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[2013] ZASCA 106
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Rossouw NO and Another v Land and Agricultural Development Bank of South Africa (794/12) [2013] ZASCA 106; [2013] 4 All SA 318 (SCA) (13 September 2013)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 794/12
In
the matter between Reportable
GERHARDUS FRANCOIS ROSSOUW NO
...............................
FIRST
APPELLANT
(In his capacity as trustee of the SJP
Family Trust)
ESTELLE KATHLEEN VAN DER MERWE NO
....................
SECOND APPELLANT
(In her capacity as trustee of the SJP
Family Trust)
and
LAND AND AGRICULTURAL DEVELOPMENT
BANK OF SOUTH AFRICA
................................................................
RESPONDENT
Neutral citation:
Rossouw NO v Land and
Agricultural Development Bank of South Africa
(794/12)
[2013]
ZASCA 106
(13 September 2013)
Coram
: Brand, Leach and Majiedt JJA, Van der
Merwe and Meyer AJJA
Heard: 22 August 2013
Delivered: 13 September 2013
Summary: Sale agreement – requirements of the
actio ad exhibendum
proved – estoppel not
available as a cause of action in our law
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
North Gauteng High Court,
Pretoria (Hiemstra AJ, sitting as court of first instance)
1. The appeal succeeds with costs.
2. The order of the court below is set aside and
substituted with the following:
“
The respondents are ordered to
pay:
(a) The sum of R1 026 000.00 to the applicant.
(b) Interest on the sum of R1 026 000.00 at
15.5% per annum from 22 June 2010, being the date on which the
application
was launched, to date of payment.
(c) The applicant’s costs”.
______________________________________________________________
JUDGMENT
______________________________________________________________
MAJIEDT JA (BRAND, LEACH JA and VAN DER MERWE and
MEYER AJJA concurring):
[1] This appeal concerns a vindicatory claim and, in the
alternative, a claim in terms of the
actio ad exhibendum
in
respect of ten centre pivots and the appurtenances thereto
(collectively the pivots). The respondent, the Land and Agricultural
Development Bank of South Africa (the Bank), was granted an order in
the North Gauteng High Court Pretoria (Hiemstra AJ) against
the SJP
Family Trust (the Trust) duly represented by its trustees, the
appellants, to pay the amount of R1 710 000 in
terms of an
instalment sale agreement in respect of the pivots. The Bank’s
claim was ultimately upheld on the alternative
basis of the
actio
ad exhibendum
. The appeal is before us with leave of this court.
[2] Central to a determination of the issues are the
questions of ownership and possession of the pivots. The Bank lent
and advanced
the sum of R2 716 737.55 to the Trust for the
purchase of irrigation equipment, including the pivots. They were
purchased
by the Bank from an agricultural equipment supplier, Andrag
Agrico (Pty) Ltd (Andrag) for on-sale to the Trust. The written
agreement
of sale between the Bank and Andrag stipulated that payment
of the purchase price was conditional upon the Bank being furnished
with two written declarations, one on behalf of the Trust and the
other by an Andrag technician. The declaration had to confirm
that
the pivots had been delivered to the Trust, had been installed and
were fully functional. The declarations were purportedly
signed on 16
November 2004 by Mr Paul van den Berg, an Andrag technician, and by
Mr Cornelis van der Merwe on behalf of the Trust
as its only trustee
at the time. The second appellant is Mr Van der Merwe’s spouse.
Van den Berg handed the signed declarations
to the Bank on the date
of their purported signature, whereupon the Bank paid the full
purchase price of the ten pivots to Andrag.
Unbeknown to the Bank,
however, only six pivots were delivered to the Trust. In the
subsequent instalment sale agreement between
the Bank and the Trust,
the Bank had reserved ownership of the pivots until the purchase
price had been paid in full by the Trust.
