THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Not reportable
Case No: 20474/2014

In the matter between:

AFGRI CORPORATION LIMITED

APPELLANT

and

MATHYS IZAK ELOFF

FIRST RESPONDENT
ELSABE ELOFF

SECOND RESPONDENT

Neutral citation:  Afgri Corporation Ltd v Eloff (20474/2014) [2016] ZASCA

141 (29 September 2016)

Coram:
Maya DP, Bosielo, Theron and Van der Merwe JJA and

Makgoka AJA

Heard:
25 August 2016

Delivered:
29 September 2016

Summary:
Contract ─ acknowledgement of debt and undertaking to pay ─
evidence contradicting the terms of the agreement rendered inadmissible by
the parol evidence rule ─ judgment granted in terms of the agreement.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Gauteng Division of the High Court, Pretoria (Hughes J
sitting as court of first instance):
(a) The appeal is upheld with costs.
(b) The order of the court a quo is set aside and replaced with the following:
„Judgment is granted against the defendants jointly for payment of:
1 The amount of US$920 844.59;
2 Interest on the amount of US$920 844.59, compounded monthly and calculated at:
2.1 14 per cent per annum from 1 September 2007 to 18 February 2008;
2.2 13 per cent per annum from 19 February 2008 to 10 November 2008;
2.3 15 per cent per annum from 11 November 2008 to date of payment.
3 Costs of suit.‟
______________________________________________________________

JUDGMENT
______________________________________________________________

Van der Merwe JA (Maya DP, Bosielo and Theron JJA and Makgoka AJA
concurring):

[1] On 26 December 2007 Dumela Farms Limited (Dumela) and the
respondents, Mr Mathys Isak Eloff and Ms Elsabe Eloff, signed an agreement
entitled „ACKNOWLEDGEMENT OF DEBT, SURETYSHIP, UNDERTAKING
& CESSION‟ (the agreement). In terms thereof, Dumela acknowledged
indebtedness to the appellant, Afgri Corporation Limited, in the amount of
US$920 844.59. In terms of the agreement, the respondents bound
themselves jointly and severally as sureties and co-principal debtors for the
due payment of the amount of US$920 844.59 by Dumela to the appellant.
The court a quo (Hughes J in the Gauteng Division, Pretoria) dismissed the
appellant‟s claim against the respondents based on the agreement, but
granted leave to appeal to this court. The central question in this appeal is

whether the court a quo should have held the respondents liable in terms of
the agreement, for payment of the said amount to the appellant.

[2] The respondents are married to each other in community of property
and are domiciled in the Republic of South Africa. They have, since 1992,
conducted farming operations in the Republic of Zambia through Dumela, a
company incorporated and registered in terms of the laws of Zambia. The
respondents were shareholders of Dumela. Mr Eloff was a director of and the
driving force behind Dumela. He signed the agreement on behalf of Dumela.

[3] Dumela mainly produced maize. Maize is planted during spring and
harvested during autumn and winter of the following year. The appellant,
which is also a Zambian company, had for some years provided producers‟
goods such as seeds, fertilizers, chemicals and fuel, to Dumela on credit. This
was regulated by standard written agreements entitled „PRODUCTION
AGREEMENT AND AGRICULTURAL CHARGE‟ (production agreement),
entered into between the appellant and Dumela in respect of each seasonal
planting.

[4] In terms of such a production agreement the appellant made a credit
facility in a specified amount available to Dumela for the purchase of
producers‟ goods. The outstanding balance of the credit facility had to be
settled by an agreed date after the harvest of the relevant crop, either by
payment thereof or by delivery of a specified quantity of maize at a fixed price.
As security for the repayment of the credit facility, Dumela granted an
agricultural charge to the appellant in terms of the then Zambian Agricultural
Credits Act 23 of 1995. For purposes of this judgment it is not necessary to
say more than that an agricultural charge provides a creditor with security
over moveable property and rights of its debtor similar to the security provided
by a notarial bond in terms of South African law. (See 17(2) Lawsa 2ed (2008)
para 399-405.)

[5] The last production agreement entered into between the appellant and
Dumela pertained to the production of maize during the 2006/2007 season.

