Abstract
In Nedbank Limited v Chance (2008 4 SA 209 (D); 2008 2 All SA 367 (D)), the court refused a claim for rectification of a contract, although it was common cause that it did not reflect the actual agreement between the parties, because the debtor had been declared insolvent and a concursus creditorum had been established. The result was that the insolvent debtor’s sureties, its erstwhile directors, managed to evade liability to the creditor for an amount in excess of R2.8 million. Given that the principles concerning a concursus creditorum, as well as those regarding rectification, have equity as their purpose, this highly prejudicial outcome for the creditor is most unsatisfactory and the decision merits closer scrutiny.
Highlights
In Nedbank Limited v Chance (2008 4 SA 209 (D); 2008 2 All SA 367 (D)), the court refused a claim for rectification of a contract, it was common cause that it did not reflect the actual agreement between the parties, because the debtor had been declared insolvent and a concursus creditorum had been established
The reorganisation agreement recorded the fact that Chance Brothers owed Nedbank an amount in excess of R10 million and that its sureties, who were directors of Chance Brothers, had personally guaranteed its obligations to Nedbank in terms of suretyship agreements executed during 1993
In terms of their agreement, a portion of the debt, an amount of R3.5 million, was to be repaid to Nedbank by the issue to it of 3.5 million cumulative redeemable preference shares, and the balance was to be dealt with in terms of a loan agreement concluded by the parties during 1996
Summary
In Nedbank Limited v Chance (2008 4 SA 209 (D); 2008 2 All SA 367 (D)), the court refused a claim for rectification of a contract, it was common cause that it did not reflect the actual agreement between the parties, because the debtor had been declared insolvent and a concursus creditorum had been established. The reorganisation agreement recorded the fact that Chance Brothers owed Nedbank an amount in excess of R10 million and that its sureties, who were directors of Chance Brothers (this fact does not appear in the judgment, but it was ascertained from Nedbank’s legal representative in the matter), had personally guaranteed its obligations to Nedbank in terms of suretyship agreements executed during 1993 In terms of their agreement, a portion of the debt, an amount of R3.5 million, was to be repaid to Nedbank by the issue to it of 3.5 million cumulative redeemable preference shares, and the balance was to be dealt with in terms of a loan agreement concluded by the parties during 1996. It was common cause that, if, in the circumstances, Nedbank failed in its claim for rectification, there would be no outstanding balance for which the sureties would be liable to Nedbank
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