Payment had to be made in
ten annual instalments commencing on 15 September 2005. This is a
typical tripartite agreement where
a financier (the Bank) paid the
supplier / seller (Andrag) for the goods which were delivered to the
debtor / possessor (the Trust).
The financier (the Bank) remained
owner until the full purchase price had been paid. The Trust was
therefore holding the six pivots
delivered to it on behalf of the
true owner, the Bank.
1
[3] The Trust failed to pay any instalments and the Bank
consequently applied to the court below for an interdict prohibiting
the
Trust from disposing of the pivots, and for a mandamus directing
the Trust to deliver them to the Bank, alternatively in the event
that the Trust had disposed of the pivots, for payment of their
value. The Bank was compelled to proceed on the alternative claim
since it became common cause that the Trust had sold the six pivots
delivered to it to a third party for R171 000 each. The
order
granted in the court below for payment of the sum of R1 710 000
is computed on the market value of ten pivots,
based on the
aforementioned sale price.
[4] In order to succeed with the
actio ad exhibendum,
the Bank had to prove the following requirements:
that it was the owner of the pivots at the time of its
disposal by the
Trust;
that the Trust had been in possession of the pivots
when it disposed of them;
that the Trust acted intentionally in that it had
knowledge of the Bank’s ownership or its claim to ownership
when it parted
with possession of the pivots;
that the Bank would be entitled to delictual damages as
well as the extent thereof (taking into account
inter
alia
the value of the pivots when the Trust
had sold them).
2
[5] The primary contention by the appellants is that
ownership has not passed to the Bank in respect of the ten pivots for
which
it was held liable by the court a quo. As to four of them their
contention was that these were never delivered. I shall come to
that.
As to the six that were delivered to the Trust the appellants
contended that, despite this delivery, ownership had not passed
to
the Bank. This contention is based in the main on annexure ‘G’
to the founding affidavit, which is a letter dated
28 December 2004
from Andrag’s attorneys to the Trust’s attorney. The
following salient facts emerged in this letter,
namely (a) that Van
den Berg and Van der Merwe had allegedly connived in perpetration
fraud against the Bank by inflating the purchase
price of the ten
pivots by approximately R900 000; (b) that Van den Berg had no
authority to conclude a contract of this dishonest
kind on Andrag’s
behalf with the Trust; and (c) that Andrag consequently regarded the
contract as null and void. A brief
recital of the relevant facts is
required to contextualise this letter and to deal with this
contention. Before I do so, it bears
emphasis that on the papers the
parties were
ad idem
that
the instalment sale agreement between the Bank and the Trust was
valid. The primary thrust of the appellants’ attack
was the
alleged invalidity of the sale agreement between the Bank and Andrag.
[6] As stated, the Bank was blissfully unaware of the
non-delivery of four of the pivots which remained in Andrag’s
possession.
It was also unaware that the ten pivots’ price had
been inflated. The Bank furthermore relied on the signed
declarations,
as required in its contract with Andrag, to effect
payment of the pivots as invoiced by Andrag. A peculiar feature of
the transaction
is that Andrag, and not the Trust, paid the 20 per
cent deposit and the VAT in respect of the goods. Andrag’s
attorneys averred
in annexure ‘G’ that this was one of
the facets of the alleged fraud against the Bank and that the monies
for the deposit
and the VAT formed part of the inflated portion of
the purchase price. On 24 March 2006 the Bank (as it was entitled to
do), in
a letter to the Trust terminated the instalment sale
agreement and demanded the return of the pivots.
3
In the response and in a letter written by the Trust’s
attorney, Mr Joop Lewies, it was stated that the Trust had already
previously accepted the Bank’s repudiation, that the Trust
repeats its previous tender to return the six pivots. Reference
was
also made to a previous letter in which the Trust’s damages of
about R30 million, allegedly suffered through the Bank’s
negligence, had been set out.
