THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number: 233/07
Reportable
In the matter between:
MILOC FINANCIAL SOLUTIONS (PTY) LTD

APPELLANT

(Applicant a quo)
and

LOGISTIC TECHNOLOGIES (PTY) LTD
FIRST RESPONDENT

(First Respondent a quo)
LOG-TEK GROUP INVESTMENTS (PTY) LTD
SECOND RESPONDENT

(Second Respondent a quo)
IRIS INTEGRATED RESEARCH INFORMATION
THIRD RESPONDENT
SYSTEMS (PTY) LTD
(Third Respondent a quo)
TECHNIPRINT (PTY) LTD
FOURTH RESPONDENT

(Fourth Respondent a quo)
ROTER DESIGN (PTY) LTD
FIFTH RESPONDENT

(Fifth Respondent a quo)
UBUNTU EDUNET (PTY) LTD
SIXTH RESPONDENT

(Sixth Respondent a quo)
TECHNICAL ILLUSTRATIONS (PTY) LTD
SEVENTH RESPONDENT

(Seventh Respondent a quo)
LOG-TEK TRAINING & SIMULATION (PTY) LTD
EIGHTH RESPONDENT

(Eighth Respondent a quo)
Q-TECH SERVICES (PTY) LTD
NINTH RESPONDENT

(Ninth Respondent a quo)
INFORMATION DYNAMICS (PTY) LTD
TENTH RESPONDENT

(Tenth Respondent a quo)
MAXWELL NAESTED MOOLMAN
ELEVENTH RESPONDENT

(Eleventh Respondent a quo)
LOG-TEK MANAGEMENT SERVICES (PTY) LTD
TWELFTH RESPONDENT

(Twelfth Respondent a quo)
LOG-TEK 1993 (PTY) LTD
THIRTEENTH RESPONDENT

(Thirteenth Respondent a quo)
MOOLMAN TRUST
FOURTEENTH RESPONDENT

(Fourteenth Respondent a quo)
CORAM:
HOWIE P, FARLAM, CLOETE, VAN HEERDEN JJA et
SNYDERS AJA
HEARD:
22 FEBRUARY 2008
DELIVERED:
28 MARCH 2008
SUMMARY:
Contract - exceptio non adimpleti contractus – principle of reciprocity
– when applicable – payment, allocation of.

Neutral citation: This judgment may be referred to as Miloc Financial Solutions
(Pty) Ltd v Logistic Technologies (Pty) Ltd (233/2007) [2008] ZASCA 40 (28/03/08).
__________________________________________________
FARLAM JA

[1] INTRODUCTION
This is an appeal from a judgment of Van Rooyen AJ, sitting in the Pretoria
High Court, dismissing an application in which the appellant sought judgment
in respect of two money claims and also certain ancillary relief against twelve
of the respondents, in the case of the first claim, and against eleven of the
respondents, in the case of the second claim.

[2] The appellant’s first claim, which was brought against the first
respondent as principal debtor and eleven of the other respondents as
sureties, was for payment of R9 985 455,10, being the total of the unpaid
balance allegedly owing on the first respondent’s current accounts with the
Standard Bank of South Africa Ltd, which had ceded its claims and the
securities it held to the appellant.

[3] The appellant’s second claim, which was also brought against the first
respondent as principal debtor and against ten of the respondents as sureties,
was for payment of R3 141 337,87, being the total of the amounts allegedly
advanced to the first respondent by the appellant, and the interest which had
accrued thereon, pursuant to a loan agreement concluded between the
appellant and the first respondent on 6 May 2004.

APPELLANT’S FOUNDING AFFIDAVIT
[4] In the founding affidavit which accompanied the notice of motion the
deponent, Mr JD Lightfoot, a manager employed by the appellant, dealt with
the conclusion of the loan agreement which formed the basis of the second
claim and the cession agreement in terms of which the amounts forming the
subject matter of the first claim were ceded to the appellant. He also annexed
two certificates of balance signed by one of the appellant’s directors in respect
of the two claims. (The loan agreement authorised the appellant to prove the
balance owing under the loan agreement by the first respondent and the other
relevant respondents by means of a certificate issued by one of its directors. I
shall assume that the appellant was authorised by the various contractual
documents to prove as against the first respondent and the other relevant
respondents the balance owing on the overdrawn bank accounts in the same
way.)

[5] Mr Lightfoot also referred in his affidavit to an agreement concluded on
19 July 2005 in terms of which the second respondent, Log-Tek Group
Investments (Pty) Ltd, sold 200 shares (20% of the issued share capital) in
Sigma Logistic Solutions (Pty) Ltd and 20% of the existing claims on loan
account in that company to the eleventh respondent, Mr MN Moolman, for
R1.5 million. This amount was to be paid to the appellant, which held the
shares so sold under a perfected pledge and which agreed to allow the
second respondent to sell and transfer the shares to the eleventh respondent
and to release them from its pledge. The pledge referred to, as appears from
the share sale agreement (to which I shall refer in what follows as ‘the
Moolman-Sigma agreement’), was concluded on 6 May 2004, the date the
loan agreement was concluded, and it clearly forms part of the securities
furnished to the appellant to secure the amounts owing to the appellant under
the loan agreement.
[6] Clause 5.2 of the Moolman-Sigma agreement reads as follows:
‘After payment of the purchase consideration [ie, the amount of R1.5 million] by the purchaser
[the eleventh respondent] to Miloc [the appellant] the sale shares will be released from the
operation of the pledge, and the company’s obligations [ie, the obligations of Sigma Logistic
Solutions (Pty) Ltd] to Miloc, and or any of its nominees, will have been fully discharged.’

