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Shabangu v Land and Agricultural Development Bank of South Africa and Others (CCT215/18) [2019] ZACC 42

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Shabangu v Land and Agricultural Development Bank of South Africa and Others (CCT215/18) [2019] ZACC 42

31st October 2019

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[1] The applicant and second to ninth respondents[1] (sureties) stood written surety for loans advanced by the first respondent (Land Bank) to the principal debtor, Westside Trading 570 (Pty) Limited (Westside), for the development of urban property.  The Land Bank was subsequently advised that the transaction (loan agreement) was beyond its statutory powers in terms of the Land and Agricultural Development Bank Act (the Act),[2] because these powers were confined to promoting, facilitating and supporting the equitable ownership and development of agricultural land by historically disadvantaged persons.[3]

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[2] Upon receipt of this advice, the Land Bank stopped advancing funds to Westside.  By then R51 million had been spent by Westside on purchasing properties and approximately R11.5 million of the planned R49 million for township establishment and professional fees as envisaged.  The Land Bank asserted that together with interest, Westside owed it some R95 million.  Westside disputed this amount.  Its financial director then signed an acknowledgment of debt in which Westside accepted liability to repay R82 million to the Land Bank in full and final settlement of its indebtedness.

[3] Westside failed to repay the amounts claimed by the Land Bank.  The Land Bank then instituted proceedings against Westside and the sureties on various bases for payment, as well as for an order declaring the development properties executable in terms of a covering mortgage bond in its favour.

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[4] After the institution of proceedings, Westside was liquidated.  The Land Bank then amended its claim.  It did not pursue its claim against Westside but persisted in a claim against the sureties – not directly based on the original principal debt under the loan agreement for payment of R82 million, but on the sureties’ alleged liability for the R82 million acknowledgement of debt.

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