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[2015] ZASCA 53
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Kilburn v Tuning Fork (Pty) Ltd (211/2014) [2015] ZASCA 53; 2015 (6) SA 244 (SCA) (27 March 2015)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 211/2014
Reportable
In
the matter between:
IAN
KILBURN
.......................................................................................................
APPELLANT
and
TUNING
FORK (PTY)
LTD
.............................................................................
RESPONDENT
Neutral citation:
Kilburn v Tuning Fork (Pty) Ltd
[2015] ZASCA 53
(27 March
2015)
Coram:
Cachalia,
Mhlantla, Saldulker JJA and Gorven and Meyer AJJA
Heard:
23
February 2015
Delivered:
27 March 2015
Summary:
Suretyship – Interpretation – apparent conflict
between heading and detailed provisions of deed of suretyship not
real
when effect is given to each and every word, read in context and
taking into account the circumstances in which it came into
existence.
ORDER
On appeal from:
Gauteng Local Division, Johannesburg (Mbha J sitting as court of
first instance):
(a) The appeal
succeeds with costs.
(b) The order of the
court below is set aside and substituted as follows:
‘
The
application against the second respondent is dismissed with costs.'
JUDGMENT
Saldulker
JA et Meyer AJA (Cachalia and Mhlantla JJA and Gorven AJA
concurring):
[1]
On 13 December 2013, the Gauteng Local Division, Johannesburg (Mbha
J) granted judgment against the appellant (the surety) in
favour of
the respondent (the creditor). This appeal against that judgment is
with the leave of the court below and concerns the
interpretation of
a deed of suretyship.
[2]
It is important to understand
the factual matrix within which
the deed of suretyship came into existence. McCarthy Limited
(McCarthy) conducted the importation
and distribution of Yamaha
motorcycles, marine products, power products, golf cart parts and
accessories, musical instruments,
audio visual products and
intelligent machinery under the trade names Yamaha Distributors,
Balanced Audio, Global Music, Music
Inc, After Market Products and
Hawker Richardson.
On 3 June 1993 McCarthy
and Kilburn Auto Enterprises (Pty) Ltd t/a Johannesburg Yamaha
(Kilburn Auto) concluded a dealership
agreement in terms of which
Kilburn Auto was appointed as an authorised dealer with the right to
purchase products for retail sale
from McCarthy’s Yamaha
Distributors division on certain terms and conditions.
[3]
With effect from 1 January 2011, McCarthy sold these business
divisions to the respondent, Tuning Fork (Pty) Ltd (Tuning Fork),
a
wholly owned subsidiary of the Bidvest Group Limited.
All
risk in, and benefits flowing from, the agreement passed to Tuning
Fork on 1 July 2011.
The internal structures and operating
activities of the trading divisions remained the same, except that
Tuning Fork reduced the
number of divisions from six to five. Music
Inc fell away.
[4]
The trading divisions operate distinct businesses in the sense that
they sell and market different products. Each division is
run by its
own general manager, credit controller, sales personnel and
employees. Separate contracts are concluded, distinct
bank
accounts are operated, invoices issued and stationery used. Only
dealers having entered into dealership agreements appointing
them as
Yamaha dealers are permitted to purchase products from the Yamaha
Distributors division whereas all traders are at liberty
to purchase
products from the After Market Products division. Products and
services sold by the Yamaha Distributors division are
not readily
available to its After Market Products division customers ‘unless
they are Yamaha dealers who are permitted to
purchase competing
products or operate other businesses.’ This is so because
Tuning Fork itself is subject to the constraints
of its agreement
with the Yamaha Motor Corporation.
[5]
Kilburn Auto was also a customer of the After Market Products
division and operated an accounting facility with the latter,
with
its credit limit at R20 000 for goods purchased from that division.
This credit facility was unsecured. In an email
dated 16 May
2011, the After Market Products division required Kilburn Auto to
complete a new credit application form and to furnish
it with
security in the form of a deed of suretyship. The reason given was
that the After Market Products division had ‘moved
out from
under McCarthy Limited and [was] now Tuning Fork Limited trading as
After Market Products.’ Attached to the email
were a number of
After Market Products documents, including that division’s
credit application form, deed of suretyship and
credit application
procedure and guidelines for the completion of the credit application
and the deed of suretyship. Each of the
attached documents was
identified and described in the email as peculiar to the After Market
Products division.