[7] Mr Lightfoot also referred in his affidavit to another agreement for the
purchase by the eleventh respondent of other shares pledged to the appellant
on 6 May 2004 by the first respondent. In what follows I shall call this
agreement ‘the USA agreement’.

[8] The shares sold under the USA agreement were 100 shares in
Information Dynamics (Pty) Ltd, the tenth respondent, and 100 shares in
Logtek USA Inc. The price to be paid was R4 million, payable to the appellant,
which agreed to allow the first respondent to sell the shares to the eleventh
respondent. The USA agreement provided for the purchase price of the
shares sold to be paid in three instalments, viz (i) R100 000 on the date when
certain suspensive conditions were fulfilled; (ii) R2.9 million within a period of
30 days thereafter; and (iii) R1 million on 30 November 2005 or the date on
which either of the companies whose shares were sold received the annual
licence fee payable to Logtek USA Inc.

[9] Clause 7.2.3 of the USA agreement provides as follows:
‘On the final payment date, the sale shares and all other shares held by Miloc [the appellant]
in terms of the pledge, will be released from the operation of the pledge, and Miloc shall
procure that all other securities provided by the seller, Logtek Group Investments
(Proprietary) Limited [the second respondent], their subsidiaries, [the eleventh respondent]
and the Moolman Trust [the fourteenth respondent] for all the seller’s and [the eleventh
respondent’s] obligations to Miloc, and/or any of their nominees in connection with the seller’s
indebtedness to Miloc, will have been fully discharged and Miloc will hand over all the original
security documents to the seller.’

[10] Mr Lightfoot stated that the eleventh respondent failed to adhere to the
terms of the Moolman-Sigma agreement and the USA agreement and in
particular he ‘failed to make payment of the amounts as agreed.’ He stated
that the eleventh respondent only paid a total of R2 million to the appellant,
namely R1 million on 3 September 2005 and a further amount of R1 million on
2 December 2005. He continued:
‘Since the Eleventh Respondent’s failure to adhere to the terms of the [Moolman-Sigma]
Agreement and the USA Agreement, I have on a regular basis communicated with the
Eleventh Respondent. Numerous meetings were also held. The purpose of the
communication and the meetings was to discuss the payment by the Eleventh Respondent of
the amount of R4 million, in order for all dealings between the various Respondents and the
Applicant to come to an end. It was provided by the USA Agreement that, upon payment of
the amount, all securities would be released to the First Respondent and the Applicant would
walk away from the remaining debt.’

[11] On 13 April 2006, Mr Lightfoot stated, he wrote a letter on behalf of the
appellant to the eleventh respondent informing him that the appellant was
‘prepared to extend the final payment date of the amount due to [it] of R3.5
million in terms of the [Moolman Sigma agreement and the USA agreement]
and to postpone cancellation thereof until 30th June 2006’ on certain
conditions. These included the signature of a CM 42 document in respect of
the Sigma Logistic Solutions (Pty) Ltd shares pledged to the appellant as
security for the amount due to it by the first respondent and that what Mr
Lightfoot called ‘the R3.5 million balance’ would bear interest from 1
December 2006 (sic: I take it he meant 2005) until payment at the rate of
prime plus 1%. The letter continued:
‘In terms of the sale of share agreements, on payment of the R3.5 million plus interest . . ., all

pledges, sureties, covering bonds and cessions we hold in respect of Log Tek’s indebtedness
to us will be cancelled and returned to you. Unfortunately we will not be able to extend the
validity of the sale of share agreements beyond 30 June 2006.

We hope this concession will be of assistance to you and ask that [you] acknowledge your
acceptance of these terms and conditions by signing the attached copy of this letter.’

[12] Mr Lightfoot explained that the amount of R3.5 million to which he had
referred in the letter was arrived at ‘by adding the R1.5 million in terms of the
[Moolman-Sigma agreement] to the R4 million in terms of the USA Agreement
(totaling R5.5 million) less the R2 million paid’.