This agreement provided for a credit facility for Dumela in the amount of
US$647 520. The credit facility had to be settled by 30 September 2007, by
payment or the delivery of 3 660 metric tons of maize. The value of the maize
to be delivered was predetermined at US$160 per ton. Although this
agreement was only signed on 19 July 2007, it is common cause that it was
implemented since commencement of the planting season during 2006. The
agricultural charge in the amount of US$647 520, envisaged in the production
agreement, was registered on 20 July 2007, inter alia over „all crops growing
and otherwise to be grown in the 2006/7 season‟. The respondents admitted
that Dumela utilized the facility to the full and thus became indebted to the
appellant in terms of this production agreement in the amount of US$647 520.

[6] The appellant subleased a portion of the land farmed by Dumela at
Mukonchi, Zambia for purposes of a depot. It is common cause that Dumela
delivered approximately 2 900 metric tons of white maize (the maize) to the
appellant at this depot. In terms of the production agreement, the appellant
therefore became entitled to utilize the maize to settle or reduce the
outstanding balance on the credit facility.

[7] However, Dumela, represented by Mr Eloff, entered into negotiations
with the appellant to prevent this outcome. Mr Eloff maintained that the low
price of maize at the time would in future probably rise materially. He
accordingly requested extension of time for settlement of the 2006/2007
production credit facility as well as other amounts owed by Dumela to the
appellant at the time. The total amount owed was US$920 844.59. Mr Eloff
also offered additional security for this debt. The appellant acceded to this
request and these negotiations led to the signing of the agreement. During
these negotiations and the entering into the agreement, Dumela and the
respondents were assisted by an attorney.

[8] Clauses 3 and 4 of the agreement setting out the debt provided:
„3.
DUMELA FARMS acknowledges that, excluding any amounts owing in
respect of Instalment Sale Agreements, as at 31 October 2007 it is indebted to
AFGRI CORPORATION LIMITED [ie the appellant], a company duly registered as

such under Registration Number 44914 in the Republic of Zambia, (hereinafter
referred to as “AFGRI CORPORATION”) [in] the following amounts:
3.1
An amount of US Dollar (“$”)920 844.59 (NINE HUNDRED AND TWENTY
THOUSAND EIGHT HUNDRED AND FORTY FOUR DOLLARS AND FIFTY NINE
CENTES) in respect of goods sold and delivered, services rendered and credit
facilities granted by AFGRI CORPORATION to DUMELA FARMS at the latter‟s
special instance and request;
3.2
Interest on the amount of US$920 844.59 from the 1st day of November 2007
to date of payment, at a interest rate equal to the Base Rate charged from time to
time by STANBIC in Zambia plus 3 percentage points and which interest will be
compounded monthly. It is recorded that the aforementioned Base Rate is presently
11.5% per annum and the interest rate charged on the aforesaid amount is presently
14.5% per annum.
4.1
The amount mentioned in paragraph 3.1 above was payable by DUMELA
FARMS to AFGRI CORPORATION before or on 31 August 2007, but was not paid;
4.2
DUMELA FARMS has requested an extention of time until 31 July 2008 for
payment of the due amounts mentioned in 3.1 and 3.2 above.‟

[9] Clauses 7 and 8 of the agreement dealt with the additional security
provided. It essentially consisted of a cession by the respondents of their
right, title and interest, up to the amount of US$1 million, in a first mortgage
bond to be registered over certain land that had been sold by the respondents
to a close corporation for purposes of development of a residential township.
The respondents also undertook to pay an amount of R100 000 to the
appellant upon transfer of each erf in the development to the purchaser
thereof.

[10] Clause 9 provided:
„9.1
DUMELA FARMS consented to AFGRI CORPORATION registering certain
Agricultural Charges against DUMELA FARMS in terms of the provisions of the
Agricultural Credits Act (Act 23 of 1995) of the Republic of Zambia, which charges
have been duly registered.
9.2
DUMELA FARMS, MATHYS and ELSABE acknowledged that the provisions
of this document will in no way prejudice or vary the rights of AFGRI
CORPORATION in terms of the Agricultural Charges registered in the Republic of
Zambia by AFGRI CORPORATION, nor affect any other rights of AFGRI

