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[2011] ZAGPJHC 209
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ABSA Bank Ltd v Innovent Rental and Asset Management Solutions (Pty) Ltd (14073/2010) [2011] ZAGPJHC 209 (1 September 2011)
REPUBLIC
OF SOUTH AFRICA
SOUTH GAUTENG HIGH
COURT, JOHANNESBURG
Case
No. 14073/2010
Date: 01/09/2011
In the matter between:
ABSA
BANK LTD
Plaintiff
and
INNOVENT
RENTAL AND ASSET MANAGEMENT SOLUTIONS (PTY) LTD
Defendant
JUDGMENT
MEYER, J
[1] The plaintiff seeks
to amend its particulars of claim in various respects. The
defendant objects to some of the proposed
amendments on the grounds
that, if they were allowed, they would introduce issues for trial and
evidence which would not disclose
a cause or causes of action or
would render the particulars of claim vague and embarrassing.
[2] It is averred in the
particulars of claim that the plaintiff and the defendant concluded a
written main cession agreement during
July 2008. This agreement
envisages the cession to the plaintiff of contracts which the
defendant had concluded with its
customers. In terms of its
express terms, the defendant warrants in respect of each contract
that it would by cession thereof
pass to the plaintiff valid title to
the goods forming the subject matter of each contract so that the
plaintiff would become the
owner of such goods. Consequent upon
the conclusion of the main cession agreement, the defendant, on 3
November 2008, concluded
two rental agreements with its customer,
Africa Heritage Investments (Pty) Ltd (‘the customer’) in
the form of a master
rental agreement and two written schedules (‘the
lease agreements’). The defendant ceded the lease
agreements
to the plaintiff pursuant to the conclusion of their main
cession agreement. It is averred that the defendant breached
the
main cession agreement in various respects. The plaintiff,
in its main claim, seeks that the defendant repurchases the lease
agreements in consequence of its alleged material breach or breaches
of the main cession agreement. In its alternative claim,
the
plaintiff claims cancellation of the main cession agreement and the
payment of damages to it in the event of the defendant
failing to
repurchase the lease agreements within the time ordered.
[3] The plaintiff
inter
alia
seeks to introduce additional averments in terms of the
proposed amendment of its main claim. The plaintiff avers that
the
defendant breached the main cession agreement and it sets out the
alleged grounds which allegedly ‘… individually and/or
collectively, constitute a material breach and/or breaches of the
main cession agreement.’ The plaintiff now seeks
to
introduce additional averments that the customer, apart from a few
payments that it had made to the plaintiff, withheld payment
of all
other amounts owing under the lease agreements and that the plaintiff
received no further payments; that the customer
was liquidated
during August 2009; that its liquidators have not elected to
determine the lease agreements as envisaged in
s 37 of the Insolvency
Act 24 of 1936 (‘the Act’) or, if they did, that the
plaintiff had not accepted such ‘repudiation’
or, if the
plaintiff has no alternative in law other than to accept it, that
such repudiation was accompanied by the withholding
of payment of the
amounts due to the plaintiff in terms of the lease agreements.
In its alternative claim, the plaintiff
seeks confirmation of the
cancellation of the main cession agreement and the payment of damages
if it is found ‘impossible’
for the defendant to
repurchase the lease agreements.
[4] The defendant’s
objections to the plaintiff’s proposed amendments concern the
plaintiff’s averments relating
to repudiation and to damages.
Adv H Epstein SC, who appeared with Adv SS Cohen for the defendant,
informed me at the hearing
of this matter that the defendant was only
pursuing its objections concerning the question of repudiation.
[5] Relevant presently is
the defendant’s first objection, which concerns the plaintiff’s
alternative averment that,
in the event of it being found that the
customer’s liquidator determined the lease agreements, the
plaintiff did not accept
such repudiation. The defendant
contends that there is no causal connection between the plaintiff’s
assertion that
the customer’s liquidators determined the lease
agreements and a repudiation on the part of the customer’s
liquidators.
This objection is premised on the contention that an
election by a liquidator in terms of s 37 of the Act to determine a
lease
agreement does not constitute a repudiation. The defendant’s
second objection, which is also presently relevant, concerns
the
plaintiff’s averment that if it has in law no alternative other
than to accept the repudiation that such repudiation
was accompanied
by the withholding of payment of the amounts due to the plaintiff in
terms of the lease agreements. The defendant
contends that
there is no causal connection between an election by a liquidator in
terms of s 37 of the Act to determine the agreement
and the
withholding of payment of the amounts due to the plaintiff in terms
of the master rental agreement. The defendant’s
counsel
submitted that the plaintiff only has recourse against the defendant
as cedent in the event of a breach of the main cession
agreement.
