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[2019] ZAWCHC 87
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ReFin Financial Services (Pty) Ltd v Lush Auto CC and Others (6695/16) [2019] ZAWCHC 87 (13 June 2019)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No:
6695/16
In
the matter between:
REFIN
FINANCIAL SERVICES (PTY)
LTD
Plaintiff
and
LUSH
AUTO
CC
First
Defendant
MARCOS
RAMON
ARELLANO
Second
Defendant
MARC
MISDORP
Third
Defendant
Hearing:
12, 15 February, 19, 20, 22 March 2019
Heads
of Argument: 22 March, 29 March (Plaintiff) and
29 April 2019 (Defendants)
Judgment: 13 June 2019
JUDGMENT
De Waal AJ:
[1]
In
2014, the Plaintiff in this matter was in the business of arranging
financing as an intermediary for the purchase of movable
assets,
including motor vehicles. The First Defendant (“
Lush
Auto
”)
was then in the business of buying and reselling motor vehicles,
especially luxury vehicles, for profit.
[2]
This
matter relates to transactions regarding the financing of the sale of
a Jaguar XF5.0 V8 (“
Jaguar XF
”)
by Lush Auto to a certain Mr Zahir Malani (“
Malani
”)
which transactions took place at the end of March and beginning of
April 2014 in Cape Town.
[3]
At
the time of the transactions the Second Defendant (“
Arellano
”)
was the sole member of Lush Auto. The involvement of the Third
Defendant (“
Misdorp
”)
with Lush Auto at the time and his role in respect of the
transactions are in dispute.
[4]
The
Plaintiff was an intermediary between a financial institution such as
a bank, which institution would ultimately provide the
finance to the
customer to purchase the vehicle, and a car dealership such as Lush
Auto. The need for such an intermediary
arises when the bank is
not prepared to deal directly with a particular dealership and
requires an intermediary to step in in order
to safeguard its
interests.
[5]
What
happens in this scenario is that the dealership would sell the
vehicle in question to the intermediary, upon which the intermediary
would sell the vehicle to the bank, which will in turn sell or lease
vehicle in terms of an instalment agreement or lease agreement
to the
end customer. Payment for the vehicle would then flow in the
opposite direction from the bank to the intermediary
and end up with
the dealership.
[6]
This
is what happened in the present instance. The bank was the
Motor Finance Corporation, a division of Nedbank Ltd (“
MFC
”)).
Having paid the Plaintiff (and the Plaintiff having paid Lush Auto),
MFC concluded an instalment agreement with
Malani. The purchase
price flowed from MFC back to the Plaintiff and then to Lush Auto.
[7]
During
June 2014 Malani failed to pay the instalments owed to MFC and
that MFC then seized the vehicle. Although not
entirely clear
from the evidence, it seems that Malani only ever paid one instalment
under the agreement to MFC. His role
in the saga dealt with in
this judgment remained somewhat of a mystery but it is fortunately
not necessary to deal with his involvement
for purposes of deciding
the matter.
[8]
After
the vehicle was seized, MFC discovered that in the documentation
presented to it by the Plaintiff, the vehicle was described
as a 2011
Jaguar XFR5.0 V8 S/C (“
Jaguar XFR
”)
whereas in fact the vehicle was a Jaguar XF, as described
above. The Jaguar XF is a considerably cheaper
kind of
Jaguar vehicle than the Jaguar XFR. As a consequence of
the misdescription of the vehicle, MFC cancelled the
agreement
between it and the Plaintiff, returned the vehicle to the Plaintiff
and the latter was obliged to pay MFC the amount
of R985 139.29.
[9]
After
MFC was refunded by the Plaintiff, the latter attempted to cancel its
sale agreement with Lush Auto and to seek a refund from
Lush Auto.
Lush Auto refused to refund the Plaintiff. In an attempt to
mitigate its loss, the Plaintiff then sold the
Jaguar to a third
party for the sum of R275 000.00.
[10]
Against
this background, the Plaintiff decided to sue the Defendants and
claims that it suffered damages in the amount of R710 139.29,
being the difference between the amount paid to MFC pursuant to the
latter’s cancellation of the sale and the amount recovered
from
the sale of the Jaguar.
[11]
The
Plaintiff claims that the Defendants are liable to compensate it for
this loss on the following grounds:
11.1.
Arellano
and Misdorp are liable by reason of the fraudulent misrepresentations
made to the Plaintiff’s representatives regarding
the kind of
vehicle sold and the fair value thereof;
11.2.
Lush
Auto is liable for breaches of warranties in agreements with the
Plaintiff and vicarious wrongs committed by Arellano and/or
Misdorp
in the course and scope of their duties as employees of Lush Auto;
and
11.3.
Arellano
as liable as surety and co-principal debtor for any amount owed by
Lush Auto to the Plaintiff.
[12]
According
to the Plaintiff, the relationship between itself, Lush Auto and
Arellano was governed by three contracts:
12.1.
The
first contract is a Master Sale and Representation Agreement (“
the
Master Agreement
”)
which was, according to the Plaintiff, entered into between itself
and Lush Auto on 9 January 2014 and which
governed the
business relationship in general; and
12.2.
The
second contract is a Tripartite Agreement (“
the
Tripartite Agreement
”)
concluded between the Plaintiff, Lush Auto and Malani on 1 April 2014
and which dealt specifically with the disputed
Jaguar sale
transaction; and
12.3.
The
third contract is a Personal Suretyship and Demand for Security
Agreement (“
the
Suretyship Agreement
”),
which is Annexure “
C
”
to the Master Agreement and which the Plaintiff contends was also
concluded between itself and Arellano on 9 January 2014.
[13]
The
Master Agreement was intended to govern the business relationship
between the Plaintiff and Lush Auto in general whereas the
Tripartite
Agreement relates to the sale of the specific vehicle in question,
i.e. the Jaguar XF in the present instance.
[14]
In
its plea, Lush Auto and Arellano denied that it entered into any of
above three agreements. As far as the Master and Suretyship
Agreements are concerned, they pleaded that Arellano’s
signatures on the agreements were forged. As far as the
Tripartite
Agreement is concerned, Lush Auto claimed that the
agreement was never signed and accordingly never came into being.
