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[2015] ZASCA 31
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Bothma-Batho Transport (Pty) Limited and Another v Nedbank Limited (223/2014) [2015] ZASCA 31 (25 March 2015)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 223/2014
NOT
REPORTABLE
In
the matter between:
BOTHMA-BATHO
TRANSPORT (PTY)
LIMITED
...............................................................................................................
FIRST
APPELLANT
BOTHMA
TERTIUS
........................................................................................
SECOND
APPELLANT
and
NEDBANK
LIMITED
....................................................................................................
RESPONDENT
Neutral
citation:
Bothma-Batho Transport (Pty) Ltd & v Nedbank Ltd
(223/14)
[2015] ZASCA 31
( 25 March 2015)
Coram:
Ponnan,
Leach,
W
illis
and
Saldulker
JJA
and Meyer AJA
Heard:
4
March 2015
Delivered: 25
March 2015
Summary:
Life policy ceded as security for a debt – insurer
cancelling the policy – whether court can order the debtor and
the
insured to ‘procure a policy with at least similar
benefits’ and cede it to the bank – such an order
not
competent – tacit terms relied upon by high court
inconsistent with written agreement and cannot be incorporated into
the
contract – appeal upheld – application in the high
court dismissed.
ORDER
On
appeal from
:
Free
State
High Court,
Bloemfontein
(Jordaan J sitting as the court of first instance)
1
The appeal is upheld.
2
The following is substituted for the order of the high court:
‘
The
application is dismissed with costs.’
3
The respondent is to pay the appellants’ costs in the appeal
save that the costs of the preparation, perusal and copying
of the
record shall be limited to one quarter (25%) of the costs incurred in
those tasks.
JUDGMENT
Willis
JA (Ponnan, Leach
and Saldulker
JJA and Meyer AJA concurring):
[1]
On 11 February 2008 in Sasolburg the first appellant, Mr Tertius
Bothma (the insured), resolved in his capacity as a director
of the
second appellant, Bothma-Batho Transport (Pty) Limited (the debtor),
to cede a Momentum Life Insurance Policy No 205810940/001
(the
policy) to the respondent, Nedbank (the bank) as security for a loan
which the bank had granted to the debtor. The policy
insured the life
of the insured for R20 million. The premiums on the policy were to be
paid by the debtor.
[2]
The bank had extended lending facilities to the debtor described as
follows:
(a)
an ‘on-demand Multi Optional Facility’ in the sum of R20
000 000 (an overdraft facility);
(b)
a ‘Special Project/Asset–based Finance Facility’ in
the sum of R11 110 000 (relating to instalment sale
agreements);
(c)
a ‘Nedfleet Facility’ in the sum of R250 000.
[3]
The business of the debtor was essentially one of transportation,
making use of heavy duty trucks. In addition to the cession
of the
policy, the bank had a general notarial bond registered over the
debtor’s movable assets as security for the debt.
[4]
During the beginning of 2009 the bank became aware of the fact that
the debtor was experiencing financial difficulties. The
bank
thereupon terminated the so-called ‘asset-based finance
facility’ or ‘revolving credit’ facility but,
as
‘bridging finance’, extended a further R4.5 million as a
temporary overdraft to be repaid on 30 April 2009. In addition,
the
bank granted the debtor a moratorium on the repayment of capital and
interest for January and February 2009 in respect of the
asset-based
finance facility.
[5]
The debtor defaulted in respect of these ‘bridging’
arrangements, resulting in the bank sending the debtor unrequited
letters of demand. The bank obtained an order of court perfecting the
notarial bond. In the meantime, in June 2009, the debtor
applied, on an ex parte basis, to the Free State High Court for a
provisional order winding it up. The order was granted and made
returnable on 30 July 2009.
[6]
Thereupon followed a flurry of negotiations. Another of the debtor’s
creditors, known as ‘Izalinx’, proposed
a compromise in
terms of s 311 of the old Companies Act 61 of 1973. This
proposal was acceptable to the bank. Upon the application
by Izalinx,
the compromise was sanctioned by the court and the provisional order
for the liquidation of the debtor was simultaneously
discharged.
[7]
The compromise was made conditional upon the following:
(a)
The bank pardoned R3 million of the debt of approximately R28 million
that it was owed by the debtor at the time;
(b)
The bank, as a secured creditor, would receive a 100% dividend on the
reduced amount of the debt;
(c)
The bank would grant the debtor a moratorium on the payment of the
installment sale agreements (also referred to as ‘the
asset-based finance facility’) until the end of February 2010;
(d)
The installment sale agreements would then be repayable over a period
of 48 months and the medium term loan over a period of
120 months.
[8]
In the meantime, the debtor suffered the theft of vehicles from its
business premises. The bank is sceptical of the truth of
this but
there is nothing to gainsay the debtor’s version of events.