[7] The matter remained in abeyance, for reasons
unknown, until the Bank’s attorneys wrote to the Trust’s
attorney on
15 February 2010 to enquire about an advertisement in the
Landbou Weekblad of 15 January 2010 in which pivots were advertised
for
sale with Van der Merwe’s mobile phone number as the
contact number. An undertaking was sought that the pivots in respect
of which the Bank asserted its ownership would not be sold. If they
had been sold, full details were requested of the purchaser
and the
pivots’ present location. This letter met with the response by
attorney Lewies by letter dated 17 February 2010 that
the Bank had
lost its ownership of the pivots through prescription, that ownership
had passed to the Trust and that it was therefore
fully entitled to
deal with the pivots as it deemed fit. It appears from the judgment
of the court below that this contention was
not pursued in argument,
although it was not abandoned. It was not raised at all in this court
and nothing more needs to be said
about it. As stated, counsel chose
instead to develop an argument that the Bank had never acquired
ownership of the pivots, based
on the abovementioned contents of
annexure ‘G’. Counsel was furthermore driven to concede
during argument that the
Trust had never acquired ownership of the
six pivots in its possession.
[8] Closely related to annexure ‘G’, and an
important backdrop thereto, is annexure ‘E2’, the
declaration
purportedly signed by Van den Berg and Van der Merwe on
16 November 2004 and handed to the Bank on that date. The appellants’
case is that Van den Berg perpetrated the fraud against the Bank and
that Van der Merwe was not party to it. It was averred in
the
answering affidavit that Van der Merwe had on Van den Berg’s
insistence signed a blank declaration on 15 October 2004.
This blank
declaration was forwarded to Van den Berg, together with an
explanatory note by attorney Lewies (annexure ‘E1’)
confirming that the declaration had been signed provisionally only
and that it would be completed and delivered to the Bank once
the
pivots had been installed and were fully functional. A blank,
unsigned declaration (annexure ‘E3’) which had to
be
filled in by an Andrag technician certifying that the pivots had been
installed and were fully functional, also accompanied
annexures ‘E1’
and ‘E2’. The appellants impute fraud on the part of Van
den Berg, suggesting that he must
have completed and signed annexure
‘E2’ and dated it 16 November 2004 as if Van der Merwe
had signed the declaration
on that date.
[9] It is plain that on the appellants’ own case
the Trust had never become the owner of the six pivots that it sold
to a
third party. It is not disputed that the six pivots had been in
its possession when they were alienated. The Bank had reserved
ownership of the pivots until due fulfilment by the Trust of its
contractual obligations in respect of payment for the goods. It
is
common cause that not a single payment had been made. The Trust’s
case in respect of the disputed ownership must therefore
stand or
fall on annexure ‘G’ above. For the reasons that follow I
am of the view that the Bank has succeeded in establishing
ownership.
[10] Firstly, if there had indeed been collusion between
Van den Berg and Van der Merwe to defraud the Bank, it is trite that
the
agreement between it and Andrag is merely voidable at the Bank’s
instance, as the innocent party.
4
The Bank consistently evinced an election to regard the
agreement between it and Andrag as valid and asserted its ownership
of the
pivots in its written demands to the Trust. It was never
denied, nor could it be, that Van den Berg had the requisite
authority
to sell pivots on Andrag’s behalf. What he did not
have, was the authority to act illegally in selling pivots.
Therefore,
whatever is contended in annexure ‘G’ cannot
in law detract from the Bank’s rights of ownership of the
pivots.
Counsel for the Trust sought assistance for his contentions
in this court’s judgment in
Dreyer and
another NNO v AXZS Industries (Pty) Ltd.
