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[2016] ZAGPJHC 251
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Chevron South Africa (Pty) Ltd v Ufudu Transport (Pty) Ltd and Others (2010/14665) [2016] ZAGPJHC 251 (6 September 2016)
Links to summary
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
CASE
NO: 2010/14665
REPORTABLE
OF
INTEREST TO OTHER JUDGES
In the
matter between:
CHEVRON
SOUTH AFRICA (PTY)
LTD
Plaintiff
and
UFUDU
TRANSPORT (PTY)
LTD
First Defendant
BANIPARSAD:
NAVIN
SITALPERSADH
Second Defendant
MOGALE:
DANIEL
SHIMANE
Third Defendant
NGWENYA:
BONGANI
STEPHEN
Fourth Defendant
JUDGMENT
PETER
AJ:
Introduction
[1]
The plaintiff, Chevron South Africa (Pty)
Limited (“Chevron”) claims an amount of R1 328 091,21
from the third
and fourth defendants (“
the
defendants”)
, a Dr Mogale and a Mr
Ngwenya, jointly and severally, as sureties for the first defendant,
Ufudu Transport (Pty) Limited (“Ufudu”),
for the
outstanding balance in respect of petroleum products sold and
delivered by Chevron to Ufudu during the period January 2008
to
December 2008, in terms of a written distribution agreement between
Chevron and Ufudu.
[2]
There are three issues for determination in
this matter. First, whether or not Chevron delivered the
petroleum product relevant
to the claim. Secondly, whether or
not a third party Mooipan Boerdery CC (“Mooipan”) had the
authority of Ufudu
to purchase petroleum products from Chevron on
Ufudu’s account and thirdly, if such authority did exist,
whether or not such
authority was validly revoked in late February
2008.
The
Facts
[3]
Chevron is a manufacturer and seller of
petroleum products and services. It conducts its business
through a network of distribution
outlets. The sale and
distribution of petroleum products is regulated by legislation; a
seller of such products requires
a licence from a statutory authority
in order to trade lawfully. At all times material to this
action Ufudu possessed the
necessary licence to deal in wholesale
quantities of petroleum products. In September 2004, Chevron
and Ufudu entered into
a written distributorship agreement, in terms
whereof Chevron granted to Ufudu the non-exclusive right to sell and
distribute Chevron’s
petroleum products and services for an
initial period of five years commencing 1 October 2004. Also in
September 2004, Dr
Mogale and Mr Ngwenya, together with the second
defendant, all three of whom were directors of Ufudu at the time,
entered into
individual written deeds of suretyship, in terms whereof
they bound themselves as sureties and co-principal debtors to Chevron
for the due payment by Ufudu of all such sums of money which might
then or at any time become owing to Chevron or claimable from
Ufudu
by Chevron. Each of the suretyships provided that all
admissions and acknowledgements of indebtedness by Ufudu were
to be
binding on the surety and that a certificate signed by any director
or the secretary of Chevron was to be
prima
facie
proof at all times of the amount
owing by the surety under the suretyship.
[4]
Dr Mogale is a medical practitioner by
profession, who was engaged in a full-time general medical practice.
Mr Ngwenya is
a lawyer by training and qualification; his full-time
occupation was that of a provincial electoral officer. Neither
was
engaged in the day-to-day conduct of Ufudu’s petroleum
distribution business. That was left to the second defendant.
Ufudu’s fortunes did not fare very well under the stewardship
of the second defendant; by the end of May 2006 Ufudu was indebted
to
Chevron in excess of R2,2 million in respect of purchases which it
was not able to pay in the ordinary course and its credit
facility
was terminated. By this time it appears that the second
defendant had ceased to participate in the management of
the business
and Mr Ngwenya’s wife, Mrs Ngwenya, was appointed as CEO,
who had to deal with the situation. Ufudu
then executed a
written acknowledgement of debt to Chevron for the repayment of these
arrears over an extended period. Thereafter
Chevron undertook
to supply Ufudu strictly on a cash on delivery basis.
[5]
In October 2006, Ufudu represented by Dr
Mogale and Mr Ngwenya, transacted with Mooipan represented by a Mr
Henk Cilliers, who seemed
to possess the necessary skill and
experience to conduct the business of wholesale petroleum
distribution, but lacked the regulatory
licence. Mooipan
entered into two written agreements with Ufudu. The first was a
lease of Ufudu’s premises from
which the business was conducted
for a period to coincide with the expiry of the initial term of
Ufudu’s agreement with Chevron.
The second was styled as
a “joint-venture” agreement. In terms of the second
agreement, Mooipan was to market
and sell petroleum products on
behalf of Ufudu, principally diesel fuel, expressly excluding
lubricants. Mooipan was given
the right and responsibility of
managing the day-to-day conduct of the business and was to see to the
appointment of a manager
who would be responsible for negotiations
between Ufudu and any petroleum company, the handling of all
administration of Ufudu
as well as the general management of Ufudu.
In consideration for this performance Mooipan was to be paid
remuneration based
on each litre of fuel sold. Mooipan undertook to
pay a small premium on fuel sold to Ufudu, which payment was rebated
in an amount
equal to the monthly rent. Ufudu continued to
maintain a presence on the premises through Mrs Ngwenya as Ufudu
continued
to sell lubricants independently of Mooipan. Although
styled a “joint-venture”, the transaction was that
Mooipan
was positioned effectively to conduct its own petroleum
resale business in Ufudu’s name. The “management
fee”
ostensibly paid to Mooipan was in reality the margin made
by Mooipan on the resale of fuel, less a royalty payable to Ufudu
which
was the holder of the regulatory licence. In November 2006,
Ufudu introduced Mooipan to Chevron’s representatives,
including
its district sales manager and the sales representative
servicing the site, all of whom were apprised of the relationship.
Mr Cilliers forthwith made arrangements with Chevron to introduce
Chevron’s Star Card facility. A Star Card is a card
issued by Chevron to certain approved large consumers of petroleum
products which operates as a form of a credit card. The
holder
of the card, by presenting the card, could acquire petroleum products
from a Chevron licensed distributor without payment
to the
distributor. Chevron honoured all such purchases, recouping the
purchase price from the holder of the card and undertaking
the risk
of the cardholder’s non-payment. The introduction of the
Star Card facility would enable sales to be made
at the premises to
holders of Star Cards; this was calculated to increase turnover.
[6]
Thereafter business was conducted by
Mooipan, which placed purchase orders on Chevron in the name of Ufudu
and paid for the purchases,
in part from Mooipan’s own bank
account and in part from the Star Card sales made by Mooipan, which
were credited by Chevron
to the Ufudu account on which Mooipan
purchased its fuel. Mooipan collected the other sales revenue
independently of Ufudu.
This continued until February 2008
when, two independent events occurred almost simultaneously which
gave rise to Chevron’s
present predicament. First, during
February 2008, Dr Mogale and Mr Ngwenya became disenchanted with
their relationship with
Mr Cilliers and Mooipan; they felt they were
not getting a sufficient return on their investment in Ufudu.
On 19 February
2008 they sold their shareholding in Ufudu to a
Mr Masinga. The auditors of Ufudu effected a change of
registration
of the directors on 22 February 2008. Mr Masinga
had different ideas for the business of Ufudu. He was
apparently
not content to receive economic rents from the use of
Ufudu’s licence and wanted to conduct the business of Ufudu
himself.
