What the Momentum court ruling means for former brokers facing R475,000 liability
The Northern Cape High Court in Kimberley has ruled in favour of Momentum Group Limited in a long-running debt case linked to the now-liquidated financial services company Maswil Finansiële Adviseurs CC.
The debts at the centre of the case arose from commissions paid in advance by Momentum to Maswil more than a decade ago, with the case complicated by the brokerage books changing hands at various times.
Momentum had instituted proceedings against Maswil, but before a judgment could be finalised, the company was placed into liquidation. As a result, the judgement said, “Momentum abandoned seeking any judgment against it.”
Maswil’s liquidation did not deter Momentum, which went after the company’s then owners who had signed surety. As a result, the court said that “the action proceeded against the second to the seventh defendants based on the deeds of suretyship”.
In the ruling, the court found the previous owners were “jointly and severally liable to the plaintiff in the sum of R474 858.24” in addition to interest at 14% per annum and costs on an attorney and client scale. However, one of the former owners’ debts was capped as the result of the initial brokerage agreement.
The court examined a series of broking and financial agreements between Momentum and Maswil. These agreements covered commission payments to the broker house and included advance payments that could be clawed back if policies lapsed.
The individuals involved, including Andries Johannes le Grange senior and junior, Marthinus Johannes Spangenberg, and Monica Johanna le Grange, had signed deeds of suretyship covering any debit balances reflected in Maswil’s commission accounts.
The defendants argued that Momentum had breached the agreements, particularly over the transfer of Le Grange senior’s client book to Maswil, and that this should release them from liability.
In rejecting this claim, the court noted that the transfer complied with all conditions or was consented to by Momentum. “Accordingly, I conclude that the defendants have not shown any breach of a legal duty or obligation by Momentum.”
The judgment clarified that the law of suretyship does not recognise a general “prejudice principle”.
As the court stated, “prejudice caused to the surety can only release the surety (whether wholly or partially) if the prejudice is the result of a breach of some or other legal duty or obligation by the creditor”. No such breach was found.
The court also confirmed that Momentum could prove the amount owed through a certificate of balance, which “shall, without more, be prima facie evidence of the amount owing”.
The defendants’ attempts to challenge the certificate as hearsay or outdated were dismissed.
The case highlights the risk that individuals face when signing deeds of suretyship for a company. Even if the company is liquidated, those who personally guaranteed its obligations can still be held liable for debts.
IOL BUSINESS