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IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE DIVISION, CAPE TOWN)

Reportable

	CASE NO: A 369/2017
In the matter between:
F D VERMEULEN	First Appellant
FRED DOUW VERMEULEN	Second Appellant
ZELMA VERMEULEN	Third Appellant
GLOBAL ASSET PROTECTION (PTY) LTD	Fourth Appellant
And
SASFIN BANK LIMITED	Respondent

 

JUDGMENT: 13 August 2018

DAVIS J et WILLE J:

Introduction

[1] This appeal raises the question of the relationship between pleadings and further evidence which might be necessary to raise a proper defence against a contractual claim.  On 21 August 2006 Kago Finance (Pty) Ltd (‘Kago’) and the first appellant concluded a written rental agreement in terms whereof the latter hired goods as specified in annexure A3 to the written rental agreement.  On 09 March 2004 Kago and Sunlyn Investments (Pty) Ltd (‘Sunlyn’) concluded a cession agreement in terms of which the former ceded to the latter all rights, title and interest including ownership of goods in terms of a series of contracts of lease into which Kago had entered into with a number of separate parties.   Accordingly on 03 November 2006 Sunlyn acquired all the rights, title and interest, including ownership, of the leased goods which were described in annexure A3 to the written rental agreement between respondent and first appellant. 

[2] On 29 March 2006 Sunlyn concluded a cession agreement with respondent in which it agreed to cede and ceded to respondent all rights, title and interest, including ownership of the leased goods in terms of contracts of lease which were set out in that agreement.  It followed therefore that on 03 November 2006 respondent acquired all the rights, title and interest, including ownership, of the leased goods as described in annexure A3.

[3] Turning to the written rental agreement, first appellant agreed, in terms of this agreement, to pay to Kago monthly rentals with the initial instalment being in the amount R 10 688. 64 (inclusive of VAT).   The first monthly rental was to be effected on the commencement date, 21 August 2006, and monthly payments were to be made thereafter on or before the 21^st day of each succeeding month for the duration of the rental period which was 36 months.

[4] It is clear from the terms of this agreement that, notwithstanding delivery of the goods to first appellant, ownership remain vested in the hirer (being respondent) at all times.  In addition, first appellant would not be liable for nor would it guarantee an amount in respect of the value of the goods at any time during or after the expiry of the rental period or after termination of the rental agreement.

[5] In the event of a breach of any terms of the rental agreement by first appellant, respondent would be entitled to claim immediate payment of all the amounts payable in terms of the rental agreement, whether or not these had fallen due, or alternatively it could cancel the rental agreement immediately, take possession of the goods, retain all amounts already paid by first appellant and claim payment of all outstanding rentals and, as pre-estimated liquidated damages, the aggregate value of the rentals which would have been payable, had the rental agreement continued until expiry by effluxion of time.  All overdue amounts would bear interest at the rate of 6% above the prevailing publically quoted base rate of interest per annum at which any of respondent’s banks would lend on overdraft (‘prime’) calculated from due date to date of payment.

[6] The agreement also provided that respondent gave no warrantees in connection with the goods and the goods were rented to the first respondent “voetstoots”. It also provided that first appellant could not raise as a defence that the goods were not performing and/or operating and undertook to continue to pay the monthly rental due to the Hirer in terms of the rental agreement, notwithstanding possible non-performance of the goods.

[7] Pursuant to the conclusion of this rental agreement, respondent, complying with its obligations delivered the goods to first appellant.  First appellant failed to make payments of the rental and/or arrear interest on due date and as at 31 May 2007, was already in arrears in the amount of R 67 702.63 inclusive of VAT.   As a result, respondent cancelled the rental agreement by giving written notice to the first appellant and claimed an amount of R 382 064.22 (67 702.63 in respect of arrear rentals and R 314 361.59 being the value of future rentals outstanding).

[8] Second and third appellants were parties to the litigation as they had signed deeds of suretyship binding themselves as sureties and co-principal debtors in solidum with first appellant for all amounts which might be payable by first appellant to respondent.  These agreements were concluded on 17 August 2006.