Understandably this brought him into direct conflict
with Mooipan and Mr Cilliers. Something of a conflagration
ensued
during late February and March 2008. According to court
papers filed by Mr Cilliers, in support of a spoliation application
and later contempt proceedings, in late February 2008 Mr Masinga
employed people to remove Mooipan and its staff physically
from the
premises. Although initially successful with spoliation orders,
by mid-March 2008 Mooipan had effectively ceased
trading at the
premises. Secondly, during February 2008, Chevron upgraded its
computerised accounting system. Prior
to the upgrade, the
system was programmed not to make any payments of refunds in respect
of Star Card purchases made from the Ufudu
distribution point
operated by Mooipan; the software was programmed with an instruction
that the Star Card purchases were credited
to the account and set off
against subsequent purchases. In the course of the system
upgrade, this instruction was not carried
through to the upgraded
system. From 22 February 2008, Chevron started making payments
to the bank account of Ufudu, over
which Mooipan had no control and
which at the time was controlled by Mr Masinga. Over R371 000,
was paid out in February
2008 and almost R742 000 paid during
the month of March 2008.
[7]
Chevron’s representatives were made
aware of the dispute between Mooipan and Ufudu. During March
2008, as an interim
measure, Chevron permitted purchases to be made
by Mooipan on Ufudu’s account for roughly the amounts of the
Star Card refunds
which had been paid to the Ufudu bank account.
At the end of February 2008, the Ufudu account with Chevron,
notwithstanding
the Star Card payments that had been made, was in
credit in the sum of R124 135,94. At the end of March
2008, the account
reflected a balance of R895 847,99
outstanding. The final amount claimed by Chevron is a balance
adjusted for certain
credit notes and purchases subsequently recorded
which had not been captured on its system at the time they occurred.
Chevron’s
claim is thus for post February 2008 sales and
deliveries.
[8]
In June 2010, Chevron obtained default
judgment against all four defendants on two claims: the balance
outstanding in terms of the
acknowledgement of debt and the balance
outstanding in respect of fuel purchases. In August 2012, Dr
Mogale and Mr Ngwenya
obtained rescission of the default judgment in
so far as it related to them.
[9]
At the commencement of the trial I was
informed from the bar that the claim in respect of the
acknowledgement of debt had been resolved
by the parties and was not
an issue before me. The defendants resisted the Chevron’s
claim for purchases on two bases.
First, from October 2006
there existed a direct relationship between Chevron and Mooipan –
either by virtue of an assignment
of the distribution agreement by
Chevron from Ufudu to Mooipan, alternatively by reason of an oral
agreement concluded between
Chevron’s representatives and
Mooipan. Secondly, the defendants denied that any product was
sold or delivered either
to Ufudu or Mooipan and put Chevron to the
proof thereof. At a pre-trial conference on 9 October 2013, the
parties agreed
that a trial bundle of discovered documents would be
prepared and such documents would, in the absence of a written notice
disputing
any such document, serve as evidence of what they purport
to be. On 25 October 2013, the defendants’ attorneys gave
written notice that the defendants placed in dispute a document
discovered by Chevron which purported to be a letter written by
Mrs
Ngwenya on 25 February 2008 addressed to Chevron. In its terms,
the letter gave Chevron notice that Ufudu had terminated
its
agreement with Mooipan and that no new fuel orders should be
authorised through Mooipan. That the defendants had disputed
the authenticity of the letter was not surprising; it was utterly
destructive of the principal defence, namely a direct relationship
between Chevron and Mooipan. By the commencement of the trial
in January 2015, the defendants wished the document to be admitted
by
agreement and Chevron required the document to be proved.
[10]
On the third day of trial, the defendants
moved an amendment, by agreement with Chevron, to introduce an
additional alternative
defence specifically disputing the authority
of Mooipan to order petroleum products from Chevron in Ufudu’s
name and further
that any such authority was revoked in February
2008. The trial continued into the fourth day while Chevron
considered the
new defence. On the morning of the fifth day,
the trial was postponed at the instance of Chevron, which at that
stage required
a proper opportunity to consider the new defence and
investigate possible evidence, arising from the legal proceedings
between
Ufudu and Mooipan which might provide an answer to this new
defence. The trial resumed almost a year thereafter, when it
proceeded for a further three days. On the penultimate day of
trial, the defendants expressly abandoned their initial principal
defence of a direct relationship between Chevron and Mooipan in all
of its various alternatives.
Delivery
[11]
In addition to the evidence of the account
and the transactions thereon, spoken to by witnesses who occupied
administrative positions
within Chevron, Chevron relied on signed
delivery notes evidencing the quantity of fuel delivered as well as
signed certificates
of balance as contemplated in the suretyship
agreements. The petroleum products were generally ordered
electronically by
Mooipan and made available for collection by
Mooipan which would dispatch tankers vehicles to a distribution
terminal of Chevron
to collect the fuel ordered. The quantity
that found its way onto the account was not necessarily what was
ordered but was
tied to the metered amount pumped from the terminal
into the tanker vehicle at the time of pickup. This quantity
was recorded
in a delivery note which was signed by the driver who
had been dispatched by Mooipan. From the quantity appearing on
the
delivery note, an invoice would be generated calculating the
amount payable at the then prevailing rate per litre.
[12]
In one instance, the quantity of fuel on an
invoice dated 3 March 2008 exceeded the quantity recorded on the
signed delivery note,
by 103 litres of diesel at R7,083 per litre,
thereby overstating the transaction amount in the sum of R729,55.
Mr
Uys
,
who appeared for the defendants, argued that on this basis the
certificates of balance should be rejected as being unreliable.
A provision in an agreement that a certificate of balance by a
creditor would constitute
prima facie
proof has the effect that unless rebutted it becomes “sufficient
proof” of the fact or facts on the issues with which
it is
concerned and which are necessary to be established by the party
bearing the onus of proof,
Senekal v
Trust Bank of Africa Ltd
1978 (3)
SA 375
(A) at 382H – 383D. The presence of evidence
rebutting the accuracy of the certificate does not destroy its
admissibility
but rather diminishes the sufficiency of the proof
afforded by the certificate. The discrepancy between the
invoice and the
delivery note demonstrates that the certificate is
not entirely correct but contains an error overstating the quantum of
the claim
by R729,55. The overall effect of this evidence
before me is not that a judgment cannot be given at all on Chevron’s
claim, but that its claim falls to be reduced by R729,55.
Authority
[13]
The provisions of the “joint-venture”
agreement expressly provided that Mooipan would market and sell
petroleum products
on behalf of Ufudu. Ufudu further granted to
Mooipan the right and responsibility of managing the day-to-day
conduct of the
business, the responsibility for the negotiations
between Ufudu and Chevron and the general management of Ufudu.
The subsequent
conduct of the parties leaves no doubt that Ufudu,
Mooipan and Chevron were fully aware that Mooipan had Ufudu’s
authority
to transact with Chevron on Ufudu’s account under the
distribution agreement. Everyone was alive to the fact that
Mooipan
would conduct the business. It was Ufudu that had the
regulatory licence to deal with petroleum products. For that
reason
Chevron could not and would not enter into a direct
contractual relationship with Mooipan. Accordingly, there is no
question
but that the joint-venture agreement gave Mooipan the power
and authority to contract with Chevron on its behalf. The real
issue between the parties is whether or not this authority was
validly revoked by Mrs Ngwenya’s letter dated 25 February
2008.
Revocation
[14]
Mrs Ngwenya testified that following the
sale of shareholding in Ufudu by the defendants to Mr Masinga, she
stayed on at the premises
for approximately a month to facilitate a
handover. Mrs Ngwenya wrote and sent the letter on Mr Masinga’s
instructions
as by that time, acrimony had arisen with Mr Henk
Cilliers of Mooipan. The letter was in fact received by
Chevron.
