Van Zyl V Bekker Ta RMS Prepaid (I 91-2016) 2016 NAHCNLD 59 (22 July 2016)
1
REPORTABLE
REPUBLIC OF NAMIBIA
IN THE HIGH COURT OF NAMIBIA, NORTHERN LOCAL DIVISION, OSHAKATI
JUDGMENT
Case no: I 91/2016
In the matter between:
JOHANNES VAN ZYLPLAINTIFF
and
CORNELIUS JACOBUS BEKKER t/a RMS PREPAIDDEFENDANT
Neutral citation: Van Zyl v Bekker ta RMS Prepaid (I 91-2016) [2016] NAHCNLD 59 (22 July 2016)
Coram:CHEDA J
Heard: 13/06/2016; 04/07/2016
Delivered:22 July 2016
Flynote:
A contract which is tainted with illegality and/ or is against public policy is unenforceable. – The court will pierce the veil to see the real intention of the party that sought to benefit from the other party. – The court has inherent jurisdiction to look into the claim even where defendant did not defend the action. – Application for default judgment dismissed. – Defendant ordered to pay what he has utilized from the claim and not the costs.
Summary:
Plaintiff lent money to defendant. The agreement was to continue in perpetuity. Defendant defaulted and an application for default judgment was applied for. No appearance to defend was entered. The loan agreement was tainted with illegality and was against public policy. The loan was designed to evade the laws governing money lending and defendant was to continue servicing the loan in perpetuity. The court used its discretion to look into the intention of the plaintiff (lender). Plaintiff was not forthcoming with more information. Application was dismissed and an appropriate order was made.
ORDER
1) Application for default judgment is dismissed with costs;
2) Defendant is ordered to pay back the amount he utilized from the deposit of
N$ 100 000.00 paid by plaintiff less the monthly instalments or any other such sums of money he has paid towards the said debt;
3) The said amount should be paid with interest a tempora morae with effect from the date of judgment to date of final payment;
4) The Registrar of the High Court is ordered to ensure that defendant is served with this order; and
5) Plaintiff must not recover costs from defendant.
JUDGMENT
CHEDA J:
[1]Plaintiff issued summons on the 29th of April 2016 against defendant.
[2]Plaintiff is employed as a mechanic at Namcon, Oshakati while defendant is a businessman trading under the name and style of RMS Prepaid, Rundu, Namibia.
[3]On or about the 13th of February 2014 the parties entered into a partly oral and partly written agreement, the terms of which are as follows:
a) Plaintiff would deposit N$ 100 000.00 into the bank account of Nored Electricity, Ondangwa. The said amount was to be utilized by defendant to purchase pre-paid electricity at a reduced amount which he would sell at a higher price for profit.
b) It was a further term of the agreement that the defendant was to pay N$ 10 000.00 per month until such time that the agreement is terminated.
c) Further there are two terms of the agreement that were orally made, that:
(i) the agreement would last in perpetuity (no less than one year) or until such time as either party elects to terminate on no less than 3 months’ notice and
(ii) should either party elect to terminate the agreement, defendant was obliged to refund plaintiff’s original investment of N$ 100 000.00
[4]Plaintiff indeed deposited the N$ 100 000.00 into the Nored Electricity bank account. According to plaintiff’s calculations as per his letter to defendant dated 5 September 2015, the following appears:
“According to my calculation the following amount is due on or before 05 December 2015.
Arrear amount as at 31 August 2015: N$ 25 000.00
Notice period: N$ 30 000.00
Invested value:N$ 100 000.00
Total payable: N$ 155 000.00”
[5]Defendant did not enter an appearance to defend this action and plaintiff applied for a default judgment on 13 June 2016.
[6]On the day of hearing I expressed my concern with regards to the whole contract in particular to the claim of N$ 155 000.00 when the loan was N$ 100 000.00. I invited Mr Greyling to file heads of argument in order to justify this claim. I alerted him to the possibility of the illegality of the contract and in particular the contravention of the Usury Act, Act 73 of 1968.
[7]Mr Greyling in his heads of arguments argued that the terms and conditions of the said agreement do not offend the said Act.
[8]I will leave that argument and approach this issue from a common law perspective. It is trite law that a contract is an agreement (arising from either true or quasi-mutual assent) which is, or is intended to be, enforceable at law, see Christie- The Law of Contract in South Africa, Butterworths, 1981, page 1.
