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[2016] ZAGPJHC 131
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Motor Finance Corporation (Pty) Limited v Xavier Motors CC t/a xavier Motors and Another (34095/2008) [2016] ZAGPJHC 131 (12 May 2016)
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Certain
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IN THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG
(REPUBLIC OF SOUTH AFRICA)
CASE
NO: 34095/2008
DATE:
12 MAY 2016
In
the matter between-
THE
MOTOR FINANCE CORPORATION (PTY)
LIMITED
..............................................
Plaintiff
And
XAVIER
MOTORS CC t/a XAVIER
MOTORS
............................................................
1
ST
Defendant
SUHA
KASLUOGLU
.......................................................................................................
2
ND
Defendant
JUDGMENT
Cassim,
AJ
Introduction
1.
By
way of application issued in October 2008, the applicant (“MFC”),
a financier made application in this court against
the first
respondent a motor dealer (“Xavier Motors”) for the
repurchase of five motor vehicles at a purchase consideration
equivalent to the monies paid by MFC to Xavier Motors in respect of
the vehicles. The parties sensibly agreed to separate merits
and
quantum and this part of the hearing relates to the merits of the
claim.
2.
The
motor vehicles are identified in prayer 1.1 of the notice of motion
as follows:
2.1
1
x 2003 model BMW325i A/D (E46) F/L motor vehicle with Chassis Number
WBAET3…….] (“BMW 325i”);
2.2
1
x 2004 model Subaru Legacy 2.0 GT motor vehicle with Chassis Number
JF1………] (“Subaru Legacy”)
2.3
1
x 2002 model BMW X5 3.0 A/T motor vehicle with Chassis Number
WBAFA……..] (“BMW X5”);
2.4
1
x 2003 model BMW M3 (E45) motor vehicle with Chassis Number
WBSBL……..] (“BMW M3”);
2.5
1
x 2006 model Renault Megane II 1.6S motor vehicle with Chassis Number
VF1CM [1………] (“Renault Megane”).
3.
The second respondent, Mr Suha Kasluoglu is
a party because MFC seeks to hold him liable for the obligations of
Xavier Motors arising
from the second respondent having bound himself
as a surety and co-principal debtor in respect of the obligations of
Xavier Motors
in favour of MFC.
4.
The respondents opposed the application and
by consent the application was referred to trial. Having
considered the 298 page
application and because as I have found and
is clear from the founding affidavit that applicant relies upon a
written agreement
to enforce its claim, in my view defined issues
should have been referred to oral evidence. The dispute in this
case falls
within the kind of narrow compass contemplated in rule
6(5) of the rules of court, primarily because the relationship is
governed
by way of a written agreement, and thus the methodology
identified in
Metallurgical &
Commercial Consultants (Pty) Limited v Metal Sales Co (Pty) Limited
1971 (2) SA 388
(W) to define the issues ought to have been applied.
This is a salutary practice because it compels the parties to
reflect on the issues, and to crystallize the disputes in the order
referring the matter to oral evidence. This practice should
be
reinforced by the courts. In this particular case the
parties did file comprehensive pleadings but the pleadings
seek
amplification in the application papers. A referral
incorporating the disputes to be determined by oral evidence assist
the court and the parties in expeditiously and yet effectively
dealing with the disputes.
5.
Mr Meyer who appeared on behalf of the
plaintiff in the proceedings before me, relied on the written
agreement entered into between
MFC and Xavier Motors.
The
basic rule regarding interpretation of a written agreement is that no
evidence may be given of its terms except the document
itself, nor
may the contents of such document be contradicted, altered, added to
or varied by oral evidence
(The
Law of Contract, Christie, 5
th
Ed
– page 192;
Lowrey
v Steedman
1914 AD 532
Act 543;
Sealed
Africa (Pty) Ltd v Kelly & Another
2006 (3) SA 65
(W) at paragraph [15] per Epstein AJ). It is useful to
reiterate the principles this court must adhere to in dealing with a
written
agreement.
