Standard Bank of South Africa Limited v Friedman [2024] ZAWCHC 49 (20 February 2024)

The case involves an application for a monetary judgment brought by Standard Bank of South Africa Limited against Jonathan Nicholas Friedman. Standard Bank claims that Friedman is indebted to them in the amount of R110 million, plus interest and costs, based on a Guarantee he provided for Urban Lime Properties (South Africa) (Pty) Ltd's obligations to Standard Bank under a loan facility agreement. Friedman, who is a director and the chief executive officer of Urban Lime, filed his answering affidavit in response to the application.

The application was initially launched in the High Court, Gauteng Division, Johannesburg, but was transferred to the Western Cape Division for convenience and cost-effectiveness, as Standard Bank was also seeking an order of liquidation against Urban Lime in the Western Cape Division. The liquidation application was suspended due to an application from Rivertown Central (Pty) Ltd seeking to place Urban Lime under supervision for business rescue proceedings in KwaZulu-Natal.

Friedman raised defenses in response to the monetary claim, focusing on an interpretation of a clause in the Guarantee. Standard Bank argued that Friedman's remaining defense boiled down to a single point, which was not fully covered in their initial arguments. During oral arguments, a fresh argument was introduced by Standard Bank, supported by new cases, which Friedman's legal team had received the day before the hearing.

The crux of the dispute centered around the timing of Standard Bank's cancellation of the loan facility agreement with Urban Lime and the subsequent invocation of the acceleration clause. Friedman argued that once the agreement was canceled, Standard Bank could not rely on the acceleration clause. Standard Bank contended that the cancellation and acceleration were executed simultaneously in the same letter, which was within their contractual rights.

The court analysed the terms of the Guarantee, the loan facility agreement, and the actions of the parties. Ultimately, the court found in favour of Standard Bank, ruling that Friedman was indeed indebted to them under the Guarantee for the claimed amount. The court ordered Friedman to pay the specified amount plus interest and costs to Standard Bank.

The core legal principle underlying the decision in this case is that when a party cancels a contract and simultaneously exercises a right to accelerate payment under that contract, such actions are permissible and do not invalidate the acceleration clause. The court held that the cancellation and acceleration could occur simultaneously in the same communication, as long as it was within the party's contractual rights. The court emphasised that the interpretation of contracts should be guided by common sense, a business-like approach, and the promotion of sensible outcomes. The principle established is that the formality of insisting on acceleration occurring before cancellation, when both actions are communicated simultaneously, serves no purpose and does not promote the objectives of the agreement or the law of contract.

The court relied on the case of Nash v Golden Dumps [1985] ZASCA 6; [1985] 2 All SA 161 (A) in its reasoning process. This case was cited in conjunction with Crest Enterprises (Pty) Ltd v Rycklof Beleggings (Edms) Bpk 1972 (2) SA 853 (A) and Walker’s Fruit Farms Ltd v Sumner 1930 TPD 394 to support the argument that the right to accelerate payment under a contract can be exercised even after the contract is canceled, as long as the right to accelerate had accrued prior to the cancellation.