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[2015] ZASCA 1
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Stupel & Berman Incorporated v Rodel Financial Services (Pty) Ltd (1075/2013) [2015] ZASCA 1; 2015 (3) SA 36 (SCA); [2015] 3 All SA 150 (SCA) (27 February 2015)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No: 1075/2013
In
the matter between:
STUPEL
& BERMAN
INCORPORATED
...................................................................
APPELLANT
and
RODEL
FINANCIAL SERVICES (PTY)
LTD
...........................................................
RESPONDENT
Neutral
citation:
Stupel & Berman v
Rodel Financial Services
(1075/2013)
[2015] ZASCA 1
(27 February 2015).
Coram:
Brand, Mhlantla, Willis JJA and Fourie and Gorven
AJJA
Heard:
17 February 2015
Delivered:
27 February 2015
Summary:
Undertaking by the appellant as
conveyancer – on instructions of the seller – to pay
proceeds of sale to the respondent
upon transfer of immovable
property – the appellant not an
adjectus
solutionis causa
but an agent whose
instructions to pay the respondent could and had been revoked by the
seller as principal.
ORDER
On
appeal from:
South Gauteng High Court,
Johannesburg (C J Claassen J sitting as court of first instance):
1 The appeal is
upheld with costs including the costs of two counsel.
2 Paragraphs (a) and
(b) of the order of the high court are set aside and replaced with
the following:
‘
The
plaintiff’s claim against the first defendant is dismissed with
costs, including the costs consequent upon the employment
of two
counsel wherever applicable.’
JUDGMENT
Brand
JA
(Mhlantla, Willis JJA and Fourie
and Gorven AJJA concurring):
[1]
The appellant, Stupel & Berman Inc (Stupel & Berman), is a
firm of attorneys. The respondent, Rodel Financial Services
(Pty) Ltd
(Rodel) is a financial institution. Rodel instituted action in the
court a quo against Stupel & Berman, as first
defendant and one
of its directors, Mr Berman, as second defendant, for payment of the
amount of R1 763 489 together
with interest and costs. When
the matter came before Claassen J, he was presented with a stated
case. Consequently, no evidence
was led at the trial. In the event,
the court a quo upheld Rodel’s claim against Stupel &
Berman while the second defendant
was absolved from the instance with
costs. The appeal by Stupel & Berman against the first part of
the order directed against
it – which is embodied in paragraphs
(a) and (b) of the order – is with the leave of the court a
quo. Rodel’s
cross-appeal against the second part in favour of
Mr Berman was abandoned before the hearing of the appeal.
Background
[2]
The background extracted from the stated case is unfortunately
somewhat complicated. Hopefully the effort to simplify what follows
will not have the opposite effect. Stupel & Berman was appointed
to act as conveyancer in the registration of transfer of an
immovable
property in Norwood, Johannesburg. The property was sold at an
auction by Amber Falcon Properties 3 (Pty) Ltd (Amber
Falcon) to
Cross Atlantic Properties 186 (Pty) Ltd (Cross Atlantic) for a
purchase price of R7.2 million. At the time the property
was bonded
in favour of Mercantile Bank Ltd for an amount slightly in excess of
R5 million. In terms of the sale agreement the
purchase price was, of
course, payable upon registration of transfer. While awaiting that
transfer, Amber Falcon obtained bridging
finance loans from Rodel in
terms of two discounting agreements. Pursuant to these two
agreements, dated 31 August 2010 and 2 September
2010, Rodel advanced
amounts of R850 000 and R550 000, respectively, to Amber
Falcon. Both these agreements consisted
of two parts: a schedule and
a document entitled ‘Terms and Conditions’.
[3]
The schedules referred to the details of the sale of the Norwood
property, including the names of the parties, the purchase
price and
so forth. They were signed on behalf of Amber Falcon, Rodel and
Stupel & Berman, the latter in its capacity as the
appointed
conveyancers. It is common cause, however, that Stupel & Berman
was not a party to the two discounting agreements
and that they were
in fact unaware of the ‘Terms and Conditions’ set out in
the second part. In both schedules Amber
Falcon confirmed that ‘I
hereby cede, transfer and make over to Rodel my/our right title and
interest in and to the proceeds
against payment of [the loan]’.