5.1
In an
action on a contract, the rule of interpretation is to ascertain, not
what the parties’ intention was, but what the
language used in
the contract means, i.e. what their intention was as expressed in the
contract.
(Worman
v Hughes
1948 (3) SA 495
(A) Act 505);
5.2
The first
step in construing a contract is to determine the ordinary
grammatical meaning of the words used by the parties (
Sassoon
Confirming & Acceptance Co (Pty) Ltd v Barclays National Bank Ltd
1974 (1) SA 641
(A) 646B).
5.3
No
evidence may be given to alter the plain meaning of an agreement
(
Rand
Rietfontein Estates Ltd v Cohn
1937
AD 317
at 326);
5.4
The
document is to be given its grammatical and ordinary meaning, unless
this would result in some absurdity or some repugnancy
or
inconsistency with the rest of the instrument. (
Coopers
& Lybrand v Bryant
[1995] ZASCA 64
;
1995 3 SA 761
(A) 767E-768E);
5.5
Regard may
be had to background and surrounding circumstances when the language
of the document is, on the face of it, ambiguous,
save that the court
is precluded from taking into account “direct evidence of their
own (the parties to the agreement) intentions”
(Cooper’s
case at 767E-768E).
5.6
However,
should a party seek to place a construction on a document that
differs from the document’s
prima
facie
meaning, that party has to plead the circumstances relied on for this
construction (
Dorman
Long Swan Hunter v Karibib Visserye Ltd
1984 (2) SA 462
(C) at 476G-H):
“
Non
constat, however, is it necessary to plead a reliance on surrounding
circumstances where the meaning of the document is uncertain
or
ambiguous or where the other party contends that it bears a meaning
other than its prima facie meaning, and where the Court
is satisfied
that there is uncertainty or ambiguity as to the proper construction
of the contract.”
5.7
Insofar as
a party intends to rely upon background circumstances or facts, these
facts must be pleaded (
Streek
v East London Daily Dispatch (Pty) Ltd
1980 (1) SA 151
(E) at 156H).
6.
In
KPMG
v Securefin Ltd
2009 (4) SA 399
SCA at paragraph 39, the court summed up the
principle as follows:
“
[39]
First, the integration (or parol evidence) rule remains part of our
law. However, it is frequently ignored by practitioners
and seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence
may not
contradict, add to or modify its meaning (
Johnson
v Leal
1980 (3) SA 927
(A) at 943B). Second, interpretation is a matter of
law and not of fact and, accordingly, interpretation is a matter for
the court
and not for witnesses (or, as said in common-law
jurisprudence, it is not a jury question: Hodge M Malek (ed)
Phipson
on Evidence
(16 ed 2005) paras 33-64). Third, the rules about admissibility of
evidence in this regard do not depend on the nature of the document,
whether statute, contract or patent (
Johnson
& Johnson (Pty) Ltd v Kimberly-Clark Corporation and
Kimberly-Clark of South Africa (Pty) Ltd
1985 BP 126 (A) ([1985]) ZASCA 132. Fourth, to the extent that
evidence may be admissible to contextualise the document (sine
‘context is everything’) to establish its factual matrix
or purpose or for purposes of identification, ‘one must
use it
as conservatively as possible’ (
Delmas
Milling Co Ltd v Du Plessis
1955 (3) SA 447
(A) at 455B-C). The time has arrived for us to accept
that there is no merit in trying to distinguish between ‘background
circumstances’ and ‘surrounding circumstances’. The
distinction is artificial and, in addition, both terms are
vague and
confusing. Consequently, everything tends to be admitted. The terms
‘context’ or ‘factual matrix’
ought to
suffice. (See:
Van
der Westhuizen v Arnold
2002 (6) SA 453
(SCA) ([2002])
4 All SA 331)
paras 22 and 23, and
Masstores
(Pty) Ltd v Roberts Construction (Pty) Ltd and Another
[2008] ZASCA 94
;
2008 (6) SA 654
(SCA) para 7).”
The
relationship between MFC and Xavier Motors
7.