CORPORATION to enforce any rights which it might have against DUMELA FARMS
in terms of the laws of force in the Republic of Zambia or any agreements entered
into between DUMELA FARMS and AFGRI CORPORATION.
9.3
DUMELA FARMS confirms that approximately 2 900 metric tons of white
maize is presently being stored in bags on DUMELA FARMS’ farm Mukonchi,
Zambia. It is recorded that the total quantity of maize being stored on the farm is inter
alia subject to the Agricultural Charge mentioned above.
9.4
DUMELA FARMS undertakes, at its cost, to take all necessary steps
including, but not limited to, effective covering and regular fumigation as prescribed
by AFGRI CORPORATION, so as to protect the bagged maize against any damage
of whatever nature, including, but not limited to damage as a result of theft,
destruction, fire, damage by water, inclement weather, storm, wind, pests and
contamination.
9.5
It is recorded that approximately 1 500 metric tons of the aforementioned
2900 metric tons bagged maize had to date not been contracted for sale and
DUMELA FARMS undertakes, subject to AFGRI CORPORATION’s prior written
consent and its rights in terms of the Agricultural Charge and other agreements
entered into with DUMELA FARMS, to enter into the necessary contracts for the sale
of the total quantity of 2 900 metric tons of maize before or on 25 July 2008.
DUMELA FARMS confirms and acknowledges that in the event of DUMELA FARMS
still being indebted in any amount to AFGRI CORPORATION at 25 July 2008 and it
failing to enter into the necessary contracts of sale in respect of the total quantity of
the stored bagged maize, or DUMELA FARMS failing to make payment of the total
purchase price of such maize to AFGRI CORPORATION before or on 31 July 2008,
AFGRI CORPORATION will be entitled, without any notice to DUMELA FARMS, to
exercise all its rights in terms of the Agricultural Charge which has been registered in
favour of AFGRI CORPORATION and which rights will include, but not be limited to
seizure and the appointment of a receiver.‟

[11] On 6 February 2008, however, Dumela was placed under receivership
in terms of the laws of Zambia. As a result, the assets of Dumela were placed
under the control of the appointed receivers. The duty of the receivers was to
distribute the assets of Dumela amongst its creditors, in accordance with the
ranking of their rights. Litigation in respect of the maize ensued in Zambia. It is
not necessary to provide the particulars thereof. It suffices to say that the prior
rights of another creditor of Dumela prevailed in respect of the maize. The

appellant consequently received no payment as envisaged in the agreement
nor from any other source.

[12] The appellant accordingly issued a provisional sentence summons
against the respondents for payment in terms of the agreement. By
agreement between the parties, the matter went to trial. The court a quo mero
motu held that the provisions of s 21(1) of the English Sale of Goods Act of
1893, applicable in Zambia, rendered the agreement invalid. The respondents
rightly conceded that this finding was wrong and nothing more need be said
about it.

[13] It is necessary to analyse the provisions of clause 9 of the agreement
in context. Their meaning is plain. Dumela confirmed that the maize was
stored in bags on its farm at Mukonchi. It undertook, at its cost, to take all
steps necessary to protect the maize against any damage of whatsoever
nature. Dumela acknowledged the provisions of the agricultural charge
registered in favour of the appellant and that the maize was subject thereto. At
its request, Dumela was granted the opportunity until 25 July 2008 to sell the
maize to third parties in order to obtain a better price. The purchase price of
the maize had to be paid to the appellant by 31 July 2008. In the event that no
such sale took place, or if Dumela failed to make payment of the full purchase
price of the maize to the appellant on or before 31 July 2008, the appellant
would be entitled, without notice to Dumela, to exercise its rights in terms of
the agricultural charge. It is clear that the parties to the agreement were ad
idem that Dumela was the owner and in control of the maize, which was
subject to the appellant‟s security consisting of the agricultural charge.

[14] The only defence proffered in the evidence of Mr Eloff, was raised in a
second amended plea filed after Mr Eloff had completed his evidence in chief.
Although his evidence in this regard was not clear and consistent, he
attempted to convey that the maize became the property of the appellant
when it was delivered to the appellant in the period up to 31 August 2007. The
implication hereof was that Dumela‟s account with the appellant ought to have
been credited with the value of the maize by 31 August 2007, that is before

the agreement was entered into. (In terms of the production agreement
Dumela would in such event have been credited with only US$464 000 (2 900
tons x US$160 per ton)).

[15] Before us, counsel for the respondents recognised that in terms of the
production agreement of 19 July 2007, the appellant had only obtained the
security of the agricultural charge over the maize. He argued that it should be
found that the appellant and Dumela had entered into a written purchase and
repurchase agreement in respect of the maize. The appellant did from time to
time in the past enter into such standard written agreements with Dumela.
The essential effect of such agreement was that the appellant purchased the
maize that was subject to a prior production agreement and the debtor
obtained the right to repurchase the maize from the appellant by a specified
date. On this basis, so it was argued, the appellant became the owner of the
maize upon the delivery thereof, which was completed by 31 August 2007.