The letter emanated from Chevron’s discovery and
Mr Oliphant, the sales representative of Chevron testified that
the
telephone number to which the letter was purportedly faxed was
his fax to email number. He did not immediately act on the letter
or
report it to his superiors; at the time he was leaving Chevron and
not motivated to act diligently.
[15]
Ms
Ternent
,
who appeared for Chevron, challenged the efficacy of the letter as an
act of revocation on four principal grounds. First,
Mrs Ngwenya
had no authority as she was no longer the CEO of Ufudu and sent the
letter on an old letterhead. Secondly, in
its terms and context
the letter did not revoke authority. Thirdly, insufficient
notice was given by sending the letter by
fax to email. Lastly,
the authority could not be revoked without a valid cancellation of
the “joint-venture”
agreement of which the authority was
a part; Mooipan had an interest in the authority and benefited by
exercising the power in
terms of the joint-venture agreement and
Ufudu had not validly cancelled this agreement with Mooipan.
[16]
As to the authority of Mrs Ngwenya, there
is no reason not to believe Mrs Ngwenya’s evidence that she
wrote the letter on
the instructions of Mr Masinga who was then the
sole director of Ufudu and in conflict with Mooipan. The letter
is clear
and unequivocal – it demonstrates the spurious nature
of the initial defence of a direct relationship between Chevron and
Mooipan, acknowledging an authority to transact and expressly
revoking such authority. A later letter by Mr Masinga, almost
a
month thereafter which did not refer to Mrs Ngwenya’s letter
does not alter its clear meaning. The use of a fax to
email
facility to the authorised sales representative dealing with the
Ufudu account was not in any way irregular. The notice
was in
fact received by Chevron and thus operative. If a valid
cancellation of the “joint-venture” agreement
was a
prerequisite, then the onus of proving such cancellation rests on the
defendants pleading the revocation of authority.
This has not
been proved. On the probabilities it appears that Mr Masinga
unlawfully repudiated Ufudu’s obligations
to Mooipan and that
in fact the “joint-venture” agreement, which granted a
mandate to Mooipan to transact in Ufudu’s
name, was never
lawfully terminated. The question is thus whether or not Ufudu
could effectively revoke Mooipan’s authority
where such
revocation was a breach of its agreement with Mooipan in terms
whereof it granted Mooipan such authority.
[17]
Mr
Uys
contended that the revocation of authority was effective and cited,
in support of his proposition, the passage in
Consolidated
Frame Cotton Corporation Ltd v Sithole and Others
1985
(2) SA 18
(N) at 22 H – I, which reads as follows:
“
The
general rule is that a principal may freely terminate the authority
he has conferred on his agent. (Cf De Villiers and Macintosh
The
Law of Agency in South Africa
3rd ed at
614.) This is so even if it is asserted in the mandate establishing
the authority that the authority is not to be revoked.
In that event,
the agent, it is true, may have a claim for damages for breach of
contract (cf
Joel Melamed and Hurwitz v
Cleveland Estates (Pty) Ltd; Joel Melamed and Hurwitz v Vorner
Investments (Pty) Ltd
[1984] ZASCA 4
;
1984 (3) SA
155
(A) at 171D - G;
The Firs Investment
Ltd v Levy Bros Estates (Pty) Ltd
[1984] ZASCA 20
;
1984
(2) SA 881
(A) at 886D and
Pretorius v
Erasmus
1975 (2) SA 765
(T)) but
as between the two of them he can no longer bind his former principal
to any transaction he purports to enter into on
his behalf (Joubert
The Law of South Africa
vol 1 para 125).”
[18]
The judgment continues with the following
passage:
“
To
this general rule there are, as usual, certain exceptions. These
exceptions may apply even if the authority is not expressed
to be
irrevocable.
The
appellant's main contention in the court below was that the matter
falls within the ambit of what is considered to be one of
the
recognised exceptions, namely where the authority "is coupled
with an interest" (cf
Natal Bank Ltd v Natorp and Registrar
of Deeds
1908 TS 1016
;
Ward v Barrett NO and Another
1962
(4) SA 732
(N) at 737).”
[19]
Ms
Ternent
,
submitted that the revocation was not effective because the authority
was coupled with an interest. Mooipan clearly had
an interest
in the exercise of the mandate to purchase fuel from Chevron in
Ufudu’s name in order to conduct its own business
and obtain
the benefit of its bargain under the “joint-venture”
agreement with Ufudu.
“
Coupled
with an interest”
[20]
The general principle referred to in the
passage from
Consolidated Frame
has been quoted with approval in
Stupel
& Berman Inc v Rodel Financial Services (Pty) Ltd
2015
(3) SA 36
(SCA). The Supreme Court of Appeal determined the
appeal without having to examine precisely what is meant by “coupled
with an interest”. The passage from
The
Law of South Africa
(“
LAWSA
”),
currently paragraph 149 in volume 1 of the third edition, deserves
careful reading. It appears that there is uncertainty
surrounding the question whether authority can be given irrevocably.
The learned authors attribute this in part to the failure
to
distinguish between the revocation of authority on the one hand and
the termination of the relationships arising out of the
contract of
mandate on the other and in part to South African decisions of what
the authors describe as the “rather vague
proposition of
English and American jurisprudence to the effect that authority is
irrevocable is coupled with an interest or forms
part of a security
and the identification of this proposition with the
procuratio
in rem suam
mentioned by Voet”.
[21]
Before embarking on an analysis of what
appears to be a thorny question it is necessary to make some
prefatory remarks. First,
regard must be had to the potential
ambiguity in the word “irrevocable”. In a broad
sense it might simply be
used to indicate that a principal cannot
revoke an authority with impunity and without adverse consequence;
thus, although the
authority is effectively terminated, arising from
the act of revocation, the principal faces a potential claim for
damages by the
agent, or possibly a claim for an interdict or
specific performance based on a promise in the agreement in which the
authority
is conferred. In a narrow sense, it is used to
indicate that any purported act of revocation is of no force or
effect and
can thus simply be ignored. When referring to
English and American texts it is not always clear in which sense the
word is
being used.
[22]
Secondly, care must be taken to identify
what power is being delegated or what authority is being granted, in
order to identify
the relevant juristic consequences. It
appears to me that the general power to enter into contractual
relationships and perform
juristic acts is an incident of, and
derives from, the exercise of a competency of personality or status
as a person in law.
It is an exercise of free will that
attaches to personality. Thus someone of the age of majority
and of sound mind has the
capacity to enter into contractual
relationships and create rights and obligations through the exercise
of will. This capacity
is lost with insanity or on death, see
Tucker's Fresh Meat Supply (Pty) Ltd v
Echakowitz
1958 (1) SA 505
(A). I
refer to this capacity as “personal competency”.
The power of a person to deal validly and competently
with property
has two sources. First there must be present personal
competency and secondly, the power is also an incident
of, and
derives from, a competency arising from that person’s status in
relation to the property in question – that
person’s
rights in the property. Thus an owner of property has the
capacity to alienate or encumber that property by
reason of such
ownership. I refer to this capacity as “real
competency”. In the context of authority, a
principal
delegates to an agent the power to exercise the principal’s
competencies. In every instance there is a delegation
of the
personal competency, within the limits and scope of the authority,
and in respect of dealings with property, an accompanying
delegation
of the principal’s real competency, so that the agent has the
power to act in the name of, and on behalf of, the
principal and pass
title or grant rights in the principal’s property to a third
party.
[23]
The starting point in the Roman Dutch
common law is Voet
17.1.17
.
