Momentum Group Ltd v Van Staden NO and Another (187/08) [2009] ZASCA 60; 2010 (2) SA 135 (SCA); [2009] 4 All SA 218 (SCA) (29 May 2009)

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Momentum Group Ltd v Van Staden NO and Another (187/08) [2009] ZASCA 60; 2010 (2) SA 135 (SCA); [2009] 4 All SA 218 (SCA) (29 May 2009)

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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 187/08
MOMENTUM
GROUP LIMITED Appellant
and
P
J M VAN STADEN NO 1
ST
Respondent
NEDBANK
LIMITED 2
ND
Respondent
___________________________________________________________
Neutral
citation:
Momentum
Group Ltd v Van Staden NO & another
(187/2008
)
60 [2009] ZASCA (29 May 2009)
Coram: FARLAM, VAN
HEERDEN et MLAMBO JJA, GRIESEL et BOSIELO AJJA
Heard: 21 May 2009
Delivered: 29 May
2009
Summary:
Cession
in securitatem debiti – Payment by debtor to cedent – subsequent
claim against debtor by cessionary – whether debtor
had knowledge
of the cession at time of payment to cedent
___________________________________________________________
___________________________________________________________
ORDER
On
appeal from
:
High Court, Pretoria (Murphy J sitting as court of first instance).
The
appeal
is
dismissed with costs.
_____________________________________________________
JUDGMENT
VAN
HEERDEN JA
(Farlam
and Mlambo JJA, Griesel and Bosielo AJJA concurring)
[1] The issue in
this appeal is whether, after cession
in
securitatem debiti
of
an insurance policy, payment by the debtor (the insurance company) to
the cedent (the policyholder) immunises the debtor from
a claim by
the cessionary under the policy. The answer to this question turns on
the debtor’s knowledge of the cession at the
time of payment by him
or her to the cedent.
[2] The first
respondent, Mr P J M van Staden, (‘Van Staden’), is the trustee
in the insolvent estate of one Mr Retief van Heerden
(‘Van
Heerden’). Van Heerden’s estate was finally sequestrated on 21
January 2003. Van Staden (in his capacity as trustee)
and the second
respondent, Nedbank Limited (‘Nedbank’), sued the appellant,
Momentum Group Limited (‘Momentum’), in the
Pretoria High Court
for payment of an amount of R250 000, plus interest, out of the
proceeds of an insurance policy issued by Momentum
in favour of Van
Heerden (‘the policy’). They claimed to be entitled to this
amount by virtue of a cession
in
securitatem debiti
by Van Heerden of his rights under the policy to Boland Bank PKS
(‘Boland’), Nedbank’s predecessor in title. This claim
succeeded with costs in the court below, Murphy J ordering Momentum
to pay Van Staden the sum of R250 000 out of the proceeds of
the
policy, plus interest
a
tempore morae
.
With the leave of the court a quo, that judgment now comes before us
on appeal.
[3] The judgment of
the trial court, in which the facts are set out in considerable
detail, is reported
1
and it is not necessary that they be repeated. For the sake of
convenience, however, I will outline the factual background very

