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[2008] ZASCA 128
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Picardi Hotels Ltd v Thekweni Properties (Pty) Ltd (680/07) [2008] ZASCA 128; 2009 (1) SA 493 (SCA) ; [2009] 1 All SA 471 (SCA) (30 September 2008)
Links to summary
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No: 680/07
In the matter between:
PICARDI HOTELS LTD
APPELLANT
v
THEKWENI PROPERTIES (PTY) LTD
RESPONDENT
Neutral citation:
Picardi
Hotels Ltd v Thekweni Properties (Pty) Ltd
(680/07)
[2008] ZASCA 128
(30 September 2008)
Coram:
MPATI P, FARLAM,
CLOETE JJA, BORUCHOWITZ et KGOMO AJJA
Heard:
27 AUGUST 2008
Delivered:
30 SEPTEMBER
2008
Summary:
Cession
in
securitatem debiti
– of all cedent’s
rights to rentals and other revenues of whatsoever nature –
clause providing that cession shall
not be acted upon until certain
conditions met – cession not conditional - transfer of rights
to cessionary not suspended,
only the exercise thereof – cedent
divesting itself of right to sue for rentals – special plea
disputing cedent’s
locus
standi
to sue for
rentals, upheld.
_______________________________________________________________
ORDER
_______________________________________________________________
On appeal from:
High Court,
Durban & Coast Local Division (Levinsohn DJP sitting as court of
first instance).
[1] The appeal is upheld with costs including those
occasioned by the employment of two counsel.
[2] The order of the court a quo is set aside and the
following is substituted in its stead:
‘
(i) The defendant’s special plea is upheld;
(ii) The plaintiff’s claim is dismissed;
The plaintiff is ordered to pay the costs of the action
including those occasioned by the employment of two counsel.’
______________________________________________________________
JUDGMENT
______________________________________________________________
BORUCHOWITZ AJA (MPATI P, FARLAM, CLOETE JJA, KGOMO AJA
concurring):
[1] The respondent instituted action against the
appellant in the Durban High Court claiming payment of arrear rentals
in terms
of an agreement of lease. In a special plea the appellant
alleged that the respondent had divested itself of the power to sue
it
for rental by virtue of a cession
in
securitatem debiti
executed by the respondent
in favour of a bank. The matter came before Levinsohn DJP who
dismissed the special plea and granted
judgment in favour of the
respondent for R845 726.98 with interest and costs. The appellant
appeals against this judgment with
leave of the court a quo.
[2] The respondent’s claim against the appellant
arises from the latter’s occupation of certain immovable
properties
owned by the respondent which are situate at West and
Gillespie Streets, Durban. When the respondent acquired the
properties it
entered into a number of related agreements with
Investec Bank Ltd (the bank). These included a loan agreement and a
covering mortgage
bond (the bond) that was registered over the
properties on 18 July 1996. Clause 8 of the bond reads as follows:
‘
8. CESSION OF RENTALS AND
REVENUES
Should the Bank give its consent
to the letting of the mortgaged property, the Mortgagor cedes,
transfers and assigns to the Bank
all the Mortgagor’s rights,
title and interest in and to all rentals and other revenues of
whatsoever nature, which may accrue
from the mortgaged property as
additional security for the due repayment by the Mortgagor of all
amounts owing to or claimable
by the Bank at any time in terms of
this bond, with the express right in favour of the Bank irrevocably
and
in rem suam
–
to institute proceedings
against lessees for the recovery of unpaid rentals, and/or eviction
from the mortgaged property;
to let the mortgaged property
or any part thereof, to cancel or renew and enter into leases in
such manner as the Bank decides,
to evict any trespasser or other
person from the mortgaged property;
to collect on behalf of the
Mortgagor any moneys payable in respect of the alienation by the
Mortgagor of the mortgaged property
or any portion thereof;
provided, however, that the
cession, transfer, assignment and authorities and powers specified
above shall not be acted upon by
the Bank without the consent of the
Mortgagor unless the Mortgagor has failed to comply with any term or
condition of this bond
or any loan secured thereby or has otherwise
committed a breach thereof. The Bank is further entitled to charge a
commission of
five (5) percentum of the gross amount of all rentals
and other revenues collected and to recover such commission under
this bond.’