[13] Mr Lightfoot stated that the eleventh respondent failed to make
payment by 30 June 2006 and that, on that date, he caused the appellant’s
attorneys to direct two letters of demand to the eleventh respondent and a
third to the first respondent. In the letters sent to the eleventh respondent the
amounts of R1.5 million allegedly due under the Moolman-Sigma agreement
and R3.5 million, plus interest, calculated at prime plus 1% from 1 December
2006 (presumably 2005 was meant) due under the USA agreement were
demanded and notice was given that, if these amounts were not paid within
fourteen days, the agreement would be cancelled. In the letter to the first
respondent the appellant demanded payment of R13 126 792,84, which it was
said was the total amount due by the first respondent to it as cessionary of the
amounts previously due to the Standard Bank of South Africa Ltd, plus the
amount which had been advanced to the first respondent under the loan
agreement dated 6 May 2004.

[14] As no payments were made by the eleventh respondent after receipt of
the letters dealing with the Moolman-Sigma agreement and the USA
agreement, further letters were sent to him on 17 July 2006 purporting to
cancel those agreements.

[15] Mr Lightfoot stated that ‘in light’, as he put it, of the cancellation of both
the Moolman-Sigma and the USA agreements, the respondents were liable
towards the appellant to pay the amounts outstanding in terms of both the
cession and the loan agreement.

[16] Mr Lightfoot stated further that the appellant’s attorneys received a
letter dated 18 July 2006 from the eleventh respondent’s attorneys,
responding to the letters of the 17 July 2006 in which the appellant had
purported to cancel the Moolman-Sigma and USA agreements. Attached to
the eleventh respondent’s attorney’s letter was a copy of a letter which the
appellant had sent to the eleventh respondent on 8 March 2006, in which the
date of payment of the amounts outstanding under the Moolman-Sigma and
USA agreements (which, so it was stated, were due by no later than 30
November 2005) was extended to 18 April 2006. (It will be recalled that this
was later further extended to 30 June 2006.) The letter contained the following
paragraphs:
‘2.
The total amount payable in terms of the sale of shares agreements is R5.5 million of
which only R2 million has been received, leaving a balance of R3.5 million unpaid.

. . .

4.
We understand that you wish to utilize the shares in Sigma Logistic Solutions (Pty)
Ltd as collateral in raising funds to settle the unpaid balance of R3.5 million referred
to above, and we confirm that we will be prepared to release these shares from the
pledge, provided that we receive suitable guarantees for payment of the R3.5 million
balance.’ (The italics are mine.)

[17] In their letter of 18 July 2006 the eleventh respondent’s attorneys
referred to the paragraphs of the appellant’s attorney’s letter of 8 March 2006
which I have quoted. They then stated that as the amount due under the
Moolman-Sigma agreement had been paid to it, the appellant, by refusing to
release the Sigma shares in question unless suitable guarantees for payment
of the R3.5 million balance under the USA agreement were furnished
(something to which it was not entitled under the Moolman-Sigma agreement),
had breached clause 5 of the Moolman-Sigma agreement and was
accordingly not entitled to claim the outstanding balance due under the USA
agreement. In this regard the eleventh respondent’s attorneys pointed out that
the appellant’s failure to release the shares had rendered it impossible for the
eleventh respondent at that stage to raise the capital required to pay the
outstanding balance of R3.5 million.

[18] Referring to the appellant’s attorneys’ letter demanding payment by the

first appellant of the full amounts due under the Standard Bank cession and
the loan agreement, the attorneys stated that they, as they put it, placed it
pertinently on record that the amounts outstanding under the cession and the
loan agreement were not owing because of the Moolman-Sigma and the USA
agreements. If these two agreements could not be carried out, they continued,
it was possible that what they called the over-arching (oorkoepelende) debt
under the cession and the loan agreement would be of application. In the
present case, they said, it did not apply and they enquired how what they
called this ‘dead point’ could be sorted out with the appellant.

[19] In dealing with the eleventh respondent’s attorneys’ letter Mr Lightfoot
said that it did ‘not affect the entitlement to relief sought in this application’. In
support of this contention he said the following:
’57.1
The USA Agreement provides for an amount of R4 million to be paid, whereafter the
parties would go their separate ways. It is common cause that only R2 million was
paid. The full amount has not been paid as alleged in the letter. Accordingly the
Applicant was entitled to, and cancelled the USA Agreement;

57.2
Both the [Moolman-Sigma] Agreement and the USA Agreement contain . . . non-
variation clauses. Any variation has to be in writing and signed by the parties,
otherwise it would have no effect;

57.3
The letter that I directed on 8 March 2006 . . . makes it clear that the Sigma shares
would be released, provided that a suitable guarantee for R3 million be received by
the Applicant. This did not happen;

57.4
My letters of 8 March 2006 and 13 April 2006 . . . clearly reflect that, if payment of
R3,5 million is not made to the Applicant, both the sale of shares agreements would
be cancelled;

57.5
At no point in time was a demand made for the release of the Sigma shares. If the
Eleventh Respondent contends that the R2 million was paid [in terms] of the Sigma
Agreement, one would have expected the Eleventh Respondent to have informed the
Applicant that the payment was for such purpose, and to have demanded the release
of the shares soon thereafter. This did not happen;
57.6
It appears from my letter of 13 April 2006 . . . that the Eleventh Respondent accepted
its terms and conditions, which were inter alia the applicant would retain all securities
until payment of R3,5 million, whereafter it would be cancelled and returned;