5
That reliance is misplaced. If anything, the judgment is
against the Trust’s submissions. Brand JA restated the
requirements
for the valid transfer of ownership of movables as
follows in
Dreyer
:
‘
Otherwise
stated, the validity of transfer of ownership is not dependent on the
validity of the underlying transaction, such as,
in this case, the
contract of sale. . . . Generally speaking, the requirements for the
valid passing of ownership of a movable
thing are: Delivery –
actual or constructive – of the thing by the owner – or
someone duly authorised to act
on his or her behalf – coupled
with a so-called real agreement or ‘saaklike ooreenkoms’,
consisting of the intention
on the part of the transferor to transfer
ownership and the intention on the part of the transferee of
accepting ownership of that
thing. . .’.
6
These requirements have been met in the present matter
and ownership of the six pivots had been transferred from Andrag to
the Bank.
[11] Secondly and moreover, apart from the general
principles outlined above, which are premised on Andrag having been
oblivious
of its employee’s wrongdoing, a completely different
picture emerged in the Bank’s replying affidavit. Pursuant to
investigations into the Trust’s denial in its answering
affidavit of any participation in the alleged fraud, the Bank came
into possession of various items of correspondence between the Trust,
its attorney (Lewies) and Andrag. The exchanges of correspondence
related inter alia to a dispute between Andrag and the Trust over
their sharing of the spoils emanating from the inflated purchase
price and resultant overpayment made by the Bank in respect of the
pivots. This prompted the Bank to appoint a firm of chartered
accountants to conduct a forensic audit. Further investigations
unearthed various electronic mail messages between Van der Merwe
and
Andrag’s managing director, Mr Walter Andrag. These messages
and other documentation reveal an undisclosed contractual
arrangement
between the Trust and Andrag to share in the proceeds from the
overpayment by the Bank. I do not deem it necessary
to elaborate in
great detail about the contents of these messages, suffice to state
that they and the rest of the documents bear
out the conclusion by
the chartered accountants that:
‘
. . .
[the transaction] . . . indicates a situation where the purchaser
(the Trust) and seller (Andrag) have colluded in order to
solicit
excess loan financing from the (Bank) . . . which funding was
intended in the first instance to be utilised by the seller
Andrag to
cover the full actual price of the pivots with the remaining surplus
to be paid over to the purchaser for its own use.’
One of the many damning items of correspondence is a
letter from attorney Joop Lewies to Andrag, dated 26 November 2004,
from which
it is plain that Van der Merwe knew by then that the Bank
had paid the full invoice amount, acting to its detriment on the
fraudulent
misrepresentation contained in ‘E2’ (the
signed declaration), and yet this fact was disclosed only on 30 June
2010
in the answering affidavit. In the same letter the Trust’s
attorney refers to the dispute between the Trust and Andrag regarding
the amount due to the Trust from the proceeds of the Bank’s
overpayment. The attorney makes reference in this regard to the
fact
that ‘your company had undertaken to pay a set amount of
R390 000.00, which amount was reduced
by
agreement
to R369 052.20 (excluding
VAT)’.
7
It is plain from all the documentation that Van der
Merwe was a party to the fraud and that attorney Lewies was, at the
very least,
an active conduit to Van der Merwe and the Trust. This
fortifies the conclusion that the Bank had indeed become the owner of
all
the pivots. I turn to the next element of the
actio
ad exhibendum
, the question of
mala
fides
on the part of the Trust.
[12] The facts set out in the preceding paragraph
plainly demonstrate that the Bank had proved mala fides on the part
of the Trust.
It can hardly be disputed on the evidence before us
that the Trust had full knowledge of the Bank’s ownership of
the pivots
when they were disposed of. To the knowledge of both Van
der Merwe (as sole trustee) and attorney Lewies, the Bank had paid in
full the inflated purchase price as per Andrag’s invoice.
Delivery was made of six of the ten pivots to the Trust, as was
agreed in the instalment sale agreement between the Bank and the
Trust. Full ownership had consequently passed to the Bank, and
Van
der Merwe knew this. But there are further compelling grounds
supporting this finding against the Trust. As set out in para
7
above, the Bank had sought an undertaking from attorney Lewies that
the Trust would not dispose of the pivots. The response was
set out
in para 7 above. Nevertheless, Lewies failed to disclose that the
Trust had, by that time (17 February 2010) disposed of
at least two
of the pivots and he also averred that the Trust could freely deal
with the pivots as it pleased qua owner thereof.