[15]
However,
during the course of the trial, the Defendants’ position
changed in respect of the Tripartite Agreement. At
trial, the
Defendants accepted that this agreement was signed by Arellano and
that it was binding.
[16]
It
is clear what precipitated this change in stance:
16.1.
The
defence that the Tripartite Agreement is “
unsigned
and accordingly never came into being in a written form
”,
was based on the wrong document. It related to the pro-forma
tripartite agreement which was Annexure “
A
”
to the Master Agreement, dated 9 January 2014.
16.2.
The
Tripartite Agreement in respect of the Jaguar, dated 1 April 2014,
was
in fact signed
.
16.3.
The
Defendants confused the unsigned pro-forma of the tripartite
agreement annexed to the Master Agreement, dated 9 January 2014,
with the signed Tripartite Agreement dated 1 April 2014
relating to the Jaguar vehicle.
[17]
The
Defendants however maintained throughout the trial that the Master
and Suretyship Agreements were never signed by Arellano.
[18]
Against
this background, I now turn to analyse the evidence presented at
trial in order to determine the following issues:
18.1.
Is
Lush Auto liable to the Plaintiff by virtue of breach of the (signed)
Tripartite Agreement?
18.2.
Was
the Master Agreement signed on behalf of Lush Auto and is Lush Auto
liable to the Plaintiff due to breach of this agreement?
18.3.
Did
Arellano sign the Suretyship Agreement and is he liable to the
Plaintiff by virtue of that agreement?
18.4.
Did
Arellano make fraudulent misrepresentations to the Plaintiff and is
he and Lush Auto liable to the Plaintiff on account thereof?
18.5.
Did
Misdorp make fraudulent misrepresentations to the Plaintiff and is he
and Lush Auto liable to the Plaintiff on account thereof?
Liability
in terms of the Tripartite Agreement
?
[19]
In
the particulars of claims, the Plaintiff claimed that, in the process
leading up to the conclusion of the Tripartite Agreement,
the parties
agreed that Lush Auto would sell to the Plaintiff a Jaguar XFR
and that Lush Auto represented that the total purchase
price of
R915 000.00 was a fair resale value. In truth, the vehicle
was of course a Jaguar XF, with a far lower
resale value.
[20]
The
Plaintiff further alleged that the representation breached the
obligation and warranties arising from the Tripartite Agreement
in
that:
20.1.
The
purchased goods did not conform to the terms, description and
specifications set out in the invoice for those goods;
20.2.
The
purchase price far exceeded the price normally charged by the dealer
for products which are the same or substantially the same
as the
vehicle sold in the ordinary course of business on the basis of a
cash transaction; and
20.3.
The
employees of Lush Auto did not act carefully, honestly, in good faith
and without negligence.
[21]
Crucial
to the misrepresentation argument is an invoice, dated 28 March 2014
(“
the
invoice
”),
made out by Lush Auto to the Plaintiff. Given its importance in
the present matter, that invoice is reproduced in
full below:
[1]
LUSH
AUTO CC
INVOICE
206B Main Road, Sea Point, Cape Town,
8005
Tel:
021 829 0904
Fax:
086 566 3690
Cell:
082 855 1011
Email:
lushauto@gmail.com
28 March 2014
PURCHASER:
Refin Financial
Services (Pty) Ltd
Glen Forum Building,
Cnr Corobay & Garsfontein Roads,
Menlyn
Pretoria
VAT NO:
4710254915
VEHICLE:
Jaguar XFR 5.0
V8 S/C
EXTRAS:
PDC, NAVIGATION,
REVERSE CAMERA
REGNO:
CA870111
ENGINE
NO:
10122114044508PN
CHASSIS
NO:
SAJAC06F0BLS08342
MILEAGE:
78 000 KM
COLOUR:
BLACK
Selling Price EX:
R 802 631,58
VAT:
R 112 368,42
TOTAL:
R 915 000,00
All
units are sold in good faith, as seen, inspected and road tested,
without guarantees or warranties whatsoever. Year models
and
speedometer mileage readings are not guaranteed or otherwise stated
in writing. The Purchaser is aware of these conditions.
IMPORTANT
Ownership
of the vehicle shall be reserved in favour of Lush Auto until such
time as the purchase price has actually been paid in
full.
[22]
The
description of the vehicle is wrong. The vehicle was not a
Jaguar XFR but a Jaguar XF.
[23]
The
first question is whether this representation breaches any provisions
of the Tripartite Agreement, standing alone. If
so, Lush Auto
would be liable to the Plaintiff regardless of whether the Master
Agreement was signed and regardless of whether
there were any
fraudulent misrepresentations.
[24]
The
relevant clauses of the Tripartite Agreement are as follows:
24.1.
Clause 3
records that “
the
dealer sells the vehicle to ReFin in accordance with the provisions
of the Master Deal Sale Agreement and with effect from the
Effective
Date, whereafter ReFin will sell the vehicle to the credit provider
in accordance with the provisions of the Master Credit
Provider Sale
Agreement”.
[2]
24.2.
Clause 1
defines that Master Dealer Sale Agreement to mean the Master Dealer
Sale Agreement concluded between ReFin and the
dealer, which
regulates the sale of motor vehicles by the dealer to ReFin,
including the sale of the vehicle referred to in the
Tripartite
Agreement.
24.3.
Clause 1
defines the term “
vehicle
”
to mean the vehicle sold or to be sold by the dealer to ReFin in
terms [of the Tripartite Agreement] and described in clause 5
together with such additional items specified in the invoice by ReFin
to the credit provider.
24.4.
Clause 5
contains a warranty from the dealer to ReFin regarding the authority
of those signing on behalf of the former and
a number of warranties
from the consumer to the dealer and to Refin.
24.5.
Clause 6
provides that the dealer and the consumer indemnify ReFin against
actual losses, liabilities, damages and costs which
ReFin may suffer
or incur as a result of or in connection with a breach of warranty by
either of them.