The general proposition is that the authority, referred to as the
mandate (Ganes’ translation),
is
dissolved by revocation; this is so notwithstanding that there is an
agreement that it should be irrevocable. Voet continues:
“
This
can indeed be done with impunity on both sides if the matter is still
in its entirety, since the direct as well as the contrary
action on
mandate is only available from the time when and to the extent to
which there has started to be an interest in the plaintiff.
If
the matter is not in its entirety, damages caused by the renunciation
or revocation having taken place untimeously must be made
good.
.
. .
But
a mandate can nohow be revoked if a person has been created agent in
rem suam by the cession of an action to him”
[24]
This appears to be the foundation for the
general rule, certainly at Roman Dutch common law, that a mandate can
always be effectively
revoked or renounced, although this might give
rise to a claim for damages. The reference to an agency
in
rem suam
with a cession of actions is
apparently a reference to a procedure of Roman law, as opposed to
Roman Dutch law, see
Natal Bank Ltd v
Natorp and Registrar of Deeds
1908 TS
1016
at 1022, a case to which I shall later refer. In early and
classical Roman law, a debt was a personal right which was not
transferable and could not be ceded. In order to circumvent
this prohibition, a creditor would appoint the person to whom
the
claim was to be transferred as a
procurator
in rem suam
who could sue the debtor in
the creditor’s name. Even then, prior to
litis
contestatio
, this authority could be
revoked by the creditor instituting action against the debtor in his
own name. The position in Roman
law and its later development
is eloquently articulated in Zimmermann
The
Law of Obligations
pp 58 – 67. The modern Roman Dutch law has echoes of this
in the rule that claims for
injuria
and general damages arising from personal injury are too personal in
nature to be capable of transmission prior to
litis
contestatio,
see
Government
of the Republic of South Africa v Ngubane
1972
(2) SA 601
(A).
The
United States
[25]
The South African reported cases that refer
to the notion of a power or authority coupled with an interest have
as their starting
point Story,
The Law
of Agency
and in particular §477.
Story lists three instances in which a power is not revocable; where
it is coupled with an interest,
given for valuable consideration or
part of a security. This is to be contrasted with the preceding
section, §476, in
which it is stated that an authority in which
the agent has no interest and for which no valid consideration has
been given is
treated as a mere nude pact that may be revoked at the
pleasure of the principal – with impunity. Accordingly it
is
not clear from the context that “irrevocable” is
necessarily used only in the narrow sense referred to above but may
be used in the broad sense that an act of revocation may result in a
claim for damages by the agent, who has an interest or has
given
valid consideration, against the principal. In any event, the
leading authority referred to by Story, and quoted fairly
extensively, in the footnote to §477 is the 1823 US Supreme
Court decision in
Hunt v Rousmanier’s
Administrators
[1823] USSC 3
;
8 Wheat 174
,
21 US 174
in which a debtor gave a creditor a power of attorney to sell the
debtor’s interest in two ships as security for the debt
owed to
the creditor. It was held that the debtor could not during his
life by his own act have revoked the power of attorney
but that it
terminated by operation of law on his death. Importantly, the
court found that this was not an authority “coupled
with an
interest”. The opinion of the court, of which Story was
himself a Supreme Court Justice at the time, was given
by Chief
Justice Marshall. The following was stated at 203 – 205:
“
This
general rule, that a power ceases with the life of the person giving
it, admits of one exception. If a power be coupled with
an
“interest”, it survives the person giving it, and may be
executed after his death.
As
this proposition is laid down too positively in the books to be
controverted, it becomes necessary to inquire what is meant by
the
expression, "a power coupled with an interest?" Is it an
interest in the subject on which the power is to be exercised,
or is
it an interest in that which is produced by the exercise of the
power? We hold it to be clear, that the interest which can
protect a
power after the death of a person who creates it, must be an interest
in the thing itself. In other words, the power
must be engrafted on
an estate in the thing.
The
words themselves would seem to import this meaning. "A power
coupled with an interest," is a power which accompanies,
or is
connected with, an interest. The power and the interest are united in
the same person. But if we are to understand by the
word "interest,"
an interest in that which is to be produced by the exercise of the
power, then they are never united.
The power, to produce the
interest, must be exercised, and by its exercise, is extinguished.
The power ceases when the interest
commences, and, therefore, cannot,
in accurate law language, be said to be "coupled" with it.
But
the substantial basis of the opinion of the Court on this point, is
found in the legal reason of the principle. The interest
or title in
the thing being vested in the person who gives the power, remains in
him, unless it be conveyed with the power, and
can pass out of him
only by a regular act in his own name. The act of the substitute,
therefore, which, in such a case, is the
act of the principal, to be
legally effectual, must be in his name, must be such an act as the
principal himself would be capable
of performing, and which would be
valid if performed by him. Such a power necessarily ceases with the
life of the person making
it. But if the interest, or estate, passes
with the power, and vests in the person by whom the power is to be
exercised, such person
acts in his own name. The estate, being in
him, passes from him by a conveyance in his own name. He is no longer
a substitute,
acting in the place and name of another, but is a
principal acting in his own name, in pursuance of powers which limit
his estate.
The legal reason which limits a power to the life of the
person giving it, exists no longer, and the rule ceases with the
reason
on which it is founded. The intention of the instrument may be
effected without violating any legal principle.”
[26]
This case identifies two principal
propositions. The first is that where a power is exercised for
and behalf of a principal,
the recipient of the power is a substitute
who cannot perform an act which the principal cannot perform.
Thus where the principal
dies so does the power. The second is
the identification of the interest by drawing a distinction between
an interest in
the subject on which the power is to be exercised; a
power “engrafted on an estate in the thing” as opposed to
an interest
in that which is produced by the exercise of the power.
The former interest is a real right held, by the recipient as a
principal,
in the property, on which the power is to be exercised,
and not merely as a substitute. The latter interest is one
which
arises as a consequence of exercising a power when acting as a
substitute for the principal. The importance of this
distinction
is the logical consequence that where the power is
“coupled with an interest”, the exercise of that power by
the recipient
is as a principal and not as a substitute for another
person. In this case the power runs with the interest; it is an
incident
of the interest.
[27]
Reverting to the terminology and concepts
which I have identified above, the power is in truth a real
competency of the recipient,
deriving from a status in relation to
the subject matter and, in particular, real rights held in and to the
property in question.
Conversely, it is not a competency of the
principal and thus not a true “authority” in the sense of
agency. The
“principal” cannot revoke the
“authority” simply because it is no longer an incident of
the principal’s
property or estate, but that of the recipient.
It is not a question of agency but rather one of property. To
illustrate
this, regard may be had to a situation in which an owner
of property grants to another a lease which includes the power of the
lessee to sublet. The exercise of possession or occupation of
the property by the lessee, and the exercise of the power by
the
lessee to grant a right of possession or occupation to a sublessee,
are aspects of a real competency deriving from the lessee’s
real right of possession or occupation. Similarly a debtor
might grant a usufruct to a creditor in the debtor’s property
for so long as the debt remains unpaid with the accompanying power of
the creditor as usufructuary to lease the property and collect
the
rents in respect thereof in partial satisfaction of the indebtedness,
until the indebtedness is fully repaid. In both
situations, the
lessee and usufructuary exercise a power coupled with an interest, in
the
Rousmanier
sense, but the power is not the exercise of the owner’s
competencies, either real or personal, but rather the exercise of
the
lessee’s and usufructuary’s personal and real competency,
arising from rights in and to the property, independently
of the
owner. Although the rights are derivative, in the sense that
the lessee and usufructuary acquire such rights from
the owner, as
real rights they are nevertheless held independently and are superior
to the owner’s rights who no longer has
full dominium in the
property. The onward transmission of a right of possession or
occupation to a third party lessee is
the exercise of the power
deriving from a right held by the lessee or usufructuary, as part of
their respective estates, and not
the exercise of a delegated
competency as substitute for and behalf of the owner. This is
to be contrasted to a situation
in which a debtor grants to a
creditor an authority to lease the debtor’s property, and
collect the rents as security for
and in satisfaction of the
indebtedness. Here the interest arises from the exercise of the
power. Prior to the conclusion
of the lease by the creditor, or
after the termination of one lease and prior to the conclusion of a
second lease, the debtor could,
albeit wrongfully, conclude a lease
with a third party and validly give a right of occupation to such
third party, thereby effectively
revoking the authority.