Furthermore the
Trust relied on a legal opinion by senior counsel to the Trust to the
effect that the Bank’s ownership rights
had fallen away through
prescription. Its cause was that it had sold the pivots on a bona
fide reliance on this opinion. The Bank’s
request for a copy of
this legal opinion in order to test the Trust’s bona fides was
refused. In the premises, I am satisfied
that the Bank has proved
mala fides by the Trust in disposing of the pivots
.
[13] The final requirement for the
actio
ad exhibendum
is for the Bank to prove that
it had suffered delictual damages and the extent thereof. It is
self-evident that the Bank has suffered
damages due to the sale of
its six pivots. Regarding the extent of its damages, absent any other
evidence to the contrary, the
market value of the pivots as at the
date of its alienation, becomes a compelling factor. The best
evidence of their market value
is the price at which the Trust had
disposed of them to the third party, namely R171 000 each.
8
On the face of it this transaction appears to have been
conducted at arms length by a willing seller to a willing buyer,
albeit
in the course of an unlawful sale. There is nothing in either
the papers or the argument before us to controvert this. It must
therefore be accepted that the pivots’ market value and the
extent of the Bank’s damages is to be calculated at R171 000
per pivot. The court below, however, erred in ordering the Trust to
pay the sum of R1 710 000 to the Bank, based on a
total of
ten pivots. On the common cause facts the Trust had only received and
unlawfully sold six pivots. Judgment should therefore
have been
granted in the sum of R1 026 000 and the appeal must
succeed to this extent.
[14] Counsel for the Trust contended, albeit without
much vigour, that the Trust had a claim against the Bank for the
costs incurred
consequent to the storage and safekeeping of the six
pivots, which the Trust was entitled to set off against the Bank’s
claim.
Reliance was misguidedly placed on
Paarlberg
Motors (Pty) Ltd t/a Paarlberg BMW v Henning.
9
That case is distinguishable on the facts – there
the seller was in breach and had declined the purchaser’s
tender to
return the merx and the court consequently held that the
purchaser was entitled to warehouse the merx at the seller’s
risk
and expense. That is not the case here. Moreover, and in any
event, storage costs (which, as an aside, defies credulity in respect
of the amounts allegedly spent by the Trust) is an unliquidated
claim, incapable of being set off against the Bank’s claim.
[15] There was a valiant, completely misguided attempt
to establish liability on the part of the Trust for the additional
undelivered
four pivots by relying on a startlingly novel principle
which I shall conveniently refer to as ‘deemed transfer of
ownership
to the Bank through estoppel’. The argument in
respect of this novel concept failed to get out of the starting
blocks. It
is well established in our law that estoppel is a defence
and not a cause of action. Junior counsel for the Bank sought to
transform
it from a shield to a sword by relying on annexure ‘E2’,
the signed declaration. As far as I could discern, the argument
went
along these lines – Van den Berg was the Trust’s agent
and he was clothed with ostensible authority; alternatively
Van der
Merwe had provided the ‘scenic apparatus’ that enabled
Van den Berg to commit the fraud on the Bank; and consequently
‘considerations of policy and fairness require that the Trust
be held to the contents and consequences’ of the signed
declaration. Reference was made to a number of authorities, including
this court’s recent judgment in
Bester
NO v Schmidt Bou Ontwikkelings
10
.
As is the case with all the other authorities
cited
in the heads of argument, this case was one in which estoppel was
invoked as a defence. There is not a single authority in
which it was
ever employed as a cause of action. In the end counsel abandoned the
argument, which was in any case stillborn.
