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[2010] ZASCA 121
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Singh v BMW Financial Services (SA) (Pty) Ltd and Another (546/09) [2010] ZASCA 121; [2011] 2 All SA 185 (SCA) (30 September 2010)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 546/09
In
the matter between:
KHOOSIAL SINGH
.......................................................................
.Appellant
v
BMW FINANCIAL SERVICES (SA) (PTY)
LTD
...........................
First
Respondent
SMG
AUTO DURBAN (SA) (PTY) LTD
........................................
Second
Respondent
Neutral citation:
Singh v
BMW Financial Services
(546/2009)
[2010] ZASCA 121
(30 September
2010).
Coram:
Mpati P, Cloete,
Cachalia, Mhlantla JJA, Bertelsmann AJA
Heard:
13 September 2010
Delivered: 30 September 2010
Summary:
Sale Agreement
providing for motor vehicle to have a ‘year of registration
2006’ – whether an essential term of
the contract –
Where an order for restitution requires a seller to repay to the
buyer the instalment payments made under
a sale agreement, mora
interest is only payable on those instalments paid pursuant to a
legal obligation.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
KwaZulu-Natal
High Court, Pietermaritzburg (Niles-Dunér, K. Pillay JJ
and Lopes AJ sitting as full court).
The following order is made:
1. The appeal is upheld with costs.
2. The order of the full court is set
aside, and the following order is substituted:
‘
2.1 Save for
the costs orders in paras 3, 4, 5 and 6, the order of the court below
is set aside.
2.2 The agreement between the
applicant and the first respondent is declared to be cancelled;
2.3 The applicant is directed to
return to the first respondent the BMW vehicle currently in his
possession bearing registration
letters and numbers ND 595 676, by
delivering it to the second respondent, against payment in terms of
paragraph 2.4.
2.4 The first respondent is directed
to:
2.4.1 repay to the applicant the sum
of R236 653.81, being the initial payment the applicant made to it in
terms of the agreement
together with interest at the rate of 15,5 per
cent per annum from 3 May 2007 to date of payment;
2.4.2 repay to the applicant the 16
instalments totalling R127 552.11 paid to it before 3 May 2007
in terms of the agreement
together with interest at the rate of 15,5
per cent per annum from 3 May 2007 to date of payment;
2.4.3 repay to the applicant all
instalments paid by the applicant to it in terms of the agreement
after 3 May 2007, together with
interest at 15,5 per cent per annum
from the date of this judgment to the date of payment;
2.5 The first and second respondents
are ordered jointly and severally to pay the costs of the appeal.’
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA (Mpati P, Cloete, Mhlantla
JJA, Bertelsmann AJA concurring):
[1] This appeal concerns a claim for
restitution of monies paid and goods delivered under an instalment
sale agreement. The dispute
arose when the appellant, Mr Khoosial
Singh, decided to buy a new BMW X5 4.41 automatic motor vehicle,
which he had seen on
display at the premises of the second
respondent, a dealership trading as SMG Auto Durban (Pty) Ltd (‘SMG’)
in December
2005. He agreed with a sales-representative at SMG that
the vehicle would be ‘first registered’ in 2006, and was
led
to believe that the process of registering the vehicle would
happen in January 2006. When the vehicle was delivered to Mr Singh,
it transpired that it had previously been registered – more
than once – in 2005. Thus began the quarrel between the
parties.
[2] The purchase price of the vehicle
was agreed to be R609 850. Mr Singh paid a deposit of R236 653.81,
leaving a balance of some
R373 000. To finance the balance Mr Singh
entered into an instalment sale agreement with the first respondent,
BMW Financial Services
(Pty) Ltd (‘BMW’), which has its
place of business in Midrand, Gauteng. The document embodying the
agreement was completed
by the sales representative at SMG and Mr
Singh signed it on 22 December 2005. The agreement specified, as
agreements of this
nature invariably do, that the finance house would
retain ownership of the vehicle until Mr Singh had met his
obligations, which
included settling the principal debt and finance
charges.
[3] The cover page of the three-page
agreement included a description of the make of the vehicle, details
of the purchase price,
its chassis and engine numbers, registration
(licence) number, and a reference to the ‘year of first
registration 2006’
ie the requirement that it be ‘first
registered’ in 2006.