[28]
Although
Rousmanier
was the subject of academic criticism in the United States, see JCW,
Agency - Revocability of Power of Sale
Coupled with an Interest
, 4 La. L. Rev.
(1942), it remains US law. A recent application of
Rousmanier
is to be found in the opinion of the appellate division of the New
York Supreme Court in
Frankel and others
v JP Morgan Chase and others
76 A.D.3d
664 (2010) 907 N.Y.S.2d 281, in which the following was stated:
“
A
power of attorney that is coupled with an interest or which has been
given in exchange for valuable consideration is irrevocable
(
see
Terwilliger
v Ontario, Carbondale & Scranton R.R. Co.,
149 NY 86, 95 [1896],
citing
Hunt
v Rousmanier's Administrators,
8 Wheat [21 US] 174
[1823];
French
v Kensico Cemetery,
264 App Div 617 [1942],
affd
291
NY 77 [1943]
;
2A NY Jur 2d, Agency § 57;
see
also Ravallo v Refrigerated Holdings, Inc.,
2009 WL 612490, 2009 US Dist LEXIS 23353 [SD NY 2009]). In order for
a power to be "coupled with an interest," the agent
must
have an estate or interest of his or her own in the thing or matter
underlying the power (
see
Farmers'
Loan & Trust Co. v Wilson,
139 NY 284, 287 [1893]
;
see
also
2A NY Jur 2d, Agency § 56). Numerous cases have held that an
agent granted the power to collect debts on behalf of a principal,
who takes his or her fee out of the proceeds, does not have a power
coupled with an interest (
see
Farmers'
Loan & Trust Co. v Wilson,
139 NY 284 [1893]
;
Marbury
v Barnet,
17 Misc 386 [1896]
;
cf.
Babrowsky
v United States Grand Lodge, Order Brith Abraham,
129 App Div 695 [1908]
).”
England
[29]
The authorities quoted by Story for his
various propositions accord with the English common law of the early
19
th
century. What is stated by Story and the decision in
Rousmanier
is to be compared with the authorities in England.
[30]
In
Walsh v
Whitcomb
(1797) 2 Esp 564
at 566,
170
ER 456
at 457 Lord Kenyon held that in general powers of attorney are
revocable from their nature; but there are exceptions. Where
a
power of attorney is part of a security for money, made to levy a
fine, as part of a security it is not to be revocable; the
principle
is applicable to every case where power of attorney was necessary to
effectuate any security, such is not revocable.
On the facts of
that case, an insolvent debtor had assigned to his creditor, all his
effects by a general deed of assignment together
with the power to
call in the debts for the benefit of creditors which was part of the
security for the payment of creditors.
It was not therefor
revocable and payment by a debtor of the insolvent, to the creditor’s
agent was a valid payment discharging
the debt; the implied
revocation by the insolvent, by giving a new power of attorney to
another person, was an ineffective revocation.
[31]
In
Bromley v
Holland
(1802) 7 Ves Jun 3
at 28,
32 ER
2
at 12, Lord Eldon, the Lord Chancellor, held that receipt of rent
and profits, not by virtue of any assignment but by virtue of
a power
of attorney which is a revocable instrument would in ordinary cases
not found jurisdiction of the court of Chancery.
But where the
power was executed for valuable consideration, the court of Chancery
would not permit it to be revoked. It
is to be noted that at
that time the remedies of an injunction and specific performance were
only available in the court of Chancery,
being a court of equity; the
remedy in the Supreme Court was one of damages, being a court of
law. In
Smart v Sanders
[1848] EngR 499
;
(1848)
5 CB 895
at 917,
136 ER 1132
at 1140, to which I refer further below,
in a note in the judgment, it is stated that Lord Eldon’s
judgment seems to import
not that the instrument of revocation would
have no operation but that it was an act which the court of Chancery
would restrain
the principal from doing. It seems that the
power is “irrevocable” in the wide sense that its
revocation was
not with impunity; the recipient of the power would be
given a remedy. The distinction between a power of attorney and
a
power by virtue of an assignment is important, as in my view, it
resonates with the distinction later drawn in
Rousmanier
and the distinction between the delegation of a personal competency
and transfer of property rights arising from a cession of a
right of
action, or in the terminology of the English common law, an
assignment of a chose in action.
[32]
In
Lepard v
Vernon
(1813) 2 V&B 51
[1813] EngR 211
; ,
35 ER 237
,
a creditor that had received a power of attorney to receive monies
payable to a debtor, and had received payment after the debtor’s
death, was required to pay the monies over to the debtor’s
executors. Here the powers held to be revoked by death as
it
was “a mere common Power, not accompanying any Assignment of
the Debt, nor making Part of any Security” to the creditor.
In
Watson and another v King
(1815) 4 Camp 272,
171 ER 87
on facts similar to
Rousmanier
,
a debtor who owned a three-quarter share of a ship, gave a power of
attorney to his creditor to sell his ownership interest.
The
subsequent sale by the creditor of the debtor’s interest in the
ship, in circumstances after the debtor had disappeared
in a
hurricane during an Atlantic crossing and was presumed to have
perished, was considered to be un-authorised. It was
held by
Lord Ellenborough that: “A power coupled with an interest
cannot be revoked by the person granting it but it is necessarily
revoked by death. How can a valid act be done in the name of a
dead man?”
[33]
Smart v Sanders
recognised
that a factor, with the general power to sell a principal’s
goods, had a lien in the goods in his possession for
advances made to
the principal. The question to be decided was whether or not
the factor could sell the goods to repay the
debt where the principal
had revoked the authority to sell and had defaulted in payment.
After a review of the authorities,
Wilde CJ held that where:
“
an
authority is given for the purpose of securing some benefit to the
donee of the authority, such an authority is irrevocable.
This
is what is usually meant by an authority coupled with an interest,
and which is commonly said to be irrevocable.”
[34]
On the facts of the case, it was held that
the power to sell was made independently and prior to the advances
being made.
The interest arose after the authority and it arose
incidentally only. As a result this was not an authority
coupled with
an interest. The formulation of “coupled
with an interest” as “given for a purpose of securing
some benefit”
was adopted in
Clerk
v Laurie
(1857) 2 H & N 199 at 200,
157 ER 83
and
In re Hannan’s
Empress Gold Mining and Development Company, Carmichael’s Case
[1896] 2 Ch 648.
In
Carmichael’s
Case
, the underwriter of an initial
public offering of shares in the company that was to purchase the
promoter’s property, had
given a power of attorney to the
promoter to apply for shares in company not taken up by the public.
Notwithstanding that
the underwriter subsequently revoked the
authority, the promoter applied in the underwriter’s name for
the shares which were
registered accordingly. The underwriter
failed to have his name removed from the share register, on the basis
of being wrongly
entered therein.
South
African Decisions
[35]
A number of South African courts have
considered the revocability of an agent’s authority. Some
courts have simply repeated
the English rules as if they apply in
South Africa, without explaining why, and at times some courts have
made reference to Voet.