‘Proceeds’ is defined in the Terms and Conditions as the
net amount payable to
Amber Falcon in terms of the sale, after
deduction of the bond, agent’s commission and other expenses.
Lastly, both schedules
contained a section entitled ‘Undertaking
by Conveyancer’, which was signed on behalf of Stupel &
Berman. Although
strictly speaking it signed two of these
undertakings, there was in effect only one. As it happened, this
undertaking eventually
constituted the nub of Rodel’s claim in
this case. By the nature of things, a more detailed discussion of its
terms is therefore
bound to follow. For introductory purposes, I find
it sufficient to say, however, that in terms of the undertaking
Stupel &
Berman confirmed that it was attending to the
registration of transfer of the property in terms of the sale; that
it had received
irrevocable instructions from the seller, Amber
Falcon, to pay the amount payable to Rodel under the discounting
agreement from
the proceeds of the sale; and that it undertook to pay
this amount within 72 hours of registration of transfer ‘unless
prevented
by interdict or operation of law’.
[4]
The next episode of relevance occurred on 22 October 2010 when Amber
Falcon, through its representative, Mr Nathan Blumenthal
(Blumenthal), notified Rodel that it had cancelled the sale agreement
with Cross Atlantic; but, that the property was remarketed
at a
higher price and would be auctioned on 24 November 2010; that the
advances from Rodel under the discount agreements were therefore
well-secured; and that Stupel & Berman would attend to the
transfer of the property to the new purchaser under the subsequent
sale. On the same day Stupel & Berman conveyed essentially the
same information to Rodel. The response on behalf of Rodel was
that
‘we are comfortable with the situation as explained by you’.
However, things did not turn out as planned. On 8
November 2010 Cross
Atlantic brought an urgent application for an interdict against
disposal of the property by Amber Falcon, which
interdict was granted
on 24 November 2010. This dispute was subsequently settled on 25
January 2011. Part of the settlement was
that the transfer of the
property to Cross Atlantic would proceed.
[5]
In the light of the settlement, Stupel & Berman informed a
representative of Rodel, Ms Tammy Hall, on 3 February 2011, that
the
sale between Amber Falcon and Cross Atlantic was proceeding and that
it was just waiting for the purchaser to pay the transfer
duty. But
on the very same day, 3 February 2011, Blumenthal conveyed a
contradictory message to the same Ms Hall. The crux of this
message
was that Amber Falcon had lost the court case; that the interdict
against alienation of the property was still in place;
that the sale
could thus be held in limbo for up to twelve months; that Amber
Falcon’s position was therefore ‘rather
precarious’,
and that, in consequence, he offered Rodel an amount in settlement
which was substantially less than that which
was owing under the
discounting agreements.
[6]
Rodel’s immediate reaction to this message, which was plainly
misleading – to say the least – was to cancel
the
discounting agreements. It did so through its attorneys by way of a
letter dated 4 February 2011. To add to the difficulties
that
subsequently arose, the letter was equivocal. According to the first
paragraph ‘[o]ur client hereby cancels the Agreement
entered
into between you and our client on 31 August 2010’ which seemed
to confine the cancellation to the first discounting
agreement only.
But in the second paragraph the attorney stated that ‘[w]e have
been instructed to demand from you, as we
hereby do, payment of the
sums of R850 000 and R550 000 plus a discounting fee of
0,133% per day’. This only made
sense if the cancellation
pertained to both discounting agreements.
[7]
In response Amber Falcon, through Blumenthal, informed Rodel that it
accepted the cancellation of the ‘Agreement’
(singular)
and that it had appointed another firm of attorneys, Bieldermans Inc,
to ‘dispose of the matter’. Further,
on 21 February 2011,
Amber Falcon instructed Stupel & Berman to withdraw any
undertakings provided to Rodel since the discounting
agreements had
been cancelled. Also on 21 February 2011, Bieldermans, inter alia,
wrote to Stupel & Berman on behalf of Amber
Falcon:
‘
We
enclose herewith a copy of our letter in response [to Rodel’s
cancellation letter of 4 February 2011] in terms of which
our client
[Amber Falcon] has accepted the cancellation. In the circumstances we
hereby formally instruct you, on behalf of our
client, not to proceed
any further with any undertakings given in favour of Rodel Financial
Services (Pty) Ltd. You are requested
to immediately withdraw any and
all undertakings given by you in terms of the aforesaid Discounting
Agreement.’
