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[2017] ZAGPJHC 369
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Corporate Finance (Pty) Ltd v Schwarz North (32806/2012) [2017] ZAGPJHC 369 (10 March 2017)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
CASE NO: 32806/2012
In the matter between:
CORPORATE FINANCE (PTY) LTD
Plaintiff
And
SCHWARTZ NORTH
Defendant
JUDGMENT
VICTOR J
:
[1] Ultimately this trial cantered around a primary issue of whether
the Plaintiff had the locus standi to sue the defendant. The
plaintiff had already acquired the rights in terms of a cession
between it and Tsamaya Asset Finance Pty Ltd (Tsamaya) before the
rental agreement was concluded with the defendant
[2] On 23 October 2008 the plaintiff, Corporate Finance (Pty) Ltd
concluded a rental agreement with the defendant in terms of which
three Gestetner machines, with the relevant serial numbers were
leased to it. The plaintiff sues in its capacity as cessionary
in
that Tsamaya had ceded the discount agreement to the plaintiff. The
cession took place on 16 July 2008 and it was ongoing.
[3] The express terms of the rental agreement are fully canvassed in
the particulars of claim. In addition, the plaintiff asserts
that the
main cession agreement between the cedent and the plaintiff was
entered into on 16 July 2008 before the conclusion
of the
agreement of 23 October 2008 and that this was an ongoing
arrangement. The plaintiff was duly represented by Mr Groenewald.
[4] In the alternative to prayers 8 to 11, the plaintiff pleads that
on or about 23 October 2008 at Bedfordview, the rental agreement
was
ceded to the plaintiff in terms of an oral agreement between the
cedent and the plaintiff. In response to the particulars of
claim and
further particulars for trial, the defendant raised a special plea,
namely the lack of
locus standi
by the plaintiff. In its plea
it pleaded as follows:
“
The plaintiff claims as
cessionary of rights in terms of a written rental agreement concluded
on or about 23 October 2008 between
Tsamaya and the defendant.”
[5] In paragraph 7.2 of its reply to the plaintiff's request for
further particulars dated 11 August 2015, the plaintiff avers,
for
the first time, that it acted as agent for and on behalf of Fintech
Underwriting (Pty) Ltd.
[6] The defendant pleads that in the result any rights that the
plaintiff may have acquired from Tsamaya as cessionary, which is
denied, the plaintiff acquired its right as agent for and on behalf
of Fintech and claims that the plaintiff as agent has no entitlement
to institute proceedings for and on behalf of its principal Fintech.
[7] The question to be addressed is whether the Plaintiff could sue
in its own name.
[8] The master rental agreement between Tsamaya and the defendant was
common cause between the parties. It was signed on 23 October
2008
and Mr Groenewald acted on behalf of the plaintiff. The agreement
itself makes provision for the possibility of a cession
in clause 14
thereof:
‘
Entitled, without notice
to the user to cede, delegate, transfer, pledge and or hypothec any
of its right or obligations under this
agreement.’
[9] It is that document which the defendant signed. It is common
cause that the defendant terminated the rental agreement and
requested the equipment to be removed. The defendant also pleaded
that the agreement was fraudulently completed. However it abandoned
this defence. The plaintiff contends that this conduct amounted to a
repudiation which repudiation it accepted and it cancelled
the rental
agreement, claimed arrear rental up until cancellation and liquidated
damages from date of cancellation up to the expiry
of the minimum
period of the rental agreement.
[10] The plaintiff presented the evidence of three witnesses, Mr
Groenewald who was the signatory to the master rental agreement,
Ms
Janine Beckman and Ms Tracy Bekker. The defendant did not lead any
evidence. The plaintiff contends that Mr Smith, whilst
duly
authorised to represent the defendant, appended his signature to the
master rental agreement containing the terms and conditions
of the
agreement as well as the debit order authorisation and also the
certificate of acceptances, annexure B1 to 3 of the particulars
of
claim.
[11] The rental agreement makes reference to the period of lease
being 60 months that it would expire in October 2013. The authority
of Mr Groenewald and Mr Stephens to conclude the main cession
agreement on behalf of the plaintiff was not disputed. It is also
common cause that the defendant made rental payments for the period
November 2008 until February 2011.
[12] The defendant gave 90 days written notice of termination of the
rental agreement on 29 November 2010 and the plaintiff cancelled
the
rental agreement during December 2011. It is also common cause that
the defendant on several occasions, during the period in
question,
requested the plaintiff to collect the equipment, which was duly done
on 25 July 2012.
[13] It is also not disputed that the equipment was valued at
R4 500.00 subsequent to their upliftment and that the net amount
of R12 312.00 was received for the equipment at the auction.