[4] Clause 2.2 of the agreement
provided that SMG, which acted as the agent for BMW Finance ‘for
the purposes of delivery’,
would deliver the vehicle to
Mr Singh within 30 days of the agreement being signed. On 31
December 2005, nine days after the
agreement was signed, the vehicle
was delivered with temporary licence plates to permit its usage for
21 days pending its registration.
[5] Early in January 2006, SMG
realized that the vehicle had previously been registered in 2005. It
notified Mr Singh of this fact
and undertook to rectify the
‘licensing error’ with the licensing office by reversing
the prior registration. By 21 February
2006, despite Mr Singh
having had several discussions with SMG concerning the problem, it
remained unsolved. Mr Singh decided to
investigate the matter himself
and contacted the Pinetown Registering Authority to this end. He
discovered that the vehicle had
been registered on three previous
occasions in 2005, on one occasion in SMG’s name.
[6] Mr Singh then consulted his
attorney who, on 2 March 2006, wrote to SMG demanding delivery of a
vehicle, which accorded with
the description of the vehicle he had
purchased – in particular one that was registered for the first
time in 2006. On 17
March 2006, after SMG had not responded to the
letter, Mr Singh’s attorney wrote another letter informing
SMG that his
client would not renew the temporary permit, which had
already been renewed several times and was to expire on 20 March
2006. The
letter went on to tender return of the vehicle that had
been delivered to Mr Singh and demanded that it be replaced. Again,
SMG
did not respond. Two further letters to SMG on 1 and 3 April 2006
also failed to elicit a response.
[7] On 5 April 2006 Mr Singh queried
the registration status of the vehicle with the Motor Licensing
Bureau of Windsor Park, Durban.
He established that he had been
registered as the owner as of 4 April 2006 and that the vehicle’s
current licence number
and two previous licence numbers bore no
resemblance to the licence number that appeared on the agreement.
Importantly, a confirmation
certificate issued by the Bureau
reflected the ‘date of liability for first licensing’ as
21 October 2005 and
the vehicle’s status as ‘used’
even though he had purchased it as ‘new’.
[8] On 21 April 2006 SMG informed Mr
Singh that ‘the correct licensing had now been received from
the licensing department’.
This was a reference to a new
Certificate of Registration that SMG had obtained from another
licencing body, the Umhlanga Rocks
Registering Authority. The
certificate reflected Mr Singh as the owner, the ‘date of
liability for first licensing (not
year model)’ and the ‘date
liable for registration’ as 4 April 2006, and the status of the
vehicle as ‘new’,
which contradicted the documentation
that Mr Singh had acquired indicating that the vehicle was used. The
name of the title holder
was given as ‘BMW Finanz (Pty) Ltd
Umhlanga Rock’ (sic) and the vehicle’s previous three
licence numbers, which
I referred to in the previous paragraph, were
also displayed on the certificate.
[9] In summary Mr Singh was unhappy
that:
(a) the vehicle was ‘first
registered’ in 2005 in the name of SMG and other persons
unknown to him before being registered
in his name in 2006;
(b) his investigations had revealed
that the vehicle’s status was ‘used’ whereas the
certificate that SMG had
obtained from the Umhlanga Rocks Registering
Authority stated that the vehicle was ‘new’; and that
(c) the registration (licence) number
on the agreement differed from any of the vehicle’s previous
licence numbers.
[10] He now believed that the vehicle
that had been delivered to him was not the one he had contracted for.
So he instituted proceedings
in the Durban High Court against BMW and
SMG on 11 May 2006 in which he sought an order for specific
performance, namely delivery
of a new BMW X5 4.41 automatic motor
vehicle, first registered in the year 2006, and bearing the same
registration number as reflected
in the sale agreement. On 13 June
2006, to protect itself against any possible wrongdoing on the part
of its agent SMG, BMW
served a third party notice on SMG claiming a
contribution and indemnification from it. SMG did not oppose this
application. On
27 June 2006 BMW filed its answering affidavit. Its
answer to Mr Singh’s claim for specific performance was that he
had contracted
for a ‘used’ vehicle registered in 2006
and this is what he had received. To support its stance that the
vehicle was
a used one it attached an invoice from SMG dated 9
January 2006 indicating as much. And it also denied that it was the
title holder
of the vehicle because the registration certificate
identified the title holder incorrectly as being ‘BMW Finanz
(Pty) Ltd
Umhlanga Rock’ (sic) instead of ‘BMW Financial
Services (Pty) Ltd’, which has its place of business in
Midrand,
Gauteng. In his replying affidavit, which is dated 25 July
2006, Mr Singh expressed astonishment that it was now being alleged
that he had not bought a new vehicle.