[9] Fourth appellant, which is a party independent of the first three appellants, carries on the business of a supplier of ‘tracker technology’, utilising an internet based technology system to manage and track fleets of heavy transport vehicles. It was the supplier of the tracker technology which was financed by respondent. From the evidence, it appears that, pursuant to a referral by fourth appellant, respondent and first appellant entered into the rental agreement and fourth appellant would provide the necessary tracker technology to be utilised by first appellant. Thus, the role of respondent was clearly defined as being to act solely as the financier for this transaction.

[10] First to third appellants defended respondent’s action in the court a quo on the basis that their obligations in terms of the rental agreement between respondent and first appellant were suspended, because the goods installed were not fit for the purpose for which they were intended.  Accordingly respondent was not entitled to cancel the agreement.  The defence was amplified on a basis, as stated in paragraph of 3.4.1 of first appellant’s plea (as amended on 27 July 2018).

‘On or about the 17 August 2006, De Wet Bernardu, an employee of Global Asset Protection, and acting on behalf of the hirer requested the First Defendant to sign an agreement:  In order that Global Asset Protection could make the further investment necessary to render the system in good working order for the purpose for which it was purchase.’

[11] The essence of first appellant’s case was that, as Mr Bernardu, although an employee of fourth respondent, had represented that the entire agreement be suspended until such time as the tracker system to be provided by fourth appellant was ‘in good working order’, first appellant would not incur any contractual obligations, pursuant to the rental agreement. 

[12] In rejecting these defences and thus upholding respondent’s claim, Ndita J, in a carefully considered and detailed judgment, rejected the argument that Mr Bernardu, an employee of fourth appellant, had validly made representations on behalf of respondent to the effect that the agreement would be suspended until such time as the tracker technology was ‘in good working order’.  The learned judge also found that there was evidence that the second appellant had confirmed that the goods were ultimately in working order and accordingly, even if the defence with regard to the suspension of the contract stood to be upheld, the evidence, on the probabilities, was to the contrary, namely that the necessary conditions to trigger first appellant’s contractual obligations had been fulfilled.

[13] On this basis, the court a quo found that the first appellant was bound by the rental agreement, its defences were unsustainable and accordingly thus had proved its claim on a balance of probabilities.

[14] With the leave of the court a quo, appellants have approached this court on appeal.

 

Appellant’s central argument

[15] Mr Pretorius, on behalf of first to third appellants, persisted with the argument that first appellant had validly relied on an oral agreement which suspended the operation of the entire rental agreement until such time as the goods as described in annexure A 3 to the agreement were in good working order and fit for the purpose for which they had been purchased.  In his view, this defence had been set out comprehensively in first appellant’s plea, in particular paragraphs 3.4.1 of which has been reproduced earlier in this judgment. This paragraph must be read with paragraph 3.4.1.2 of the amended plea:

‘The said De Wet Bernardu indicated to the first defendant that notwithstanding the signing by the first defendant of the agreement, the agreement and or any payment in respect of such agreement, would be suspended until such time as the first defendant would indicate to a representative of the hirer that the system was now in good working order and fit for the purpose for which it was purchased.’

[16] He also referred to paragraph 3.2.2 thereof in which the first appellant pleaded as follows:

‘The first defendant did not at any time have any direct contract with the Hirer or any of the employees of the Hirer.  The Hirer was at all relevant times represented by De Wet Bernardu an employee of Global Asset Protection.’

[17] Mr Pretorius referred to respondent’s replication in which the following passage appears: ‘In so far as the allegations herein are contradicted by the plaintiff’s particulars of claim, same or denied.’  According to Mr Pretorius, as it was first appellant’s case that the rental agreement and the consequent suspension thereof had been negotiated by Bernardu on behalf of Kago, and therefore on behalf of respondent, it was incumbent upon respondent, if it wished to place the authority of Bernardu in issue, that it should have specifically pleaded this fact.

[18] In short, appellants’ case was that first appellant had pleaded that Bernardu was authorised to represent respondent in order to agree to the suspension of the agreement as described in para 3.4.2.1 of first appellants plea.  It was therefore incumbent on respondent to that any denial of this authority be specifically and unambiguously pleaded. 