briefly.
[4] On 30 July 1999,
Renbes Family Foods CC (‘Renbes’) borrowed a sum of R750 040 from
Boland in terms of a written loan agreement.
As security for this
loan, Van Heerden signed a suretyship in favour of Boland and a deed
of cession in terms of which he ceded
to Boland all his rights in a
fixed deposit in the amount of R250 000 held with Boland ‘and/or
any re-investment, renewal or
substitution thereof’. The deed of
cession expressly limited Van Heerden’s liability thereunder to
R250 000.
[5] Shortly
afterwards, the fixed deposit referred to above was indeed
substituted with a so-called ‘redemption policy’, issued
by
Momentum on 11 August 1999. A Mr Willem de Wet (‘De Wet’) of Absa
Brokers and Consultants assisted Van Heerden in applying
for the
policy and made the arrangements necessary for the release of the
fixed deposit of R250 000 by Boland and the payment of
this amount
into Momentum’s bank account.
[6] During the
trial, four witnesses testified about the facts and circumstances
surrounding the substitution of the investment.
They were: Mr Deon
Hurter (‘Hurter’), a commercial banker in Boland’s employ, who
represented the bank in the negotiations
with Renbes and Van Heerden
in regard to the loan and securities, a Mr Tinus de Beer (‘De
Beer’), a risk manager in the employ
of Boland, on behalf of the
respondents; and De Wet and a Ms Marietjie de Jager (‘De Jager’),
a broker consultant and marketing
advisor at Momentum, on behalf of
the latter.
[7] On 6 August
1999, a letter
was
written by De Jager to Hurter under a Momentum letterhead containing
its recognised commercial logo. The letter was faxed to
Hurter on the
same day. The accompanying fax cover sheet contains a handwritten
inscription made by de Jager in the following terms:
‘
Hello Deon
Hoop di
s
vir jou voldoende. Laat weet my asb. sodra die fondse oorgeplaas
word.
Groete
Marietjie de Jager’
[8
] The
typed letter reads as follows:
‘
Boland
Bank:
Silverton
Die B
estuurder
Aandag: mnr Deon Hurter
Geagte mnr Hurter
INSAKE MNR R VAN HEERDEN:
MOMENTUM BELEGGING 92079647
Hiermee
word bevestig dat bogenoemde polis met onmiddellike effek aan Boland
bank gesedeer word
.
Sodra die fondse na Momentum Lewens se bankrekening oorgeplaas word
kan die polis aanvaar word.
Die
sessie vorm deel van die polis en word onmiddellik met aanvaarding
teen Boland Bank aangeteken
.
U sal
derhalwe nie ongesekureer wees tussen die uitbetaling van die fondse
en die uitreiking van die kontrak nie
.
Die kontrak sal egter binne ‘n week na uitreiking van die polis
beskikbaar wees.
Groete
M de Jager
Momentum Lewens’
(Emphasis added.)
[9
] The
money was transferred to Momentum’s bank account on 11 August 1999.
According to De Beer, he authorised the transfer of
the R250 000 from
Boland to Momentum because the former had received an assurance from
Momentum, in the form of the letter from
De Jager set out above, that
as soon as the funds were transferred to Momentum, Boland would
become the cessionary of the policy,
the cession in Boland’s favour
would be noted on the policy documents and Boland’s security would
be protected.
[10
] On
12 December 2000, after certain queries were made, Momentum granted
an interest-free loan against the policy to Van Heerden
in the amount
of R267 891.
[11
] In
the meantime, Renbes was liquidated on 28 November 2000 and Boland
became entitled to enforce its suretyship against Van Heerden.
As the
latter was not able to pay the debt, Boland invoked the cession and
attempted to collect its security in the amount of R250
000 from
Momentum. The latter informed Boland, however, that a loan had been
granted against the policy and advised it not to surrender
the policy
as this would result in a minimal payout, the value of the policy
having been greatly reduced by the loan. Boland persisted
with its
claim, ultimately issuing summons (together with Van Staden) against
Momentum in October 2003. Momentum adopted the stance
that it was
only obliged to pay the plaintiffs the surrender value of the policy
(subsequent to deduction of the loan made to Van
Heerden) in the
amount of R29 690, payment of which it tendered in its plea.
[12
] The
main defences raised by Momentum were, first, that De Jager lacked
authority to bind Momentum to any agreement or to make
any
representation on its behalf and, second, that when making the
interest-free loan against the policy to Van Heerden, Momentum
(as
debtor) had no knowledge of the cession in favour of Boland and acted
bona
fide.
Neither of these defences succeeded in the court below.
[13
] The
legal principles applicable to the present appeal are cogently stated
by P M Nienaber
2
as follows:
‘
Performance
by the debtor, more particularly payment, to the cessionary, the new
creditor, discharges the debt. It should follow
as a corollary that
payment to the cedent ought
not
to
release the debtor. Yet it is a well-established rule, based on the
palpable need to protect a blameless debtor who rendered
performance
to the party he or she genuinely believed to be the true creditor,
that payment to the cedent absolves or at least
releases the debtor,
provided that he or she was unaware of the earlier cession or, if
aware thereof, that he or she nonetheless
acted in good faith in
effecting the payment. The debtor’s prior knowledge of the cession,
however gained, would normally exclude
good faith and defeat the
payment. But it has been said that the debtor will be released from
liability if such debtor can show
that, notwithstanding his or her
prior knowledge of the claim by the cessionary, he or she
nevertheless paid the cedent in good
faith.
. . .
The rule is
essentially based on the blamelessness of the debtor. It may thus be
refined, so it is suggested, to read that the debtor
will be deemed
to be absolved by performance or any other form of discharge rendered
to the cedent if, at the time thereof,
he
or she genuinely and reasonably believed the cedent to be his or her
true creditor.
. . .
Although
notice to the debtor of the cession is not a pre-requisite for
cession, it is thus incumbent on the cessionary, in whose
interest it
is to do so, to inform the debtor of the cession to him or her at the
risk, if this is not done, that his or her claim
may be pre-empted by
the
unsuspecting debtor’s performance to the cedent . . . whom he or
she genuinely and reasonably identifies as his or her true
creditor
’
.
(Emphasis added, footnotes
omitted.)
[14] Momentum
contended that De Jager was a mere broker with no authority to bind
Momentum. In her testimony, De Jager described
her role as that of a
‘go-between’ between the broker and Momentum: the broker ensured
that all the requisite documents were
provided by the client, handed
this documentation to her and she then sent it through to the
Momentum Head Office where all transactions
relating to the policy
were attended to.
[1
5] It
is, however, clear from the terms of the contract between De Jager
and Momentum that she was appointed to represent Momentum
in the
solicitation and maintenance of policies.
It
was common cause that she had authority to use Momentum letterheads
and often did so.
[1
6] I
agree with the learned judge that it was eminently reasonable for
Boland to have relied upon De Jager’s conduct and representations