[11] On 18 January 2007 SMG filed its
answering affidavit. Regarding the vehicle’s multiple
registrations, it explained that
the vehicle had initially been
erroneously registered in the name of another customer, a Mr Merrick,
on 21 October 2005 with
the licence number ND 164772. When the
error was detected the vehicle was re-registered in its name on 27
October 2005 under a
different licence number. The vehicle remained
part of SMG’s stock. Thereafter one of SMG’s directors
arranged for
the new registration number to be allocated to another
vehicle. This meant that the vehicle had to be re-registered yet
again –
this time under another licence number. It had thus
been registered three times. SMG states that its salesman who sold
the vehicle
to Mr Singh was unaware of this history. In summary SMG’s
defence, in contrast to the stance adopted by BMW, was that the
vehicle was new and registered in 2006 (having been erroneously
registered previously). However, when the matter came to be argued
in
the high court, BMW accepted SMG’s facts and also did not
persist with its denial that it was not the title holder of
the
vehicle.
[12] SMG does not, however, explain
how its invoice to BMW dated 9 January 2006 came to describe the
vehicle as ‘used’.
Nor does it explain the origin of the
licence number on the agreement, which differs from all the vehicle’s
other licence
numbers.
[13] A year after Mr Singh had
instituted proceedings the matter had not yet been heard, and it was
no longer possible for the respondents
to comply with an order for
specific performance. So, Mr Singh amended his notice of motion. He
now sought a declaration that the
agreement was of no force and
effect. He tendered return of the vehicle in his possession and
claimed repayment of the monies he
had paid thus far.
[14] The high court (Rowan AJ) granted
the relief claimed. The learned judge found that having been
registered on three previous
occasions in 2005 the vehicle was
thereafter not capable of being ‘first registered’ in
April 2006. He also held that,
because the registration requirement
was an essential term of the sale agreement, Mr Singh had not
received the vehicle for which
he had contracted. And it followed,
the judge said, that as specific performance was no longer possible,
the appellant was entitled
to cancel the contract and assert his
right to claim restitution. However, the full court, sitting in
Pietermaritzburg, (Niles-Dunér J,
K. Pillay J and
Lopes AJ concurring) reversed that order. Mr Singh now comes on
further appeal with special leave of this
court.
[15] The full court approached the
matter differently to the high court. First, it considered that Mr
Singh had entered into two
contracts: the sale agreement with BMW for
the purchase of the vehicle, and the oral agreement with SMG in terms
of which the latter
undertook to register the vehicle on his behalf.
And since, in its view, the contracts were severable, if there was a
breach of
the oral agreement this had no bearing on the sale
agreement. Accordingly, so it held, there was no legal basis for Mr
Singh to
resile from the sale and to claim restitution. Secondly, it
said that even if it was a term of the contract between Mr Singh and
BMW that the vehicle was to be ‘first registered’ in
2006, the certificate was procured in April of that year. So,
it held
that the obligation had been fulfilled. Thirdly, the date of
registration, said the full court, had no bearing on the vehicle’s
intrinsic characteristics or qualities, but only on its value. It
thus concluded that if the date of first registration was an
essential element of the contract Mr Singh received what he had
contracted for. Finally, it held that even if he did not get what
he
contracted for his claim was limited to one for damages against SMG
for beach (of the second contract) – a claim, said
the court,
he had not and could not make in these proceedings. The full court
accordingly set aside the decision of the high court
and dismissed
the claim. It will be convenient to deal with the issues in the same
sequence as the full court did.
[16] I turn to consider the first
question, whether the requirement that the vehicle was to be ‘first
registered’ in
2006 was a term of the sale agreement, or a
separate severable oral agreement or arrangement between Mr Singh and
SMG. In finding
that there were two agreements the full court
reasoned that even though the description of the vehicle in the sale
agreement included
a reference to the year of registration, once the
vehicle had been delivered to Mr Singh on 31 December 2005,
BMW’s
obligation under the sale agreement came to an end. All
that remained were the registration formalities to be undertaken by
SMG
afterwards. Moreover, said the full court, because the sale
agreement contained a non-variation clause, there was no room to
import
a term relating to the registration of the vehicle into it.