57.7
The Eleventh Respondent at no time indicated, that without the Sigma shares being
released to it, the Eleventh Respondent would not be able to raise the funds;

57.8
The letter . . . in fact reflects an admission of the liability for the full amount, but
seems to reflect a contention that the sale of shares agreements are still operative. It
follows that, due to the cancellation of those agreements, the full amount of the
liability on strength of the ceded claims and loan facility, [is] owing;

57.9
On any construction, it is submitted that R3,5 million is due and payable;

57.10
The letter does not raise any dispute as to the entitlement to the relief sought.’

OPPOSING AFFIDAVIT FILED ON BEHALF OF RESPONDENTS
[20] In his opposing affidavit filed on behalf of all fourteen respondents the
eleventh respondent denied that any amounts had been advanced to the first
respondent under the loan agreement. He also denied the total amount owing
by the first respondent to the Standard Bank of South Africa Ltd on 19 April
2004. In this regard he stated that the bank had charged interest at a rate
above the rate agreed. He also said that, after the cession, the appellant had
charged interest above the agreed rate, had wrongly charged two so-called
‘success fees’ of R603 253 and R375 250 and had further charged interest on
these fees. He further alleged that the appellant had, totally contrary to the
agreement, charged VAT at 14% on the interest which it had debited, which
rendered the effective interest levied excessive. The appellant, he said, would
thus have to reconcile what he called the whole transaction history (‘die
gehele transaksie geskiedenis’).

[21] He explained that it was for this reason that the appellant was prepared
to accept R7 million for the full liability for the outstanding indebtedness
towards itself. Settlement discussions took place between the respondents’
attorneys and those acting for the appellant. They took place in about June
2005 and were held with the purpose of replacing and settling the total liability
of the first respondent (and also of all the other respondents which stood
surety for the debts of the first respondent and provided security therefor) and
also in order to determine methods for the final disposal and payment of all
amounts.

[22] Thereafter, said the eleventh respondent, discussions took place
between Mr Lightfoot and himself and eventually, in July 2005 and at Pretoria,
they orally settled the matter on the following basis and terms:
(a)
the appellant was to receive an amount of R7 million in full and final
settlement of all its claims against the first respondent and the other
respondents;

(b)
the settlement would be implemented by means of the conclusion of
three agreements, viz (i) an agreement for the sale, to one WC Swanepoel, of
Sigma shares for R1.5 million, payable to the appellant (what I shall call the
Swanepoel-Sigma agreement); (ii) an agreement for the sale, to eleventh
respondent, of Sigma shares for R1.5 million, payable to the appellant (what I
have, in summarising Mr Lightfoot’s affidavit, called ‘the Moolman-Sigma
agreement’) and (iii) an agreement for the sale to the eleventh respondent of
shares in the tenth respondent and Logtek USA Inc for R4 million, payable to
the appellant (what I have, in summarising Mr Lightfoot’s affidavit, called ‘the
USA agreement’).

[23] The purpose of these three agreements, said the eleventh respondent,
was to put in place a practical mechanism to pay the R7 million and to carry
out the terms of the settlement agreement, to which all the respondents were
parties. The eleventh respondent also said that it was part of the settlement
that, on payment to the appellant of the two amounts of R1.5 million under the
two Sigma agreements, the shares sold would be immediately released from
the pledge to which they were subject. As far as the eleventh respondent was
concerned, this was in order to enable him to utilise his shares to provide
security to a financial institution so that he could raise the necessary funds to
pay the R4 million under the USA agreement. The provision that the appellant
was to release the Sigma shares was, he said, a material provision and a
reciprocal term of the settlement. Both he and Mr Lightfoot were thoroughly
aware of the fact and agreed that the remaining R4 million due under the
settlement would have to be paid by using the Sigma shares in order to get
the necessary funding.
[24] The eleventh respondent also said that the intention of the settlement
between Mr Lightfoot and himself was that it and the resulting three

agreements would constitute a novation of the rights the appellant had
received under the cession and the loan agreement. He explained further that
the actual intention of himself and the appellant’s representative was that
there would be only one final settlement agreement, in terms of which R7
million would be paid to the appellant in order to discharge the whole debt. He
submitted that, if the appellant were to contend that there was not one
agreement but three separate agreements, it should be estopped from relying
on the precise literal interpretation of the three agreements. Alternatively, he
said, he and the respondents concerned were entitled to have the agreements
rectified so that they were in accordance with the oral settlement agreement.

[25] The eleventh respondent stated both he and Mr Swanepoel had paid
the amounts due under the Sigma agreements and he had in addition paid
R500,000 in respect of the USA contract. Mr Swanepoel had received his
shares under the Swanepoel-Sigma agreement but he (the eleventh
respondent) had not.