The distinction in
Rousmanier
has been mentioned in three reported South African decisions;
Fick
v Bierman
(1883) 2 SC 26
;
Hunt,
Leuchars & Hepburn, Ltd. In re Jeansson
(1911) 32 NPD 493
and
National Bank of
South Africa Ltd v Hoffman's Trustee
1923 AD 247.
In
Fick v Bierman
at 35, Smith J, possibly alluding to
Smart
v Sanders
, said the following:
“
An
ordinary instance of such an interest occurs when a factor has
possession of the goods of his principal with a power to sell.
He is
entitled to sell and indemnify himself for any advance he may have
made notwithstanding the insolvency of his principal,
for he has a
special property in the goods and can sell them in his own name he
has a lien upon the goods, and upon the purchase
price of goods
lawfully sold. On the other hand, a mere broker having no special
property has none of these rights, and his authority
becomes extinct
upon the insolvency of his principal.”
[36]
In
Koch v Mair
(1894) 11 SC 71
, a power of attorney expressed to be irrevocable was
held to be revocable in its terms after the lapse of a reasonable
period of
time. In the course of the judgment, De Villiers CJ
made the following remarks:
“
There
can be no doubt that, by our law, a principal may effectually bind
himself by contract not to revoke his power. Such a contract
would be
implied, where the power is given to secure the performance of a
promise made by the agent for valuable consideration,
whether the
power on the face of it purports to be irrevocable or not. On the
other hand, as Voet (17.1.17) justly observes, a
mere undertaking on
the part of the principal not to revoke a power, does not make it
irrevocable. In order to make the power irrevocable
there must be
consideration for the undertaking, or if there was no such
consideration it must be shewn that the agent has done
such acts
under the power that its revocation would be to his prejudice.”
[37]
Two observations must be made. First,
the requirement of consideration must be viewed with some
circumspection. At the
time, the question whether the English
doctrine of consideration in a contract was part of South African law
was unsettled.
The learned Chief Justice was a strong proponent
of its incorporation in South African law. That consideration
was not a
requirement to make a contract enforceable in the modern
Roman Dutch law of South Africa, was finally settled 25 years later
in
Conradie v Roussouw
1919 AD 279.
Secondly, in its context, the reference to
consideration, a requirement for a contract to support a cause of
action, or the
presence of prejudice in the absence of consideration,
suggests the wider meaning of “irrevocable”; that an act
of
revocation would be wrongful but not necessarily ineffective.
[38]
In
Marcus’
Executor v Mackie Dunn & Co
(1896)
11 EDL 29
, prior to his death, a produce dealer had forwarded produce
for sale to a factor to whom he was indebted for advances. The
produce dealer’s executor was held not to be entitled to
restrain the factor from selling the produce in discharge the debt.
In a separate concurring judgment, Solomon J held that the authority
was irrevocable and thus not revoked by death, as there was
no doubt
that the goods consigned form part of the security for the advances
made. In so doing, after a review of the English
authorities,
and referring to
Koch v Mair
and the remarks being
obiter
,
the learned judge came to the conclusion on a narrower basis at 33:
“
The
effect then of the English decisions is that the principle that an
authority coupled with an interest is irrevocable, applies
only to
those cases where the authority is given for the purpose of being a
security, or as part of the security.”
[39]
In
Van Niekerk
v Van Noorden
(1900) 17 SC 63
, sellers
of certain immovable properties had obtained bridging finance from a
creditor in anticipation of receiving the sale prices.
The
sellers granted a power of attorney, expressed to be irrevocable and
in rem suam
,
to the creditor to attend to the transfers and collect payment.
De Villiers CJ held that the creditor’s refusal to
agree to the
appointment of the conveyancer selected by the sellers to attend to
the transfers was not a breach of contract.
Further, as between
the sellers and the creditor it was held that the power was revocable
to the extent that the sellers “could
at any time by paying the
whole of the amount of the debt due to the creditor claim that the
power should be revoked, but so long
as the debt remains it is really
irrevocable”.
[40]
In
Natal Bank
Ltd v Natorp and Another
1908 TS 1016
,
a debtor firm had granted a power of attorney to its bank, expressed
to be irrevocable, to register a mortgage bond over immovable
property, the title deeds of which were deposited with the bank as
security for an overdraft facility. It seems that this
was a
common form of security in those times; the practice of the bank was
to hold such documents and only to register the mortgage
bond when it
believed there would be a need to rely on the security.
Certainly this is not the modern practice which is to
register the
mortgage bonds as early as possible; the modern practice might be
attributable to the provisions of
section 88
of the
Insolvency Act,
1936
which operate to deny any preference to such a covering mortgage
bond on the insolvency of the debtor within a period of six months
after being lodged for registration. Prior to Natal Bank acting
on the power, Natorp resolved to revoke the authority and
inform the
registrar of deeds accordingly. Natal Bank brought an
application for an order annulling the revocation of the
power of
attorney and authorising the registrar of deeds to register a bond
passed under the power. Solomon J, having moved
from the
Eastern Districts of the Cape Province to the then recently
established Transvaal Colony, gave judgment granting the relief
sought by Natal Bank. Rather than apply the test in
Koch
v Mair
, the learned judge followed the
approach in
Van Niekerk v Van Noorden
and quoted Voet
3.3.8
as authority for the proposition that a power
in
rem suam
is one in which the donee
transacts business not for the benefit of the mandator, but for its
own benefit. The submission that
a power could not be given by way of
security was rejected where the following was said at 1023:
“
Then
it is contended that a power cannot be given by way of security. Why
not, I fail to understand. If a bank is prepared to take
a power as
security, why should it not? Of course the bank runs a certain amount
of risk, because if the donor becomes insolvent
before the authority
has been exercised the power would lapse. But if the bank is prepared
to take that risk, I cannot understand
what there is to prevent a
bank from taking a power by way of security; nor can I see anything
in law or in public policy to prevent
a bank from acting in that way.
And if a bank does accept a power as a security, it seems to me that
it is only common sense that
it is in the same position as if it has
accepted any other security. Supposing some article of great value
had been given to the
bank as security: the pledgor could not recover
it without payment; and the bank would be entitled to hold it until
its debt had
been discharged. So here the bank, having taken the
power as security, is entitled to hold it until its debt has been
discharged,
and the power cannot be revoked by the person by whom it
was given.’
[41]
In a separate and concurring judgment,
Mason J dealt with an alternative argument that the bank should have
sued by action for a
new bond. The promise to give a bond could
be enforced, the promise was admitted, the giving of the power of
attorney was
admitted and the intention was for the bank to have it
as security. Since the bank had the power of attorney, the
title deeds
and had prepared the bond, Mason J at 1026, held that in
those circumstances the action would be entirely superfluous and
nothing
less than a waste of money.
[42]
Consistent with his earlier judgment in
Marcus’ Executor
,
the approach of Solomon J, was to apply a restricted version of the
English rule of “coupled with an interest” to
where the
power is given for the purpose of being a security, or as part of the
security, as opposed to the more general purpose
of securing a
benefit. The interest is one in that which is produced as a
result of the exercise of power. This approach
differs from
Story and
Rousmanier
which distinguish a power given as security as a concept different
from one “coupled with an interest” – the
power in
question had been given as security but lapsed on death because it
was not “coupled with an interest”.
This approach
treats the power as a species of property, capable of being possessed
by an agent, when given for the purpose of
being a security.