[16] I deem it necessary to express my disquiet about
the manner in which the Bank, funded by taxpayers’ money, went
about
the litigation in this matter. Apart from the lengthy delays in
enforcing its rights of ownership, it shunned an offer from Andrag
which would have resulted in a considerably more expeditious and less
costly resolution of the dispute. I have already shown why
annexure
‘G’ does not assist the Trust in its denial that
ownership of the pivots had passed from Andrag to the Bank.
But that
letter, written by Andrag’s attorneys to attorney Lewies, also
contained a sensible proposal to resolve the matter.
This proposal
entailed the repayment by Andrag of all amounts received from the
Bank, that Andrag would then take cession of the
Bank’s right
of action against the Trust and that the Trust would return the six
pivots while Andrag would retain the four
undelivered pivots. This
proposal was repeated in a letter from Andrag’s attorneys to
the Bank’s attorneys, dated 16
March 2005 (it will be recalled
that annexure ‘G’ is dated 28 December 2004). The Bank
declined, for reasons unknown,
to accept this sensible course of
action. This occurred long before the pivots were sold by the Trust
during early 2010. This perplexing
attitude adopted by the Bank not
only resulted in drawn out and costly litigation, but is also
inimical to the objects of a commercial
enterprise such as the Bank.
[17] Lastly, there is the question of costs. The Trust
has succeeded on appeal in respect of the reduction of the amount of
the
judgment granted. But it ran its case below on an all or nothing
basis advancing several spurious defences. If it had conducted
its
case on the basis that four pivots had in fact never been in its
possession and that the Bank is not entitled to judgment in
a sum
equal to ten pivots, it would have been a much simpler case. I am of
the view that, in the premises, the costs of only one
counsel is
warranted on appeal. The Bank was compelled to assert its ownership
rights by bringing the application in the court
below and is
therefore entitled to its costs.
[18] In the premises, the following order is made:
1. The appeal succeeds with costs.
2. The order of the court below is set aside and
substituted with the following:
“
The respondents are ordered to
pay:
(a) The sum of R1 026 000.00 to the applicant.
(b) Interest on the sum of R1 026 000.00 at
15.5% per annum from 22 June 2010, being the date on which the
application
was launched, to date of payment.
(c) The applicant’s costs”.
________________________
S A MAJIEDT
JUDGE OF APPEAL
APPEARANCES
For Appellant: T Strydom SC (with J J Botha)
Instructed by:
Joop Lewies Incorporated, Pretoria
Vermaak & Dennis Attorneys, Bloemfontein
For Respondent: N Kades SC (with D Goodenough)
Instructed by:
Gildenhuys Malatji Incorporated, Pretoria
Honey Attorneys, Bloemfontein
1
See
generally:
Air-kel (Edms) Bpk h/a
Merkel Motors v Bodenstein
1980 (3) SA
917
(A) at 923G-H.
2
See:
Vulcan Rubber Works (Pty) Ltd v South
African Railways and Harbours
1958 (3)
SA 285
(A) at 289A – B.
3
The
agreement stipulated in clause 10.2 that in the event of the Trust
failing to pay any instalment when due, the bank has the
right to
cancel the agreement and to claim the return of the goods.
4
See,
generally, Van der Merwe, Van Huyssteen, MFB Reinecke and GF Lubbe,
Contract General Principles
4
th
ed (2012) at 87.
5
Dreyer
and another NNO v AXZS Industries (Pty) Ltd
2006
(5) SA 548
(SCA).
6
Ibid
para 17.
7
Loosely
translated; the underlining is mine.
8
Philip
Robinson Motors (Pty) Ltd v N M Dada (Pty) Ltd
1975
(2) SA 420
(A) at 428H-429E.
9
Paarlberg
Motors (Pty) Ltd t/a Paarlberg BMW v Henning
2000
(1) SA 981
(C).
10
Bester
NO v Schmidt Bou Ontwikkelings CC
2013
(1) SA 125
(SCA). Reliance was placed on paras 21 and 22 of the
judgment.