[8]
In compliance with these instructions, Stupel & Berman wrote to
Rodel on 24 February 2011. The relevant part of this letter
reads as
follows:
‘
1.
As you are aware, we are attending to the above transfer of Erf . . .
Norwood from [Amber Falcon] to [Cross Atlantic].
2. We attach hereto
a copy of a fax dated 21 February 2011 from Bieldermans Inc.
Attorneys wherein they have instructed us to immediately
withdraw any
and all undertakings given by us in terms of a Discounting Agreement
concluded between [Rodel] and [Amber Falcon].
3. In the
circumstance we are compelled to give effect to the
mandate/instruction of [Amber Falcon] and hereby withdraw from the
undertakings given by us as Conveyancers in the above transaction . .
..
4.
Please be advised accordingly.’
[9]
Rodel did not react or respond in any way to Stupel & Berman
having withdrawn its undertakings. More particularly, no attempt
was
made until some five months later, in July 2011, to contest the
withdrawal. In the interim, registration of transfer of the
property
was effected by Stupel & Berman on 17 March 2011 while the net
proceeds were subsequently paid by it to Amber Falcon
on 30 March
2011. In the meantime Rodel pursued its claim for repayment of the
amounts advanced in terms of the discounting agreements
– on
the basis that these agreements had been cancelled – against
Amber Falcon and Mr Julius Blumenthal, who had signed
a suretyship in
favour of Rodel pursuant to these agreements. When this claim was
opposed by both Amber Falcon and Julius Blumenthal,
Rodel applied for
and obtained summary judgment. Its attempts to execute on this
judgment, however, proved to be unsuccessful.
Only then did Rodel
look to Stupel & Berman in order to recover the money advanced to
Amber Falcon.
The
undertaking
[10]
The claim against Stupel & Berman was based on the undertaking
which formed part of the schedules to the discounting agreements.
The
undertaking provided:
‘
Undertaking
by Conveyancer
1.
We are currently attending to the
registration of the abovementioned property transfer, arising out of
the sale agreement entered
into between the parties referred to
above.
2. The sale
agreement is valid and enforceable in law and there are, to our
knowledge, no attachments or interdicts registered against
the
Property.
3. All suspensive
conditions in respect of the above transfer have been fulfilled, and
we know of no further impediment or encumbrance
that would delay or
hinder the registration of transfer of this transaction.
4. The Client has
entered into a discounting agreement with Rodel . . . whereby Rodel
has agreed to purchase the proceeds arising
from the above
transaction on registration of transfer.
5. The balance owing
to the mortgagee is as set out above.
6. No further
undertakings have been/will be made or given which would reduce the
Proceeds on registration of transfer.
7. We acknowledge
that the Client has furnished us with an irrevocable instruction to
pay to Rodel, from the Proceeds, the full
amount payable in terms of
the said discounting agreement . . . .
8. We hereby
undertake to pay to Rodel from the Proceeds the above amount within
72 hours of registration of transfer/receipt of
funds, unless
prevented by interdict or operation of law.
9. We undertake to
inform Rodel forthwith if the Client lodges with us a request to
uplift his file, or terminates or attempts to
terminate our mandate
to act on its behalf, which act we understand to be a breach of your
agreement with the Client.
10. In the event of
a cancellation of the sale for whatsoever reason and where the funds
provided by Rodel have been utilised for
the payment of transfer duty
or rates and taxes, we will pay to Rodel all and any monies received
in respect of the refund of transfer
duty or rates and taxes paid . .
.
11. We undertake to
keep you advised of all material and important developments in regard
to the transaction.
12.
. . . .’
Contentions for
the parties
[11]
The defences raised by Stupel & Berman were essentially
threefold.
(a) First, it
contended that the undertakings upon which Rodel’s claim rested
had been withdrawn by it on the instructions
of Amber Falcon. It is
not disputed that, as a fact, that is so. Rodel’s response was,
however, that although Stupel &
Berman purported to withdraw its
undertakings, it was in law not entitled to do so. Or, stated
somewhat differently, that in law
the undertakings were not revocable
either on the instructions of Amber Falcon or by Stupel & Berman
on their own accord.