[19] Significantly, the courts in the cases cited, by Mr Pretorius, namely Durbach v Fairway Hotel 1949 (3) SA 1081 (SR) at 1082 and Nyandeni v Natal Motor Industries Limited 1974 (2) SA 374 (d) & (CLD) at 277, dealt with the problem of a defendant who denied that the person who had allegedly entered into a contract on its behalf had the necessary authority to so do. Neither of these cases, so enthusiastically embraced by Mr Pretorius, dealt with the precise question which confronts this court.  To recapitulate, respondent specifically pleaded as follows:

‘On 21 August 2006 and at Cape Town, alternatively Johannesburg, Kago Finance (Pty) Limited (“Hirer”) and the first defendant, both represented by duly authorised employees, concluded written Rental Agreement in terms whereof the first defendant hired goods as per Annexure “A3” hereto (“the goods”).’

To this the first appellant pleaded that Bernardu ‘acting on behalf of the Hirer requested the first defendant to sign an agreement’. It is clearly for this reason that the respondent, in its replication, stated that, to the extent that there were allegations which contradicted its particulars of claim, these were denied. In summary, respondent had clearly and unambiguously pleaded that employees duly representing respondent and first appellant respectively had concluded a contract. It therefore denied that any other party had been authorised to contract on its behalf.

[20] That first appellant’s pleaded that Bernardu had acted on behalf of Kago and therefore respondent is clear. What does not follow therefrom is that appellant was not required to provide any evidence to the court to support the veracity of its plea. The effect of Mr Pretorius’ submission was that, as respondent had failed to place Bernardu’s authority to act on its behalf specifically in issue in its replication, there was no requirement for appellant to adduce any evidence to support its case. Hence, the failure of respondent to specifically and unambiguously deny this plea was fatal to its claim.

[21] As indicated, the authorities cited in support of this proposition deal with an entirely different situation, that is an insufficiently unambiguous and clear explication of a denial by a defendant of a specific person’s authority, who the plaintiff alleged had concluded a contract with it. This is clear from the following passage of Tredgold J’s judgment  in Durbach’s case, supra at 1082:

‘The plaintiff in his declaration, and the particulars incorporated therein, made it clear that he relied upon a verbal agreement  said to have been made by two directors duly authorised thereto.  The defendant company in its plea contented itself with a general denial of the entire allegation in the relevant paragraphs of the declaration, but went on to admit that the defendant company had entered into negotiations with the plaintiff.  The whole purpose of pleadings is to bring clearly to the notice of the Court and the parties to an action the issues upon which reliance is to be placed.  The defendant company admitted that it, the defendant company, had negotiated, and certainly left and impression that it admitted that the directors named in the declaration were authorised to negotiate. If it was intended to deny that the directors had authority to conclude an agreement, this should have been specifically stated in the plea. The denial of the authority of an agent is a special defence and must be specifically and unambiguously pleaded, and not left to be inferred from a general traverse of the allegations in the declaration.’

[22] In the present dispute, it is clear that respondent had pleaded unambiguously as to the parties who had concluded the rental agreement. In its replication, it simply stated that, to the extent that there was any contradiction between its version of how the contract came into existence and that which had been pleaded by the appellants, the latter’s version was denied.

[23] Mr Pretorius was constrained to argue in this fashion because there was a startling absence of any evidence on the record to support appellants’ version of Bernardu’s role in the conclusion of the contract which had been entered into between first appellant and respondent. Indeed, the evidence pointed in exactly the opposite direction from that urged upon the Court by appellants. It was clear that Bernardu had been employed by fourth appellant and not by Kago at the relevant time. This, on its own, illustrates the problem with appellants’ case. Appellants wish this Court to accept that a person who had no employment relationship with Kago somehow possessed the legal authority to alter the terms of the rental agreement by way of oral representations which had the effect of suspending the contract, on the basis as set out in appellant’s plea. Furthermore, the director of Kago, Mr Jabulani Magagula testified that he had signed the rental agreement. As Mr Pretorius chose not to cross examine Mr Magagula, appellants never placed in issue that it was Mr Magagula, who had represented Kago nor were any questions directed to this witness as to any possible role that Bernardu might have played on behalf of Kago, albeit that he was not in its employ.

