THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:   420/2010

In the matter between:
FRANS JACOBUS KRUGER
h/a KRUGER ATTORNEYS

Appellant

and

PROPERTY LAWYER SERVICES (EDMS) BPK

Respondent

Neutral citation:
Kruger v Property Lawyer (420/2010) [2011] ZASCA

80 (27 May 2011)
Coram:
Mpati P, Brand, Lewis, Malan and Tshiqi JJA
Heard:
4 May 2011
Delivered:
27 May 2011
Summary:
Bridging finance – undertaking by transferring attorney to pay
against  registration of transfer – construction of undertaking –
undertaking to pay from proceeds of sale.

___________________________________________________________________
ORDER
On appeal from the North Gauteng High Court, Pretoria (Murphy J sitting as court of
first instance):
(a)
The appeal is upheld with costs including the costs of two counsel;
(b)
The order of the court below is set aside and replaced by the following:
‘The application against the first respondent is dismissed with costs.’
___________________________________________________________________
JUDGMENT
MALAN JA (Brand, Lewis, Maya and Tshiqi concurring)
[1] The appellant appeals against the whole of the judgment and order of Murphy
J in the North Gauteng High Court, Pretoria in terms of which the appellant was
directed to pay to the respondent an amount of R271 244,90 together with interest
and costs. This appeal is with leave of the court below.
[2] The appellant, a firm of practising attorneys, furnished a written letter of
undertaking to the respondent, a provider of bridging finance to sellers of immovable
property and their agents, mainly attorneys. The bridging loan was to be made
pending transfer of certain properties in which the appellant was engaged, albeit not
as the conveyancer, as attorney on behalf of the sellers. The undertaking of the
appellant is addressed to the respondent and commences with a reference to the
properties to be transferred and who the transferors and transferee were. The
material part reads as follows:
‘Ons onderneem hiermee onherroeplik om die bedrag van R500 000,00 (Vyfhonderd Duisend Rand)
tesame met 20% (twintig persent) en 10% (“raising fee”) in die volgende rekening in te betaal op
datum van registrasie van die bogemelde eiendomme in die Aktekantoor te Pretoria:
Proplaw Bridging

Absa, Brooklyn
Branch: 632 005
Account Number: 4071652511
tensy ons van regsweë verhoed word of aangestel word as agente namens die Suid Afrikaanse
Inkomste Diens ooreenkomstig Art 99 van die Wet op Inkomstebelasting No. 58/1962 soos gewysig.’

[3] The seller of six of the properties referred to in the undertaking, Bell
Investments (Pty) Ltd (the company), was liquidated and its liquidators claimed the
proceeds arising from the sales. The seller of the seventh property was Mr I M Bell.
All the properties were sold to the same purchaser, Philadelphia Game Ranch (Pty)
Ltd.

[4] The respondent, when considering an application for finance, requires certain
documentation including a request for bridging finance and mandate to pay signed
by the client, an identity document, a copy of the sales agreement and also a letter of
undertaking from the conveyancer or attorney that the amount of the bridging finance
will be repaid by the conveyancer against registration of transfer of the sale property.
The ‘Bridging Request and Mandate to Pay’ in this case, signed by Mr Bell for
himself and also on behalf of the Bell Ontwikkkelings Trust (the client), refers to the
properties involved and the particulars of their transfer. It was submitted to the
respondent by the appellant (referred to as the ‘law firm’) on behalf of the client. The
borrowers were Mr Bell and the Trust and the sellera of six of the properties was the
company and Mr Bell the seller of the seventh. Apparently both the company and the
Trust were controlled by Mr Bell. The bridging request contains a request by the
client for payment of an amount of R500 000 (the amount of the loan) and continues:
‘And whereas [the respondent] requires that the client in return cedes in their [favour] his right, title
and interest to the proceeds in the above transaction in the amount of (requested amount plus 20 %
as well as a raising fee of 10 %)
R100 000,00 (Een Honderd Duisend Rand) plus die “raising fee” van 10% R50 000.00 (Vyftig
Duisend Rand)
Now therefore the [appellant] is hereby irrevocably instructed to issue a Bank Guarantee / Letter of
Undertaking, in the last mentioned amount in favour of [the respondent] payable on registration of the
above transaction. Should the transaction for whatever reason be cancelled or not registered within