In this trial I was told very little about
Xavier Motors. The only witness for Xavier Motors, Ms Lancaster, the
manageress of the
business informed me that she managed the business
for it would appear the beneficial owner, the second respondent
Kasluoglu. Xavier
Motors was at the material time a preferred
approved dealer by MFC.
8.
Xavier Motor’s status as an approved
preferred dealer by MFC must have been motivated if not wholly
premised by the terms
of the Master Discount Agreement entered into
between MFC and Xavier Motors on 19 July 2005 as amended on the 24
th
January 2007 (“the agreement or MDA”)
9.
The MDA in part A contemplates Xavier
Motors from time to time offering to cede its rights under any or all
of its contracts to
MFC (“the offer to cession) by furnishing
MFC with a complete credit application form furnishing details of the
applicant
who is to conclude a dealer contract with Xavier Motors, a
description of the goods in question and other relevant information
in relation to the transaction in question as may be requested by MFC
from time to time. MFC may, in its sole discretion,
accept or
reject all or any of the offers to take cession. Part B,
contemplates Xavier Motors from time to time offering
to sell goods
to MFC by furnishing MFC with a copy of the tax invoice relating to
the goods which tax invoice shall fully identify
and describe the
goods by way of serial and identification numbers. MFC may in
its sole discretion accept or reject all or
any of the offers to
purchase. In the event of MFC accepting any offer to take
cession or any offer to purchase, the general
provisions contained in
part C of the MDA are of application.
10.
In practical terms this means the
following. In the case of Xavier Motors selling motor vehicles on
credit to its customers, Xavier
Motors looks to MFC to finance the
transaction. In practice this is done in two ways. Generally speaking
the dealer cedes its rights
in the transaction to the financier with
or without recourse. With recourse means that the financier can look
to the dealer for
recovery of the monies it expanded in the event of
default by the customer. The other way this credit transaction is
undertaken
is that the vehicle is sold to the financier which then
resells it to the customer. In both instances the recourse which the
financier
has against the dealer is generally speaking, as in this
case, determined by the terms of the MDA.
11.
Mr Meyer, informed me at the commencement
of the proceedings and as is pertinently set out in the application
papers that MFC relied
upon the following terms contained in the MDC
to vindicate its claim:
“
7.
DELIVERY
…
7.3 The Dealer shall deliver or
procure delivery of the goods specified to the relevant Customer, and
procure that such Customer
signs an acknowledgement of receipt of
delivery of such Goods which acknowledgement the Dealer shall furnish
to MFC.
7.4 The Dealer shall retain the risk in and
to the goods until such time as the Dealer has delivered or procured
the delivery of
the Goods to the customer.
12.
DELIVERY
12.1 MFC shall be deemed on
conclusion of a MFC contract to have instructed the Dealer to deliver
ownership of the Goods to MFC
by way of constructive delivery.
…
12.3 The provisions of 7.3,
7.4 and 7.5 similarly shall apply equally to the delivery of
ownership of the Goods as contemplated
in this Part B.
15.
WARRANTIES
The dealer warrants in respect of each Cession of
a Dealer Contract and each sale of Goods, as the case may be, that:
…
15.14 neither the Customer nor
the Dealer, being the parties to such Dealer Contract, is entitled to
terminate such Dealer
Contract for any reason whatsoever.
15.23 Information provided to
MFC in regard to the Customer’s identity and credit worthiness
is to the best of the Dealer’s
knowledge true and correct and
the Dealer has not withheld any information from MFC.
15.26
The
Dealer has taken all steps to verify the Customer’s credit
information as contemplated in 16.
15..28 Complete delivery of
the Goods has been made to the Customer and unqualified acceptance of
the Goods has been taken by the
Customer prior to payment being made
by MFC to the Dealer of the Cession Purchase Price or of the Sale
Purchase Price, as the case
may be.
…
16.
CREDIT INFORMATION
16.1 The Dealer shall in
respect of each offer contemplated in 3.3 obtain sufficient and
comprehensive credit information in respect
of the Customer, in the
format required by MFC from time to time and reflected in the Credit
Application Form or such other form
as MFC may require from time to
time, and the Dealer will furnish such credit information to MFC at
the time as contemplated in
5 or 10, as the case may be.