[24] This is not the end of appellants’ difficulty.  It chose not to call Mr Bernardu.  Therefore the court a quo never had the benefit of any evidence that Mr Bernardu might have proffered in support of the submission that a person, never employed by a contracting party, had somehow obtained the authority to fundamentally change the terms and conditions of a contract entered into between two other parties.   Even if this evidence can be ignored, a further problem arises: second appellant, who did testify on behalf of appellants, was not able to shed any light at all on the precise legal role which Mr Bernardu might have played.   Mr Vermeulen was asked on a number of occasions: ‘Now what made you think Mr Vermeulen that De Wet Bernardu had any right and authorisation to represent Kago Finance other than his own say-so?’ 

[25] The best that Mr Vermeulen could do in response is illustrated in the following passage:

‘So he never told you that he is authorised on behalf of Kago Finance to have you sign the contract?  He simply told you to sign the contract? --- He’s come- he was telling me he having the contract of the bank.  I don’t know if he was authorised to do it.  I don’t know was he employed by them.  I don’t know if they was give him a kickback to sign the contract.  I don’t know if what’s the …, between the bank and De Wet Bernardu, what was the arrangements between them, but he was the person that’s coming to the – with the contract to me to sign that.

[26] To the extent that there can be any doubt that the submission of Mr Pretorius has no legal merit, Rule 25 (3) of the Uniform Rules of Court provides that, if a replication or subsequent pleading is delivered, failure to deal specifically with allegations in the previous pleadings does not amount to an admission of the allegations in the plea or other previous pleadings. 

[27] The reliance by Mr Pretorius on appellants’ pleadings, in the absence of any evidence to support an argument that an employee of fourth appellant somehow was authorised authority to represent respondent, a totally independent party must also fail due to the consequences of  appellants’ failure to call relevant witnesses, in particular Mr Bernardu.  A negative inference thus confronts appellant.  In Raliphaswa v Mugivhi and others 2008 (4) SA (SCA) para 15 the position was set out thus:

‘When a witness is equally available to both parties, but not called to give evidence, it is logically possible to draw and adverse inference against both.  The party on who the onus rests had no greater obligation to call a witness, but may find that a failure to call a witness creates the risk of the onus proving decisive.’ (emphasis)

[28] The consequences of a finding that appellant cannot rely on its interpretation of the pleadings alone are manifestly devastating for its case.  Once it is accepted, as it must be, that a valid rental contract was concluded between first appellant and respondent, none of the other defences which were raised by the appellants require any consideration.  For example, much was made by appellants about an oral agreement suspending the operation of the rental agreement and the need to take account of evidence of a prior or contemporaneous oral agreement to the effect that the written contract should not come into force save upon a certain contingency.  Even if  the appellant could persuade the court that the anti variation clause, 14.1 of the rental agreement, namely that ‘this agreement constitutes the sole and exclusive record of the agreement between the parties hereto relating to the subject matter thereof and no variation modification consensual ovation or wager  of any of the provisions thereof … shall be of any force or effect… unless the same shall be reduced to writing and signed by the parties thereto’, should be ignored in order to consider evidence of an oral agreement or a variation of the written agreement, none of these arguments are relevant and thus require the attention of this Court.  Once it is found that a written rental agreement was concluded between first appellant and the respondent, whatever Mr Bernardu might have said on behalf of fourth appellant has no bearing on the contractual relationship between respondent and first appellant. This puts an end to any defence to respondent’s claim based on the terms of the written agreement.

 

Costs

[29] Clause 50.2 of the rental agreement provides that in the event that legal costs are incurred by the hirer (respondent), fees shall be paid on an attorney and own client scale.  There is no suggestion that this particular provision should be ignored, in the event that respondent is successful in pursuit of its claim.

[30] Accordingly, for the reasons set out, the appeal is dismissed with costs on the scale as between attorney and own client.

 

 

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DAVIS J

 

 

I agree. 

 

 

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SALDANHA J

 

 

I agree and it is so ordered.

 

 

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WILLE J

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