[17] I am unable to agree with the
full court in this respect. It was an express term of the sale
agreement that the vehicle which
SMG was to deliver to Mr Singh
would be ‘first registered’ in 2006. That much is clear
on the face of the contract
itself. As the seller’s agent ‘for
purposes of delivery’ SMG was thus required to deliver a motor
vehicle, which
bore the registration details provided for in the sale
agreement or was capable of being registered so that it would. I
accept
that the delivery of the vehicle and the registration
certificate did not have to take place simultaneously. But this does
not
mean that SMG had a separate agreement with Mr Singh concerning
the delivery of the certificate. SMG remained the seller’s
agent and was obligated to deliver to the buyer the vehicle and
certificate of registration as contemplated by the sale agreement.
There was, therefore, only one agreement – the sale agreement
between Mr Singh and BMW.
[18] As to whether the term was in any
event fulfilled, as the full court found it had been, by the delivery
of the certificate
of registration in April 2006 purporting to show
that the vehicle was registered on 4 April 2006, I also respectfully
disagree.
Apart from the fact that I have serious reservations
regarding the circumstances of how SMG procured this certificate, and
the
three-month delay in doing so, which was not explained, the
certificate does not accord with the common cause facts: The printed
certificate has a standard line, which provides for a ‘date
liable for registration’. The date that was filled in,
in the
space provided, was 4 April 2006. There is no explanation in the
affidavits what the ‘date liable for registration’
refers
to, but whatever it means, it does not indicate that it is the date
of ‘first registration’. That much is clear
as the
certificate allows for the registration date of both new and used
vehicles to be filled in this space. Furthermore, the
certificate
provides for the vehicle’s last three licence numbers to be
filled in. This indicates that a vehicle could have
had previous
licence numbers and, therefore, a prior registration history. The
certificate reveals that the vehicle in question
indeed had three
previous licence numbers, none of which is the number appearing on
the sale agreement.
[19] Mr Marnewick, who appeared for
both respondents, submitted, though somewhat faintly, that the errors
in the registration had
been explained and that the date 4 April 2006
reflected what the parties had agreed. It may be that the initial
registration in
the name of Mr Merrick was done in error. But
the vehicle was thereafter registered twice in 2005 –
‘deliberately
and intentionally’, as Rowan AJ correctly
found in the high court. The certificate does not reflect the true
facts. In the
circumstances it clearly does not comply with the
requirement that the vehicle was to be ‘first registered’
in 2006.
[20] There are two other troubling
aspects arising from the certificate. The status of the vehicle is
described as ‘new’.
But the respondents do not provide
any explanation why the receipt from SMG to BMW on 9 January 2006
indicates that the vehicle
was ‘used’. Indeed in its
answering affidavit BMW relied on the very receipt to support its
assertion that Mr Singh
bought the vehicle as ‘used’. BMW
also initially disavowed the certificate asserting that it was not
the title holder
of the vehicle described therein. For present
purposes, because of the rule that in application proceedings the
facts averred by
the respondents must be accepted, I accept that the
vehicle was purchased as new. But this does not detract from the fact
that
BMW made false assertions, on oath, without verifying the true
facts. Its conduct in this regard was reprehensible.
[21] Once it is found, as I have, that
the ‘year of first registration 2006’ was an essential
term of the contract it
follows that delivery of the vehicle, which
did not meet this requirement, was not in accordance with the terms
of the sale agreement.
BMW’s failure therefore meant that it
was in breach of the contract.
[22] This brings me to the third
issue, whether the breach related to the intrinsic qualities of the
vehicle or, put another way,
went to the root of the contract. If
not, as the full court found, Mr Singh was only entitled to claim
damages to compensate him
for the shortcomings. This would be the
situation where the breach did not affect the substance of what the
buyer expected to receive.
[23] Again, I must respectfully join
issue with the approach of the full court. The view I take of the
contract and of the common
cause facts is that Mr Singh wanted to
purchase and was promised a particular vehicle, which was new, and
which had to be registered
for the first time in 2006 –
probably to secure some financial advantage in the event he decided
to sell the vehicle. It
may be that some would consider the
requirement of ‘first registration’ to be trifling. But
this is immaterial. If
this term was important to the parties, as it
was in this case, BMW was obliged to comply. It failed to and this
entitles Mr Singh
to resile from the contract and to claim
restitution.
[24] After the dispute arose Mr Singh
continued to perform his obligations under the contract by meeting
his instalment payments
as and when they became due under the
agreement. When the matter was argued before us on 13 September
2010 we were informed
that only one instalment remained. He also
tendered return of the vehicle on 17 March 2006. We were told
that it remains unused
and is parked in his garage.