[25]
The
Tripartite Agreement, standing alone, does not contain relevant
warranties made by the dealer. Clause 5 merely sets
out
that the dealer warrants that the signatories to the agreement are
duly authorised. That clause further contains warranties
from
the consumer, which are not relevant. No relevant dealer
warranties are stipulated in the Tripartite Agreement.
[26]
The
reason for this is that the relevant warranties are contained in the
Master Agreement and the Tripartite Agreement incorporates
the Master
Agreement between the Plaintiff and Lush Auto. Clause 3,
quoted above, read with the definition of the Master
Agreement,
incorporated the Master Agreement “
concluded
between ReFin and the dealer which regulates the sale of motor
vehicles by the dealer to ReFin
”
What happens if no Master Agreement was ever signed, as contended by
the Defendants? When this issue was raised, Ms Christians,
who appeared for the Plaintiff, readily conceded that the Tripartite
Agreement can only incorporate the Master Agreement to the
extent
that the latter was in fact signed and accordingly “
concluded
”
between the Plaintiff and the dealer. This means that the
Plaintiff cannot rely on the express terms of the Tripartite
Agreement, standing on its own.
[27]
Insofar
as reliance was placed by the Plaintiff on an established trade
practice, alternatively custom, I do not believe that the
practice or
custom was sufficiently established through evidence at the trial.
In the Plaintiff’s heads of argument
it is merely stated that
one of the Plaintiff’s witnesses established the trade practice
in his “
uncontroverted
evidence
”.
I was not referred to specific parts of the evidence, which
established the trade practice contended for, despite
the fact that
the evidence by the relevant witness was transcribed.
[28]
For
these reasons I conclude that Plaintiff’s claim against Lush
Auto cannot be granted due to breach of the Tripartite Agreement
standing alone
Liability
under the Master Agreement
?
[29]
The
Master Agreement has six components:
29.1.
A
cover page containing the details of Lush Auto and the Plaintiff and
defining them for purposes of the agreement as “
the
dealer
”
and “
the
intermediary purchaser
”;
29.2.
A
Credit Application for a Business Account, consisting of two pages in
which the dealer is required to provide details of its business
and
bank account; its business / trade references as well its consent to
use the information provided and that held by credit bureaus
to
assess the creditworthiness of the dealer;
29.3.
The
detailed terms and conditions which run from page 3 to 16;
29.4.
Annexure “
A”
to the Master Agreement is a pro-forma tripartite agreement;
29.5.
Annexure “
B”
to the Master Agreement is the rules of engagement between the
intermediary purchaser (i.e. the Plaintiff) and the dealer; and
29.6.
Annexure “
C”
to the Master Agreement is the personal suretyship.
[30]
The
case for Lush Auto is that Arellano was prepared to sign the credit
application in order to get onto the Plaintiff’s “
panel
”
but that he was not prepared to sign the other parts of the Master
Agreement. In this regard, Arellano:
30.1.
Claimed
that did not sign because he wanted to discuss the terms of the
Master Agreement with his father and his attorney.
30.2.
Claimed
that he kept an unsigned copy of the remainder of the Master
Agreement with him and these parts were never signed.
By the
time of the trial, some five years later, he no longer had a copy of
the unsigned agreement as Lush Auto had closed down
some time ago.
30.3.
Claimed
that someone must have forged his signature on the last two pages of
the Master Agreement and his initials which appear
on the other
pages.
30.4.
Repeatedly
challenged the Plaintiff to provide the opinion of a handwriting
expert on whether the signatures and initials on the
remainder of the
Master Agreement are his.
[31]
The
Plaintiff’s version was provided mainly through the evidence of
Mr Jaco du Toit (“
Du
Toit
”),
the Plaintiff’s Managing Director during the relevant period
(January to April 2014).
[32]
According
to Du Toit, he and Ms Trish Owens (“
Owens
”),
the Plaintiff’s Business Development, Finance and Insurance
Manager at the time, visited the premises used by Lush
Auto on
9 January 2014 with the express purpose to sign Lush Auto
up as a dealer. According to Du Toit, this included
the signing
of the Master Agreement. Du Toit testified that the Plaintiff
would never do business with any dealership without
such an agreement
in place.
[33]
Owens
testified that she had most of her dealings with Misdorp. Owens
and Du Toit indeed considered Misdorp to be the driving
force behind
Lush Auto. Why was Misdorp not asked to sign the Master
Agreement? According to Du Toit, Misdorp said
to him on
9 January 2014 that he could not or was reluctant to sign
documents as he was going through a divorce.
[34]
For
this reason, Du Toit testified, Arellano was asked sign the documents
on behalf of Lush Auto. Du Toit further testified
that he
personally saw Arellano signing the “
pack
of documents
”
which included the Master Agreement.
[35]
I
pause at this stage to explain that the business premises of Lush
Auto was not what one would normally associate with a car
dealership.
The premises had no showroom and it was in fact the
premises from which Misdorp ran his other business (Supplements
Express) which
sold food supplements to bodybuilders and others
interested in such products.
[36]
According
to Du Toit, the signing was done by Arellano at the front desk of the
shop. Owens, who signed the Master Agreement
on behalf of the
Plaintiff and, it appears, also signed as witness, was at that stage
at the back of the shop busy with another
transaction. Owens
did not actually see Arellano signing the agreement. Misdorp,
on the other hand, claimed that he
was outside the shop.
[37]
None
of the Plaintiff’s witnesses was asked to explain why a
handwriting expert was not called. Plaintiff’s counsel,
however, suggested that it is not the kind of matter where a
handwriting expert would be able to give a conclusive opinion.