[3] It is settled law that unless otherwise agreed, a
cession
in securitatem debiti
results in the cedent being deprived of the right to recover the
ceded debt, retaining only the bare
dominium
or a ‘reversionary interest’ therein. See
Bank
of Lisbon and South Africa Ltd v The Master
;
1
Land- en Landboubank van Suid-Afrika v Die
Meester;
2
Goudini Chrome (Pty) Ltd v MCC Contracts (Pty)
Ltd
;
3
Louw v WP Koöperatief Bpk;
4
Standard General Insurance Co Ltd v SA Brake
CC
.
5
[4] The learned judge held that the proviso to clause 8
of the mortgage bond had the effect of suspending the operation of
the cession
pending fulfilment of the conditions therein mentioned.
He also held that as neither of the conditions had been fulfilled,
the
cession had not come into effect and the appellant was not
deprived of its right to recover the ceded debts. It is the
correctness
of this finding that falls to be determined in the
present appeal.
[5] The matter is essentially one of interpretation. It
is incumbent upon the court to ascertain the intention of the parties
which,
in the first instance, must be gathered from the language of
the clause itself. The words of the cession must be given their
plain,
ordinary, popular and grammatical meaning, unless it clearly
appears from the context that the parties intended them to have a
different meaning. Absent ambiguity, the meaning conveyed by the
words themselves must be given effect to unless this would give
rise
to absurdity, repugnancy or inconsistency with the rest of the bond.
In order to ascertain what the parties intended by the
language used
the court is required to consider the bond as a whole rather than
isolated expressions and is to have regard to its
object. The
relevant provision must also be construed in accordance with sound
commercial principles and good business sense so
that it receives a
fair and sensible application. These well established principles are
encapsulated in
Jaga v Dönges NO;
Bhana v Dönges NO
;
6
Swart en ‘n ander v Cape Fabrix (Pty)
Ltd
7
and
Coopers & Lybrand v Bryant
.
8
.
[6] The first sentence of clause 8 of the covering
mortgage bond is of particular importance. The relevant portion
provides:
‘
. . . the Mortgagor
cedes, transfers and assigns to the Bank all the Mortgagor’s
rights, title and interest in and to all
rentals and other revenues
of whatsoever nature . . . .’
[7] The phrase
‘cedes,
transfers
and
assigns’ incorporates all of the constituent elements of a
cession, and is sufficient to constitute an effective transfer
of
rights. The use of the present tense is also a strong indication
that an immediate transfer of rights was intended.
See
Standard General Insurance Co Ltd
(supra).
[8] The central question is whether the proviso to
clause 8 has the effect of overriding the clear indication in the
first sentence
that an immediate and unconditional cession and
transfer of rights was intended.
[9] The relevant portions of the proviso provide as
follows:
‘
. . . that the cession,
transfer, assignment and the authorities and powers specified above
shall not be acted upon by the Bank
without the consent of the
Mortgagor unless the Mortgagor has failed to comply with any term or
condition of this bond or any loan
secured thereby or has otherwise
committed a breach thereof . . . .’
The court a quo found that these words were an
indication that the cession was conditional and became effective only
upon the happening
of one or the other of the events stated in the
proviso. I do not agree with this finding. Such interpretation
strains the plain
language that is used. The phrase ‘shall not
be acted upon’ connotes nothing more than that the bank shall
not be entitled
to exercise any of the rights ceded to it including
the powers specified in sub clauses 8.1, 8.2 and 8.3 until the
happening of
one or other of the stated events. What is suspended is
the right to act upon the cession and not the cession itself. The
words
‘acted upon’ imply the existence of some fact or
state of affairs upon which an action could be effected. In context,
this can only be a reference to the completed cession.
[10] In the case of
P G Bison Ltd
and others v The Master and another
9
this court had occasion to consider a clause which provided that:
‘
This cession will not be
implemented unless the account is overdue by 30 days, and seven days’
notice of the intention to
implement this cession has been given.’
In commenting on the ordinary grammatical meaning of the
word ‘implement’ Grosskopf JA said the following:
‘
The verb “carry
out” is one of the dictionary meanings of “implement”
and, in my view, that is what “implement”
in the present
context probably connotes. The additional clause accordingly provides
that the cession will not be carried out (by
the cessionary) unless
the account is overdue and notice has been given (to the cedent). It
certainly does not follow that the
actual transfer of the rights is
suspended. The appellants as cessionaries are merely prevented from
personally exercising those
rights until the corporation defaults and
notice has been given.’