[14] The validity of the rental agreement of course forms an
important feature in the adjudication of this matter. The defendant’s
claim that the conclusion of the master rental agreement by Tsamaya,
represented by Mr JJ Groenewald, and that the rights of the
master
rental agreement acquired by the plaintiff from Tsamaya did not give
the plaintiff the right to sue because the plaintiff’s
principal was Fintech.
[15] However, it was common cause, according to the defendant that
the plaintiff's first witness, Mr Groenewald, at the time
of the
conclusion of the rental agreement, was, amongst others, employed by
Fintech as a manager and in particular as head of Sales
Administration. Mr Groenewald testified that the front page of
the master rental agreement had been signed on his instruction
by
one, Mr Gerhard Venter who was also an employee of Fintech and
according to the plaintiff's second witness Ms Beckman she acted
as
Mr Groenewald’s second in charge.
[16] The defendant contends that because Mr Groenewald testified
that he had signed the front page of the master rental agreement
in
the block which was to be completed by Tsamaya Asset Finance (Pty)
Ltd, he was acting in his capacity as head of Sales Administration
of
Fintech Underwriting. Mr Groenewald conceded that he never had
any authority to conclude agreements on behalf of Tsamaya
and could
not have represented Tsamaya in the conclusion of the master rental
agreement, He asserted that paragraph 4 of the particulars
of claim
are incorrect.
[17] The defendant in its heads of argument sets out a timeline which
demonstrates that Mr Groenewald could not have been
acting on
behalf of Tsamaya, when Tsamaya presented the invoice to Fintech
Underwriting, it was Fintech Underwriting that paid
Tsamaya for the
equipment. The defendant contends that according to the timeline when
Fintech on 22 October 2008 paid the Tsamaya
invoice, it, Fintech,
acquired ownership of the equipment and therefore it was fatally
defective for the plaintiff to sue in its
name.
[18] It is the Plaintiff’s case that the concession by
Groenewald that there was no need for a cession of agreement as
Fintech
was already the owner, is incorrect, and that a legal
concession by a lay person cannot be read to be correct in law. In
other
words, a concession incorrectly made cannot stand and in this
regard see the case of
Matatiele Municipality & Others v
President of the RSA & Others
2006(5) SA 47 CC para [67]
Ngcobo J stated’
It is
trite that this Court is not bound by a legal concession if it
considers the concession to be wrong in law
’
[19] It is common cause that there was a valid cession of the rental
agreement between Tsamaya and the plaintiff. It is also common
cause
that there was no discounting letter delivered by the plaintiff to
Tsamaya and that the main cession agreement entered into
between
Tsamaya and the plaintiff, was deviated from without any compliance
of the formalities described in clause 11.4 of the
main cession
agreement. The plaintiff contends that such informal deviation was
permissible and this did not render the cession
agreement
ineffective.
[20] It is trite law that a cession is a bilateral juristic act
whereby a right, a contractual right is transferred by agreement
between the cedent and the cessionary. This can be compared to the
sale of the goodwill in the business. In
Botha
& another v Carapax Shadeports (Pty) Ltd
[1991] ZASCA 134
;
1992 (1)
SA 202
(A) pg 214. Botha JA stated ‘
When
he sells the goodwill of the business, the merx embraces that
contractual right.’
[21] The cession therefore embraces the contractual right to sue. It
is common cause that a cession, to be effective, does not
require the
prior consent, knowledge, concurrence or cooperation of the debtor.
The debtor has no right of refusal/veto or to intervene
in the
cession agreement unless there is prejudice. It is effective
irrespective of the debtor’s attitude as the debtor is
not
actively engaged in the process.
[22] The question for determination here is whether the defendant had
sufficient interest in the cession so as to justify the defence
taken
on the cession. There was no prejudice alleged or that the cession
was to the defendant’s detriment or that lack of
compliance
with clause 11(4) of the cession agreement resulted in prejudice. The
formalities can be waived by the party, or the
party in whose favour
it is stipulated. In this regard reference was made to the cases of
Hillock and Another v Hilsage Investments (Pty) Ltd
1975
(1) SA 508
(A) Muller JA, Aussenkehr Farms (Pty) Ltd v Trio Transport
CC
2002 (4) SA 483
(SCA) Lewis JA stated ‘
that
the position could be different where a third party reasonably relied
on the apparent terms of an agreement between others
to his or her
detriment, such that an estoppel arose, but this was not the case
…”
[23] In
Letseng Diamonds Ltd v JCI Ltd & others; Trinity Asset
Management (Pty) Ltd & others v Investec Bank Ltd & Others
2007 (5) SA 564
(W) in applying the correct principle in relation to
whether a third part has locus standi in relation to a declaration of
rights
it was held that: (1) applicant must have a direct interest in
subject-matter of the litigation; and not an indirect financial
interest in validity of agreements and therefore lacks locus standi
to bring applications. In an unreported case in 2013
Corporate
Finance Solutions (Pty) Ltd v Dwergieland Kleuterskool & Others
,
a decision of the full bench it was held:
‘
The respondent’s
contention since the procedure had not been followed, there can be no
valid and binding cession cannot be
entertained. Respondent’s
not having been parties to the cession agreement cannot raise this as
a defence, especially when
the parties to the agreement do not and in
fact, insist that a valid and binding cession was concluded.’