[26] He annexed to his affidavit a letter which he sent to Mr Lightfoot on 20
February 2006. This letter contains the following:
‘1)
With regard to the two payments, totalling R2 million, made by myself
towards the [Moolman-Sigma and USA] transactions, I wish to confirm
that the Sigma transaction is now paid in full, being R1.5 million. The
balance of R500 000 was paid towards the [USA] transaction and the
balance owing on this transaction is currently R3.5 million as per our
agreement last year.

2)
I therefore respectfully request the return of the original Sigma share
certificates and signed transfer documentation to conclude the Sigma
transaction.

3)
I require the certificates and transfer documentation as a matter of
urgency to enable me to raise the final capital in my own name to effect
the final R3.5 million payment to you.’

[27] The appellant’s demand in paragraph 4 of its letter of 8 March 2006

(which was written in answer to his letter of 20 February 2006) that he provide
extra security for payment of the R3.5 million before the Sigma shares were
released was, he said, completely in conflict both with the settlement
agreement and the terms of the three written agreements. The appellant, he
contended, by refusing to release his Sigma shares was in mora in respect of
its obligations under the agreement. It was accordingly unable to demand
payment of the balance due in respect of the USA agreement.

[28] The eleventh respondent contended that the appellant was in the
circumstances not entitled to cancel the Moolman-Sigma and the USA
agreements. As regards the Moolman-Sigma agreement, this was because he
had paid the R1.5 million due in respect of the shares and, as regards the
USA agreement, because the R3.5 million, the balance outstanding under the
agreement, could for the reasons stated above not be demanded until the
appellant had complied with its obligation to release his Sigma shares.

[29] He also contended that, in any event, even if the two agreements were
validly cancelled, this would not revive the old indebtedness in terms of the
loan agreement and the indebtedness which formed the subject matter of the
cession by the Standard Bank of South Africa Ltd.

APPELLANT’S REPLYING AFFIDAVIT
[30] In a replying affidavit deposed to by Mr Lightfoot, which was filed on
behalf of the appellant, it is contended that the appellant is entitled to
judgment against the respondent in the amount of R3.5 million, namely the
amount outstanding under the USA agreement, in which amount - Mr Lightfoot
said - the respondents admitted they were indebted to the appellant but which
they alleged was not due because of the appellant’s failure to release the
Sigma shares. Mr Lightfoot further argued that the respondents could not rely
on the settlement alleged by the eleventh respondent because of non-
variation clauses contained in the loan agreement and the agreements
between the respondents and the Standard Bank of South Africa Ltd which
allegedly gave rise to the rights ceded to the appellant. Furthermore, so Mr
Lightfoot contended, the eleventh respondent, by signing the letter of 13 April
2006, to which I referred in para [11] above, ‘accepted the terms and

conditions contained in [that letter], which [included] that only upon payment of
R3.5 million together with interest would all pledges, sureties, covering bonds
and cessions be cancelled and returned. Also a term of [the letter] is that a
CM42 document in respect of the Sigma shares was to be signed. This flies in
the face of the allegation that payment had been made: the R2 million had
been paid by 3 December 2005, [the eleventh respondent] had directed the
letter of 20 February 2006 . . ., yet on 13 April 2006 [he] signed [the letter in
question] with this condition stipulated therein.’ Mr Lightfoot also stated that
the eleventh respondent had signed the relevant CM42 document.

[31] Mr Lightfoot stated that the respondents never demanded the release
of the Sigma shares, with the result that ‘[e]ven if payment had been made of
R1.5 million, as is alleged by [the eleventh respondent], the [appellant] has not
been placed in mora to release the Sigma shares. On this basis alone’, he
continued, ‘the allegation that the agreements were not cancelled, is bad in
law.’

[32] Mr Lightfoot stated that the appellant did lend and advance the amount
of R2 489 127 to the first respondent and he annexed two documents as proof
of payment of this amount.

[33] The first of the documents annexed, headed ‘Transaction History’,
relates to a ‘CFS Call Account’ and contains an entry apparently dated 30
June 2004. Under the heading ‘Amount’ appear the figures ‘-469705,87’ and
under the heading ‘Description’ are the words ‘BANKIT TRF TRF TO MFS-
LOGTEK’. (Presumably ‘MFS’ is a reference to the appellant.) The next entry
on this document, apparently dated 2 July 2004, also refers to LOGTEK.
Under the heading ‘Amount’ appear the figures ‘469705-87’ and under the
heading ‘Description’ are the words ‘BANKIT PMT TRF FROM LOGTEK TO
C’. Someone has drawn an arrow from the entry dated 30 June 2004 and
immediately below the head of the arrow the following appears in manuscript:
‘LOAN FACILITY R469,705,87 TRANSFERRED 30 JUNE 2006’.