[11] The same reasoning is apposite to the
interpretation of the words ‘acted upon’ in this matter.
In their respective
contexts ‘acted upon’ and ‘carry
out’ and ‘implement’ (as considered in
P
G Bison
supra) are all intended to connote
the same thing, namely that a transfer of rights has been effected by
means of the cession but
that the right to act in accordance with
such cession or to enforce such rights has been suspended.
[12] To interpret the cession in the manner contended
for by the respondent would be destructive of the very purpose for
which the
cession
in securitatem debiti
was entered into, which was to provide security for the loan that the
bank was to advance to the respondent. That purpose is specified
in
the first part of clause 8 which provides that the cession was to
operate ‘
as additional security for the
due repayment by the Mortgagor of all amounts owing to or claimable
by the Bank at any time in terms
of this bond
. . . .’ The evidence shows that the bank required the
respondent to furnish the maximum conceivable security for the loan.
Were the respondent’s interpretation correct, the bank would
enjoy no security from the cession in the event of the respondent’s
insolvency. The bank’s representatives conceded that it could
never have been the intention of the parties that the bank
would not
be a secured creditor in respect of the respondent’s rental
revenues in the event of its insolvency.
[13] Counsel for the respondent submitted that the
interpretation contended for by the appellant would have the
following consequences:
the transaction between the parties would be
stultified, as the respondent would be unable to collect the rentals
which it needed
to be able to service the payments under the mortgage
bond and to meet its expenses; the bank would have to change its
methods
of doing business including its standard agreements; and the
bank would also have to create a rent collection department for the
collection of the ceded rentals and would then have to account to the
respondent in respect of such collections. I do not agree
with these
contentions. On the evidence neither the bank nor the respondent
understood the transaction to operate in this way.
There is no
practical bar to the respondent in such a situation from simply
continuing to collect the rentals, the cession notwithstanding.
This
is a question of mandate. It is not unusual for a creditor to permit
a debtor to collect ceded debts. See for example
Goudini
Chrome (Pty) Ltd
10
and
Springtex Limited
v Spencer Steward & Company
.
11
If however the respondent wished to sue for unpaid rentals it would
have to obtain a recession of the ceded claims from the bank.
[14] I am of the view therefore that an effective and
unconditional transfer of rights occurred when the cession
in
securitatem debiti
was executed. The
consequence is that the respondent was divested of the power to sue
the appellant in respect of the unpaid rentals.
In order to sue for
the recovery of the ceded debts the respondent should have taken
recession of them from the bank.
[15] It follows that the court a quo should have upheld
the special plea and dismissed the respondent’s claim. It only
remains
to add that the decision in
Solomon NO
v Spur Cool Corporation (Pty) Ltd
,
12
which is inconsistent with this conclusion, was wrongly decided and
it is overruled.
[16] In the result the following order is made:
(1) The appeal is upheld with costs including those
occasioned by the employment of two counsel.
(2) The order of the court a quo is set aside and the
following is substituted in its stead:
‘
(i) The defendant’s special plea is upheld;
(ii) The plaintiff’s claim is dismissed;
The plaintiff is ordered to pay the costs of the action
including those occasioned by the employment of two counsel.’
________________________
P
BORUCHOWITZ
ACTING
JUDGE OF APPEAL
Appearances
:
For
Appellant: D A Gordon SC
R
D E Gordon
Instructed
by
Bernadt
Vukic Potash & Getz, Cape Town
Lovius
Block, Bloemfontein
For
Respondent: C G Marnewick SC
Instructed
by
Murugasens,
Chatsworth, Durban
McIntyre
& Van Der Post, Bloemfontein
1
1987 (1) SA 276(A)
at 294C.
2
1991 (2) SA 761
(A) at 771C-F.
3
[1992] ZASCA 208
;
1993 (1) SA 77(A)
at 87G-H.
4
[1994] ZASCA 54
;
1994 (3) SA 434
(A).
5
[1995] ZASCA 46
;
1995 (3) SA 806(A)
at 814I-815B.
6
1950 (4) SA 653
(A) at 662G-H.
7
1979 (1) SA 195
(A) at 202B-C.
8
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 767E-768C.
9
2000 (1) SA 859
(SCA).
10
s
upra at 87H.
11
1991 (1) PH A.7 (C).
12
2002 (5) SA 214
(C).