[24] In relation to the special plea raised by the defendant as to
the plaintiff's
locus standi
, it was submitted by the
plaintiff that it was entitled to act as an agent for the undisclosed
principal being Fintech but it had
already acquired rights in terms
of the cession. The plaintiff asserts that it is a party to the main
cession agreement in its
own name and not in its capacity as agent.
There is also no indication that Tsamaya was aware of the fact that
the plaintiff acted
on behalf of Fintech when entering into the main
cession agreement. The fact that Tsamaya subsequently invoiced
Fintech for the
equipment, according to the plaintiff is of no
consequence.
[25] The subsequent discovery of an undisclosed principal does not
alter the position to that of a named or a disclosed principal.
The
plaintiff had already acquired the rights in terms of the cession. It
is also common cause that the defendant, on a monthly
basis, paid the
debit order to Fintech as a beneficiary. It is not disputed that
Fintech acted as an administrative collecting
agent on behalf of the
plaintiff.
[26] The plaintiff explains that it did not institute action against
the defendant on behalf of Fintech but in its own name and
did so
based upon its reliance on the main cession agreement. It also
contends that the fact that it acted as an undisclosed agent
for
Fintech in taking cession of the written rental agreement, is
irrelevant to the rights of the defendant. The question is whether
the plaintiff can maintain the action where it acted as agent on
behalf of an undisclosed principle.
[27] Reliance was placed on the case of
Continental Illinois
National Bank and Trust Co of Chicago v Greek Seamen's Pension
Fund
1989 (2) SA 515
(D) at 538 to 539 where Thirion J held
that the agent would however be entitled to maintain an action on a
contract in respect
of which he had acquired rights and he emphasises
that an agent has a right to sue in his own name on a contract where
the contract
was made with him personally or where he has acquired a
special interest in terms of the contract. Where a right to sue is
not
conferred on the agent in express terms, the terms of the agent's
authority have to be examined to ascertain whether the right to
sue
is implied in it.
[28] Reliance was also placed on the principle that an agent can sue
on behalf of an undisclosed principal. In the case of
DB Botha v
Geozie t/a Paragon Fisheries
, this involved the purchase of a
fast food business conducted in Queenstown in the Eastern Cape and
where the seller had sued for
the purchase price which the buyer had
refused to pay. The issue argued before that court, was whether the
appellant acting as
agent for an undisclosed principal was entitled
to sue a third party in his own name. In this regard, the argument
was upheld and
reference was made to LAWSA, 2
nd
Edition,
by Joubert paragraphs 178 and 181 as follows, I quote form LAWSA 2
nd
:
ed
‘
In a standard situation
of representation, the representative acquires no rights and incurs
no liabilities from the contract concluded
by him or her on behalf of
his or her principal. The rights and obligations come into being
between the principal and the third
party.
In an undisclosed-principal
situation, however, the intermediary and the third person create
vincula juris between themselves by
the contract concluded in their
own name, but also, in alternative vinculum
juris
between the undisclosed principal and the third person.
At paragraph 181:
“
The contract is concluded
between the third person and the intermediary acting in his or in her
own name, the third person is in
terms of the contract liable to the
intermediary, he or she cannot avoid liability to the intermediary on
the ground that he or
she is liable to the undisclosed principal
unless and until the undisclosed principal elects to hold him or her
liable.’
[29] It is for that reason therefore, based on the principles
emanating from the cases referred to, that an agent can act on behalf
of an undisclosed principal where as in this case it acquired rights
in terms of the cession agreement and sue in its own name.
The
plaintiff also refers to the fact that it is not the defendant’s
case that the plaintiff could not act as an agent for
an undisclosed
principal because the identity of the entity taking cession of the
rental agreement was not a material factor for
the defendant. It made
no difference to which entity rental payments were made, it had the
use and enjoyment of the equipment and
the identity of the owner of
the equipment was not material The defendant was also not deprived of
any of its defences as a result
of the cession or the existence of an
undisclosed principal.
[30] A further question to be addressed is that of repudiation. Did
the defendant repudiate the agreement by terminating same prior
to
the five year period reflected on the master rental agreement? It was
put to the plaintiff's witnesses that the agreement was
for 30 months
and not 60 months, however, the question of fraud was not persisted
with, fraud having been mentioned that the plaintiff
had failed, or
the person acting on behalf of the plaintiff, had failed to record
that the agreement was only to be for 30 months.
