THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 267/17

In the matter between:

JOHN ANTHONY SHAW
1st APPELLANT
WADE GRAHAM TAYLOR
2nd APPELLANT

and

GLENN WILLIAM MACKINTOSH
1st RESPONDENT
MABILI SEARCH & SELECTION (PTY) LTD
2nd RESPONDENT

Neutral Citation:
Shaw & another v Mackintosh & another (267/17) [2018]
ZASCA 53 (29 March 2018)
Coram:
Shongwe ADP and Wallis, Dambuza and Mathopo JJA
and Davis AJA
Heard:
22 February 2018
Delivered:
29 March 2018
Summary:
National Credit Act 34 of 2005 (the NCA) – co-principal
debtors – whether transaction is a credit guarantee in terms of s 8(5) of the
NCA – whether credit provider required to register in terms of s 40 of the
NCA.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: The Gauteng Local Division, Johannesburg (Tsoka,
Makume & Wepener JJ, sitting as court of appeal):

The appeal is dismissed with costs.
______________________________________________________________

JUDGMENT
______________________________________________________________

Mathopo JA (Shongwe ADP and Wallis, Dambuza JJA and Davis AJA
concurring):

[1] This appeal concerns the proper interpretation of s 8(5) of the National
Credit Act 34 of 2005 (the NCA). The question is whether the effect of that
section is to exclude the transaction between the appellants, Messrs Shaw
and Taylor, and the first respondent, Mr Mackintosh (the respondent), which is
described below, from the ambit of the NCA. If it does, then the judgment
granted in Mr Mackintosh’s favour by the Gauteng Local Division,
Johannesburg (Georgiades AJ) and upheld on appeal by the full court of that
division (Tsoka J, with Makume and Wepener JJ concurring), must stand. If it
does not, then the appellants invoke the provisions of the NCA to avoid
liability to Mackintosh. The present appeal is with the special leave of this
Court.

[2] In about 2009, Mackintosh lent Mabili Search & Selection (Pty) Limited
(Mabili) an amount of R2 million. During October 2012 the parties signed a
written acknowledgement of debt (the agreement) in terms whereof Mabili as
the debtor acknowledged its indebtedness to Mackintosh as the creditor in the
sum of R2 million payable over a period of twelve months from the date of
advancing the said amount. It was a term of the agreement that the sum of
R2 million would attract interest at the rate of R50 000 per month with effect

from October 2012 until the date of final payment. It was further agreed that
should the debtor make a part payment of the capital to the creditor
(Mackintosh), the interest payable would be pro-rated. Mabili further
acknowledged being indebted to Mackintosh in the sum of R100 000
representing interest for the months of August and September 2012.

[3] When Mabili defaulted on its repayments in terms of the agreement,
Mackintosh obtained default judgment against it. It is common cause that
Mabili was subsequently liquidated. Invoking the provisions of clause 5 of the
agreement, Mackintosh sued the appellants as sureties.

[4] In view of the amount involved and Mabili’s turnover, it was common
cause that, insofar as Mabili was concerned, the agreement fell outside the
area of operation of the NCA. The dispute between the parties was whether
their relationship was governed by the NCA. Clause 5 of the agreement reads
as follows:
‘THE SURETYSHIP
Shaw and Taylor hereby:
5.1
Bind themselves jointly and severally unto and in favour of Mackintosh as
joint and several co-principal debtors with Mabili for the repayment of any amounts
which now are, or which may hereafter become owing by Mabili to Mackintosh from
whatsoever cause (including without limitation the Admitted Debt); and
5.2
Waive the benefits of excussion, division and cession of action.’

[5] Mackintosh alleged that the agreement arose as a result of a loan
granted to Mabili and not to the appellants during 2009. He submitted that the
effect of clause 5 of the agreement was to constitute the appellants as
sureties for Mabili’s indebtedness. He contended that the agreement between
himself and the respondents was a credit guarantee as defined in the NCA
and was excluded from the operation of the NCA by s 8(5) thereof, because it
was a credit guarantee in respect of an agreement that was not itself subject
to the NCA.

[6] The appellants argued that the agreement was a stand-alone credit
agreement falling within the ambit of the NCA and that clause 5 did not
constitute them as sureties because they became parties to the agreement as
co-principal debtors in respect of the Admitted Debt as defined in clause 2.1.1
of the agreement. In support of their argument, they relied on clause 2.1.3
which described them and Mabili as ‘the Debtors’. They further contended that
the agreement between them and Mackintosh was not a credit guarantee, but
a credit transaction as defined in s 8(4)(f) of the NCA and that there had been
no compliance by Mackintosh with his obligations under the NCA. They
alleged that the failure of Mackintosh to register as a credit provider in terms
of the NCA rendered the agreement between them void.