[34] The second annexed document, headed ‘Standard Bank of South
Africa Ltd’, describes itself as a ‘Computer Generated Copy’ and ‘Customer

All Payments Interim Audit Report’. The ‘User Name’ reflected on the
document is ‘Credit Management Solution’ and the transaction reflected
relates to an amount of R2 019 421.05. The ‘Account Name’ is given as
‘LOGISTIC TECHNOLOGIES’, the “Statement Reference’ is ‘CREDIT
MANAGEMENT SOLUTIONS G’ and the ‘Status Description’ is ‘VALIDATED-
ADDITION’. (Presumably ‘CREDIT MANAGEMENT SOLUTIONS’ is a
reference to Credit Management Solutions (Pty) Ltd which, according to other
letters in the papers, is a subsidiary of Credit Management Solutions Group
(Pty) Ltd. According to other letters in the papers the appellant is also a
subsidiary of Credit Management Solutions Group (Pty) Ltd.)

An arrow has been drawn from the amount ‘R2 019 421.05’, which appears
against the entry ‘Total Batch amount’, and below the arrow are hand-written
the words:
‘LOAN FACILITY – R2, 019,421-05 TRANSFERRED 17 MAY 2004’.

FURTHER AFFIDAVIT BY ELEVENTH RESPONDENT
[35] The statement in the replying affidavit that the eleventh respondent by
signing the letter of 13 April 2006 accepted the ‘terms and conditions’ set out
in the letter elicited a further affidavit from the eleventh respondent. In this
affidavit the eleventh respondent pointed out that the allegation in question
was a new one which had not been included in the founding affidavit. He
stated that he signed the letter when Mr Lightfoot handed it to him, not
because he agreed with the terms and conditions for the extension of
payment, but merely because Mr Lightfoot requested him to acknowledge
receipt of the letter by placing his initials thereon before he was aware of the
contents.

JUDGMENT IN COURT A QUO
[36] The learned judge in the court a quo, applying the general rule set out
in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623
(A), held that on the eleventh respondent’s version, which had to be accepted
for present purposes, the appellant’s claim could successfully be resisted by
the respondents by raising the exceptio non adimpleti contractus. He held that
there was no reason to reject the eleventh respondent’s averment ‘that the

common intention was to make use of the share agreements to, as it were,
finance each other’. He pointed out that there was no reference in the
Moolman-Sigma agreement or the USA agreement ‘that before shares may
be released a guarantee would have to be provided for payment of the
balance due under the other contract.’ He also made the point that Mr
Lightfoot’s demand in the letter dated 8 March 2006 ‘that a guarantee must be
provided for the R3.5 million owing if the Sigma shares are transferred to [the
eleventh respondent] conflicts with the introductory part of the sentence: “We
understand that you wish to utilize the shares in Sigma . . . as collateral in
raising funds to settle the unpaid balance of R3.5 million referred to above      .
. .”  Although the settlement by way of the share agreements was intended to
be a unit’, he continued, ‘there is no indication in one of them that the release
of the shares under it could be made dependent on the other. If it were
possible for [the eleventh respondent] to obtain “suitable guarantees” for R3.5
million based on the shares which have been paid for, it is unlikely that he
would need the release of the Sigma shares at all.’

APPELLANT’S CONTENTIONS
[37] Mr Van Nieuwenhuizen for the appellant submitted that this was not a
case where the general rule in Plascon-Evans, supra, should be applied. On
the contrary, he contended, the court should find that the factual dispute
raised on behalf of the respondents in the eleventh respondent’s opposing
affidavit was not bona fide. He submitted that the eleventh respondent’s denial
that any moneys had been advanced to the first respondent under the loan
agreement was false. He argued in this regard that Mr Lightfoot had
demonstrated in his replying affidavit that the appellant had lent and advanced
R2 489 127 to the first respondent pursuant to the loan agreement. Counsel
drew attention to the fact that the eleventh respondent had chosen not to deal
in the further affidavit filed on his behalf with this aspect of Mr Lightfoot’s
replying affidavit nor with Mr Lightfoot’s statement that he had signed the
CM42 form referred to in the letter of 13 April 2006.

[38] Mr Van Nieuwenhuizen submitted that, once it was clear that the
eleventh respondent’s denial that moneys had been advanced under the loan
agreement was false, this was relevant on the broader question as to the

bona fides of the whole defence and that accordingly the appeal should on
that ground alone succeed.

[39] In the alternative, even if the case were to be decided on the basis of
what was contained in the eleventh respondent’s affidavit, counsel submitted
that the appeal should succeed because it was clear that the appellant had
validly cancelled the Moolman-Sigma and USA agreements on 17 July 2006.
He sought to answer the respondent’s contentions based on the exceptio non
adimpleti contractus by submitting that the eleventh respondent was not
entitled to transfer of the Sigma shares because he had not paid for them. It
follows, so he contended, that the appellant was entitled to cancel the
Moolman-Sigma agreement when the eleventh respondent failed to pay for
the shares by 30 June 2006, the extended date for payment. As the appellant
had, on this approach, not breached any reciprocal obligation under the
settlement agreement, it followed that it was also entitled to cancel the USA
agreement.