[6]
The credit application incorporated standard terms and
conditions subject to which all purchases were to be made from After
Market
Products by a ‘customer . . . which has been granted
credit in terms of this application’. The relationship
created
between such customer and After Market Products is stated to
be ‘that of a Customer buying as an independent contractor from
AFTER MARKET PRODUCTS and reselling to end-users and other
re-sellers.’ In addition, the credit application included
an undertaking that the credit manager of the After Market Products
division would be notified in writing of any changes to certain
particulars furnished in the form.
[7]
On 24 May 2011, Kilburn signed the credit application form on behalf
of Kilburn Auto and the deed of suretyship and submitted
them to the
After Market Products division. The heading of the required deed of
suretyship reads as follows-
‘
DEED OF
SURETYSHIP – TUNING FORK (PTY) LTD T/A AFTER MARKET PRODUCTS’
and the introductory
and other relevant provisions thus-
‘
I, the
undersigned, (full name of the “Surety”) IAN KILBURN
Identity Number 6711215130085 do hereby bind myself irrevocably
as
Surety and co-principal Debtor in solidum and jointly and severally
with KILBURN AUTO ENTERPRISES (PTY) LTD 9302973/07 (“the
Debtor”) to and in favour of Tuning Fork (Pty) Ltd Registration
No: 2010/001048/07 (“the Creditor”) its successors
in
title or assigns:-
1. For the due
fulfillment by the Debtor of all its obligations to the Creditor of
whatsoever nature and howsoever arising, whether
already incurred or
which may from time to time hereafter be incurred, as a continuing
surety, and notwithstanding any change in
or temporary extinction of
such obligations and without limiting the generality of the
aforegoing, for the payment of all monies
which are due or may become
due and owing from time to time, whether for damages or otherwise, by
the Debtor to the Creditor in
terms of or arising out of the
enforcement, breach or cancellation of any agreement between the
Creditor and the Debtor.
. . .
6. The Surety
acknowledges and understands that this document constitutes a
personal Deed of Suretyship, which renders him/her personally
liable
for the debts of the principal debtor.’
[8]
It is common cause that Kilburn Auto breached the terms of the
dealership agreement, and failed to make payment to Tuning Fork
of
the outstanding invoices issued by the Yamaha Distributors division
amounting to R808 883.01 as at 29 August 2012
plus interest
thereon at the rate of 15.5% per annum. As a result, Tuning Fork
launched an application in the high court in which
it claimed payment
of that amount, as well as ancillary relief, and costs jointly and
severally from Kilburn Auto as the principal
debtor and from Kilburn
as surety. Kilburn Auto did not oppose the application and default
judgment was granted against it.
[9]
Kilburn however opposed the application. He contended that Kilburn
Auto had discharged its principal indebtedness to Tuning
Fork that
had arisen from purchases made from the After Market Products
division and that he, as surety, was accordingly not liable
under the
deed of suretyship. It was common cause that the indebtedness of
Kilburn Auto in respect of the After Market Products
division had
been discharged. Tuning Fork contended that the terms found in the
body of the deed of suretyship are widely worded
and cover any
indebtedness that had arisen from purchases made by Kilburn Auto from
any of its other trading divisions, and in
particular its Yamaha
Distributors division. The interpretation contended for by Tuning
Fork found favour with the high court.
It held that the words ‘AFTER
MARKET PRODUCTS’ used in the heading of the deed of suretyship
were no more than the
usage of a trading name, merely intended to
enhance the identification of Tuning Fork. Because there is only one
legal person,
the high court held that the creditor in terms of the
deed of suretyship is Tuning Fork and not any one of its trading
divisions.
It therefore granted an order against Kilburn as well.
[10]
Before us, the issue now to be decided is whether Tuning Fork has a
contractual right derived from the deed of suretyship to
recover from
Kilburn, as surety, the indebtedness that arose from the purchases
made on credit by Kilburn Auto from Tuning Fork’s
Yamaha
Distributors division. This requires a proper construction of the
deed of suretyship. Its provisions must be interpreted
in accordance
with the established principles of interpretation. (See
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA
593
(SCA) para 18;
Bothma-Batho Transport (Edms) Bpk v S Bothma &
Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA) para 12.)
[11]
As to the language used in the deed, the words ‘DEED OF
SURETYSHIP’ that appear in the heading obviously identify
the
nature of the document. The words ‘TUNING FORK (PTY) LTD’
when read in context with the introductory paragraph
of the deed of
suretyship refer to the creditor. Only Tuning Fork (Pty) Ltd and not
any of its business divisions can legally be
the creditor as the high
court held. Divisions operating within the same juristic entity are
not in law regarded as distinct or
severable or as separate
personalities. (See
Two Sixty Four Investments (Pty) Ltd v Trust
Bank
1993 (3) SA 384
(W) at 385F-G.)