[38]
The
approach to be adopted in resolving factual disputes in a trial when
there are two irreconcilable versions is set out in
Stellenbosch
Farmers' Winery Group Ltd v Martell
et
Cie
2003 (1) SA 11
(SCA) (my underlining):
“
[5]
On the central issue, as to what the parties actually decided, there
are two irreconcilable versions. So, too, on a number of
peripheral
areas of dispute which may have a bearing on the probabilities. The
technique generally employed by courts in resolving
factual disputes
of this nature may conveniently be summarised as follows. To come to
a conclusion on the disputed issues a court
must make findings on (a)
the credibility of the various factual witnesses; (b) their
reliability; and (c) the probabilities. As
to (a), the court's
finding on the credibility of a particular witness will depend on its
impression about the veracity of the
witness. That in turn will
depend on a variety of subsidiary factors, not necessarily in order
of importance, such as (i) the witness'
candour and demeanour in the
witness-box, (ii) his bias, latent and blatant, (iii) internal
contradictions in his evidence, (iv)
external contradictions with
what was pleaded or put on his behalf, or with established fact or
with his own extracurial statements
or actions, (v) the probability
or improbability of particular aspects of his version, (vi) the
calibre and cogency of his performance
compared to that of other
witnesses testifying about the same incident or events. As to (b), a
witness' reliability will depend,
apart from the factors mentioned
under (a)(ii), (iv) and (v) above, on (i) the opportunities he had to
experience or observe the
event in question and (ii) the quality,
integrity and independence of his recall thereof. As to (c), this
necessitates an analysis
and evaluation of the probability or
improbability of each party's version on each of the disputed issues.
In the light of its
assessment of (a), (b) and (c) the court will
then, as a final step, determine whether the party burdened with the
onus of proof
has succeeded in discharging it. The hard case, which
will doubtless be the rare one, occurs when a court's credibility
findings
compel it in one direction and its evaluation of the general
probabilities in another. The more convincing the former, the less
convincing will be the latter. But when all factors are equipoised
probabilities prevail.”
[39]
In
applying these principles, the Plaintiff has shown, in my view, on
the balance of probabilities, that Arellano in fact did sign
the
Master Agreement. I base this finding on the following reasons:
39.1.
Firstly,
there are the probabilities.
39.2.
Du
Toit visited the Lush Auto premises for no other reason than to sign
it up as a dealer. The Plaintiff never dealt with
Lush Auto
before that day, i.e. 9 January 2014. Lots of deals
apparently took place thereafter between the two
entities. It
is inconceivable that the Plaintiff would have done all these deals
with Lush Auto if Arellano held back the
Master Agreement in order to
first discuss the contents with his father / attorney. It is
also inconceivable that if Arellano
asked for time to consider the
Master Agreement that there would be no email or other document in
which the issue is raised.
Surely Du Toit or Owens would have
asked him how much time he needed, etc.?
39.3.
There
was a reason why Du Toit did not sign there and then for the
Plaintiff. The purpose of his visit was to get Lush Auto
to
sign to Master Agreement. Thereafter the Plaintiff would do
certain checks before entering into the Master Agreement.
This
explains why Owens signed later on behalf of the Plaintiff and
(probably) why she also signed as a witness to Arellano’s
signature.
39.4.
The
Defendants sought to make something out of the fact that the Addendum
to the Master Sale & Presentation Agreement purports
to reflect
the signature of Arellano as having signed on behalf of
both
Lush Auto and the Plaintiff. I do not believe that anything can
be made of this. The obvious explanation is that he
signed
twice by mistake. It is certainly not a fact which shows that
Arellano’s signature was forged. Someone
forging
Arellano’s signature on the Master Agreement at the instigation
of the Plaintiff would avoid doing so twice.
Why forge
Arellano’s signature purporting to sign for the Plaintiff when
Owens or someone else could simply have signed this
part? In
fact, Owens did sign this part and she appended her signature next to
the one of Arellano – on the correct
place for Refin. In
my view, Arellano signing twice was not a mistake that someone
forging his signature would have made,
particularly not someone who
then puts her own signature next to the one of Arellano.
39.5.
Secondly,
there is the direct evidence at the trial.
39.6.
Du
Toit made a good impression on me as a witness. For instance,
he readily conceded that he could not be 100% sure about
whether
there were deals between the Plaintiff and Lush Auto before
9 January 2014 and then undertook to conduct a search
for
documentation relating to such deals.
[3]
It was later reported through his attorneys that no such
documentation exist. The rest of his evidence was also
consistent
and believable.
39.7.
Arellano’s
evidence, on the other hand, was not convincing at all. As I shall
explain below, he had to change his version
on the witness stand in
respect of a number of important issues. For present purposes,
he could not explain why it was contended
in the answering affidavit
in the summary judgment proceedings / plea that the Tripartite
Agreement was “
unsigned
”.
He could also not explain his reference to “
two
oral contracts of sale between the Plaintiff and Lush Auto
”
in his answering affidavit. The inference to be drawn is that
the Defendants’ initial strategy was to deny that
any
written contracts came into being between Lush Auto and the
Plaintiff. For this reason it was claimed that the Tripartite
Agreement was unsigned, and that Arellano’s signature was
forged on the Master Agreement / Suretyship Agreement. But
this
strategy unravelled when it emerged that the relevant Tripartite
Agreement was concluded on 1 April 2014.
This change
in stance casts grave doubts on the credibility of Arellano.
39.8.
The
signatures and initialling on the Tripartite Agreement, which
Arellano admitted are his, do not in my view differ materially
from
the signatures and initialling which appear on the Master Agreement
and Suretyship Agreement. Although no handwriting
expert was
called by either party, any person observing these signatures /
initials would conclude that they are not an obvious
forgery. I
do attach, some, but not significant weight to this observation of my
own.
[4]
[40]
For
these reasons, I find that the Plaintiff has shown, on the balance of
probabilities, that the Master Agreement was signed.
[41]
I
now turn to the terms of the Master Agreement. For present
purposes, the following terms are of importance:
41.1.
Clause 3.3.1,
which provides that the dealer will issue an invoice to the
intermediary purchase in respect of the goods concerned
reflecting a
full and accurate description of all goods sold;
41.2.
Clause 3.5,
which provides that the purchase price will not exceed the price
normally charged by the dealer, for products which
are the same or
are substantially the same as the goods, in the ordinary course of
business on the basis of a cash (CSI) transaction;
41.3.