[43]
In
Hunt,
Leuchars & Hepburn, Ltd. In re Jeansson
(1911) 32 NPD 493
,
a
debtor executed a power of attorney to his creditors to generally
manage and administer a piece of land two and a half months
before he
died. Dove Wilson J quoted both Story and Story’s
reference to
Rousmanier
.
On the strength of
Fick
,
Marcus’ Executor
,
Van Niekerk
,
and
Natal Bank
,
the learned Judge President, with the other members of the court,
granted the relief that the power of attorney could be enforced
posthumously at 497 on the basis that:
“
As
there can be no doubt here that, the power of attorney was given to
the applicants in security of the indebtedness to them, and
that
their interest is an interest in the subject matter of the agency, I
think they are entitled to the order which they ask.”
[44]
In my view, this conclusion is utterly
irreconcilable with both US and English jurisprudence in
Rousmanier
and
Watson and Another v King
.
As is apparent from the quotation from
Natal
Bank
, an intervening insolvency would
cause the power to lapse.
[45]
In
National
Bank of South Africa Ltd v Hoffman's Trustee
1923
AD 247
, a customer had executed a power of attorney in favour of his
bank to register a mortgage bond.
Six
months thereafter, when the customer was in financial difficulty, the
bank registered the mortgage bond. Three months
later the
customer was sequestrated. The customer’s trustee sought
to have the registration of the mortgage bond set
aside as null and
void, which the trustee could do unless the bank could discharge its
onus of showing that both the bank and the
insolvent were
bona
fide
, in that there was no intention to
prefer one creditor over another and that the mortgage bond was
registered in the usual and
ordinary course of business. In
dealing with the question of
bona fides
Innes CJ said the following in respect of the power of attorney at
249:
“
The
power of attorney was given by the insolvent not to effectuate the
immediate passing of a bond, but to be acted upon by the
bank at its
convenience. It did not in terms purport to be irrevocable; but it
could not be withdrawn at the pleasure of the principal
except upon
payment of the indebtedness proposed to be secured. Having been given
for the agent's sole benefit in return for a
continuance of banking
facilities, an arbitrary revocation thereafter would have been a
fraudulent act which the law could not
countenance. (See
Story
on Agency,
sec. 477).
But though it was a procuration
in
rem suam
it was not accompanied by any
cession of action or of rights in the sense referred to by
Voet
(17.1.17); nor was it coupled with an interest in the sense referred
to by MARSHALL, C.J. in
Hunt v
Rousmaniere
(see
Story
Introd. Note 1). It empowered the agent to execute a mortgage in his
own favour on behalf of the principal; but it ceded to him
no present
right or interest in the assets to be charged. He was authorised
merely to act in the name of the principal; and he
could only do what
the principal could rightly have done at the moment of action.”
[46]
In a separate concurring judgment, De
Villiers JA said the following at 261:
“
Hoffman's
want of
bona fides
would taint the transaction. The person who takes a power upon which
he does not act at once takes it subject to that risk. And
it makes
no difference that the bank had an irrevocable power (assuming that
to be so), for in spite of the fact that the power
cannot be revoked
(if that be so), the act remains the act of the principal. It is only
where there is a transfer of a right by
means of a cession of action,
which the nature of the mandate here does not allow, that the
cessionary takes the place of the principal.
Apparently in England
and America the law is the same, as Story on
Agency
,
par. 488, points out. For when the power is coupled with an interest,
the interest or estate passes with the power and vests in
the person
by whom the power is to be exercised (
Hunt
v Rousmanier's Administrator
[1823] USSC 3
; ,
8 Wheat,
174).
”
[47]
Both judgments distinguish the power that
was granted from a cession of action or rights and appreciate the
distinction in
Rousmanier
of
an interest in the subject matter of the power as opposed to an
interest arising from the exercise of power. De Villiers JA does
not
necessarily accept that the power was irrevocable while Innes CJ
quotes Story in characterising an unlawful revocation as “a
fraudulent act which the law could not countenance”.
Quite clearly, an unlawful revocation will ground a cause of action
for a remedy. However Innes CJ does not go so far as to say
that such an act would be a nullity which could be simply ignored.
Neither of these two judgments appear to adopt the formulation
of
Marcus’ Executor
or
Natal Bank
.
Most importantly, both judgments refer to the juristic nature of the
agency; that the bank was acting in the name of its
customer but was
not dealing with its own then present property right. Neither
of these judgments treat the power held by
the bank as a species of
property of, or possessed by, the bank. The dissenting judgment
of Solomon JA does not refer to
his earlier two judgments, nor does
it deal at all with the nature of the power of attorney in coming to
the conclusion that
bona fides
was present.
[48]
The case of
Ward
v Barrett NO and Another
1962 (4) SA
732
(N) was concerned with a power of attorney executed by a deceased
debtor granting to his creditor the authority to register a notarial
mortgage bond, over the assets of a bottle store business, which had
not been registered at the time of his death. The deceased
estate was insolvent and in terms of the provisions of section
48(3)(b) of the Administration of Estates Act, 1913 the executrix
commenced administering the estate for the benefit of creditors as if
there had been a sequestration order. The executrix
registered
a mortgage bond after she had commenced such administration. In
the accounts of the estate the creditor was accorded
no preference in
respect of the mortgage bond. The creditor challenged this, claiming
that a preference should be accorded, notwithstanding
that the
mortgage bond had been registered after the commencement of a
concursus creditorum
,
by reason of the irrevocable nature of the power of attorney given as
security for the recovery of the debt. Caney J undertook
a
review of the authorities. Notwithstanding the criticism in the
words of the authors of
LAWSA
that this was “a rather half-hearted attempt . . . to
create order out of chaos”, the judgment has certain notable
features. The learned judge was constrained to distinguish
Hunt, Leuchars
and accepted, at 738A – B, that the power of attorney given by
a principal as security for the recovery of what is owing
was
irrevocable, nevertheless addressed the issue that to make it
effective as against creditors in a
concursus
creditorum
something further was
required. That was identified as a cession of rights of a
proprietary interest which had not occurred.
Two further points
are worthy of note at 737 E – F. First, that there seems
to be no particular magic in the use of
the terms “irrevocable”
or
procuratio in rem suam
or “a power coupled with an interest”; it is essential to
discover precisely what the transaction was and secondly,
an
appreciation that “irrevocable” might have more than one
meaning including an obligation contractually not to revoke
the
agent’s authority, save on pain of liability of damages.
[49]
The order dismissing the challenge was
upheld on appeal in
Ward v Barrett NO
and Another NO
1963 (2) SA 546
(A). The judgment of Steyn CJ identifies that underlying the
power to register a bond, was a right in the creditor to the
registration of the bond but that this right was a personal right and
not a real right and as such could not be registered after
a
concursus
had supervened. At 553A the following was said:
“
The
appellant's personal right to the registration of a bond could,
therefore, not be converted into a
jus
in rem
under a registered bond. Neither
could such a transformation be brought about by the power of
attorney, irrespective of whether
or not it is a
procuratio
in rem suam
. Even if irrevocable, the
mere grant and existence of the power to effect registration could
not and did not change the personal
right into a real one.”
The
modern Roman Dutch law in South Africa
[50]
It appears that the English law and US law
have diverged with regard to what is meant by “coupled with an
interest”.
The broader English formulation appears to
include an interest arising from the exercise of the power and is not
confined merely
to an interest in the subject of the power, but
absent an assignment of rights, the “irrevocable” power
is nonetheless
revoked on death. From the South African
decisions there does not appear to be consistency or finality in
precisely what
is meant by “coupled with an interest” nor
the extent to which a power of attorney is truly irrevocable in the
sense
that an act of revocation might be ignored as null and void.