six (6) months from signature then the amount will immediately become due and payable to [the
respondent].’
[5] At the end of the bridging request there is a ‘Confirmation by Registering
Attorney’ in the following terms signed by the appellant (or the law firm):
‘I, the undersigned Marthinus Jacobus Pretorius on behalf of the law firm hereby confirm that:
1. We have been instructed to attend to the registration of the above matter.
2. That all conditions precedent, or otherwise, to the said transaction as well as linked
transactions (if applicable) have been met, all registration documents have been signed, costs
have been paid or provision for the payment thereof have been made and that no reason
exists why registration triggering the payment of the guarantee/undertaking should not take
place on the said expected date.
3. Approval hereof relies materially upon the above request and confirmation.’
[6] The appellant furnished both the letter of undertaking and the bridging request
to the respondent. Registration of transfer of the properties did not take place within
the six month period envisaged in the bridging request but only thereafter. After
liquidation of the company the liquidators elected to abide by the sales and the
properties were duly transferred. An amount was available from the proceeds of the
sale of the seventh property (by Mr Bell) which was paid to the respondent leaving
the balance claimed.
[7] Two issues were raised on appeal: first, the proper construction of the letter of
undertaking, particularly whether it constitutes an undertaking independent of the
underlying transaction, that is the bridging loan to Mr Bell and the Trust; and,
secondly, if the letter of undertaking is not an independent undertaking, whether it is
enforceable since the bridging finance loan does not comply with the provisions of
the National Credit Act 34 of 2005 (NCA). In this regard, the appellant submitted that
the letter of undertaking, in any event, constitutes a ‘credit guarantee’ as defined in
the NCA. In the court below Murphy J found in favour of the respondent on all these
issues. Relying on Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd &
others 2010 (2) SA 86 (SCA) he found that the letter of undertaking gave rise to an
independent obligation and was not of an accessory nature, nor was it unenforceable
due to non-compliance with the provisions of the NCA. He gave judgment in favour

of the respondent. For the reasons that will appear from this judgment it is not
necessary to consider the applicability of the NCA.
[8] The letter of undertaking was issued pursuant to the bridging loan made by
the respondent to Mr Bell and the Trust. It must be construed in that context, the
factual matrix in which the parties operated,1 so as to give it a commercially sensible
meaning.2 It is clear from the wording of the undertaking that the appellant undertook
to pay the amounts stipulated against registration of transfer of the properties. It is
also clear that the appellant did this on the instructions of the client: it uses the word
‘onherroeplik’ implying that the mandate to the appellant could not be revoked by its
principal, the client. The fact that the appellant acted as the agent of the borrowers in
giving the undertaking does not mean, of course, that it could not have incurred a
personal liability in terms of the letter of undertaking.3 The word used is ‘onderneem’
leaving no doubt that a personal obligation was envisaged. The real question,
however, is not whether the appellant undertook to pay but what the content of this
undertaking was.
[9] The purpose of the undertaking was that the appellant, as the attorney
involved in the transfer of the properties, would make payment to the respondent of
the money lent and other charges from the proceeds received from the sale of the
seven properties by the company and Mr Bell.4 This is clear from the terms of the
bridging request. It recites that all the conditions precedent to the sales have been
fulfilled and that registration was expected to take place not later than the end of
August 2008. It records that the client, that is Mr Bell and the Trust, requested
payment of the amount borrowed and that the respondent requested the client ‘in
return’ to cede ‘his right, title and interest to the proceeds in the above transaction in
the amount of “(requested amount plus 20% as well as a raising fee of 10%)”’ to the
respondent. As security for the bridging loan the client therefore ceded part of its

1 See KPMG Chartered Accountants (SA) v Securefin Ltd & another 2009 (4) SA 399 (SCA) para 39;
Swart & ‘n ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C-D.
2 Ekurhuleni Metropolitan Municipality v Germiston Municipal Retirement Fund (457/2008) ZASCA
154 [2009] [27 November 2009]; 2010 (2) SA 498 (SCA); [2010] 2 All SA 195 (SCA) para 13;
Masstores (Pty) Ltd v Murray & Roberts Construction (Pty) Ltd & another 2008 (6) SA 654 (SCA) para
7.
3 Cf Ridon v Van der Spuy and Partners (Wes-Kaap) Inc 2002 (2) SA 121 (C) at 137I-138B.
4 Venter & others v Credit Guarantee Insurance Corporation of Africa Ltd & another 1996 (3) SA 966
(A) at 973D-E.