Clause 6.1.3,
in terms of which the dealer warrants in favour of the intermediary
purchaser that upon delivery of the goods
they will confirm to the
terms, description and specifications set out in the relevant
invoice;
41.4.
Clause 6.1.13.
which provides that the dealer recognises that the intermediary
purchaser never had effective control over the
goods and that it is
unreasonable to expect the intermediary purchaser (and the bank) to
have discovered any defect to the goods;
41.5.
Clause 7.1,
which provides that the dealer indemnifies the intermediary purchaser
against,
inter
alia
,
losses which the latter may suffer or incur as a result of or in
connection with a breach of warranty by the dealer or the negligent
or wilful breach by any person employed or appointed by the dealer.
[42]
By
presenting to the Plaintiff on invoice that it was buying a
Jaguar XFR whereas in fact it was buying a Jaguar XF, Lush
Auto breached all of the above terms.
[43]
Moreover,
to the extent that Lush Auto acted in breach of the Master Agreement,
it cannot escape liability based on the alleged
instruction received
from Owens, which I deal with below, to invoice for a Jaguar XFR
and not for a Jaguar XF.
Clause 20.1 of the Master
Agreement is clear in that the parties are not bound by any
representations not recorded in writing.
Variations of the
Master Agreement must also be recorded in writing as is the case with
the Tripartite Agreement (see clause 10
of the latter).
[44]
Lush
Auto is thus liable to pay the Plaintiff’s damages for breach
of the Master Agreement.
Arellano’s
liability based on the Suretyship Agreement
[45]
The
dispute about the signing of the Suretyship Agreement is the same as
the one about the signing of the Master Agreement.
Arellano
denies that he signed the Suretyship Agreement whilst Du Toit claims
that it formed part of the pack of documents signed
by Arellano in
his presence on 9 January 2014.
[46]
Arellano
did not proffer any reason why he would have signed the Master
Agreement but not the Suretyship Agreement. Of course,
his
version is that he neither.
[47]
In
my view, for the reasons set out above, both were signed.
[48]
In
terms of the Suretyship Agreement (Annexure “
C
”
to the Master Agreement), Arellano bound himself as suretyship and
co-principal debtor for the due and punctual performance
by Lush Auto
of all its obligations to the Plaintiff, including for damages for
breach of contract.
[49]
In
the circumstances, Arellano is personally liable for the damages due
to the breach of contract by Lush Auto.
Liability due to
misrepresentations made by Arellano
[50]
I
have concluded above that Lush Auto and Arellano are liable for the
Plaintiff’s damages due to breach of contract.
For the
event that I may be wrong on that score I proceed to consider whether
they are also liable to the Plaintiff based on alleged
fraudulent
misrepresentations made by Arellano in the course and scope of his
duties as employee of Lush Auto.
[51]
Two
preliminary issues arise in respect of this alternative ground for
the relief sought against Arellano (and Misdorp).
[52]
The
first is the Defendants’ contention that no separate delictual
claim is contained in the Plaintiff’s particulars
of claim and
that allegations regarding the delictual claim are “
intermingled
”
with those regarding the contractual claim. I disagree.
Specific allegations regarding the fraudulent misrepresentations
made
by Arellano and Misdorp are made at paragraph 23 of the
particulars. It is then stated at paragraph 26 that,
but
for these representations, the Plaintiff would not have concluded the
agreements relating to the Jaguar and would not have
transferred the
sum of R920 684.04 to the Plaintiff. Moreover, in
paragraph 31, the claims made against Arellano
and Misdorp,
based on fraudulent misrepresentation, are listed separately from
those against Lush Auto, based on breaches of the
Master and
Tripartite agreements. There can accordingly be no doubt that
the delictual claim was pleaded separately to the
contractual claim.
[53]
The
second point taken in the Defendants’ heads of argument is the
Plaintiff’s particulars fall foul of the
ratio
expounded in
Lillicrap,
Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd
1985 (1) SA 475
(A). This objection also has no merit. As
held in
Holtzhausen
v Absa Bank Ltd
2008 (5) SA 630
(SCA), an action is maintainable in delict even if a
concurrent action is available in contract as long as the negligence
alleged
does not consist of breach of contract.
[54]
I
now turn to deal with the evidence regarding the claim made against
Arellano based on fraudulent misrepresentation.
[55]
This
part of the dispute turns on the reason why the invoice describes the
vehicle to be purchased by the Plaintiff from Lush Auto
as a
Jaguar XFR and not a Jaguar XF. It is common cause
that the difference is material in that the Jaguar XFR’s
value can be as much as R150 000.00 higher than the Jaguar XF.
[56]
The
Plaintiff’s version is essentially that Owens dealt with
Misdorp regarding the financing of the Jaguar sale to Malani.
The representation made on the invoice was the
merx
was a Jaguar XFR and that a selling price of R915 000.00
would be a fair price for this vehicle.
[57]
The
Defendants’ version, on the other hand, was that Arellano was
dealing with Owens, who instructed him what amount to invoice
for.
[58]
As
with the signing of the Tripartite Agreement, Arellano’s
version of why the description of the vehicle on the invoice is
wrong, changed. His version changed from the answering
affidavit in the summary judgment application (dated 23 June 2016)
to the plea (dated 5 August 2016) and then yet again
at the trial which took place in February / March 2019.
More particularly:
58.1.
In
the answering affidavit in the summary judgment proceedings, Arellano
claimed that it is difficult to “
distinguish
”
as the XF and XFR look identical and that he was genuinely under the
impression and had good reason to believe that the
vehicle could be
sold at the reasonable price of R915 000.00. Arellano
further claimed that Owens advised him to insert
the code listed
under “
special
vehicles
”
in the Mead & McGrouther Trade Book (“
the
M&M Book
”)
which matched the price of the vehicle, being a Jaguar XF series
in 2011 as there was no code listed for the Jaguar XFR.
He
further contended that an email was sent by Owens directing Lush Auto
to submit the invoice setting out the agreed price and
model details
of the vehicle.
58.2.