Some decisions apply a modified English meaning limited to when
the
power is given for purpose of being a security, others refer to
Rousmanier
where
the power is given as part of the security, in the sense of an
incident of a real right of security.
[51]
The passage in
LAWSA
,
to which I referred above, notes, with reference to Bynkerhoek
Obs
Tum
1 729, that the Hooge Raad in
the Netherlands consistently refused to recognise the irrevocability
of authority. None
of the cases appear to identify a reason in
principle why this should be so or why the converse should apply.
[52]
In my view, the answer to this is to be
found in an analysis of the transaction and identification of the
rights and interests involved.
A proper analysis of the
transaction, notwithstanding the terminology used, might reveal that
what is ostensibly the grant of a
power is in fact a cession or
transfer of rights, see
Netherlands Bank
of South Africa v Yull’s Trustee and Another
1914 WLD 133
and
Kotsopoulos v Bilardi
1970 (2) SA 391
(C). A true authority
or power is a personal competency delegated to the agent to “
do
what the principal could rightly have done”. That is to
be distinguished from a right, either personal or real.
A
personal competency and any accompanying real competency is something
personal and attached to the will of the person that, to
adapt an
expression from Zimmermann at 58, “hinges on the bones and
entrails . . . and can no more be separated from his
person than the
soul from the body”. A power which is no more than an
incident of a person’s will is not property
that can be owned
or possessed by another. The faculties of personality can be
delegated, and with the will of the principal,
exercised by the
agent; they cannot be alienated nor can they be possessed or
exercised against the will of the principal who has
changed his or
her will. Owning or possessing the will of another is a feature
of slavery. The personal competency
has, at least since the
coming into effect on 1 August 1834 of the
Slavery
Abolition Act 1833
(3 & 4 Will. IV c. 73),
in the then Cape Colony, been incapable of being
sold or trafficked in South Africa. Slavery is now prohibited
by the provisions
of section 13 in the Bill of Rights of the
Constitution of the Republic of South Africa, 1996.
[53]
Where there is an authority “coupled
with an interest” in the
Rousmanier
sense, there is a transfer of a real right. Consequently the
exercise of the “authority” is no more than the
exercise
of the right held in the recipient and not an agency power. By
transferring property, or rights in property, the
real competency is
lost and transferred with the property or the right concerned.
Although derivative, it is independent
and separately held by the
transferee. In addition to factors referred to in the earlier
decisions, there will be an authority
“coupled with an
interest”, in the
Rousmanier
sense, where there has been a cession
in
securitatem debiti
, a pledge of movable
property with the right of
parate
executie
– to sell the property
on default of the pledgor’s debt repayment obligation, and
where there are provisions in a notarial
bond, entitling the creditor
to sell the property when the bond has been perfected by taking
possession. In these examples,
the creditor can sell and pass
valid title to the property, including the debtor’s ownership,
to a third party. The
creditor does so, not as a substitute for
or on behalf of the debtor, but by reason of rights held in and to
the property which
were superior to those of the debtor.
[54]
Where a power is given for the
purpose
of being a security, or as part of the security for advances made,
absent a cession of rights, or delivery of possession
property, it
confers no security until exercised. With the exception of a
registered special notarial bond in terms of section
1(1) of the
Security by Means of Movable Property Act, 1993, modern South African
Roman Dutch law, does not recognise a non-possessory
security
interest in movable property. Similarly absent registration in
the deeds registry, a non-possessory security interest
in immovable
property is not recognised.
Where
there is a true delegation of authority in the sense of what I have
referred to as a competency and the agent has an interest
that is to
be served or in that which is produced by the performance of such
authority, there will be an underlying promise, express,
tacit or
implied, by the principal to the agent in relation to that interest
of a personal nature. That promise may be that
something will
be done, for instance the performance of an obligation to the agent
or a third party, that property would be dealt
with in a particular
manner, and for these purposes the agent is given the power to do
what the principal could do to fulfil that
promise. The
performance of this promise is a personal right of the agent against
the principal. Where there has been
an act of revocation of
authority in these circumstances, there will also be a breach of the
underlying promise which will afford
the aggrieved agent a remedy.
Depending on the circumstances, the nature of the promise and
the interest, the remedy may
be damages, an interdict or specific
performance based on the underlying promise. However, absent
the intervention of a court
in giving such interdict or specific
performance, the creditor or agent and, in particular, a third party,
cannot simply ignore
a revocation of an “irrevocable”
authority. This may be illustrated by a debtor giving a
creditor a power of
attorney to execute a debit order on the debtor’s
bank account for the discharge of a debt. Should the debtor
revoke
the authority and countermand any standing debit order,
neither the creditor nor the bank could simply ignore the
revocation.
Should the power be
revoked, the correct remedy, in my view, is based on the underlying
promise.
[55]
For these reasons, notwithstanding that the
act of revocation by Ufudu of Mooipan’s authority was a breach
of the “joint-venture”
agreement, I am of the view that
it was effective in terminating Mooipan’s power to bind Ufudu
to Chevron in respect of purchases
of petroleum products on Ufudu’s
account. The interest Mooipan held in the exercise of the power
was not one held in
any property forming the subject matter of the
power, but rather an interest in that which is produced by the
exercise of the power.
Although authority was arguably “coupled
with an interest” within the meaning accepted in England, it
was not “coupled
with an interest” in the more limited
sense of Solomon J in
Marcus’
Executor
nor
in
the
Rousmanier
sense.
[56]
I am alive to the fact that what I have set
out herein may be incompatible with some of the South African
decisions and in particular
Natal Bank
.
Fortunately, because the power concerned was not given as a security,
it is not necessary for me to determine whether or
not
Natal
Bank
remains good law.
Notwithstanding the statement in
LAWSA
that is difficult to see how cases like
Natal Bank
and
Hunt, Leuchars
,
can be supported, I would have considered myself bound to follow
Natal Bank
had the power been given as a security. This is because it is a
decision of two judges of a colonial court which is the predecessor
of the court in which I heard this matter, constituting a court
composed of a single judge.
Costs
[57]
The only defence upon which the defendants
were successful is the one that was introduced on the third day of
trial. Until
the amendment, the plaintiff was entitled not to
have any regard to an un-pleaded defence and to prepare for trial on
the defence
that the defendant had pleaded. The authenticity of
the very document upon which the defence was founded, had been
disputed
by the defendants until the first day of trial. None
of the other defences pleaded had any merit, some of which were
abandoned,
correctly so in my view. Had the defence been
timeously pleaded and the trial limited to those issues, a great deal
of costs
and time would have been saved. Although the defendants are
substantially successful, in my view this is a proper matter for the
exercise of a discretion to deviate from the general rule that costs
follow the result.
[58]
In the result I make the following order:
1
Judgment is entered for the third and
fourth defendants.
2
The third and fourth defendants are to pay
the plaintiff’s costs occasioned by the hearing on the first
three days of trial
being 26 – 28 January 2015 inclusive,
jointly and severally, the one paying the other to be absolved.
3
The plaintiff is to pay the third and
fourth defendants’ costs occasioned by the defence of the
action including and after
29 January 2015.
___________________________
J R
PETER
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Appearance
for plaintiff:
Ms
P V
Ternent
, instructed by Wright Rose-Innes Inc, Johannesburg
Appearance
for the third and fourth defendants
:
Mr
P L
Uys
, instructed by Gildenhuys Malatji Inc, Pretoria, Rossouw
Leslie Inc, Johannesburg
Date
of hearing
:
26, 27,
28, 29, 30 January 2015; 18, 19 and 20 January 2016
Date
of judgment
:
6
September 2016