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The Effect of a Deregistered Company on Suretyship

Thomani and Another v Seboka NO and Others 

The Thomani case concerns a company that concluded a loan with a bank, and as security for such a loan, the bank and the applicants entered into a suretyship agreement in 2007 whereby they attached their mortgage bond as surety. In 2008 the company ceased making payments to the bank due to its inability to do so and the company was subsequently deregistered in 2010. Thereafter, the Bank only issued summons in 2013, however due to the bond forming part of the surety it did not prescribe and default judgment was granted. 

The case at hand deals with the rescission of same.

The main issue in contention became the fact that the Bank relied on the bond which on its face seemed to consist of a normal housing bond over the applicants’ sectional unit and not a surety bond. The bank argued that the entire housing bond had been signed as surety over the loan agreement between the bank and the company.

The banks main error in these proceedings was when it stated the following in its answering affidavit:

“it should be kept in mind that, at the state of granting financial assistance to the principal debtor, the bank had no knowledge of the principal debtor, except that the applicants were involved and that the applicants stood suretyship for the indebtedness of that entity”

This meant that the bank was trying to enforce a surety agreement in terms of a loan agreement it had signed with an unknown party. It was after this that the bank desperately tried to justify how the applicant’s personal property had been allegedly mortgaged in respect of an unidentified debtor’s loan.

The debtor was eventually identified as Abrina 1591 (Pty) Ltd whom was deregistered at the inception of the loan agreement. Furthermore, Abrina was named on the lease agreement, and labelled deregistered accordingly.

The bank attempted to argue around this by stating that at the time, Abrina was in the process of re-registering.

The court found that had the bank drawn up a new mortgage bond as suretyship with the applicants in terms of the loan agreement between the Bank and Abrina it could have found success. It is evident that the bank avoided entering into a second mortgage, but chose to arbitrarily attach a housing bond to the surety, due to the claim being prescribed had it not been secured by the original bond.

As a result, the court found that the mortgage bond which was registered as security for the applicants’ home loan, could not be used as security for a loan to Abrina 1591, due to its non-existence at the time, coupled with the arbitrary arguments on behalf of the bank.

 Full Case
Prepared by Alexander VD Laan

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