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[2012] ZAGPJHC 297
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First Rand Bank Limited Trading Inter Alia as Wesbank And Wesbank Aviation Finance v Sky Hawker Partnership and Another (09/36599) [2012] ZAGPJHC 297 (7 March 2012)
REPUBLIC OF SOUTH
AFRICA
SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
CASE
NO: 09/36599
DATE:
07 MARCH 2012
In the matter
between:
FIRST RAND BANK
LIMITED TRADING INTER ALIA
AS WESBANK AND
WESBANK AVIATION FINANCE
...................................
Applicant
And
SKY HAWKER
PARTNERSHIP
...........................................................
First
Respondent
SKYEINVEST
ADMINISTRATION (PTY) LTD
............................
Second
Respondent
J U
D G M E N T
WEPENER, J:
[1] The applicant, a
bank, seeks confirmation of the cancellation of an agreement entered
into between it and the first respondent
and seeks return to it of an
aircraft which it owns, but sold to the first respondent pursuant to
an instalment sale agreement
whilst retaining ownership thereof.
[2] The facts are
largely common cause and insofar as there are disputes of fact, the
respondent’s version is taken into account
(Plascon-Evans Ltd v
Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)). I omit the facts
which do not have a bearing on the issues, the latter which
crystallised before me.
[3] The defences
contained in the answering affidavit and heads of argument i.e. that
this Court has no jurisdiction to hear the
matter; the assertion by
the first respondent of lien over the aircraft and the defence that
the certificate of balance had expired,
were not pursued by Mr Bekker
who appeared for the respondents and those issues need no further
consideration.
[4] During argument
the only two defences which crystallised were firstly, that the
applicant had waived its right to cancel the
agreement and secondly
that the applicant is estopped from asserting its rights and in
particular from relying on the cancellation
of the agreement, which
the applicant effected.
[5] The instalment
sale agreement provides that the first respondent would pay a cash
price of R33 million plus VAT and costs in
a total amount of R44 353
302 million by giving a deposit of R6 million and the balance in
twelve instalments the first instalment
of R4,6 million being due and
payable on 28 February 2007, ten instalments payable half-yearly
thereafter of approximately R2 million
each and a final instalment of
approximately R20 million.
[6] The written
agreement provides inter alia that:
“14. BREACH
14.1 If you fail to
comply with any of the conditions of this Agreement (all of which you
agree are material), or fail to pay any
amounts due to the Seller, or
commit any act of insolvency, or you have made misleading or
inaccurate statements to the Seller
relating to financial affairs or
otherwise before or after signing this Agreement, or leave the employ
or abscond from the company,
firm or association that employs you at
the date of execution of this Agreement, or you allow any judgment
that has been taken
against you to remain unpaid for more than seven
days, then the Seller will have the right (without affecting any of
its other
rights):
14.1.1 to cancel the
Agreement and claim from you the amount which the Seller would have
been paid had you fulfilled all your obligations.
To this end, the
Seller will be entitled to take the Goods back, sell the Goods, keep
all payments you have made and claim the
balance (if any) from you as
damages; or
14.1.2 to claim
immediate payment of the full amount that the Seller could claim in
terms of the Agreement, as if it was then due
by you;
Provided that
pending payment of such arrears and/or damages that the Seller shall
not be obliged to tender or repay to you any
amounts paid under this
Agreement or any allowances or credits granted to you.”
and
“16.
INDULGENCE
Should the Seller
not have insisted that you follow any of the terms and conditions
strictly at any previous stage, you may not
assume that the terms and
conditions have been altered. These terms and conditions will still
apply and the Seller will at any
time thereafter be entitled to
enforce them strictly without notice.”
and
“22. VARIANCE
No Agreement at
variance with the terms and conditions of this Agreement (the
instalment sale agreement) and no waiver by the Seller
of any rights
shall be of any force or effect unless reduced to writing and signed
by the parties hereto.”