In
their plea, the Defendants make no mention that the XF and XFR
Jaguars look identical but claimed that they at all times “
genuinely
believed
”
that the vehicle which was invoiced to the Plaintiff was in fact what
it purported to be. The claim regarding what
Owens advised
Arellano to do is repeated as per the summary judgment affidavit.
58.3.
During
the trial, Arellano changed his version again. At trial he
contended that:
53.3.1
He
knew at all times that the vehicle to be sold was a Jaguar XF
and not a Jaguar XFR;
53.3.2
He
could not find the M&M code for a Jaguar XF and took the
matter up with Owens, who instructed him to use the code for
the
cheapest XFR model and series;
53.3.3
Owens
instructed him to invoice in the amount of R915 000.00; and
53.3.4
He
sent the invoice by email on 28 March 2019 to Owens (“
the
28 March email
”);
53.3.5
The
28 March email had two attachments, namely the invoice, which
attachment was named “
Jaguar XF
Premium Lux
”
and the Natis document of the vehicle which reflects the vehicle as a
Jaguar XF series;
53.3.6
The
above indicates that there was no intention to misrepresent the
vehicle.
[59]
The
evidence presented on behalf of the Plaintiff was essentially that
Owens got the information regarding the vehicle from Misdorp.
Given that it was described as a Jaguar XFR, the Plaintiff and
MFC was satisfied about the selling price of R915 000.00.
[60]
The
Plaintiff also called Mr Edward le Roux (“
Le
Roux
”),
who has worked for MFC for 25 years. Le Roux testified
that the bank tests the value of a vehicle by selecting
the make,
model, series and derivative from a dropdown menu on the M&M
Book. They do not enter the M&M code but work
with the
specifications of the vehicle given to them. This means that it
is irrelevant whether or not the M&M code is
provided. The
bank needs the vehicle’s details, not a code.
[61]
Le
Roux also testifies that the Natis system hardly ever correctly
reflects the specific derivative of a vehicle. The evidence
of
Le Roux on this last aspect was confirmed by Mr Anton Brewer
(“
Brewer
”),
who was employed by Jaguar from 2006 – 2011.
[62]
At
the end of the trial the Plaintiff applied for the introduction into
evidence of correspondence between the parties’ attorneys
to
the effect that there was a third attachment to the 28 March email,
namely an extract from the M&M code which underlined
the
XFR 5.0 V8S/C series / derivative with a new vehicle price
of R1 187 000.00. The Defendants did not
object to
the introduction of this evidence but requested an opportunity file
an answering affidavit which, it was suggested, would
place the
correspondence into context as to its meaning. In that
answering affidavit, the Defendant’s attorney however
alleges
that he made a
bona
fide
error regarding the question of whether the extract from the M&M
Book was annexed to the 28 March email. According
to him,
it was not attached to that email.
[63]
In
the view I take of the matter it is not necessary to determine
whether the extract from the M&M Book was annexed to the 28 March
email.
[64]
I
now turn to analyse the evidence:
64.1.
The
email correspondence of 28 March 2014 constitutes the most
important evidence regarding the factual dispute now under
consideration.
64.2.
On
that day at 12:30 PM, Owens sent an email to Misdorp’s
email address at Lush Auto in which she states that the latter
must
invoice for R915 000.00. A response is then sent from
Misdorp’s email address at 2:11 PM to which there
were at
least two attachments, namely the invoice and the Natis document.
64.3.
The
Defendants’ version kept changing. In the summary
judgment answering affidavit and plea it is suggested that they
did
not know that the vehicle was an XF and not an XFR. It was
further contended that Owens instructed Arellano to use the
M&M
code for the XF. All of this changed during the trial when it
was contended that Owens instructed Arellano to use
the cheapest XFR
code.
64.4.
But
even the Defendants’ last version makes no sense. The
absence of the M&M code for the XF was no reason to misrepresent
the series / derivative on the invoice. The invoice does not
reflect any M&M code. The claim that the wrong vehicle
description had to be put on the invoice because there was no code
that matched the Jaguar XF 5.0, is accordingly illogical.
64.5.
It
must be borne in mind, as was conceded by Arellano, that the invoice
was for the Plaintiff’s benefit only as no one else
would see
it.
64.6.
Brewer
testified that if the M&M code is not available, the appropriate
response would be to obtain a so-called “
Transunion
report
”
for the vehicle. This tool was available to the Plaintiff.
Owens would have resorted to this fall-back instead
of
instructing Arellano to submit the wrong description. It was
never suggested that Owens was somehow in cahoots with Lush
Auto to
defraud the bank.
64.7.
It
is inconceivable, if the unusual instruction came from Owens to
invoice for a different, more expensive, series / derivative,
that
this would not have been recorded in either her email or in the
response thereto from Misdorp’s email address.
Merely
naming the attachment “
Jaguar XF
Premium Lux
”
does not deal with the alleged unusual instruction from Owens.
Also, the fact that the Natis document reflected the
vehicle as a
Jaguar XF was not of much assistance as Brewer convincingly
explained that the series and derivative were often
not correctly
reflected on the Natis document. Owens accordingly would only
check whether the invoice corresponds with the
year, chassis number
and engine number on the Natis document.
64.8.
To
this one must add that the invoice also contains other material
misrepresentations. As far as “
extras
”
is concerned, the invoice listed: “
PDC,
NAVIGATION, REVERSE CAMERA
”
whereas Arellano accepted during cross-examination that these
features actually come out standard with the Jaguar XF.
Arellano’s explanation that the features are described so as to
inform the client what he or she “
is
getting
”,
merely has to be stated to be rejected. One simply does not
misrepresent a feature as an extra in order to inform
the client what
he or she is buying. In the present instance it makes even less
sense as this representation was made to
the Plaintiff and not the
ultimate customer, i.e. Malani.
64.9.