16.2
The
Dealer shall ensure that:
16.2.1 The Customer signs the
Contract in the presence of the Dealer’s staff;
16.2.2 The identities of the
signatories and witnesses are clearly reflected on the Contract and;
16.2.3 The Dealer’s
staff verifies that the identity photo of the person purporting to be
the Customer matches the person
signing the Contract – such
verification must be made with reference to an original identity
document or original passport
that must be presented to the Dealer’s
staff for this purpose.
…
19.
INDEMNITIES
The Dealer indemnifies MFC and
holds it harmless against any claim of whatever nature that may arise
out of or defences which may
be raised by any person or loss or
damages or expense (including legal costs on the scale as between
attorney and his own client)
arising out of or in connection with or
which may be sustained or incurred by MFC as a direct consequence of:
19.1 a breach or non-performance by the
Dealer of any of the terms, conditions, warranties or undertakings of
the Dealer in terms
of this agreement or any Cession pursuant thereto
including, but not limited to, any negligent misrepresentation
(whether negligent
or otherwise) by the Dealer to MFC; or
19.2 a fraudulent sale of the Goods or other
fraudulent action by any of the Dealer’s employees.
20.
BREACH
20.1 An event of default shall
occur if:
20.1.2 The Dealer breaches any
of the warranties furnished by the Dealer in terms of this agreement;
…
20.2.5 Demand that the Goods
purchased by MFC be sold back to the Dealer and that the rights of
MFC in terms of the relevant MFC
contract relating to such goods be
ceded to the Dealer.
20.3
If MFC elects to enforce its rights
under 20.2.4 or 20.2.5, the goods specified in the notice shall be
deemed to have been sold
to the Dealer by MFC, and the rights of MFC,
in terms of the relevant contract shall be deemed to have been ceded
to the Dealer
by MFC upon receipt by the Dealer of the notice for an
amount equivalent to the present value of the collectable under the
contract
(as at the date of receipt of that consideration by MFC)
plus all costs and expenses which MFC has incurred up to date of
receipt
of the aforesaid amounts (which costs and expenses shall
include, but not be limited to, costs and expenses incurred by MFC in
connection with the repossession, storage, repair and sale
commission).
20.4
Where there is a breach by the
Dealer and for whatsoever reason the goods cannot be physically
returned to the Dealer (due to a
loss of goods be it by theft or
otherwise) MFC shall not be under any obligation to deliver the goods
back to the Dealer.
…”
The transactions concerning
the five motor vehicles being the subject matter of this application.
12.
The
five motor vehicles were sold by Xavier Motors to MFC during the
period September 2007 to April 2008 in terms of the MDA.
It is
common cause that the individual customer to whom these vehicles were
sold was not the person identified in the tax invoice.
fraud, if
not syndicate (fraud)
13.
Four of the five persons to whom the
vehicles were purportedly sold to, testified in this hearing.
Messrs Mnisi, Nwedamutswu,
Khabo and Mushwana attended court under
subpoena and gave evidence to the following fact.
13.1
They did not purchase the motor vehicles
they are alleged to have purchased. Each of them had no idea as to
the physical location
of Xavier Motors, never attended at the
premises and took no delivery of any vehicle.
13.2
The signatures on a host of documents
purporting to be their signatures is a forgery;
13.3
The information supplied on the pre
agreement statement as well as the contract for vehicle finance is
not theirs but forged;
13.4
Their identification documents and drivers
licence were appropriately forged and used in the perpetration of
these unlawful transactions;
13.5
Regrettably such is the state of our nation
that two of them were duped by Metro Police at roadblocks to produce
their drivers licence
under the pretext that it was for lawful
examination and whereas in one instance another persons licence was
returned and in another
instance the police officers, on friendly
terms, engaged the individual and in the process did not return the
drivers licence to
him. This as I have already alluded to, is a
serious indictment on law enforcement agencies in our society at
large. In this court’s
view, the only effective manner in
curbing this unacceptable conduct is for the courts to be tough on
corruption and either unlawful
conduct particularly where it is
perpetrated by police officers.