[7] After the
conclusion of the agreement the first respondent failed to pay the
deposit punctually but the applicant indulged this
late payment. In
such event it is clear that the applicant would still be entitled to
enforce the terms and conditions of the
agreement strictly (as agreed
between the parties in clause 16). When the first instalment fell
due the first respondent defaulted
and it also it defaulted with
subsequent instalments until 8 June 2009 when the applicant cancelled
the agreement, the first respondent
then being in arrear with
payments in the sum of R9,5 million. During the period 28 February
2007 to 8 June 2009 the parties had
various discussions in order to
resolve the first respondent’s default and the first respondent
also made some payments from
time to time but nevertheless built up a
substantial arrear amount as at 8 June 2009.
[8] Respondent
states that the reason why the deposit was paid late was that it was
in “dire financial straits, and it was
hopelessly unable to
meet its commitments”. Thereafter it says that, save for some
superficial communications between the
parties, nothing of any
consequence happened for almost three years. The first respondent
then states that the applicant’s
failure to take steps and its
election or not to cancel the agreement because of the breaches led
it to reasonably believe that
the applicant elected to keep the
agreement in force and to rather “recover the money due to it
in terms (of the agreement)
on an accelerated basis in due course”.
[9] The first
respondent did not rely on a defence of waiver as it is generally
understood by that term i.e. a waiver which in itself
is a contract
and which requires both parties to assent to such waiver or release
from the rights and obligations. This general
type of waiver
requires communication to the other party and acceptance by both
parties thereof. See Napier v Van Schalkwyk
2004 (3) SA 425
(W). The
first respondent disavowed reliance on waiver in this sense in
particular as a result of the provisions of clause 22 of
the written
instalment sale agreement which precludes it from relying on a
waiver.
[10] The first
respondent argued that the waiver it relies upon is the applicant’s
election not to cancel. It is argued that
because the applicant
allowed the contract to remain in existence, despite the breaches, it
elected to keep it in esse and the
applicant is consequently barred
from approbating and reprobating by both keeping it in esse and
cancelling it.
[11] I cannot agree
with this argument. Firstly, the words of clause 22 do not limit the
issue of waiver to a waiver in the broad
sense and not to a waiver in
the sense of an election, which latter waiver is a genus of the
concept of waiver. See
[12] Clause 22 does
in my view stipulate that the first respondent’s reliance on
any form of waiver of rights (including the
election not to cancel
the agreement at a certain stage) is excluded.
[13] If I am wrong
in this conclusion, the first respondent has a further hurdle. The
applicant’s election not to cancel the
agreement because of
certain breaches cannot be seen as an election not to cancel the
agreement as a result of any future breach.
To so hold would hamper
commercial realities and credit providers would be held to agreements
whilst debtors can stop paying with
impunity, whilst credit providers
attempt to assist debtors. The first respondent’s failure to
pay the instalment in January
2009 led to the letter of cancellation
and the launching of the present application against the first
respondent. Secondly each
act of non-payment by the first respondent
constituted a separate and distinct breach of contract. Cohen v
Sherman and Company
1941 TPD 134
; Lochrenberg v Sululu
1960 (2) SA
502
(E). To deny the applicant the right to rely on the non-payment
of an instalment in January 2009 because it indulged the first
respondent prior to this date would have no basis as clause 16 of the
agreement protects the applicant in such a case. It was not
argued
that the applicant was not entitled to rely on the breach, which
occurred in January 2009 but rather that the applicant’s
election not to cancel should be gleaned from the fact that it failed
to enforce the contract for the previous breaches by the
respondent.
[14] The result is
that the first respondent’s reliance of the applicant’s
election not to cancel based on breaches
when he did not so cancel
the agreement, is misplaced both as a result of the clear wording of
the agreement and the first respondent
wrongly placing reliance on
acts which have no bearing on the breach, which occurred in January
2009 and which led to the cancellation
of the agreement. There was
no argument that the cancellation was not effected within a
reasonable time from the date of the breach
which occurred in January
2009.
[15] Thirdly there
is a strong presumption against waiver. See Le Roux v Odendaal
1954
(4) SA 432
(N) and the first respondent is required to show that the
applicant with full knowledge of its rights decided to abandon it.