right to the sale proceeds to the respondent.5 Because payment was expected by no
later than the end of August 2008 the appellant was instructed to issue the letter of
undertaking. The appellant’s confirmation at the end of the bridging request in so
many words confirms that, because all the conditions for registration and payment of
the costs have been met, ‘no reason exists why registration triggering the payment of
the guarantee/undertaking should not take place on the said expected date’. It is only
by virtue of his control over the proceeds of the sales that effect to the entire
transaction could have been given.
[10] The undertaking is not to pay ‘regardless’ but to effect payment from the
receipt of the proceeds of the sales. Nor was it envisaged that the proceeds would
vest in the appellant: by virtue of the ‘cession’ the proceeds in the agreed amount
had to be paid to the respondent. It would have been absurd for the appellant to
have given an unconditional, independent undertaking in these circumstances. The
letter of undertaking itself contains a reference to the bridging finance provided to Mr
Bell and the Trust, recites the properties to be transferred and links payment of the
undertaking to registration of transfer. Seen in this context, the undertaking amounts
to no more than an undertaking to make payment from the proceeds of the sales.6 It
is common cause that the sales of the company’s properties left a deficit. The
proceeds of the sale of the seventh property by Mr Bell left a net balance which was
paid to the respondent.  It follows that the respondent is not entitled to any further
payment from the appellant.

5 The fact that a partial, and hence an invalid, cession was involved is not relevant for the purposes of
this matter: apparently, all the parties regarded it as valid.
6 See also The Minister of Transport and Public Works: Provincial Government of the Western Cape
and The Head of the Department of Transport and Public Works: Provincial Government of the
Western Cape v Zanbuild Construction (Pty) ltd and Absa Bank Limited  (68/2010) [2011 ZASCA 10
(11 March 2011) paras 14 ff on the importance of interpreting the terms of the particular undertaking
or guarantee under consideration.

[11] The following order is made:
(a)
The appeal is upheld with costs including the costs of two counsel;
(b)
The order of the court below is set aside and replaced by the following:
‘The application against the first respondent is dismissed with costs.’

_________________
F R MALAN
JUDGE OF APPEAL

APPEARANCES:
For Appellant:

A Subel SC

J Pretorius

Instructed by:

Eversheds Attorneys

Johannesburg

Webbers

Bloemfontein

For Respondent:

D B du Preez SC

Instructed by:

Strydom & Bredenkamp Inc

Brooklyn

E G Cooper & Majiedt Inc

Bloemfontein

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:
27 May 2011

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.

KRUGER v PROPERTY LAWYER

The Supreme Court of Appeal today upheld an appeal by a firm of practising
attorneys, who had furnished a written letter of undertaking to the respondent,
a provider of bridging finance to sellers of immovable property. Bridging
finance was made available to the appellant’s clients pending transfer of
certain properties in which the appellant was engaged, albeit not as the
conveyancer, as attorney on behalf of the vendors. The undertaking of the
appellant is addressed to the respondent and contains an irrevocable
undertaking to pay an amount of R 500 000 on registration of the properties
sold in the name of the purchaser. The Supreme Court of Appeal held that the
undertaking had to be interpreted in the context of the bridging loan made to
the appellant’s clients.  The purpose of the undertaking was that the appellant
would make payment to the respondent of the money lent and other charges
from the proceeds received from the sale of the properties. This was clear
from the terms of the bridging request. The appellant’s confirmation at the end
of the bridging request in so many words reads that, because all the

conditions for registration and payment of the costs have been met, ‘no
reason
exists
why
registration
triggering
the
payment
of
the
guarantee/undertaking should not take place on the said expected date’. It is
only by virtue of his control over the proceeds of the sales that effect to the
entire transaction could have been given. The seller in respect of some of the
properties was liquidated and only a portion of the price of the other property
was received by the appellant. The latter amount, less than the amount
stipulated in the undertaking, was paid over to the respondent. The Supreme
Court of Appeal held that the appellant had discharged its obligations under
the undertaking and found that the respondent was not entitled to claim the
balance from the appellant. The appeal from the North Gauteng High Court
(Pretoria) was therefore upheld with costs.