(b) The second
defence raised by Stupel & Berman rested on the proposition that
the purported cession of the net proceeds of
the sale in favour of
Rodel amounted to a partial cession of the purchase price, which was
as such invalid in law (see eg
Van der Merwe v Nedcor Bank Bpk
2003 (1) SA 169
(SCA) para 6 and 8;
Kruger v Property Lawyer
Services (Edms) Bpk
2011 JDR 0527 (SCA) para 9 fn 5). In
consequence, so the contention went, the undertaking relied upon had
been given pursuant to
an invalid cession which rendered this
undertaking likewise invalid and unenforceable.
(c)
Thirdly, Stupel & Berman contended that the undertaking was given
as part and parcel of discounting agreements that fell
away when they
were cancelled by Rodel. This defence gave rise to a rather lengthy
debate – arising from the ambiguous letter
of cancellation on
behalf of Rodel dated 4 February 2011 – as to whether Rodel
cancelled the first discounting agreement
only or whether both these
agreements had been cancelled. In my view the short answer to the
debate is that Rodel’s clear
intent was to cancel both
agreements and that Amber Falcon understood it in this way. I say
that because logic dictates that Rodel
had no reason to cancel the
one and not the other. Contrary to the finding by the court a quo, I
therefore find, as a fact, that
both discounting agreements had been
cancelled by Rodel on 4 February 2011. My further consideration will
proceed on the premise
of that factual finding.
[12]
Since the court a quo was left unpersuaded by any one of these three
defences it rejected them all. On appeal Stupel &
Berman
contended that it had erred in doing so. In considering the merits of
this contention, I propose to deal first with the
question whether
Stupel & Berman were obliged to withdraw or revoke the
undertaking on the instructions of Amber Falcon.
Withdrawal
of the undertaking
[13]
In deciding that Stupel & Berman were neither compelled nor
entitled to withdraw the undertaking, which formed the basis
of
Rodel’s case, the court a quo began from the premise that the
undertaking constituted part of a tripartite agreement between
Amber
Falcon, Rodel and Stupel & Berman. In terms of this tripartite
agreement, so the court’s reasoning went, Stupel
& Berman
was the debtor, Amber Falcon was the creditor while Rodel was cast in
the role described in Roman law as that of an
adjectus
solutionis causa
(
adjectus
)
.
An
adjectus
,
according to its generally accepted definition, is an entity, other
than the creditor, to whom, by agreement between the debtor
and the
creditor, the debtor is entitled to pay what is due to the creditor
and so discharge its obligations (see eg Susan Scott
The
Law of Cession
2 ed (1991) at 161).
[14]
Based on the assumption that Rodel was an
adjectus
, the court
a quo held that, as a matter of law, Amber Falcon could not withdraw
its instruction to Stupel & Berman to pay Rodel.
As authority for
this thesis, the court referred to the following statement by Pothier
Obligations
para 489, which was quoted with approval, inter
alia, in
Norman Kennedy v Norman Kennedy Ltd; Judicial Managers,
Norman Kennedy Ltd NO v Reinforcing Steel Co Ltd & others
1947
(1) SA 790
(C) at 802:
‘
A
person to whom the creditor has indicated the payment to be made by
the agreement itself, is very different from one who has merely
an
authority from the creditor to receive. The power of paying to a
person having a simple authority ceases by revocation of the
authority notified to the debtor, which the creditor may make at
pleasure . . . .
On
the contrary, the right of paying to the person indicated by the
agreement being founded upon the agreement itself, of which
it
constitutes a part, and which cannot be derogated from, but by mutual
consent, the creditor cannot deprive the debtor of it,
and the
debtor, notwithstanding any prohibition of the creditor, may
according to the law of the agreement, pay to the person indicated
.
. . .’