Non-performance on the part of the customer does not, in the
submission of counsel, afford the plaintiff any remedy
under the main
cession agreement
vis-à-vis
the defendant.
[6] S
37(1) of the Act
inter alia
provides that ‘[a]
lease entered into by any person as lessee shall not be determined by
the sequestration of his estate,
but the trustee of his insolvent
estate may determine the lease by notice in writing to the lessor…’
S 37(2)
provides that ‘[i]f the trustee does not, within three
months of his appointment notify the lessor that he desires to
continue
the lease on behalf of the estate, he shall be deemed to
have determined the lease at the end of such three months.’
[7] The following
dictum
by Friedman J in
Smith and Another v Parton NO
1980 (3) SA
724
(D), at p 729B – C, demonstrates the untenableness of the
defendant’s legal contentions:
‘
In a manner
of speaking, any party to an executory contract can “elect”
whether to carry out his obligations or to repudiate
the contract
but, of course, should he wrongfully repudiate it the other party may
be able to compel performance specifically;
so too with a
trustee, but with the one exception to which I have referred and that
is that, if the trustee decides not to perform,
the other party
cannot, because of the
concursus
,
compel performance by the trustee but must content himself with a
monetary claim either for performance or for damages for
non-performance
of the insolvent’s contractual obligations, as
the case may be. To state the so-called rule that if the
trustee does
not elect to affirm the contract he is taken to have
abandoned it, is to say no more than that the trustee who does not
affirm
the contract must be taken to have abandoned it since the
other party is unable to compel performance on his, the trustee’s,
part. Once one accepts, therefore, that the only real basic
principle is that the contract survives the insolvency, then
it seems
to me to follow inevitably that the accrued right to cancel
survives. Where the creditor decides after insolvency
to
exercise his right of cancellation, he is not thereby enforcing a
right against the insolvent estate and in that way altering
the order
of things as established by the
concursus
;
he is simply notifying the trustee of his election to exercise a
right which he has and which has survived insolvency.’
[8] A decision on the
part of a liquidator not to carry on with the execution of a lease
agreement may accordingly constitute a
repudiation of that contract.
See:
Thomas Construction (Pty) Ltd (in liquidation) v
Grafton Furniture Manufacturers (Pty) Ltd
1988 (2) SA 546
(A), at
pp 566I – 567A. The other contracting party has an
election in the event of an unlawful repudiation of the
lease
agreement to disregard the repudiation and keep the contract alive -
in which event it remains liable for and must render
its
counter-performance and it may prove a concurrent claim for damages
in lieu of performance - or it may accept the repudiation
- in
which event the lease agreement is cancelled and a concurrent claim
for the loss which it has suffered because of the breach
may be
proved. See: Sharrock
et al
:
Hockly’s
Insolvency law
8th Ed 2006, para 7.2.4.
[9] The defendant’s
contentions are also irreconcilable with the express wording of
clause 6.2 of the main cession agreement,
which reads:
‘
If any
Customer alleges that it has any claim as referred to in 6.1 and/or
withholds payment of any amount owing under a contract
the Bank shall
have the right to require the Cedent to repurchase the contract upon
the terms and conditions provided in 7.2 hereunder.’
[10] The defendant’s
counsel submitted that there are no lease agreements to re-purchase
by the defendant if they had been
determined by the liquidator.
This submission, in my view, goes beyond the ambit of the defendant’s
grounds of objection.
See:
Squid Packers (Pty) Ltd v
Robberg Trawlers (Pty) Ltd
1999 (1) SA 1153
(SE), at p 1156D - F.
This question
inter alia
places the meaning of clause 7.2 of
the main cession agreement in issue, the provisions of which clause
entitle the plaintiff to
require the defendant to ‘repurchase’
a contract in certain circumstances.
[11] The defendant has
not established ‘…that the amended pleading will (not
might) be excipiable’ if the plaintiff’s
proposed
amendment is allowed. See:
Krischke v Road Accident
Fund
2004 (4) SA 358
(W), at 363A – B.
[12] In the result:
1. The plaintiff is
given leave to amend its particulars of claim in accordance with its
notice in terms of Rule 28 dated
19 January 2011.
2. The defendant is
ordered to pay the plaintiff’s costs of this application for
leave to amend.
P.A. MEYER
JUDGE OF THE HIGH COURT
1 September 2011