Also
see Hepner v Roodepoort-Maraisburg Town Council
1962 (4) SA 772
(A) at 778C-F. The applicant did not immediately cancel the
agreement when the first breaches occurred and although the
respondent
baldly denies the applicant’s version it is quite
apparent that the applicant, as a first objective as a financier,
attempted
to earn profits from the financing of goods and equipment
and that it would far rather receive payment of instalments than the
return of the aircraft. The deponent on behalf of the applicant
stated that a sale of a security asset usually only partly mitigates
the damages suffered in the event of a cancellation and that its
value never compensates the total cash value of an instalment
sale
transaction; a decision to cancel the agreement is therefore taken
only as a last resort where substantial loss to all parties
to the
agreement is involved; that since the instalments payable by the
first respondent were only to be effected on a 6-monthly
basis it
would hardly have been financially and legally prudent to immediately
cancel the agreement simply because the respondent
had missed initial
payments; throughout the period 2006 to 2009 numerous negotiations
were conducted with the view of saving the
agreement for the benefit
of both parties. The applicant cannot be criticised for adopting this
attitude and later cancelling the
agreement when a fresh breach of
the agreement occurred. The delay can therefore not without more,
deprive the applicant of its
rights. North Eastern Districts
Association (Pty) Ltd v Surkhey Ltd
1932 WLD 181
at 186.
[16] The second
issue raised by the first respondent is that because the applicant
cancelled the agreement in 2009 and commenced
proceedings for return
of the aircraft shortly thereafter but failed to pursue the relief,
it is estopped from relying on the cancellation.
The first
respondent avers that since the commencement of the proceedings it
made various additional payments, which the applicant
accepted.
Negotiations again ensued to attempt to resolve the matter.
Proposals were sent backward and forward. There were restructuring
proposals and attempts to assist the first respondent. However
nothing came of these discussions and the applicant set the matter
down for hearing some 30 months later. The first respondent argues
that this lapse of time has estopped the applicant from relying
on
the cancellation, which it effected in June 2009. Firstly, in order
to rely on estoppel as a defence it is a requirement that
the
representation upon which the party relies was made negligently. The
applicant’s conduct by negotiating and attempting
to keep the
contract alive as a commercial reality cannot be categorised as an
act of negligence. Indeed the first respondent was
well aware that
the applicant was attempting to assist it whilst considering, inter
alia, the possibility of selling the aircraft,
all of which conduct
cannot be said to have been negligent or could lead the first
respondent to believe that the applicant elected
to keep the
agreement in esse.
[17] I am of the
view that the applicant attempted to assist the first respondent to
recover from its dire financial straits and
that it took a commercial
decision whilst negotiating and discussing with the first respondent
rather than to lead the first respondent
to believe otherwise. The
first respondent was well aware why the parties negotiated a possible
new deal and could not have believed
that the applicant made
representations that it would not rely on the cancellation or that it
abandoned its rights.
[17] The
negotiations and attempts to assist the first respondent to keep it
to its bargain cannot be said to constitute negligence
on the part of
the applicant and the first respondent has not shown that the
applicant is estopped from relying on the cancellation
of the
agreement.
[18] Having come to
this conclusion the first respondent has failed to set up a valid
defence to the plaintiff’s claim for
the return of the
aircraft. In the circumstances I grant an order in terms of
paragraphs A2, A3, A4 and A5 of the Notice of Motion
dated 26 August
2009.
W L WEPENER
JUDGE OF THE
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
COUNSEL FOR
APPLICANT ADV CLIVE VAN DER SPUY
ADV M HELLES
SC (IN REPLY)
INSTRUCTED
BY LANHAM-LOVE ATTORNEYS
COUNSEL FOR
RESPONDENTS ADV S BEKKER SC
INSTRUCTED
BY FAIRBRIDGES ATTORNEYS
DATE OF
HEARING 29 FEBRUARY 2012
DATE OF
JUDGMENT 7 MARCH 2012