Then
there is the fact that Lush Auto bought the Jaguar from Fantasy Cars
for a mere R320 000.00. The vehicle was sold
days later to
Malani for almost triple the price. Who gained by
misrepresenting the kind of vehicle to be sold? It
is in my
view unlikely in the extreme that Owens, knowing that the vehicle is
a Jaguar XF and not a Jaguar XFR, would
have “
dictated
”
the much higher price to Lush Auto. All that the Plaintiff
stood to gain from any higher price was a slightly higher
commission
(R50 000.00). Lush Auto, on the other hand, stood to gain
more than R600 000.00 from misrepresenting
the vehicle as an
XFR.
64.10.
Finally,
there is the question of how the “
R
”
badge got on to the Jaguar vehicle. It was not there when the
Jaguar was bought from Fantasy Cars and yet it was there
when the
vehicle was seized from Malani. The Plaintiff had no
opportunity to add the badge. It didn’t possess
the
vehicle before it was sold and only saw it after repossession. On
the probabilities, it seems more likely than not that
the Defendants
were responsible for adding the “
R
”
badge.
[65]
For
these reasons, I reject the evidence of Arellano and accept the
Plaintiff’s version which is that a misrepresentation
was made,
knowing that it was false, to the effect that the vehicle to be sold
to Malani was a Jaguar XFR and not a Jaguar XF.
[66]
This
means that Arellano is also liable in delict to pay the Plaintiff’s
damages. Lush Auto is also liable on this basis
as Arellano was
acting within the course and scope of his duties as employee when he
made the misrepresentation.
Misdorp’s
involvement and liability
[67]
As
already explained above, the Plaintiff’s version is that Owens
dealt throughout with Misdorp regarding the sale of the
Jaguar
vehicle.
[68]
The
Defendants, on the other hand, contended that Misdorp had no
involvement as far as the misrepresentation is concerned.
[69]
This
calls for an analysis of the evidence as far as Misdorp’s
involvement is concerned.
[70]
Yet
again, the Defendants’ version changed.
[71]
To
begin with, in the answering affidavit in the summary judgment
proceedings Lush Auto claimed that Misdorp had at no point in
time
been a member of Lush Auto. This is wrong. From the CIPC
company search, which was admitted into evidence, it
is apparent
that:
71.1.
Misdorp
was appointed as a member on 30 May 2012 and he resigned on
2 November 2012.
71.2.
Thereafter,
he was again appointed on 16 October 2015 and resigned on
3 February 2016.
71.3.
Arellano
on the other hand was appointed on 10 August 2012 and
resigned on 10 December 2014.
71.4.
Thereafter,
Arellano was again appointed on 19 December 2014 and
resigned on 16 October 2015.
[72]
It
is not clear why Misdorp swapped with Arellano over these periods.
Misdorp testified that he sold the car dealing business
to Arellano
and then later bought it back. No details were given about the
amounts that were paid. Misdorp claimed
that over the years
that he was doing deals with Owens, whilst the latter was
representing other companies, amounting to some R40 million
a
year. It would have been somewhat of a strange move to sell a
business with this kind of turnover for no good reason.
More
likely, in my view, is that during the time when Misdorp was going
through his divorce, it suited him not to be a member of
Lush Auto as
he did not want this asset in his name. However, Misdorp
continued to be very much involved although he was
no longer formally
a member.
[73]
Misdorp’s
involvement, even during the time when he was replaced by Arellano as
the sole member of Lush Auto, is evidenced
by the following facts
which were established at the trial:
73.1.
Facebook
page of Lush Auto which existed throughout the relevant period, i.e.
January 2014 – April 2014. During
that time
various vehicles were advertised and members of the public were
invited to contact Misdorp at his cell number.
Misdorp also
corresponded with members of the public on the Facebook page.
Not a single advertisement directs the public
to contact the supposed
owner, Arellano.
73.2.
Arellano
never had his own email address at Lush Auto. Instead, it was
claimed that he always used Misdorp’s email address,
i.e.
marc@lushauto.co.za
.
The reason for this, Misdorp claimed, is that the public was used to
his email address and hence Arellano decided to continue
using it.
I find this explanation entirely unconvincing. A new owner
would hardly keep on using the email address of
the previous owner.
Emails directed at the former owner’s email could be easily
redirected to the new owner’s
email address.
73.3.
The
crucial email, dated 28 March 2018, is identified in a
discovery affidavit, deposed to by Misdorp, as an email to
the Third
Defendant, i.e. Misdorp.
73.4.
Misdorp’s
cell number appears on the invoice for the Jaguar that the present
matter relates to. On this invoice, the
email address given is
lushauto@gmail.com
, which
indicates that Misdorp’s email address was not the only one
used. This in turn raises the question of why Arellano
did not
use this email but instead used Misdorp’s email when doing the
Jaguar transaction.
73.5.
In
the credit application to the Plaintiff, Misdorp’s name was
given as a director. The reason for this, Arellano claimed,
is
because Misdorp was known to the Plaintiff and his name would have
facilitated the approval of the credit application.
Again, I do
not find this convincing. I fail to see how the inclusion of
Misdorp as a director would have assisted Lush Auto
in respect of the
credit application. It would not add anything. In my
view, it was placed there because Misdorp continued
to act
de
facto
as a “
director
”
of Lush Auto.
73.6.
“
Marc
”
is listed as the contact person for Lush Auto on the Tripartite
Agreement, notwithstanding Arellano’s signature on
the
document.
73.7.
Despite
being in Court throughout the proceedings, Arellano did not dispute
Du Toit’s evidence that Arellano told him to speak
to Misdorp
regarding MFC’s complaints (and accordingly the present
dispute). Why would Misdorp deal with the fall-out
in
circumstances where he had nothing to do with the transaction in
question?
[74]
Turning
to the Jaguar deal in particular, Arellano initially testified that
he was solely responsible for this transaction.
Crucially, he
claimed that the deal came about because Malani contacted him from
KwaZulu-Natal to find a Jaguar luxury vehicle
for him.
According to Arellano he then went to source the vehicle. His
evidence in chief was that he did not buy the
vehicle until Malani’s
finance was approved. It however quickly became apparent during
cross-examination by Ms Christians,
that this could not possibly
have been the case as Lush Auto had already purchased the Jaguar from
Fantasy Cars on 20 March
2014, some six days before the first
credit application on behalf of Malani was forwarded to the
Plaintiff.