Despite some intermittent successes, the terms of the
compromise
could not be met and as a result of this, a settlement conference
took place in Sandton which was attended by the legal
representatives
of both parties. A settlement was reached in terms of which:
(a)
The debtor would continue paying its normal monthly
installments on the various installment agreements on 1 January 2011
and the reduction of the overdraft on February 2011;
(b)
Thereafter the debtor would pay monthly installments of R450
000 until the amount of the outstanding balance had
been paid
in full;
(c)
The debtor would sell all assets in respect of which there were
extant installment sale agreements by 31 May 2011;
(d)
Any breach of this agreement would result in the full amount
outstanding immediately becoming due and payable to the bank and
the
bank would be entitled to proceed with execution against the debtor’s
immovable properties.
[9]
The debtor defaulted in respect of this settlement agreement and, on
22 July 2011, advised the bank that it had ceased all operations
on
30 June 2011. In the meantime, as a result of the non-payment of the
premiums on the policy, Momentum Life (the insurer), which
had issued
the policy ceded to the bank, cancelled it with effect from 1 October
2012. As a result of the insurer’s cancellation,
the bank
brought an application to court that the insured and the debtor take
steps to reinstate the policy, alternatively that
they take steps to
take out a similar policy and cede it to the bank. The high court
(Jordaan J) made an order that the debtor
and the insured ‘procure
a policy with at least similar benefits than the erstwhile Momentum
Life Assurance policy no 205810940/001
(the policy), and cede such
policy to the applicant [the bank]’. The high court also
ordered the debtor and the insured to
pay the bank’s costs of
the application. The debtor and the insured appeal, with the leave of
this court.
[10]
No allegation was made by the bank in its founding papers that there
had been any tacit term either of the overdraft agreement
or the
agreement of cession that either the debtor or the insured would
maintain adequate security for the bank in terms of a ceded
life
insurance policy with cover of R20 million.
[11]
The agreement of cession between the bank and the debtor provided
expressly that the bank could pay, in its ‘sole discretion,
and
without any obligation to do so, any premiums which may fall due and
charge the same to the cedent’s account or to recover
the same
from the cedent’.
[12]
The insured said that the policy replaced a previous policy with the
same life assurer. He claimed that he took out the policy
on the
specific recommendation of a representative of the bank. The insured
said he was diagnosed with prostate cancer in June
2011, as a result
of which he had a radical operation. When he claimed in terms of the
policy as a result of his diagnosis with
cancer, the insurer
repudiated liability. The insurer claimed that the risk had not been
covered in the policy.
[13]
The insured claimed that he was misled by both the bank and the
insurer about the nature of the cover and, for this reason,
had no
obligation to maintain the cover. On 1 October 2012 the debtor
requested the insurer to cancel the policy but the
insurer responded
that the policy could not be cancelled by mutual agreement without
the consent of the bank.
[14]
The high court accepted that, as the policy had lapsed, it could not
be reinstated. The court found that there was ‘at
least’
an implied term of the continuing agreements with the bank that the
debtor and the insured would maintain adequate
security for the bank
in terms of a ceded life insurance policy with cover of R20
million. It was on this basis that the
high court made the order that
it did.
[15]
Even if an order of the kind made by the high court were competent –
which it is not – it is amenable to criticism
on account of its
vagueness and lack of certainty. The desirability of court orders
being clear and unambiguous has long been recognised.
[1]
The reason is not hard to find. There is little point in the making
orders of court that are not effective. In the present case,
what is
meant by ‘at least similar benefits than the erstwhile Momentum
Life Assurance Policy’ is unclear. In
what degree must
the benefits be ‘similar’? Moreover, to whom must the
policy appear to be ‘similar’? Must
the policy be taken
out with the same insurer? What if it declines? Must the bank first
approve the policy before it comes into
operation? By when must
performance take place? Must it take place within a ‘reasonable
time’? If so, how is
one to ascertain what a ‘reasonable
time’ might be in all the circumstances of the matter?
[16]
Not only is the order of the high court unacceptably imprecise but it
purports to order that which, in all probability, may
be impossible
to perform, because it may be unlikely that, having had a radical
prostatectomy as a result of his diagnosis with
cancer, that the
insured and the debtor would be able to procure a policy ‘with
at least similar benefits’ to that
of the policy in question.
Even if they had, the premiums may well have been prohibitive
[17]
Sight must not be lost of the fact that the agreement of cession was
ancillary to the overall overdraft agreement: the cession
was given
in compliance with one of the terms of the overdraft agreement.
Although, as set out above, the particular terms
of the facilties
granted by the bank to the debtor varied from time to time, both the
debtor and the insured have admitted that
‘Bothma-Batho ceded
the policy to Nedbank as security for all and any sums of money which
Bothma-Batho may from time to time
owe the bank’. In addition
to the remedy which the bank had, in terms of the agreement of
cession, to pay the insurance premiums
and to recover them from the
debtor, it had a further remedy: in the light of the debtor’s
breach of a material term of the
overdraft agreement, it could have
‘called up’ (cancelled) the overdraft and claimed damages
(the amount owing to the
bank in terms of the loan).