[31] Clearly the defendant repudiated the agreement. It did so before
the termination period, it stopped paying and invited the
plaintiff
to come and fetch the equipment, which it ultimately did. The
defendant has submitted that if the court were to find
that the
plaintiff does have
locus standi
, then the question of damages
has not been correctly computed or quantified by the plaintiff.
[32] In the light of the fact that I do find that the plaintiff has
locus standi
based on the factual matrix and cases referred to
above, I now have to assess whether the plaintiff’s damages
have been properly
quantified. On behalf of the defendant it was
submitted that the rental agreement does not make provision for
transfer of ownership
by the plaintiff to the defendant and that the
damages are in fact arrear rentals and for loss or rentals remaining
for the unexpired
period. It was submitted on behalf of the defendant
that the onus rests on the plaintiff to show the amount that should
be credited
to the defendant because of the reversion to the
plaintiff of the right to sublet the equipment and that there is no
onus on the
defendant to establish the value of the reversionary
right as part of its onus of proving that the plaintiff had failed to
mitigate
its loss.
[33] The evidence in this regard was clear, I have already referred
to the initial estimate of the value of the goods returned
as being
R4 500.00 and the goods later being sold for R12 000.00. In the
result, it seems to me, that in the absence of testimony
on behalf of
the defendant and in its cross-examination of the plaintiff's
witnesses, there was nothing to demonstrate that the
plaintiff had
done nothing to mitigate its loss. It is quite clear that the
equipment was sold in excess of the initial valuation.
[34] The defendant has also submitted that because of the non-use of
the three copiers and it’s tender of return to Fintech
and the
fact that Fintech only collected the equipment some 16 months later,
this was a factor that should be taken into account
in the mitigation
of its damages. The evidence of Ms Beckman of the plaintiff was
clear, that the plaintiff does not mitigate its
loss by re-renting
the copiers to an alternative lessor, it simply sells the equipment.
[35] It is the defendant’s case therefore that the plaintiff
has not mitigated its damages and that it has been unreasonable
in
not re-renting the copiers. Ms Beckman was quite clear that
prospective customers are not keen to take over and rent second
hand
copiers. The defendant also points to the fact that the delay meant
that the equipment could have been sold some 16 months
prior, that is
April 2011 and from that date the plaintiff would have had no claim
for future rentals and the damages would have
been computed quite
differently.
[36] The defendant had ample opportunity to cross-examine the
plaintiff's witnesses in this regard and the submission therefore
that it was entirely up to the plaintiff to come and collect the
equipment timeously is unreasonable in my view. The defendant
itself
could have delivered the equipment to Fintech, but it did not do so,
therefore the submission that the defendant should
only be liable for
two months in arrears is without substance.
[37] It was quite clear from the agreement and having abandoned the
initial defence of fraud it was up to the defendants to claim
that
the plaintiff should have acted differently within that 60 month
period. It is the defendant’s case that the plaintiff
has
recovered an asset and that would not be an appropriate calculation
of the damages.
[38] It is the defendant’s case that the calculation of damages
is limited to the agreement of the rental agreement and that,
because
it was only in arrears in respect of two months, the plaintiff cannot
now submit that the value of the equipment is the
R12 000.00-odd that
it has claimed.
[39] In my view, the calculation done by the plaintiff is accurate.
The plaintiff did what it could to mitigate its loss, its loss
was
not simply tied or connected to the loss or rental, the value of the
equipment is something which the court must take into
account.
[40] The defendant repudiated the agreement and the plaintiff was
entitled to cancel, the calculation and the amount claimed by
the
plaintiff, is R510 605.91. The summons was served on 9 May 2013, the
agreement makes provision for costs on the attorney client
scale
should there be any litigation as per clause 16 of the rental
agreement. In the result I make the following order:
The defendant is ordered to pay the amount or R510 605.91;
Interest on the said sum calculated at 15.50% per annum from date of
service of summons, being 9 May 2013 to date of final payment;
Costs of suit on the attorney and client scale;
The conditional counterclaim to be dismissed with costs.
There is the question of the first third party. It submitted that it
should not have been brought to court. No case was made out
against
it. It was not even mentioned in the plaintiff's evidence and had to
sit through the trial at the instance of the plaintiff.
It sought
costs for its attendance at court. In Gr
oss v Commercial Union
Assurance Company Limited & Another
1974(1) SA 630 costs are
a discretionary matter in relation to the costs of a third party.
There was nothing to suggest that it
was reasonable to bring the
first third party to court. A costs order in the circumstances of
this case is justified. The first
third party was indeed represented.
The order that I make in that regard is the following:
The plaintiff is ordered to pay the first third party’s costs
of this trial action including the days when it attended
court.
M. VICTOR
Judge of the High Court
Gauteng Local Division