14.
Mr Smit who appeared on behalf of Xavier
Motors correctly in my view accepted as common cause that in each
five instances there
was fraud in that the person alleged to have
purchased the vehicle from MFC was in fact not the person who
purchased the vehicle.
15.
This court must also record that each of
the four persons who testified before me were good solid South
African citizens. Their
experience arising from the wrongful use of
their identities created havoc in their lives. Their credit
facilities were wrongly
curtailed because their documentation was
used by others to perpetrate a fraud. In the records of the
authorities they were registered
as the owner of motor vehicles
purchased by others and they stood liable for licence fees and other
charges whereas in truth and
in fact they were not liable. The
administrative hurdles for these individuals to overcome, although
innocent victims were
enormous in terms of resources and emotionally.
One of them put to me that his life had been consumed by events
beyond his control.
This court will appreciate it if MFC
continues to render its assistance to these individuals in order to
regularise their affairs.
16.
Not a single instalment was paid in respect
of each of the instalment sale agreements. MFC, as owner of the
vehicles, reported the
five vehicles as having been stolen, and two
of the vehicles, namely the Subaru Legacy and the Renault Megane were
recovered by
the police.
17.
MFC argues that Xavier Motors breached its
obligations in two material respects. First, it gave delivery to
persons who are fraudsters
and not the persons who purported to
purchase the vehicles. Secondly, Xavier Motors did not exercise the
kind of care it ought
to have in detecting that there was material
irregularities in the paperwork relied upon by the fraudsters.
Non-delivery
18.
MFC relies upon the provisions of clause
7.3 and the warranty contained in clause 15.28 in the MDA. Customer
in clause 1.1.6 means
any person other than the MFC, bound to the
dealer in terms of a dealer contract and “dealer contract”
in clause 1.1.7
is defined as the written agreement relating to the
goods concluded by the dealer with its customers.
19.
In each instance, delivery did not take
place to the person allegedly purchasing the motor vehicle. By means
of fraud and deception
the motor vehicle was delivered to some other
person. The person alleged to have purchased the motor vehicle did
not buy the vehicle.
Ordinarily, it thus follows that delivery did
not take place as is contemplated in clause 7.3 of the MDA and MFC
was led to believe
that proper delivery took place and made payment
in breach of the warranty give by Xavier Motors in clause 15.28 of
the MDA. Ms
Lancaster, it is common cause, held out that in each
instance, the person receiving delivery was in fact the customer.
This is
in fact not so.
20.
Mr Smit argued that non-delivery to the
persons who were supposed to have purchased the vehicles, but in fact
never purchased it
(because they were not party to the transaction);
their identity documents and drivers’ licence being used by
fraudsters,
is not a reason or justification to impose liability on
Xavier Motors. On a proper construction of the relationship between
MFC
and Xavier Motors I should find that once Xavier Motors sold the
motor vehicles to third parties, Xavier Motors thereafter become
the
agent of MFC and hence MFC must accept liability and responsibility
for the loss. In this context, he urged me to have regard
to the
judgment of the House of Lords in
Shogun
Finance Ltd v Hudson
2003 UKHL 62.
Mr
Smit referred me to various portions of the judgment to argue that,
in these circumstances, Xavier Motors is neutral. Xavier
Motors
completed its obligations by undertaking a cursory credit check on
the potential customers and on the face of things relied
upon
fraudulent identity documents, drivers’ licence and
information, but was
bona fide
and liability cannot be attached to Xavier Motors for the fraud
committed on MFC. Xavier Motors, on this argument, could not have
done more.
21.
I disagree. Unlike the case of
Shogun
Finance Ltd v Hudson
, the relationship
between MFC and Xavier Motors is regulated by a written agreement and
MFC’s cause of action is based on
the written agreement.
Ultimately, the test or issue is whether Xavier Motors complied with
its obligations or not.