[15]
I accept that, as a general rule, once an
adjectus
has been
contractually nominated, the creditor cannot unilaterally change its
instructions to the debtor and that the debtor can
insist on paying
the
adjectus
(see eg also
Administrator, Natal v Magill
Grant & Nell
1969 (1) SA 660
(A) at 699H). But my problem
with the court a quo’s reasoning lies in its fundamental
premise. As I see it, there are a number
of reasons why Rodel simply
cannot be regarded as an
adjectus
. First of all, the
assumption that the undertaking relied upon by Rodel was part of a
tripartite agreement, is unfounded. Albeit
that it formed part of a
larger transaction governed by a whole battery of agreements –
including also the agreement of sale,
the discounting agreements and
the agreement of mandate between Amber Falcon and Stupel & Berman
– the undertaking itself
constituted a ‘stand-alone’
agreement between Rodel, on the one hand, and Stupel & Berman, on
the other from which
certain obligations arose for Stupel &
Berman. The content of those obligations depend on a construction of
the stand-alone
agreement. Second of all, and in any event, Stupel &
Berman was never in the position of a debtor. Nor was Amber Falcon in
the position of its creditor. In terms of the agreement of sale,
Amber Falcon was the creditor in respect of the purchase price
while
the debtor was the purchaser. In terms of the agreement of mandate,
Amber Falcon as principal appointed Stupel & Berman
as its agent
to do two things: (a) to transfer the property to the purchaser and
(b) to pay the net proceeds of the purchase price
to Rodel. In fact,
if Rodel was truly an
adjectus
, it would have no claim against
Stupel & Berman at all. This conclusion derives from the rather
trite principle formulated
thus in 2
Lawsa
2 ed para 17:
‘
The
creditor may direct his or her debtor to render performance to a
third party. The debtor is under no compulsion to do so. But
if the
debtor does agree, performance to the third party (the
solutionis
causa adjectus
) absolves the debtor.
Such an agreement is not cession. The right does not pass. It remains
with the creditor. The third party
obtains no right of action to
enforce performance. Failure on the part of the debtor to perform to
the third party would accordingly
not invest the third party with an
action against the debtor . . . .’
[16]
I now turn to the construction of the undertaking as a stand-alone
agreement. In terms of clause 8 Stupel & Berman plainly
undertook
to pay the net proceeds of the sale to Rodel within 72 hours of
registration of transfer and receipt of the purchase
price. But to me
it is clear that it did not do so in its personal capacity (as
happened for example in
Ridon v Van der
Spuy & Partners (Wes-Kaap) Inc
2002
(2) SA 121
(C) at 137I-138C), but in pursuance of its mandate as the
agent of Amber Falcon. I say this because the undertaking made it
clear
that it was given on the instructions of Amber Falcon (clause
7) and that Stupel & Berman would let Rodel know if Amber Falcon
terminated or tried to terminate its mandate (clause 9). It stands to
reason that, if the undertakings to pay were personal, termination
of
the mandate would be of no consequence to Rodel.
[17]
Once it is accepted that Stupel & Berman gave the undertakings in
the capacity of an agent on the instructions of a principal,
the law
of agency provides that, as a general rule, those instructions could
be terminated. The fact that these instructions are
described as
irrevocable in clause 7, does not detract from the principle (see eg
Consolidated Frame Cotton Corporation
Ltd v Sithole
1985 (2) SA 18
(N) at
22H). Rodel’s argument, which found favour with the court a
quo, was however, that the undertaking fell within the
ambit of what
is considered to be one of the recognised exceptions to the general
rule, namely where the authority can be categorised
as ‘coupled
with an interest’ (see
Consolidated
Frame Cotton supra
22J-23B. Cf,
however,
Ward v Barrett NO & another
1962 (4) SA 732
(N) at 737D-E). The
first interest relied upon by Rodel in this regard is its own obvious
stake in the execution of the mandate.
But the accepted principle, as
I understand it, is that the interest to be protected by
irrevocability under this exception, must
be that of the agent as
opposed to that of a third party (see
Consolidated
Frame Cotton supra
23C-D).
[18]
The second interest upon which Rodel relied in support of this
argument is the interest of Stupel & Berman in executing
transfer
in order to claim its conveyancing fees. But as I see it, there are
at least two answers to this argument. First, if this
is the type of
interest contemplated by the exception, it stands to reason that this
can only render the mandate irrevocable to
the extent that revocation
will constitute a breach of the mandate contract, which will expose
the principal to a claim for damages
by the agent. It cannot possibly
afford the agent the right to insist on specific performance in the
execution of its mandate.