[40] When asked about the two amounts totalling R2 million paid by the
eleventh respondent on 3 September 2005 and 2 December 2005 and
whether R1.5 million thereof should not be regarded as having constituted
payment for the shares purchased under the Moolman-Sigma agreement, Mr
Van Nieuwenhuizen submitted that, as neither the eleventh respondent nor
the appellant had allocated the amounts paid to one of the debts due to the
appellant, the payment was to be regarded as being, as counsel put it, ‘in
suspense’ until it could be ascertained which debt was the most burdensome,
whereupon the common law rules as to appropriation of payments would be
applied. He submitted in the alternative that, on 2 December 2005, the most
burdensome debt was the USA debt of R4 million because until it was
discharged, the securities held by the appellant would not be released.

[41] Mr Van Nieuwenhuizen did not press the contention foreshadowed in
the papers that the rectification contended for by the respondents could not be
relied on because of the non-variation clauses in the various agreements. As
the clauses in question did not in clear and explicit terms prevent reliance on
rectification of a written variation contract, there was in any event, in my view,

no substance in the contention: see Gralio (Pty) Ltd v DE Claassen (Pty) Ltd
1980 (1) SA 816 (A) at 824A-B; Leyland (SA) (Pty) Ltd v Rex Evans Motors
(Pty) Ltd 1980 (4) SA 271 (W) at 273B-D and Primavera Construction SA v
Government North-West Province 2003 (3) SA 579 (B) at 598I–599A.

[42] At the end of his argument Mr Van Nieuwenhuizen submitted that, if the
court was against him on the question as to whether the appellant had validly
cancelled the agreements for the sale of shares, the court should order that
the matter be referred to trial. He conceded that he had not asked for this in
the court a quo but submitted that, if he had done so, he would have been
entitled to such an order. It was also not a point raised in the notice of appeal.

DISCUSSION
(1)
BONA FIDE DISPUTE?
[43] In my opinion it is not possible to find that the factual dispute raised on
the papers by the eleventh respondent is not bona fide. Apart from the fact
that I am not persuaded that the documents annexed to Mr Lightfoot’s replying
affidavit do ‘demonstrate’ that the eleventh respondent’s denial that the
appellant lent and advanced R2 489 127 to the first respondent is false, it
does not follow, even if the denial can be rejected, that the rest of the eleventh
respondent’s version cannot be correct, particularly in view of the fact that
there is considerable corroboration for the main parts thereof. I also do not
think that the fact that the eleventh respondent signed the CM42 document
relating to the shares takes the case any further.

(2)
WERE
THE
SALE
OF
SHARES
AGREEMENTS
VALIDLY
CANCELLED?
[44] I turn now to consider Mr Van Nieuwenhuizen’s submission that the
appellant validly cancelled the Moolman-Sigma and the USA agreements and
that it can claim what were alleged to be the correct amounts under the old
indebtedness.

[45] I shall assume, without deciding, that if the agreements in question
were validly cancelled, it is possible for the appellant to claim the full amounts
allegedly owing under the old indebtedness and that it was not limited to

claiming the balance of the amount outstanding under the USA agreement,
plus interest thereon.

[46] On 3 September 2005, when the first amount of R1 million was paid by
the eleventh respondent, only the Moolman-Sigma agreement had been
concluded and the amount paid thus reduced the amount owing under that
contract. When the second amount of R1 million was paid on 2 December
2005 there were two amounts owing: the balance of R500 000 under the
Moolman-Sigma agreement and the R4 million under the USA agreement. As
neither the debtor nor the creditor appropriated the payment to either of the
two debts, the common law rules (which are set out in Wessels The Law of
Contract in South Africa 2 ed (1951) vol 2, paras 2306-2313) apply. ‘The
fundamental principle underlying these rules’, as was pointed out by Henning
J in Ebrahim (Pty) Ltd v Mahomed 1962 (1) SA 90 (D) at 97G-H, ‘is that
payment made by a debtor to his creditor should, in the absence of express
appropriation by either party, be appropriated to the debt which is most
onerous to the debtor (Wolhuter v Zeederberg (1885) 3 H.C.G 437 at p 441),
or, as it has been put, to the debt which it would be most in the interest of the
debtor to pay (Western Province Bank, In Liquidation v Du Toit, Smith & Co
(1892) 2 C.T.R 22).’ We were not referred to any authority in support of Mr
Van Nieuwenhuizen’s main proposition, viz that where it is not clear what debt
is most burdensome the payment goes, as it were, into suspense, nor could I
find any authority on the point.

[47] In any event the submission lacks a factual basis. It is clear which debt,
as on 2 December 2005, it was more in the interest of the eleventh
respondent to pay: the balance due under the Moolman-Sigma agreement.
The discharge of that debt would have released the Sigma shares which the
eleventh respondent had purchased from the pledge to which they were
subject, thus enabling the seller to transfer them to him, whereupon he could
have used them in an endeavour to obtain financing to enable him to pay the
amount due under the USA agreement. Mr Van Nieuwenhuizen’s alternative
argument that the payment is to be appropriated to the debt due under the
USA agreement overlooks the fact that such appropriation would only have
partly discharged the debt in question, whereas an appropriation to the

Moolman-Sigma agreement debt would have discharged the indebtedness
and thereby, as I have said, brought about the release of the shares.