22.
I find that Xavier Motors breached its
obligations arising from clause 7.3 and breached the warranty
contained in clause 15.2.8
of the MDA. I record that the evidence on
behalf of MFC established that payment was made by MFC to Xavier
Motors after having
been satisfied by Xavier Motors that complete
delivery of the motor vehicle in question had been made to the
customer, whereas
delivery was made to a third party fraudster.
Credit
information
23.
I have set out in paragraph 11 above, the
contents of clause 16 of the MDA dealing with credit information. In
my view, Xavier Motors
did not measure to the requirements imposed on
it by clause 15.2.6, namely that it shall take all steps to verify
the customers’
credit information as contemplated in clause 16.
24.
I find it unacceptable that Ms Lancaster
could not have detected that those purporting to be the individuals
in the five identity
documents and licence documents were in fact not
the proper persons. On her evidence, she managed the business of
Xavier Motors
and dealt with, literally speaking, hundreds of
applications for credit; she is an accredited FAIS agent and
registered as a financial
service provider and, in my view, she did
not exercise reasonable caution expected of a person in her position.
Otherwise, she
would have detected material irregularities. Thus for
instance, she failed to observe that the signature of Mnisi on the
application
for instalment finance is materially different on the
acknowledgement of delivery forms which she says, under declaration,
was
completed in her presence. The signature is also different to the
naked eye on the agreement between MFC and Mnisi. The photograph
on
Mnisi’s driver’s licence is different from the photograph
in his identity document. She should have had regard,
in these
circumstances, to the signature appearing on the reverse side of the
driver’s licence which she did not do. There
are numerous other
examples pointed out in cross-examination by Mr Meyer as to why she
ought to have been put on the alert and
should have interrogated the
information more closely. The first name of one of the four people
who testified before me is different
in the forged identity document
as compared to the original identity document which was demonstrated
in the evidence before me.
A similar cell number is used in two
separate applications for two different individuals for finance. In
all five applications,
it is a common feature that the salesperson is
one Allistair who is still in the employment of Xavier Motors and he
may have been
in a position to throw more light on how this fraud was
perpetrated. He was, however, not called to testify.
25.
Ms Lancaster’s evidence was in the
nature of general evidence. She could not throw light on the five
cases before me, but
testified as to the pattern she followed
generally. Thus, generally, she would interview each applicant for
credit by reference
to the applicant’s identity document,
passport and driver’s licence. She could not, however, explain
why in these five
cases Xavier Motors was duped. Moreover, on her own
version, she caused the release of five motor vehicles whereas there
was proof
of only one insurance policy in respect of a single motor
vehicle, whilst it was a requirement that before the motor vehicles
were
released to the customers, there must be insurance cover taken
on the motor vehicle to protect the interest of MFC. There was no
debate that this was a requirement.
The
records of Xavier Motors
26.
Discovery by Xavier Motors in this trial
is, in the circumstances, dismal. Other than financial statements for
the years ending
February 2007 to February 2010, the court is told
very little about Xavier Motors. As at February 2008, it had gross
revenue made
up of sales slightly in excess of R37 million. No
documentation are discovered relating to these five transactions,
being the subject
matter of this trial. The response that everything
was furnished to MFC is unhelpful. A business generating turnover of
R37 million
must have systems and structures to record each of its
transactions. This court would have expected a file or other
methodology
recording all material events
apropos
each transaction. A failure to have this readily available must
result in an adverse inference against Xavier Motors that it did
not
conduct its business as is required of a reasonable business. The
result being that I must find that Xavier Motors was negligent
and/or
did not comply with the requirements imposed on it by clause 16 read
together with clause 15.2.6 of the MDA.
Conclusion
27.
In the result, I find in favour of the
plaintiff, MFC. I am satisfied that MFC is entitled to the relief
provided in the MDA in
clause 20.3 which is set out in paragraph 11
above. In the result, I grant a draft order in terms of annexure “
X”
attached hereto dated and initialled by me.
The Registrar
High Court Chambers
21 September 2011