[2]
An overdraft is ordinarily repayable on demand.
[3]
[18]
There is a more fundamental reason why the high court ought not to
have made the order which it did: it impermissibly imported
terms
into a contract which were not even alleged in the founding papers,
never mind appear from the contract between the parties.
It is not
apparent from the judgment of the high court why it found that there
was ‘at least’ the implied term upon
which it relied in
making its order. It seems the high court may have used the word
‘implied’ when what it had in mind
was a ‘tacit’
term. Since
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
[4]
the distinction between ‘implied terms’ in a contract on
the one hand and ‘tacit terms’ on the other has
been
clear.
[5]
Counsel conceded that
the high court had meant to use the expression ‘tacit term’.
[19]
Even if what the high court had in mind was, in truth, a tacit term,
such a term cannot, in the circumstances of this particular
case, be
imported into the contract. As was said by Trengove JA in
Robin
v Guarantee Life Assurance Co Ltd
:
[6]
‘
A
tacit term cannot be imported into a contract in respect of any
matter to which the parties have applied their minds and for which
they have made express provision in the contract.’
[7]
Here
the parties made express provision in respect of this matter. The
bank could, in terms of a clause in the agreement of cession
pay, in
its ‘sole discretion, and without any obligation to do so, any
premiums which may fall due and charge the same to
the cedent’s
account or to recover the same from the cedent’. This express
provision not only points to the remedy
which had been available to
the bank but also prohibits the importation of the terms found by the
high court. It follows that the
appeal must succeed.
[20]
Despite frequent and increasingly insistent remonstrations by this
court concerning the unnecessary burdening of an appeal
record with
documentation that is irrelevant to the determination of the
issues,
[8]
the appellant
produced a record 75% of the contents of which were superfluous.
For
example, not only is the record replete with duplication but it even
contains a transcript of counsel’s argument in the
high court.
The
order for costs will take account of this.
[21]
The following order is made:
1
The appeal is upheld.
2
The following is substituted for the order of the high court:
‘
The
application is dismissed with costs.’
3
The respondent is to pay the appellants’ costs in the appeal
save that the costs of the preparation, perusal and copying
of the
record shall be limited to one quarter (25%) of the costs incurred in
those tasks.
_________________________
N
P WILLIS
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant:
F Strydom
Instructed
by:
Nolte
Incorporated, Vereeniging
c/o
Mthembu & Van Vuuren Inc, Bloemfontein
For
the Respondent:
JJ Buys
Instructed
by:
Baloyi
Swart & Associates
, Johannesburg
c/o
Botha Hefer Inc, Bloemfontein
[1]
See
for example
Administrator,
Cape & another v Nyshwaqela & others
1990
(1) SA 705
(A) at 715H;
Firestone
South Africa (Pty) Ltd v Genticuro AG
1977 (4) SA 298
(A) at 304D-G;
Garlick
v Smartt & another
1928 AD 82
at 87; and
West
Rand Estates Ltd v New Zealand Insurance Co Ltd
1926 AD 173 at 186-195 in which reference is made to the
old authorities.
[2]
See for example
Nash
v Golden Dumps (Pty) Limited
1985 (3) SA 1
(A) at 22D-H.
[3]
See
Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd
1995 (4) SA (C) at 546I-551B in which Selikowitz J gives a helpful
overview of the authorities around the world on this aspect.
[4]
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506 (A).
[5]
See
531C-535G.
[6]
Robin
v Guarantee Life Assurance Co Ltd
1984 (4) SA 558 (A).
[7]
Robin
v Guarantee Life Assurance Co Ltd
(supra) 567C-D. See also
Ashcor
Secunda (Pty) Ltd v Sasol Synthetic Fuels (Pty) Ltd
[2011] JOL 27883
(SCA);
Pan
American World Airways Incorporated v SA Fire and Accident Insurance
Co Ltd
1965 (3) SA 150
(A) at 175C;
South
African Mutual Aid Society v Cape Town Chamber of Commerce
1962 (1) SA 598
(A) at 615D;
Mullin
(Pty) Ltd v Benade
Ltd
1952
(1) SA 211
(A) at 215D-216E;
Richter
v Bloemfontein Town Council
1922 AD 57
at 70.
[8]
See
for example
Premie
r
of the
Free
State Provincial Government & others v Firechem Free State (Pty)
Ltd
2000
(4) SA 413
(SCA) para 42;
Africa
Solar (Pty) Ltd v Divwatt (Pty) Ltd 2
002
(4) SA 681
(SCA) paras 40-45; Van Aardt v Galway
2012 (2) SA
312
(SCA) paras 35-39 and see also, LTC Harms ‘Heads of
Argument in Courts of Appeal’ 20
Advocate
December 2009.