Secondly, the argument confuses Stupel &
Berman’s mandate to pass transfer and receive the proceeds of
the sale, on the
one hand, with its mandate to pay these proceeds to
Rodel, on the other. Once it had executed the first of these
mandates, it was
entitled to its conveyancing fee. There is no
indication that it would receive additional compensation for
executing the second
part of its mandate, ie to pay the net proceeds
to Rodel. Thus understood, it would be of no consequence to Stupel &
Berman
if the second part of the mandate were to be withdrawn. Any
possible doubt that these two parts of the mandate could be
separated,
is removed by what actually happened in this case.
Moreover, as I see it, the parties to the undertaking clearly
appreciated that
in terms of the governing legal principles, Stupel &
Berman’s mandate could be terminated. That appears from the
express
provisions of clause 9, the quotation of which I repeat for
the sake of convenience. It provides:
‘
We
undertake to inform Rodel forthwith if the Client lodges with us a
request to uplift this file or terminates, or attempts to
terminate
our mandate to act on its behalf, which act we understand to be a
breach of your agreement with the Client.’
[19]
What is more, the clause leaves no room for doubt that it was within
the contemplation of the parties that Amber Falcon could
exercise its
right to terminate the mandate of its agent. In that event the clause
imposed the obligation on the agent, Stupel
& Berman, to inform
Rodel of that fact. The clause then proceeds to record the reason for
this obligation. It is because termination
of the mandate would
constitute a breach of Amber Falcon’s agreement with Rodel.
This, in turn, echoes clause 5.14 of the
discounting agreements which
stipulated a commitment by Amber Falcon not to terminate the mandate
of Stupel & Berman. In this
light the reason for the notice
obligation in clause 9 is not hard to find. It is to afford Rodel the
opportunity to prevent Amber
Falcon from terminating the mandate,
and/or to prevent Stupel & Berman from acting on that
termination. Rodel’s dilemma
in this case resulted from its own
failure to heed Stupel & Berman’s warning that, while it
was proceeding with the transfer
of the property to Cross Atlantic,
its mandate to pay the net proceeds of the purchase price to Rodel
had been terminated. Rodel’s
obvious remedy was to seek an
interdict against Amber Falcon – joining Stupel & Berman as
an interested party –
to prevent the latter from giving effect
to the termination of the mandate by the former. Alternatively it
could have enabled Stupel
& Berman to institute the interpleader
proceedings provided for by Rule 58 of the Uniform Rules of Court.
[20]
Stupel & Berman’s further argument under the rubric that
they were obliged to withdraw its promise to pay was that,
in any
event, Rodel’s cancellation of the discounting agreements left
Amber Falcon free of its contractual undertaking in
terms of clause
5.14 not to terminate the mandate. Although there may be some merit
in this argument I find it unnecessary to decide
whether this is so.
Once I conclude, as I do, that Amber Falcon was entitled to withdraw
Stupel & Berman’s mandate, the
latter had no option but to
act upon that termination. Or in the words of clause 7 of the
undertaking, it was prevented to pay
Rodel ‘by operation of
law’. That is the end of the matter. Whether or not Amber
Falcon was acting in breach of its
obligation in terms of the
discounting agreements, to which Stupel & Berman was not a party,
is of no consequence. By the same
token I find it unnecessary to
embark upon a consideration of the other defences raised by Stupel &
Berman. Even if the court
a quo was correct in rejecting these
defences, Rodel’s claim is destined to fail which means that
the appeal is bound to
succeed.
[21]
In the result:
1 The appeal is
upheld with costs including the costs of two counsel.
2 Paragraphs (a) and
(b) of the order of the high court are set aside and replaced with
the following:
‘
The
plaintiff’s claim against the first defendant is dismissed with
costs, including the costs consequent upon the employment
of two
counsel wherever applicable.’
________________
F
D J BRAND
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant: B Berridge SC and B Manentsa
Instructed
by
:
Webber Wentzel
Johannesburg
c/o
Lovius Block, Bloemfontein
For
the Respondent: R Solomon SC and E Myhill
Instructed
by
:
Norman Berger &
Partners Inc
Johannesburg
c/o
McIntyre & Van der Post, Bloemfontein