[7] The argument in the high court, both at first instance and on appeal,
proceeded on the basis that the key issue was whether the effect of clause 5
of the agreement was to constitute the appellants as sureties. Following this
approach both courts held that they were. In view of the attitude I take of this
matter, it is unnecessary for me to consider whether their conclusion on this
issue was correct. For the purposes of this appeal I will accept that the
appellants became co-principal debtors with Mabili for the repayment of the
admitted debt. The proper question we are called upon to decide is whether
the contract between them and Mackintosh was a credit guarantee in terms of
s 8(5) of the NCA, in which event it is an agreement to which the NCA does
not apply, or a credit transaction in terms of s 8(4)(f) as they contended.

[8] The NCA applies in respect of three kinds of agreements, namely a
credit facility, a credit transaction or a credit guarantee. A credit guarantee is
defined in s 1 as being an agreement meeting the criteria set out in s 8(5).
That section reads in material part as follows:
‘An agreement, irrespective of its form . . . constitutes a credit guarantee if, in terms
of that agreement, a person undertakes or promises to satisfy upon demand any
obligation of another consumer in terms of a credit facility or a credit transaction to
which this act applies.’
If the agreement between the appellants and Mackintosh is a credit guarantee
as defined, it does not fall within the NCA because s 4(2)(c) provides that:

‘…
(c)
this Act applies to a credit guarantee only to the extent that this Act applies to
a credit facility or credit transaction in respect of which the credit guarantee is
granted.’
If the appellants bound themselves in terms of a credit guarantee as defined,
the credit transaction in respect of which the credit guarantee was granted
was the transaction between Mabili and Mackintosh. If the NCA does not
apply to the credit transaction, it cannot apply to the credit guarantee.

[9] It is apparent that the question in this case is answered by determining
whether the agreement between the appellants and respondent was a credit
guarantee and then whether the credit transaction between Mabili and
Mackintosh falls within the NCA. These questions falls to be answered by
applying the ordinary provisions of statutory interpretation stated in Natal Joint
Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para
18 to s 8(5) and then determining whether the agreement between the
appellants and Mackintosh falls within that section.

[10] I turn to consider the relevant provisions of the agreement. An essential
precondition to the operation of s 8(5) of NCA is that it applies to the
obligations of another. The language of the section, refers both to an
undertaking and a promise to satisfy the obligation of another. It makes no
reference to a suretyship or guarantee or any similar word. In terms of clause
5 of the agreement the appellants, as joint and co-principal debtors, with
Mabili in terms of clause 2.1.3, undertook or promised to pay on demand the
Admitted Debt owed by Mabili to Mackintosh as detailed in clauses 3.1, 3.1.1,
3.1.2 and 3.1.3 of the agreement. It must be stressed that Mabili, and only
Mabili, was the debtor in respect of the Admitted Debt. The loan was granted
pursuant to an oral agreement which was concluded between Mabili and
Mackintosh. The purpose of the acknowledgement of debt which the
appellants signed, was to arrange how the amount owing to Mackintosh was
to be repaid. As debtors the appellants undertook to settle the admitted
indebtedness to Mackintosh in terms of the provisions of clause 6 of the
agreement which provides as follows:

‘6. The Debtors hereby undertake to settle the admitted indebtedness to Mackintosh
as follows:
6.1.1 the Debtors will make payment to Mackintosh of the monthly instalments that
becomes due between the signature date and the date upon which the Admitted
Debt is discharged in full; and
6.1.2 the Debtors undertake to settle the full Admitted Debt on or before the end of
March 2013.’

[11] When Mabili defaulted with its repayments and was subsequently
liquidated, Mackintosh invoked the provisions of clause 7 of the agreement
and sued the appellants on the basis of clause 5 of the agreement. Clause 7
provides as follows:
‘7. BREACH
7.1 Should the Debtors default in the due performance of any of their obligations in
terms of this Agreement, all of which are material, including in particular if any
payment is not made on due date, then:
7.1.1 Mackintosh may in is sole discretion proceed against the Debtors on the basis
of this Agreement, or on the basis of the underlying causes of action; and
7.1.2 the full balance of the Admitted Debt shall immediately become due, owing and
payable by the Debtors to Mackintosh.’