[9]The court in enforcing a contract will first and foremost look at the intention of the parties and thereafter the legality, as they cannot enforce agreements tainted with illegality, immorality or contra bones mores and those that are against public policy. This was clearly laid down in Eastwood v Shepstone 1902 TS 294 302 where Innes CJ stated:
“Now this Court has the power to treat as void and to refuse in any way to recognise contracts and transactions which are against public policy or contrary to good morals. It is a power not to be hastily or rashly exercised; but once it is clear that any arrangement is against public policy, the court would be wanting in its duty if it hesitated to declare such an arrangement void. What we have to look at is the tendency of the proposed transaction, not its actually proved result.” (my emphasis).
[10]Married to the above principle is the principle of public policy which is presumptive in the event of the issue of illegality arising. I am mindful of the fact that defendant did not enter an appearance to defend. Simple logic dictates that he is fully aware of his indebtedness to plaintiff. This, of course is in order as every man must honour up and give Ceaser what is due to Ceaser. However, at the same time these courts being courts of justice are enjoined to ensure that justice is done between man and man and that there is no party which unduly takes advantage of the other by virtue of lack of knowledge of their rights which unfortunately could only be ascertained by securing legal services which on its own does not come cheap.
[11]It is for that reason that having been persuaded by the tenets of justice I had to use a magnifying glass in this agreement.
[12]Plaintiff in his founding affidavit averred that he lent N$ 100 000.00 to defendant in order for him to use for a particular trade. The details of this agreement are not clear. I find that there are the following gaps in plaintiff’s case:
1) the agreement is vague as to its termination. It merely states that: “the agreement between plaintiff and defendant would last in perpetuity (no less than one year) or until such time as either of the parties elect to terminate the agreement on no less than 3 months’ notice.”
An agreement which is vague is unenforceable at law. This point was dealt with in Levenstein v Levenstein 1955 (3) SA 615 SR 619 where Quénet J remarked:
“Firstly, those cases which exemplify the maxim nulla promissio potest consistere, quae ex voluntate promittentis statum capit; in such cases the so-called contract is not enforceable because the promise is ‘dependent on a condition which in fact reserves an unlimited option to the promisor’….Secondly, where the vague and uncertain language justifies the implication that the parties were never ad idem….. Thirdly, where there is no concluded contract as in the uncertainty is fatal to the existence of the so-called contract; in the first class because there is uncertainty as to whether the promisor will ever acknowledge the existence of an obligation; in the second, there is uncertainty as to what he has acknowledged as being his obligation, and in the third class there is uncertainty as to the subject matter which has still to be agreed. The fourth class concerns those cases where the unspecified details of the contract are questions of fact capable of determination by the evidence.”
Although such conditions are not void, they are voidable and are therefore voidable at the instance of the plaintiff who is required to lead evidence to clarify and remove the vagueness. For the court to come to his rescue the aid of evidence is required. In the absence of evidence the court cannot interpret the contract to plaintiff’s favour as the benevolent interpretation would have been taken too far. However, a contract that reserves an unlimited option to the promisee as opposed to the promissor is not void for vagueness, but, is valid.
2) Plaintiff did not state how much defendant has paid towards this debt and further did not state what the balance is.
3) In the letter of demand the following is recorded:
“According to my calculation the following amount is due on or before 05 December 2015.
Arrear amount as at 31 August 2015: N$ 25 000.00
Notice period: N$ 30 000.00
Invested value:N$ 100 000.00
Total payable: N$ 155 000.00”
From the above it is not clear how the N$ 25 000.00 “arrears” are compiled. According to the agreement, defendant was supposed to pay N$ 10 000.00 per month. As it is, it is not clear how much defendant paid and when the payment was effected bearing in mind that the agreement was signed in February 2014 and arrears are at N$ 25 000.00 for a period of 11 months.
4) there is a figure on N$ 30 000.00 referred to as notice period. This again is neither in the written agreement nor alluded to in the verbal agreement.
[13]While the courts are desirous to put effect into contracts duly entered into by the parties, the parties need to be candid with the courts and make a clear breast of the circumstances surrounding the agreement they wish the court to enforce. All this cannot be left to conjecture. Plaintiff has in its particulars of claim failed to give details of the terms and conditions of its agreement. It further failed to come clean when being asked to shed light as to the details of its agreement. The courts are not being unnecessarily nosy, but, have a duty to ensure that the agreements are both legal and do not offend public policy considerations.