[75]
Arellano
then had to change his version on this aspect as well. He then
testified that Misdorp must have purchased the vehicle
but that he
was unfamiliar with the details. He could not, for instance,
explain why the Jaguar’s price was so low
and it was a
“
distressed
sale
”
made by Fantasy Cars to Lush Auto. Arellano then claimed that
Misdorp, as the “
salesperson
”
was authorised to sign sale agreements or purchase agreements (in the
case of the deal with Fantasy Cars) on behalf of Lush
Auto. One
of these sale agreements, relating to a Mercedes-Benz E350 was
introduced into evidence and Misdorp admitted that
he signed this
sale agreement and that he was authorised to do so on behalf of Lush
Auto.
[76]
In
my view, one is driven to the conclusion that Arellano did not know
much about the Jaguar deal and that Misdorp remained the
driving
force in respect of this transaction as well.
[77]
Misdorp
himself claimed that he bought the vehicle as a great bargain from
Fantasy Cars as the latter was going through financial
difficulties.
This was done even though Lush Auto would not ordinarily buy vehicles
to keep as dealer stock. Ordinarily,
Lush Auto would merely
link buyers with sellers. Lush Auto, after all, had no
showroom. Misdorp further testified that
by pure coincidence,
very shortly after the Jaguar XF was bought, Malani made
enquiries for such a vehicle. According
to Misdorp, Arellano
handled the rest of the transaction and all that he received was a
10% commission for sourcing the vehicle.
[78]
In
my view, Owen’s evidence to the effect that Misdorp was
involved in the transaction, or that he was at least co-responsible
for the misrepresentation on the invoice, is to be preferred over the
evidence of Arellano and Misdorp. In this regard, I
find the
following to be of some importance:
78.1.
Arellano
had to change his version drastically during cross-examination as to
how the transaction came about. It became apparent
that the
person with the knowledge of the deal was Misdorp. It is
inconceivable that he did not carry it through.
78.2.
Misdorp’s
email was used for the Jaguar transaction. I do not find the
explanation that Arellano used Misdorp’s
email convincing.
78.3.
Misdorp’s
cell number is on the Jaguar invoice.
78.4.
The
continuing involvement of Misdorp is demonstrated by the Facebook
page, his email address being used, and his name on the credit
application as director.
78.5.
Owens’
evidence was acceptable.
[79]
I
accordingly conclude that Misdorp must have been at least
co-responsible for the misrepresentation on the invoice and that he
too is liable for the Plaintiff’s damages due to this
fraudulent misrepresentation.
[80]
Misdorp
furthermore held out to the world that he could represent Lush Auto
in these deals, as is evidenced from his cell number
on the invoice;
the Facebook page; his email address being used; and his name on the
credit application as director. In the
circumstances, I further
hold that Lush Auto is estopped from denying Misdorp’s
authority to represent it and that Lush Auto
is vicariously liable
for Misdorp’s misrepresentations.
Quantum
[81]
As
to the quantum of damages, Du Toit testified that R275 000.00
was the best that the Plaintiff could secure for the vehicle.
This was not seriously disputed, no doubt because it was common cause
that the same vehicle was bought by Lush Auto from Fantasy
Cars for
R320 000.00 in March 2014. It was further not
disputed that the Plaintiff had to pay MFC the amount of
R985 139.29
and that the Plaintiff accordingly suffered damages in the amount of
R710 139.29,
Conclusion
The following order is
made:
(a)
First,
Second and Third Defendants are ordered liable, jointly and
severally, the one paying the others to be absolved
pro
tanto
,
to pay the Plaintiff the sum of R710 139.29 plus interest on
that amount from the date of the summons (21 April 2016)
to
the date of final payment;
(b)
First,
Second and Third Defendants are further to pay the Plaintiff’s
costs in the matter.
H J DE WAAL AJ
Acting Judge
of the High Court
Cape Town
13 June 2019
APPEARANCES
Plaintiff’s
counsel: Ms A Christians
Plaintiff’s
attorneys: Smiedt & Associates
Defendants’
counsel: Mr D Stevens
Defendants’
attorneys: AZS Attorneys Inc.
[1]
There
was also a Lush Auto stamp on the invoice which could not be
reproduced
[2]
The Master Credit
Provider Sale Agreement is defined to mean the Master Sale and
Representation Agreement concluded between ReFin
and the relevant
credit provider in terms whereof the vehicle is sold by ReFin to the
said credit provider.
[3]
In
cross-examination, Mr Stevens, who acted for the Defendants,
suggested to Du Toit that there may have been business between
the
Plaintiff and Lush Auto before 9 January 2014, when the
Master Agreement was allegedly signed. Pursuant to
a request
from Mr Stevens, I then ruled that any documentation to this
effect should be discovered as it was clearly relevant,
even though
discovery was only sought during the trial. It turned out that
there are no documents in the possession of
the Plaintiff which
indicates that there were business dealings between itself and Lush
Auto before 9 January 2014.
Lush Auto also produced
no such documents.
Mr Stevens
also made application or demanded that the Plaintiff should discover
its financial statements to enable the Defendants
to determine
whether an application for security for costs is warranted.
This request was denied. The
effect
of the omission in the 2008 Companies Act of a provision similar to
that of the repealed Companies Act allowing a court
to order a
plaintiff company to furnish security for costs is that Court may
only order a plaintiff
incola
company to furnish security if satisfied that the proceedings are
vexatious, reckless or otherwise amounting to abuse. See,
Boost
Sports Africa (Pty) Ltd v SA Breweries (Pty) Ltd
2015 (5) SA 38
(SCA). No such case was made out in the present
instance.
[4]
In
the Defendants’ heads of argument reference is made to the
work
Law
of Evidence
by Schmidt and Rademeyer at p. 10-6 where the learned authors
state that s 4 of the Civil Proceedings Evidence Act
1965
“
makes
it possible for the court or a layperson to make the comparison, but
the courts are hesitant to rely on their own judgment
or that of a
layperson instead of that of an expert
”.