[16] The argument is devoid of any factual basis. Such agreement could
only have been entered into after the production agreement of 19 July 2007.
No such agreement was produced at any time. In his testimony Mr Eloff only
tentatively referred to the possibility of such agreement and in any event
explicitly said that his case was that the appellant had become the owner of
the maize as a result of the production agreement. This evidence directly
contradicted the contents of the agreement.

[17] In Union Government v Vianini Ferro-Concrete Pipes (Pty) Ltd 1941
AD 43 at 47 Watermeyer JA said:
„Now this Court has accepted the rule that when a contract has been reduced to
writing, the writing is, in general, regarded as the exclusive memorial of the
transaction and in a suit between the parties no evidence to prove its terms may be
given save the document or secondary evidence of its contents, nor may the
contents of such document be contradicted, altered, added to or varied by parol
evidence‟.
This is referred to as the parol evidence or integration rule. The rule renders
statements and negotiations leading up to the conclusion of a written contract

irrelevant and therefore inadmissible. Where a document that had not been
signed by all the parties to the agreement, was accepted by them as their
contract, the rule is of equal application. (See Rielly v Seligson and Clare Ltd
1977 (1) SA 626 (A) at 637C-H.) However, where the parties to an agreement
reduced only part of the agreement into writing, the rule does not prevent the
admission of extrinsic evidence in respect of the portion of the agreement that
was not integrated in the document. (See Affirmative Portfolios CC v Transnet
Ltd t/a Metrorail [2008] ZASCA 127; 2009 (1) SA 196 (SCA) para 14.)

[18] This led counsel for the respondents to argue, albeit faintly, that that
was the case here. He was, however, unable to identify any portion of the
agreement between the parties in respect of the debt in question that had not
been integrated. In my judgment, the agreement embodied the whole of the
arrangement of the parties in respect of the debt in question. This is clear
from the negotiations that led to the agreement, the nature of the transaction
and the contents of the agreement. This conclusion is particularly
underscored by the provisions of clause 5 of the agreement. This clause was
headed „Possible claims not covered by Acknowledgement‟. It provided that
an alleged claim by the appellant against Dumela for damages in respect of
delivery of wheat during the production season 2006/2007 and an alleged
claim by Dumela against the appellant in respect of the sale of  soya beans,
were excluded from the operation of the agreement. The same applied to
amounts owing in respect of instalment sale agreements, in terms of clause 3
of the agreement.

[19] Therefore, the evidence of Mr Eloff was inadmissible. This of course
renders it unnecessary to consider whether the evidence was in any event
acceptable on the general probabilities arising from the matter, which appears
to be doubtful, to say the least. To the extent that Mr Eloff‟s evidence reflected
an interpretation of the production agreement, the evidence was inadmissible
on that ground too. (See KPMG Chartered Accountants (SA) v Securefin Ltd
& another [2009] ZASCA 7; 2009 (4) SA 399 (SCA) para 39 at 409G-H).

[20] It follows that the court a quo should have granted judgment in favour
of the appellant against the respondents as claimed. Clauses 10.3 and 10.4 of
the agreement provided that all payments in terms thereof had to be made in
US dollars. Judgment should be given in that currency. Our courts have the
power to do so (see Standard Chartered Bank of Canada v Nedperm Bank
Ltd 1994 (4) SA 747 (A) at 774F-I).

[21] The following order is accordingly issued:
(a) The appeal is upheld with costs.
(b) The order of the court a quo is set aside and replaced with the following:
„Judgment is granted against the defendants jointly for payment of:
1 The amount of US$920 844.59;
2 Interest on the amount of US$920 844.59, compounded monthly and calculated at:
2.1 14 per cent per annum from 1 September 2007 to 18 February 2008;
2.2 13 per cent per annum from 19 February 2008 to 10 November 2008;
2.3 15 per cent per annum from 11 November 2008 to date of payment.
3 Costs of suit.‟

__________________
C H G van der Merwe
Judge of Appeal

APPEARANCES:
For Appellant:

J G Bergenthuin SC
Instructed by:
Ernst J V Penzhorn Attorneys, Pretoria
Hill McHardy & Herbst Incorporated, Bloemfontein

For Respondents:
A Liversage
Instructed by:
Grosskopf Attorneys, Pretoria
Spangenberg
Zietsman
&
Bloem
Attorneys,
Bloemfontein