[12] It is clear that the appellants were not granted any loan nor was any
credit advanced to them and neither were they parties to the historical
agreement between Mabili and Mackintosh concluded in 2009. Their
involvement only arose when they undertook or promised to pay on demand
the admitted indebtedness of Mabili to Mackintosh. The agreement expressly
stated that the sum of R2 million was advanced to Mabili and not the
appellants. That brings the obligations of the appellants squarely within the
language of s 8(5). However, s 4(2)(c) of the NCA provides that this Act
applies to a credit guarantee only to the extent that this Act applies to a credit
facility or credit transaction. Mackintosh was not a credit provider in terms of s
40 of the Act. He was not in the business of providing credit. The agreement
was a once-off transaction and not falling within the ambit of the provisions of
the NCA Act. It was rightly not suggested that the arrangement could be both
a credit guarantee and a credit transaction in terms of s 8(4)(f) of the NCA

(see JMV Textiles v De Chalain Spareinvest 2010 (6) SA 173) (KZD). The
agreement between appellant and Mackintosh thus falls outside of the scope
of the NCA. For these reasons the appeal must fail.

[13] The appeal is dismissed with costs.

________________________
R S Mathopo
Judge of Appeal

APPEARANCES:

For appellant:
J J Meiring

Instructed by:

Fullard Mayer Morrison Inc, Johannesburg

Lovius Block, Bloemfontein

For respondent:
D Mahon

T Moretlwe

Instructed by:

Harris Billings Attorneys, Fourways

Honey Attorneys Inc, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA
-

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

29 March 2018

STATUS

Immediate

Please note that the media summary is intended for the benefit of the media and does
not form part of the judgment of the Supreme Court of Appeal.

Shaw & another v Mackintosh & another (267/17) [2018] ZASCA 53 (29 March 2018)

Today the Supreme Court of Appeal (SCA) dismissed an appeal against the judgment of the
Gauteng Local Division, Johannesburg. The issue on appeal concerned the proper
interpretation of s 8(5) of the National Credit Act 34 of 2005 (the NCA).

A brief background of the matter is that, the first respondent, Glenn William Mackintosh
(Mackintosh) and Mabili Search & Selection (Pty) Limited (Mabili) concluded an oral
agreement, in 2009, in terms of which an amount of R2 million would be loaned to Mabili by
Mackintosh. The parties, in October 2012, signed a written acknowledgement of debt (the
agreement) in terms of which Mabili, as the debtor, acknowledged its indebtedness to
Mackintosh, the creditor. In the agreement Mr Shaw and Mr Taylor (the appellants) bound
them self as sureties for the amount owed by Mabili, the appellants were not party to the oral
agreement. Mabili subsequently defaulted on its repayments.

Mackintosh contended that the agreement between it and the appellants was a credit
guarantee and therefor falls outside the operation of the NCA because it was a credit
guarantee in respect of an agreement that was not itself subject to the NCA. The appellants’
argued that the agreement between them and Mackintosh was not a credit guarantee, but a
credit transaction as defined in s 8(4)(f) of the NCA and that there had been no compliance by
Mackintosh with his obligations under the NCA.

The SCA accepted that, for the purpose of the appeal, the appellants were co-principal
debtors. The SCA considered that the NCA applies to three kinds of agreements, namely a
credit facility, a credit transaction or a credit guarantee. In terms s 1 of the NCA an agreement
is a credit guarantee if a person undertakes or promises to satisfy upon demand any
obligation of another consumer in terms of a credit facility or a credit transaction to which the
NCA applies.

The SCA considered the operation of s 8(5), a precondition to the operation of s 8(5) is that it
applies to the obligations of another. The language of the section refers both to an
undertaking and a promise to satisfy the obligation of another. In the section no reference to a
suretyship or guarantee or any similar word is used. The appellants were not granted any
loan nor were any credit advanced to them. The involvement of the appellants only arose
when they undertook or promised to pay on demand the admitted indebtedness of Mabili to
Mackintosh.

The SCA found that the agreement expressly stated that the sum of R2 million was advanced
to Mabili and not the appellants. That brings the obligations of the appellants squarely within
the language of s 8(5). However, Mackintosh was not a credit provider in terms of s 40 of the
Act. He was not in the business of providing credit. The agreement was a once-off transaction
and not falling within the ambit of the provisions of the NCA. Section 4(2)(c) of the NCA
provides that the NCA applies to a credit guarantee only to the extent that the NCA applies to
a credit facility or credit transaction. Due to the provisions of s 4(2)(c), and even though
obligations of the appellants fall within the language of s 8(5), the agreement between the
appellant and Mackintosh falls outside the NCA.

The appeal was dismissed with costs.