Debt cannot be enforced, judges rule
Businessman wins decision in Concourt
CONTROVERSIAL businessman Roux Shabangu emerged victorious yesterday after the Constitutional Court ruled he could not be legally compelled to pay the R82 million his company owes the Land Bank.
In 2006, Shabangu’s company, Westside Trading, clinched a R100m loan agreement with the bank for the purpose of buying and developing properties. However, in 2007 the bank learnt that the loan was invalid as it was not empowered to issue the funds.
In terms of the Land and Agricultural Development Bank Act, the bank’s powers are confined to promoting and supporting programmes that advanced equitable ownership of agricultural land by historically disadvantaged South Africans.
Despite the clause contained in the Act which effectively prohibited the loan, Westside had already spent R51m of the R100m loan on buying properties. Of the remaining R49m, it had spent up to R11.5m, which it planned to use for professional fees and township investment.
Following negations between the bank and Westside, the company agreed to pay back R82m in 2009.
But the entity was then liquidated and wound up in 2012, before it could return the money, triggering a civil claim by the bank against individual shareholders of the company who had signed a deed of surety and mortgage bond, and who included Shabangu.
The North Gauteng High Court dismissed arguments by Shabangu and fellow shareholders that they could not be held personally liable as the principal loan advanced to them was invalid, making the deed of surety also invalid as a supporting agreement.
The court also ruled that the shareholders were jointly and severally liable for the R82m, and Shabangu’s appeal against the ruling was subsequently dismissed by the Supreme Court of Appeal, forcing him to launch an appeal in the Constitutional Court.
Shabangu had earlier told the court that the claim by the bank would bankrupt him if it was enforced.
Delivering the unanimous judgment, Justice Johan Froneman said Shabangu and fellow shareholders could not be held liable for the funds, as their acknowledgement of debt in the deed of surety was tainted by the invalidity of the loan agreement.
Justice Froneman said there was also no proof that the shareholders had looted the money.
Justice Froneman said the acknowledgement of debt sought to perpetuate the original invalidity of the loan agreement, and that the bank had also wanted to benefit off the invalid contract as it initially sought to be paid interest from the loan.
“The court accordingly holds that there is no valid claim against Westside in terms of acknowledgement of debt, and thus also no valid claim against the sureties. As a result, the appeal is upheld with costs,” he ruled.