[48] It follows, that as the eleventh respondent must be taken to have paid
the amount due under the Moolman-Sigma agreement on 2 December 2005,
the appellant was not entitled to cancel the agreement on 17 July 2006.

[49] Mr Lightfoot’s statement that the respondents never demanded release
of the Sigma shares is clearly false, as the eleventh respondent’s letter of 20
February 2006, which has been quoted in para 26 demonstrates. It is thus
clear the appellant was in mora from 20 February 2006 in respect of its
obligation to release the shares.

(3)
PRINCIPLE OF RECIPROCITY
[50] It is clear, in my view, that on the version of the contract deposed to by
him, the eleventh respondent’s obligation to pay the balance due under the
USA agreement was so closely linked to the appellant’s obligation to release
the Sigma shares that the principle of reciprocity applies: that is to say the
appellant must release the Sigma shares before being able to claim the price
of the USA shares. In the interim the eleventh respondent is entitled to
withhold performance of his obligation to pay for the USA shares, which
obligation is suspended: see BK Tooling (Edms) Bpk v Scope Precision
Engineering (Edms) Bpk 1997 (1) SA 391 (A) at 418B-H.

[51] The fact that the overall transaction deposed to by the eleventh
respondent was given effect to by the conclusion of three separate
agreements will not in itself exclude the operation of the principle of
reciprocity, which can still apply if ‘the terms of the agreements considered as
a whole clearly evince the intention that there would be reciprocity between
the obligations undertaken in each’: Wynns Car Care Products (Pty) Ltd v
First National Industrial Bank Ltd 1991 (2) SA 754 (A) at 758C-D. It is the
failure of the agreements taken as a whole to evince that intention which the
respondents seek to deal with by having them rectified.

[52] It follows that the appellant was not entitled to cancel the USA

agreement on 17 July 2006 nor is it entitled, as Mr Van Nieuwenhuizen
argued in the alternative, to judgment in the amount of R3.5 million, being the
balance due under the USA agreement.

(4)
REFERENCE TO TRIAL?
[53] I now turn to deal with Mr Van Nieuwenhuizen’s last minute application
for the matter to be referred to trial. He conceded, as I have said, that he did
not apply for a reference to trial at any stage before the court a quo. The
circumstances were such that, if it had the power to do so, the court a quo
was not obliged to have acted mero motu in ordering a reference to trial: cf
Joh-Air (Pty) Ltd v Rudman 1980 (2) SA 420 (T) at 428H-429H. (Whether it
had the power to do so has been described as a question ‘not free from
difficulty’ which has not yet been decided by this court: see Minister of Land
Affairs and Agriculture v D&F Wevell Trust 2008 (2) SA 184 (SCA) at para
60.)

[54] The judge a quo can accordingly in my view not be faulted for not
having done so. While I am not prepared to say that a court of appeal should
never order a reference to trial where it has not been sought in the court
below nor raised in the notice of appeal, such an order would in my view only
be appropriate, if at all, in special circumstances, which have not been shown
to be present in this case.

[55] The appeal must accordingly fail.

ORDER
[56] The following order is made:
The appeal is dismissed with costs.

……………..
IG FARLAM
JUDGE OF APPEAL
CONCURRING
HOWIE

P
CLOETE

JA
VAN HEERDEN
JA
SNYDERS

AJA

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM:
The Registrar, Supreme Court of Appeal

DATE:
28 MARCH 2008

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

The Supreme Court of Appeal today dismissed an appeal brought by Miloc Financial
Solutions (Pty) Ltd against a judgment given in the Pretoria High Court by Mr Acting
Justice Van Rooyen in favour of a Pretoria businessman, Mr MN Moolman, the
Moolman Trust, Logistic Technologies (Pty) Ltd and a number of other companies in
the Log-Tek group of which he was a director and shareholder.

The Appellant had sued Mr Moolman, the trust and the companies for R9.985 million,
which it said was owed by Logistic Technologies (Pty) Ltd under its current accounts
with the Standard Bank of South Africa Ltd, which had ceded its claims to the
appellant. The appellant also sued for a further amount of R3.141 million which it
said it had lent and advanced to Logistic Technologies (Pty) Ltd.

The defence set up by Mr Moolman, his companies and the trust was that there had
been a settlement between the appellant and himself. In terms of the settlement a total
amount of R7 million was to be paid to the appellant. Mr Moolman said R3.5 million
had already been paid and that before the balance of R3.5 million could be claimed
the appellant had, in terms of the settlement, to transfer to him 200 shares in one of
the companies in the Log-Tek group, Sigma Logistic Solutions (Pty) Ltd. He said that
the written agreements concluded between the appellant and himself had to be
rectified to insert this term of the settlement. The Supreme Court of Appeal said that
the defence put up by Mr Moolman could not be rejected on the papers and that the
appeal against the Pretoria High Court’s judgment had to fail.