[12]
The words ‘T/A AFTER MARKET PRODUCTS’ are also included
in the heading of the deed of suretyship. Contextually
we know
that Tuning Fork trades under the names of five separate and distinct
divisions. What then was intended by the inclusion
of this particular
trading name in the heading of the deed of suretyship?
[13]
Tuning Fork raised three contentions. First, that the heading
conflicts with the body of the deed of suretyship. Secondly,
that the
words ‘T/A AFTER MARKET PRODUCTS’ were included for
purely administrative purposes and did not affect the
construction of
the deed. Thirdly, that the context in which the deed came into
existence was a neutral factor.
[14]
In dealing with the first contention, Tuning Forks relied on a dictum
of Cloete JA in
Sentinel Mining Industry Retirement Fund &
another v WAZ Props (Pty) Ltd & another
2013 (3) SA 132
(SCA)
para 10, where he said, ‘. . . where a heading conflicts with
the body of the contract, it must be the body of the
contract which
prevails because the parties' intention is more likely to appear from
the provisions they have spelt out than from
an abbreviation they
have chosen to identify the effect of those provisions’. Cloete
JA went on to say, however, that ‘.
. . where the heading and
the detailed provisions can be read together, that should be done.
And in the present case, they can.’
They can also be read
together in the present matter. The apparent conflict between the
heading and the detailed provisions of
the deed of suretyship
disappears when they are read together.
[15]
Turning to the second contention, Tuning Fork’s argument is
that these words are meaningless or superfluous and in the
words of
their counsel, merely ‘administrative’; any one or none
of the five trading names could have been included
in the heading.
This contention in our view is flawed, as it militates against the
longstanding precept of interpretation that
every word must be given
a meaning. A court should not conclude, without good reason, that
words in a single document are tautologous
or superfluous. (See
National Credit Regulator v Opperman & others
2013 (2) SA
1
(CC) para 99;
African Products (Pty) Ltd v AIG South Africa Ltd
2009 (3) SA 473
(SCA) para 13.) In the present matter the words
are not meaningless or superfluous. Thus, the meaning that the high
court attributed
to the concluding words of the heading - ‘T/A
AFTER MARKET PRODUCTS’ - that they are intended to enhance the
identification
of the creditor, has no basis in its language or
context.
[16]
The third contention was that the context in which the deed came into
being is a neutral factor. Linguistically, when these
words are read
in isolation and in the context of the body of the deed of
suretyship, it may be thought that they are not clear.
However
clarity is achieved when the language is considered in the light of
the relevant factual matrix, including the purpose
of the deed of
suretyship and the circumstances in which it came to be prepared and
produced. And it is clear that the deed of
suretyship came into
existence only because security was required for Kilburn Auto to buy
goods on credit from the After Market
Products division. Kilburn was
rendered personally liable on the terms set out in the deed of
suretyship for only the debts incurred
by Kilburn Auto in purchasing
goods on credit from the After Market Products division. Whilst there
is, in law, only one creditor,
there is nothing to prevent a
suretyship securing only certain debts due to that creditor.
[17]
To conclude, we hold that there is no conflict between the heading
and the body of the deed of suretyship. When effect is given
to all
the words in the deed of suretyship, and account is taken of the
circumstances in which it came into existence, the liability
of
Kilburn is limited to those debts incurred by Kilburn Auto in its
purchases from the After Market Products division of Tuning
Fork.
This means that the appeal must succeed and the order of the high
court holding Kilburn liable for the debts of Kilburn Auto
to the
Yamaha Products division must be set aside.
[18]
In the result the following order is made:
(a) The appeal
succeeds with costs.
(b) The order of the
court a quo is set aside and replaced with:
‘
The
application against the second respondent is dismissed with costs.’
_____________________
H
SALDULKER
JUDGE OF APPEAL
__________________
PA
MEYER
ACTING
JUDGE OF APPEAL
APPEARANCES:
Appellant:
C Acker
Instructed
by:
Grant
Rae Attorney, Edenvale
Phatshoane,
Bloemfontein
Respondent: A Subel
SC with J Lourens
Instructed by:
Werksmans
Incorporated, Sandton
Symington & De
Kok, Bloemfontein