[25] I turn to consider what the
appropriate order should be. The parties agreed that in the event
that the appeal succeeded the
costs orders of the court of first
instance should be reinstated. They also concurred that BMW must
repay all the monies that Mr
Singh has paid in terms of the agreement
against the return by him of the vehicle that was delivered to him.
They, however, disagreed
on what mora interest should be paid.
[26] Ms Julyan, who appeared for Mr
Singh, submitted that he is entitled to repayment of the sum of R236
653.81 being the initial
payment made in terms of the agreement on 22
December 2005 together with interest thereon at the rate of 15,5 per
cent calculated
from this date to the date of payment; and also to
repayment of all instalments paid by Mr Singh, at the same rate of
interest,
calculated from the date of such payment to the date of
repayment. Ms Julyan cites no authority to support her contention. Mr
Singh
initially sought an order for specific performance and
cancelled the agreement only on 3 May 2007. He is, therefore, not
entitled
to mora interest before this date. So, in respect of the
initial payment of R236 653.81 and the 16 instalment payments made
until
then, totalling R127 552.11, mora interest is payable only from
3 May 2007. The total of the two amounts in respect of which mora
interest is payable as from 3 May 2007 is therefore R364 205.92.
[27] Concerning the payments made
after cancellation of the contract, Ms Julyan submitted that Mr
Singh is entitled to interest
on these payments from the date of
payment to the date of repayment. This is, so the submission went,
because the payments were
made ‘as a matter of commercial
reality . . . under protest’. I am not sure what this means but
once the contract had
been cancelled, Mr Singh was under no legal
obligation to continue making instalment payments totalling R460
866.05. He is therefore
only entitled to claim interest on this
amount from the date of this judgment to the date of repayment.
[28] There remain two other matters.
The first relates to whether this court should order the costs of
senior counsel because the
Taxing Masters in the high courts of
Pietermaritzburg and Durban apparently refuse to allow such costs
unless specifically ordered
to. I accept that this matter involved
some complexity and it was prudent for both parties to engage the
services of senior counsel.
But this court does not make orders
stipulating that the costs should include the costs of senior
counsel, and the Uniform Rules
of Court make no provision for such an
order.
[29] The second issue concerns the
condition of the vehicle when it is returned. Mr Marnewick submitted
that an order for the return
of the vehicle presupposes that Mr Singh
is able to restore possession in an undamaged and unused condition,
save for its use before
the agreement was cancelled. I do not agree
that such an order is competent. Once the agreement was cancelled,
and restitution
was sought, the risk of the deterioration of the
vehicle’s condition passed to BMW. It must now take possession
of the vehicle
in the condition that it finds it, subject of course
to Mr Singh not having used it, after the contract was cancelled.
[30] The following order is made:
1. The appeal is upheld with costs.
2. The order of the full court is set
aside, and the following order is substituted:
‘
2.1 Save for
the costs orders in paras 3, 4, 5 and 6, the order of the court below
is set aside.
2.2 The agreement between the
applicant and the first respondent is declared to be cancelled;
2.3 The applicant is directed to
return to the first respondent the BMW vehicle currently in his
possession bearing registration
letters and numbers ND 595 676, by
delivering it to the second respondent, against payment in terms of
paragraph 2.4.
2.4 The first respondent is directed
to:
2.4.1 repay to the applicant the sum
of R236 653.81, being the initial payment the applicant made to it in
terms of the agreement
together with interest at the rate of 15,5 per
cent per annum from 3 May 2007 to date of payment;
2.4.2 repay to the applicant the 16
instalments totalling R127 552.11 paid to it before 3 May 2007
in terms of the agreement
together with interest at the rate of 15,5
per cent per annum from 3 May 2007 to date of payment;
2.4.3 repay to the applicant all
instalments paid by the applicant to it in terms of the agreement
after 3 May 2007, together with
interest at 15,5 per cent per annum
from the date of this judgment to the date of payment;
2.5 The first and second respondents
are ordered jointly and severally to pay the costs of the appeal.’
____________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: J A Julyan SC
Instructed by Gounder &
Associates, Durban
Claude Reid Inc, Bloemfontein
RESPONDENT: C G Marnewick SC (1
st
and 2
nd
respondents)
Instructed by John Hudson Attorneys,
Durban
Lovius Block, Bloemfontein