[14] The fact that plaintiff is not keen to make a full disclosure and the real purpose for this kind of arrangement unavoidably invites the court to delve further albeit armed with scanty information the majority of which has been withheld. There can only be two types of this non-disclosure, it can either be bona fide or mala fide. If it was bona fide, in my view, it would have been disclosed and condonation sought. This, therefore, leaves me with only one conclusion being that it was mala fide. The gaps pointed out above are clearly an indication of either some illegality behind the agreement or offence against public policy.
[15]With regards to illegality it is trite law that contracts entered into for illegal purposes are themselves illegal, or put differently, contracts, the object of which is to achieve something forbidden by law are illegal. The celebrated case of Kennedy v Steenkamp 1936 CPD 113 at 116 is to the point in this regard. On that case Watermeyer AJP stated:
“Coming now to the subject of unenforceable contracts it is clear that there are many factors which enter into the making of a contract. For example there are the mutual promises, there is the purpose or aim for which the promises are made, and there is the causa or oorsaak of the promises (using these words in the sense of the reason why the promises are made), and illegality may be found in any one or more of these elements. In general it can be stated that an apparently lawful promise if knowingly made for an illegal purpose will not be enforced, a promise illegal in itself will not be enforced, and a promise made in return for an unlawful consideration will not be enforced.”
This point was laid down in Eastwood’s case (supra). Plaintiff devised a system where he can lend money to defendant to be paid back with an undisclosed interest, which loan was to continue in perpetuity and leaving himself being the only one to dictate terms and conditions of the said contract.
[16]All this transaction enabled him to trade in a money lending business or scheme which will operate under the Ministry of Finance’s radar and all other law enforcement agents. This of course is illegal, it should be borne in mind by all and sundry that no matter how much the culprit will devise a sinister way to disguise its financial machinations to cheat the fiscus operations, the court is empowered to pierce the veil and expose the true intentions hidden therein in order to see what the real nature of the object is. In Mohamed Abdullah v Levy 1916 CPD 302 at 308, De Villiers AJ, stated:
“I may, however, express the opinion that the transaction was void on the ground of illegality, its object being, beyond any doubt, to enable Abbas to trade as a general dealer without a licence, which constitutes an offence forbidden by law. It should be clearly understood that, no matter in what form such transactions are cast, the Court will inquire into their real nature and into the real intentions of the contracting parties, and will adjudicate upon them accordingly.” (my emphasis).
[17]I hold the view that there is more to this transaction than meets the eye and accordingly, this court cannot come to the aid of the plaintiff in the circumstances. These courts cannot be seen to lend assistance to a party who seems to seek enforcement of a contract that is tainted with illegality. The Latin maxim, pacta quae turpen causam continedt non sunt observanda, simply put, agreements founded upon an immoral consideration are not to be observed.
[18]Where a party finds itself with financial die straits and needs money, yes it is in order for it to approach financial institutions for loans, but, payment arrangements should be both legal and moral as these courts cannot promote contracts which tend to lend support to ventures which are against public policy as this goes against the grains and ethos not only of commercial practices, but, against the general populace.
[19]As stated above, there is a lot of information which has been withheld in this matter which presents the court with some difficulty in coming up with the exact amount utilized and/or paid back by defendant. Assuming that he benefited from the funds, he is obliged to pay back the said amount to plaintiff’s funding which, if not paid plaintiff will be prejudiced. Plaintiff is highly to blame for this transaction, so to be as it was state by William Shakespeare, in Hamlet when he said: “neither a borrower, nor a lender be; for loan often loses both itself and friend.”
[20]In the result this is the order of the court:
1) Application for default judgment is dismissed with costs;
2) Defendant is ordered to pay back the amount he utilized from the deposit of
N$ 100 000.00 paid by plaintiff less the monthly instalments or any other such sums of money he has paid towards the said debt;
3) The said amount should be paid with interest a tempora morae with effect from the date of judgment to date of final payment;
4) The Registrar of the High Court is ordered to ensure that defendant is served with this order; and
5) Plaintiff must not recover costs from defendant.
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M Cheda
Judge
APPEARANCES
PLAINTIFF:J. Greyling
Greyling & Associates
Oshakati
DEFENDANT: