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[2016] ZASCA 93
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Absa Bank Ltd v Knysna Auto Services CC (266/2015) [2016] ZASCA 93 (1 June 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 266/2015
In
the matter between:
ABSA
BANK LTD
APPELLANT
and
KNYSNA
AUTO SERVICES
CC
RESPONDENT
Neutral
citation:
Absa
Bank Ltd v Knysna Auto Services CC
(266/15)
[2016] ZASCA 93
(1 June 2016)
Coram:
Majiedt, Seriti,
Swain, Zondi and Mathopo JJA
Heard
:
18
May 2016
Delivered:
1 June 2016
Summary:
Contract
─ floor plan agreement (FPA) ─ Sale and financing of
motor vehicles ─ reservation of ownership until
receipt of
payment ─ payment not received – rei-vindicatio ─
estoppel ─ possessor not acting reasonably
in construing
representation by owner that seller entitled to pass ownership –
any representation ambiguous – possessor
obliged to enquire
from owner as to true position – possessor obliged to return
vehicle.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town
(Masuku
AJ sitting as court of first instance):
1.
The appeal is upheld with costs.
2.
The order of the court a quo is set aside and replaced with the
following:
‘
1.
Respondent is ordered to forthwith return to Applicant a 2011
Volkswagen Polo 1.4 Comfortline sedan with engine number CLP034196
and chassis number AAVZZZ6RZBU030970.
2.
Respondent is ordered to forthwith return/or supply to Applicant the
original NATIS documentation, together with duly signed
Notification
of Change of Ownership Forms (NCO(5)) of the Polo.
3.
That, in the event of Respondent failing and/or refusing to return/or
supply to Applicant forthwith the aforesaid vehicle and
documents,
the Sheriff be and is hereby authorised and requested to enter into
and upon Respondent’s premises, or wherever
same may be found,
to attach the vehicle and documents referred to in 1 and 2 above, and
to return the vehicle and documents to
Applicant as a matter of
urgency.
4.
That in the event of Respondent failing and/or refusing to forthwith
sign and return to Applicant the Notification of Change
of Ownership
Forms (NCO(5)), the sheriff be and is hereby authorised and requested
to sign such documents.
5.
The respondent is ordered to pay the costs of this application.’
JUDGMENT
Mathopo
JA (Majiedt, Seriti, Swain and Zondi JJA concurring):
[1]
On 16 July 2014 the appellant (Absa Bank) on an urgent basis obtained
a rule nisi calling upon the respondent (Knysna Auto Services
CC) to
show cause why a Polo motor vehicle should not be declared to be the
property of the bank and why the respondent should
not be ordered to
return the motor vehicle to the bank. The Western Cape Division, Cape
Town (Masuku AJ) held that although the
bank was the owner of the
motor vehicle it was estopped from vindicating it. On 30 January
2015, the court a quo discharged the
rule nisi with costs and
thereafter granted leave to appeal to this court.
[2]
The facts giving rise to this appeal can briefly be summarized as
follows. On 21 August 2013 Absa Bank concluded a written floor
plan
agreement (FPA) with an entity called Business Zone 2157 (the
Corporation). In terms of the FPA the Corporation acknowledged
and
agreed that the bank would at all times remain owner of any motor
vehicle which was subject to its terms. It would only cease
being the
owner and title holder once it had received payment for a vehicle
sold by the Corporation and had notified the Corporation
accordingly
in writing.
[1]
[3]
The respondent is a vehicle dealership that trades in second-hand
motor vehicles in Cape Town. Before the respondent started
trading in
second hand vehicles, it traded in new vehicles from 2006 to 2009.
During that period it operated through a floor plan
agreement with
Wesbank Ltd. It is not in dispute that the respondent was
well-acquainted with floor plan agreements, even though
it had no
dealings with the appellant. The respondent, represented by Mr Van
Vuuren and the Corporation represented by Mr Smit,
regularly bought
and sold vehicles from and to each other and had a good business
relationship.
[4]
In January 2014, the respondent purchased a Toyota Fortuner vehicle
(the Fortuner) from the Corporation. The agreed purchase
price had
initially been R265 000. The Fortuner was delivered to the respondent
on 17 January 2014, and after inspecting it, the
respondent, noted
certain defects, which according to Mr van Vuuren required repair. As
a result of these defects the purchase
price was reduced to R260 000,
which amount was ultimately paid to the Corporation. Despite the
agreement that the Corporation
would deliver the original National
Traffic Information System (NATIS) documents in respect of that
vehicle, it failed to do so.
[5]
Four months later, on 28 May 2014, and after making several attempts
to obtain the NATIS documents, Van Vuuren returned the
Fortuner to
the Corporation and asked to be reimbursed the purchase price.
Instead of refunding the respondent Smit suggested that
the Fortuner
be exchanged for two motor vehicles. These vehicles were subject to
the terms of the Absa FPA with the Corporation,
being a Polo (valued
at R100 000) and a Toyota Hilux (valued at R170 000). The shortfall
of R10 000, was paid by the respondent
to the Corporation. Contrary
to the FPA this exchange transaction was concluded without the
knowledge and consent of the bank.
[6]
On 20 May 2014 the bank realised that these vehicles, of which it was
the owner, were not at the premises of the Corporation.
The bank then
demanded an explanation regarding their whereabouts, as well as
payment for them in terms of the FPA. The Corporation
responded by
saying that:
‘
We
have a crisis on hand. We unfortunately do not have a cheque book
since Friday. We still had two left but when we went to collect
from
ABSA, they said it would take 2 or 3 days to order. We will send the
settlement as soon as we received our cheque book.’
Dissatisfied
with this response, the bank then cancelled all agreements with the
Corporation and demanded possession of the vehicles.
The Corporation
failed to provide the appellant with the vehicles, or details as to
their whereabouts. The appellant then launched
an investigation
through NATIS searches and discovered that the two motor vehicles had
been registered in the name of the respondent.
The respondent refused
to return the motor vehicles to the appellant, contending that it had
acquired ownership of them.
[7]
On 14 July 2014, the appellant accordingly lodged an urgent
application before the court a quo for the return of these vehicles.
The respondent opposed the application and raised two main defences:
first that the FPA was a simulated transaction and secondly,
that the
appellant was estopped from asserting ownership. Only the latter
defence remains for determination, the respondent having
abandoned
the first. The interim order was therefore only granted in respect of
the Polo motor vehicle. As pointed out above, on
the return date the
court a quo discharged the rule nisi with costs concluding that:
‘
It
follows that the common law rei-vindicatio remedy must not be used to
effect arbitrary deprivation of property belonging to third
party
purchases of vehicles.’
The
court further reasoned that the respondent became owner of the motor
vehicle on registration by the licensing authority and
that unless
the registration certificate was impugned or set aside the
respondent’s ownership could not be challenged.
[8]
In this conclusion, the court a quo erred and the only issue in this
appeal is whether the appellant is estopped from vindicating
the Polo
motor vehicle in the respondent’s possession, of which it is
the owner.
[9]
The respondent contended that the appellant should be estopped from
asserting its ownership against the respondent or estopped
from
denying the Corporation’s right to dispose of the vehicles to
the respondent. It was argued that by permitting Smit
to furnish the
respondent with letters from the bank (namely KA5 and KA6,
purportedly signed by a bank official Mr Faizal Banoo)
and
authorising Smit to sign the RVL form (being an application for
registration and licensing of a motor vehicle), Smit acted,
as the
appellant’s agent and misrepresented to the respondent that the
Corporation was entitled to exchange the vehicles.
This was contrary
to the FPA which specifically barred the Corporation from making
representations to any third party that it was
owner of the vehicles,
for as long as the bank had not been paid. Moreover, the FPA bound
the Corporation to conduct all transactions
in respect of the
vehicles in such a manner that the client understood and was informed
by the Corporation that the bank is owner.
[10]
The contention advanced on behalf of the respondent was that since
all the documents emanated from the appellant, it was estopped
from
alleging that Smit or the Corporation, were not entitled to sell the
motor vehicles. By making all the documents available
to the
respondent, the appellant should have reasonably contemplated that
any prospective buyer might act on the representation
to his
detriment. The appellant had been negligent in not taking reasonable
steps to guard against that possibility. Smit or the
Corporation must
be taken to say that the appellant by making the documents KA5, KA6
and the NATIS documents available to the respondent
relinquished its
rights to retain ownership of the motor vehicles. The appellant
accordingly represented to the respondent that
the Corporation was
the owner of the vehicles and had the right to dispose of them.
[11]
The respondent also argued that by displaying the vehicles in the
showroom of the Corporation, together with other vehicles
displayed
by it for sale, the Corporation had dealt with the motor vehicles
with the bank’s consent. The bank had by its
conduct created
the impression to an innocent purchaser in the position of the
respondent, that the Corporation had dominium in
the vehicles or the
jus dispondendi was vested in the Corporation. In the respondent’s
affidavit which was deposed to by
Van Vuuren, it resisted the bank’s
claim for the return of the motor vehicle on several grounds. The
affidavit included the
following statements:
‘
24
I did, however, insist on being satisfied that the Corporation was
entitled to sell the vehicles. Smit agreed to show me the
NATIS
documents and he did so. Along with the NATIS documentation, I was
provided with a letter in respect of each vehicle, dated
28 May 2014,
addressed by Mr Faizal Banoo (a manager of Applicant, employed in the
Applicant’s Credit Control Floorplans
section, in turn a part
of Absa Vehicle and Asset Finance) to the licensing department and
headed “confirmation of re-registration”.’
In
para 26 the respondent further stated that the NATIS documents were
shown to him on 28 May 2014 by Smit. These documents indicated
that
the vehicles had previously been registered in Absa’s name (as
title holder and owner). According to the respondent,
the vehicles
were re-registered in the name of the Corporation and thereafter in
the name of the respondent. The effect of this
argument is this: once
the vehicles were registered in the name of the respondent, the
respondent became the owner and title holder
by virtue of the NATIS
registration documents. As pointed out above this argument
incorrectly found favour with the court a quo,
which erroneously held
that unless the registration was impugned or set aside, ownership
vests in the respondent.
[12]
The appellant argued that: The registration documents KA5 and KA6
were headed ‘without prejudice to our rights’
and should
have drawn the respondent’s attention to the fact that the
Corporation was not the owner of the vehicles. Accordingly
the
Corporation did not have the right to deal with the vehicles, without
the express consent of the appellant. A minimum enquiry
by the
respondent would have revealed that these letters were electronically
generated through the Geolock system/Fast system,
which could be
accessed by any dealer familiar with the Absa floor plan agreement.
To safeguard its interest, the bank marked the
letters with the words
‘without prejudice to our rights’ to enable the dealer to
register the vehicle as stock and
then into the purchaser’s
name. The dealer is then offered a period of forty-eight hours within
which it has to pay the appellant.
[13]
The appellant submitted that the Corporation abused this system and
through fraudulent means represented to the respondent
that it was
the owner and entitled to dispose of the motor vehicles. In terms of
the agreement (FPA) the Corporation failed to
pay the money
outstanding with the result that ownership of the motor vehicles
remained vested in the appellant.
[14]
Quite clearly the Corporation and the respondent knew that without
the registration letters and NATIS documents they would
not be able
to effect registration of the vehicles. It was argued that the
version of the respondent is improbable, because as
a dealer with
experience since 2004, the respondent must have known and accepted
that it was business practice amongst motor dealers,
especially where
floor plan agreements were involved, that the reservation of
ownership remains with the appellant until payment
has been made to
it in full. During argument counsel for the appellant submitted that
the conduct of the respondent in respect
of the two motor vehicles,
constituted an exchange in contravention of clause 8.1 of the FPA
which provides:
‘
The
Dealer may under no circumstances whatsoever exchange any of the
Goods with other goods
without
obtaining the prior written consent of the Bank
.
If consent has been obtained from the Bank such exchange would amount
to a new transaction in terms of this agreement. All amounts
owing to
the Bank in respect of the Goods so exchanged will immediately become
due and payable.’ (My emphasis.)
[15]
A reading of the
clause indicates clearly that the exchange transaction between the
Corporation and the respondent fell foul of
the FPA. It was not in
dispute that, no such consent was obtained from the bank prior to the
conclusion of the exchange transaction
agreement between the
respondent and the Corporation.
[16]
The legal principles to be applied are clear and were stated by
Holmes JA in
Oakland Nominees (Pty) Ltd v Gelria Mining &
Investment Co (Pty) Ltd
1976 (1) SA 441
(A) at 452A-G where he
held:
‘
Our
law jealousy protects the right of ownership and the correlative
right of the owner in regard to his property, unless, of course,
the
possessor has some enforceable right against the owner. Consistent
with this, it has been authoritatively laid down by this
Court that
an owner is estopped from asserting his rights to his property only─
(a
)
Where the person who acquired his property did so because, by the
culpa
of the owner, he was misled into the belief that the person, from
whom he acquired it, was the owner of was entitled to dispose
of it;
or
(b)
.
. .
.
. .
As
to
(a)
,
supra
, it may be stated that the owner will be
frustrated by estoppel upon proof of the following requirements─
(i)
There must be a representation by the owner, by conduct or otherwise,
that the person who disposed of his property was the owner
of it or
was entitled to dispose of it. A helpful decision in this regard is
Electrolux (Pty) Ltd v Khota and Another
1961 (4) SA 244
(W),
with its reference at 247 to the entrusting of possession of property
with the
indicia
of
dominium
or
jus disponendi
.
(ii)
The representation must have been made negligently in the
circumstances.
(iii)
The representation must have been relied upon by the person raising
the estoppel.
(iv)
Such person’s reliance upon the representation must be the
cause of his acting to his detriment.’
[17]
Furthermore in
Electrolux Pty Ltd v Khota and Another
1961 (4)
SA 244
(W) 247B-C, Trollip J said the following:
‘
To
give rise to the representation of
dominium
or jus
disponendi
,
the owner’s conduct must be not only the entrusting of
possession to the possessor but also the entrusting of it with the
indicia
of the
dominium
or
jus
disponendi
.
Such
indicia
may be the documents of title and/or authority to dispose of the
articles, as for example, the share certificate with a blank transfer
form annexed . . . or such
indicia
may be the actual manner or circumstances in which the owner allows
the possessor to possess the articles, as for example, the
owner/wholesaler allowing the retailer to exhibit the articles in
question for sale with his other stock in trade. . . In all such
cases the owner
“
provides
all the scenic apparatus by which his agent or debtor may pose as
entirely unaccountable to himself, and in concealment
pulls the
strings by which the puppet is made to assume the appearance of
independent activity. This amounts to a representation,
by silence
and inaction . . . as well as by conduct, that the person so armed
with the external indications of independence is
in fact unrelated
and unaccountable to the representor, as agent, debtor, or
otherwise.”
Trollip
J said further (at 247H─ 248A):
‘
It
follows that to create the effective representation the dealer or
trader must, in addition, deal with the goods with the owner’s
consent or connivance in such manner as to proclaim that the
dominium
or
jus
disponendi
is vested in him; as for example, by displaying, with the owner’s
consent or connivance, the articles for sale with his own
goods. It
is that additional circumstance that provides the necessary “scenic
apparatus” for begetting the effective
representation.’
[18]
As regards estoppel by conduct in
Concor Holdings (Pty) Ltd t/a
Concor Technicrete v Potgieter
2004 (6) SA 491
(SCA) at 495A-C
and 496D-E it was held that:
‘
Our
law is that a person may be bound by a representation constituted by
conduct if the representor should reasonably have expected
that the
representee might be misled by his conduct and if in addition the
representee acted reasonably in construing the representation
in the
sense in which the representee did so. . . Nevertheless if a
representation by conduct is plainly ambiguous, the representee
would
not be acting reasonably if he chose to rely on one of the possible
meanings without making further enquiries to clarify
the position.’
[19]
The respondent based its argument primarily on the registration
letters from the bank and the NATIS documents. An examination
of
these letters indicate that they were marked ‘without prejudice
to our rights’. As to how the respondent could possibly
believe
that the said letters granted the Corporation authority to alienate
the motor vehicles to the exclusion of the appellant’s
right of
ownership is startling. Accordingly reliance on these documents
cannot assist the respondent. These documents clearly
referred to the
appellant as owner and title holder of the motor vehicle. The
respondent as an experienced motor dealer, who had
dealt with floor
plan agreements before, must have known that in such transactions
ownership of the goods was reserved to the owner.
In this case there
is no suggestion that the appellant expressly, or by conduct,
conveyed an impression that it was relinquishing
ownership of the
motor vehicle.
[20]
Once it became clear that the Corporation was unable to refund the
respondent the purchase price or provide the NATIS documents
in
respect of the sale of the Fortuner, for a period of four months, Van
Vuuren on behalf of the respondent as an experienced motor
dealer
should have made enquiries regarding the Polo and Toyota Hilux motor
vehicles, which were exchanged for the Fortuner. There
were warning
signs which should have alerted the respondent to make further
enquires and not rely on the representations made by
the Corporation.
The fact that the Corporation was unable to repay the purchase price
for the Fortuner, or supply the necessary
transfer documents, should
have alerted the respondent that the appellant had not been paid by
the Corporation for this vehicle.
The respondent nevertheless elected
to adopt a supine attitude and decided not to make any enquiry from
the appellant regarding
the ownership of the Polo and Toyota Hilux
motor vehicles. At the very least, any representation by the conduct
of the appellant
that the corporation was entitled to pass ownership
of the vehicles, was plainly ambiguous. By not making any enquiries
from the
appellant, the respondent did not act reasonably. The
defence of estoppel was accordingly not established by the
respondent. The
appellant as owner of the Polo is accordingly
entitled to its possession.
[21]
I accordingly make the following order:
1.
The appeal is upheld with costs.
2.
The order of the court a quo is set aside and replaced with the
following:
‘
1.
Respondent is ordered to forthwith return to Applicant a 2011
Volkswagen Polo 1.4 Comfortline sedan with engine number CLP034196
and chassis number AAVZZZ6RZBU030970.
2.
Respondent is ordered to forthwith return/or supply to Applicant the
original NATIS documentation, together with duly signed
Notification
of Change of Ownership Forms (NCO(5)) of the Polo.
3.
That, in the event of Respondent failing and/or refusing to return/or
supply to Applicant forthwith the aforesaid vehicle and
documents,
the Sheriff be and is hereby authorised and requested to enter into
and upon Respondent’s premises, or wherever
same may be found,
to attach the vehicle and documents referred to in 1 and 2 above, and
to return the vehicle and documents to
Applicant as a matter of
urgency.
4.
That in the event of Respondent failing and/or refusing to forthwith
sign and return to Applicant the Notification of Change
of Ownership
Forms (NCO(5)), the sheriff be and is hereby authorised and requested
to sign such documents.
5.
The respondent is ordered to pay the costs of this application.’
_________________
R
S Mathopo
Judge
of Appeal
Appearances
For Appellant:
L M Olivier SC
Instructed by:
Jay Mothobi Inc, Johannesburg
Phatshoane Henney Attorneys,
Bloemfontein
For
Respondent:
B C Wharton
Instructed by:
Meyer Inc, Cape Town
Horn & Van
Rensburg, Bloemfontein
[1]
2.10 The Dealer acknowledges and
agrees that the Bank will at all times remain the owner,
title-holder and financier of the financed
Goods, and that the Bank
will only stop being the owner and title-holder of the financed
Goods once the Bank has received payment
for the financed Goods and
have notified the Dealer accordingly in writing.
2.11 The
Dealer undertakes not to do anything or to take any steps, which
will give the impression that the Dealer is the owner
of the
financed Goods.
2.12.
The Dealer shall not represent to any third party that it is the
owner of any of the financed Goods for as long as any amount
remains
unpaid in respect of such financed Goods. In particular the Dealer
undertakes to conduct all transactions in respect
of the sale,
lease, rental or other finance agreement of the financed Goods to
its clients in such a way that the client understands
and is
correctly informed by the Dealer, through the negotiations and the
required documentation, that the Bank is the owner,
title-holder and
financier of the financed Goods, and that the financed Goods are
subject to the Bank’s right of ownership.