others 2001 (1) SA 545 (CC) at para [21]). In considering the ambit of rights entrenched in the Bill of Rights a wide and generous interpretation should be favoured over a narrow and limited one (S v Mhlungu and others 1995 (3) SA 867 (CC) at para [8]).
22. I respectfully say that the Court a quo failed to accord sufficient weight to the provisions of section 34 of the Constitution, which guarantees the protection of a fair judicial process as a prerequisite for a just and credible legal order. Courts, I am advised, are obliged to ensure that the proceedings before them are always fair, and to interpret legislation and rules of court in a way that would render the proceedings fair. It is a crucial aspect of the rule of law that court orders should not be made without affording the other side a reasonable opportunity to state its case (Chief Lesapo v North West Agricultural Bank and another 2000 (1) SA 409 (CC) at para [13]; De Beer NO v North Central Local Council and South Central Local Council and others 2001 (11) BCLR 1109 (CC) at paras [9]-[12]). The fact that a court has no jurisdiction in provisional sentence proceedings to require oral evidence to be
heard on issues other than the authenticity of the defendant’s signature is at least a prima facie infringement of the basic right of a party to present its case.
23. Provisional sentence proceedings in their current formulation and application place an unfair and unjustifiable constraint on defendants in respect of their ability to present their defence fully (including through discovery and cross-examination of the plaintiff’s witnesses), in particular because the remedy in all instances, and without exception, requires defendants against whom provisional sentence has been granted to satisfy the judgment debt and taxed costs (albeit against the provision of security de restituendo) before they are allowed to enter into the principal case.
24. Moreover, the persons most likely to be denied the right to a fair trial pursuant to the availment by claimants of provisional sentence proceedings are those with insufficient financial resources to meet the requirements for entering into the principal case. In such circumstances the provisions of Rule 8 as regards a defendant’s rights in proceeding with the principal action are entirely hypothetical and the defendant is precluded from obtaining a fair hearing on the merits of its defence. Conversely, provisional sentence favours the plaintiff who is able to provide security de restituendo. In other words, provisional sentence is a remedy which operates inequitably specifically in the circumstances where a wealthy plaintiff sues an impoverished defendant. The resultant potential inequity of the remedy, which allows only a provisional sentence judgment debtor who is able to satisfy the claim and the costs of provisional sentence proceedings against security de restituendo the
right to proceed to the trial of the claim, offends against the equality provisions of section 9 of the Constitution.
25. A court, in granting provisional sentence, has no authority to tailor its order in such a manner as to allow the defendant to enter into the principal case even if it is unable to satisfy the judgment within a period of two months, against the provision of security de restituendo. A court also cannot competently refuse provisional sentence for discretionary reasons once the plaintiff has demonstrated an entitlement to it (Rood v Van Rooyen 1934 TPD 110 at 111).
26. For a defendant faced with a provisional sentence judgment against it and unable to satisfy such judgment within the relatively short period of two months, the provisional sentence stage of the proceedings is the end of the litigation. Any appeal against the final judgment (the grant of provisional sentence not being appealable, at least generally) which automatically ensues if the principal case is not entered into within the two-month period provided for by Rule 8 would be futile, given the absence of any opportunity to adduce oral evidence in support of the defence (Avtjoglou v First National Bank of Southern Africa Ltd 2004 (2) SA 453 (SCA) at paras [6]-[8]; Smit v Scania South Africa (Pty) Ltd 2004 (3) SA 628 (SCA) at paras [6]-[7]).
27. The law relating to provisional sentence (as presently formulated, i.e. in limiting the discretion of the court to allow oral evidence to be heard) cannot in the circumstances
be regarded as being rationally connected to a legitimate purpose.
28. There is a reasonable prospect, I respectfully say, that this Honourable Court may find that the remedy of provisional sentence as presently formulated is inconsistent with the right to a fair hearing enshrined in section 34 of the Constitution, as well as the equality provision in section 9 of the Constitution, and is neither reasonable nor justifiable in a system which recognises generally the importance of oral evidence in ensuring that disputed issues are fully ventilated prior to what is effectively a final judgment being delivered.
29. The Applicants recognise the value of having a procedure such as provisional sentence, available to a claimant armed with a liquid document, and accordingly would not seek an order striking down the whole of Rule 8.
30. We contend, and would wish to argue, only that provisional sentence is unconstitutional in so far as it does not vest in the court a discretion to refer the matter to oral evidence or to permit a defendant to enter into the principal case, where such defendant raises a defence which is not so far-fetched or clearly untenable that it may be rejected on the papers and has satisfied the court that he would be unable to satisfy the provisional sentence judgment before it becomes a final judgment. It is the Applicants’ contention that we fall within that category of defendant, and that, had such a discretion been vested in the Court a quo, an appropriate order of referral to oral evidence would have been made.
Conclusion
31. The Applicants accordingly respectfully ask for an order in terms of the notice of application to which this affidavit is annexed.
NICOLAS CHARLES KRONE
Signed and sworn to at the address below on this day of JULY 2010, the Deponent having acknowledged that he knows and understands the contents of this Declaration, and having uttered the words: ‘I swear that the contents of this Declaration are true, so help me God.’ I certify further that the provisions of Regulation 1258 of 21 July 1972 (as amended) have been complied with.
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COMMISSIONER OF OATHS