and to assume that she had the necessary authority, at the very least
to accept and record a notification of the existence of the
cession
of Van Heerden’s policy in Boland’s favour. As in the case of
Glofinco
v Absa Bank t/a United Bank
,
3
Boland was entitled to assume that De Jager’s functions encompassed
these activities. It could not reasonably have been expected
of it to
know of any internal limitations on De Jager’s actions
4
and, therefore, even if De Jager did not have actual authority to
deal with Momentum in the way she did, Momentum is bound by her

ostensible authority.
[
17] As
regards the factual question whether Momentum had knowledge of the
cession before or at the time of payment of the interest-free
loan to
the cedent (Van Heerden), the probabilities in this case point
overwhelmingly to the conclusion that Momentum
did
have imputed knowledge of the cession in favour of Boland at the
relevant time. This appears clearly from the terms of De Jager’s

fax cover sheet and letter to Hurter dated 6 August 1999.
5
Murphy J made a fairly strong credibility finding against De Jager
6
and there are no grounds to interfere with this finding.
Interestingly, appellant’s counsel did not seek to challenge it in
argument before us in any way.
[18] The
knowledge of the cession
in
favour of Boland to secure Van Heerden’s debt to it was certainly
material and important. It cannot be gainsaid that, in the
ordinary
course of business, a reasonable person in the position of De Jager
would be expected to impart this knowledge to Momentum,
the entity
who had delegated to her the control and conduct of its affairs in
this regard.
7
This being so, Momentum must be said to have had knowledge of the
cession in favour of Boland in August 1999, long before it authorised

and paid out to Van Heerden the loan against the policy in question.
There is nothing in the evidence to indicate that, despite
such
knowledge, Momentum can nonetheless be said to have acted in good
faith in paying out such loan.
8
[19
] Murphy
J proceeded from the premise that the cessionary bears the onus of
proving knowledge of the cession on the part of the
debtor in a
situation such as the present,
9
but on the facts of the present case, nothing turns on that and this
aspect warrants no further discussion.
[2
0] It
follows from the above that Nedbank (Boland’s successor in title),
as pledgee of the proceeds of the policy, was entitled
to realise its
security at the time it sought to do so.
10
In the meantime, however, Van Heerden’s estate was sequestrated in
January 2003. Van Staden, in his capacity as trustee of the
cedent’s
(Van Heerden’s) estate is thus ‘the person entitled to recover
the proceeds [of the policy] as part of his duty
to realise the
assets of the estate, but subject to the real right of pledge held by
Nedbank who consequently remains fully protected.’
11
[2
1] In
the result the appeal must fail and it is dismissed with costs.
__________________
B
J VAN HEERDEN
JUDGE OF APPEAL
Appearances:
For the
Appellant: J F Steyn
Gerings
Attorneys
c/o Hendriëtte
Muller
Pretoria
Instructed
by: Rossouw & Conradie Inc
Bloemfontein
For the
Respondent: F J Erasmus
De Swart V
ö
gel
Mahlafonya
Pretoria
Instructed by
Symington & De Kok
Bloemfontein
1
As
Van
Staden NO & another v Firstrand Ltd & another
2008
(3) SA 530
(T).
2
Joubert (ed)
The
Law of South Africa
2ed,
vol 2 Part 2 (2003) sv ‘Cession’ para 48.
3
2002 (6) SA
470
(SCA), where this court held (paras 15-16) that the appointment
by a bank of a branch manager implied a representation to the
outside world to the effect that the branch manager is empowered to
represent the bank in the sort of business and transactions
that a
branch of the bank and its manager would ordinarily conduct. What
this ordinary kind of business is, is a factual matter
and depends
on the evidence before the court.
4
See the
Glofinco
case paras 17-18.
5
Set out in
paragraphs 7 and 8 above.
6
See paras 32 to 34 of the
reported judgment, at 539H-540E.
7
Town
Council of Barberton v Ocean Accident and Guarantee Corporation Ltd
1945
TPD 309
at 311, subsequently referred to with approval by this
court, see eg
Wilkens
NO v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 141H.
8
See
Brook
v Jones
1964
(1) SA 765
(N) at 767E-F.
9
See para 34
of the reported judgment at 540D, read with para 29 at 539C-D.
10
By claiming
payment of R250 000 from the proceeds of the policy in February 2001
– see para 11 above.
11
Paragraph
42 of the reported judgment of the trial court, at 543B-D.