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[2015] ZAKZPHC 43
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Standard Bank of South Africa v A-Team Africa Trading CC (4417/15) [2015] ZAKZPHC 43 (2 September 2015)
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 4417
/15
DATE:
02 SEPTEMBER 2015
In
the matter between
STANDARD
BANK OF SOUTH
AFRICA
......................................................................
APPLICANT
And
A-TEAM
AFRICA TRADING
CC
...............................................................................
RESPONDENT
JUDGMENT
Delivered:
2 September 2015
Moodley
J
[1]
This is an application for the return of goods consequent upon the
cancellation of the agreements under which the goods were
sold by the
applicant to the respondent.
[2]
During the period from December 2010 until July 2013, the applicant
and the respondent concluded 17 similar instalment sale
agreements
(‘the agreements’), in terms of which several vehicles
and two brick making plants (referred to collectively
as ‘the
goods’) were sold by the applicant to the respondent. It is
common cause that the applicant reserved ownership
of the goods in
terms of each agreement, although possession thereof was given to the
respondent, and that the respondent remains
in possession of the
goods.
[3]
It is also common cause that that the respondent failed to make
payment due under each of the agreements, and consequently defaulted
in its contractual obligations in terms thereof. The applicant’s
attorney thereafter sent a letter dated 17 February 2015
to the
respondent, referring to the default and giving the respondent notice
to remedy that breach.
[4]
Clause 9 of each of the agreements provides:
‘
9
Default
If
you fail to make any payment of any amount due or breach any term of
this agreement, you must remedy your default within seven
business
days of us notifying you to do so, unless there are laws that
dictates(sic) otherwise. If you fail to do so or if you
are declared
insolvent, or are provisionally or finally sequestrated or
liquidated, die, or allow any judgment against you to remain
unsatisfied for more than seven business days, we may exercise any of
our remedial rights.’
[5]
Clause 10 sets out the applicant’s remedies. The portions of
the clause pertinent to this applications state:
‘
10
Remedies
10.1
Subject to any applicable legislation, on your default, we may do any
of the following without prejudicing any of our rights:
10.1.1
…………….;
10.1.2
…………….;
10.1.3
cancel this agreement, take possession of the goods and claim from
you damages as well as the outstanding balance less the
market value
of the goods as at the date of cancellation. If the goods are not
recovered, their value will be deemed to be nil.
[6]
The applicant alleges that the requisite notice to remedy its default
under clause 9 was given to the respondent in the letter
of 17
February 2015 which was sent to the respondent per email and
registered mail on 19 February 2015.
[7]
The applicant contends that :
(i)
the letter containing the default notice
was received by the respondent, which is evinced by the letter dated
18 March 2015 from
its attorney, which could only have been written
on receipt of the letter dated 17 February 2015 from the respondent;
(ii)
as the respondent failed to remedy its
default within seven business days of receipt of the notice, the
applicant had cancelled
the agreements as it was entitled to, and
claims the return of the goods, which are its property;
(iii)
there is no merit in the respondent’s
dispute as to the validity of the notice of cancellation on the
ground that it did not
receive the earlier demand: all that is
required of a valid notice of cancellation of a contract is that the
party in breach should
be advised of the election by the other party
to cancel the contract, and such notice was effectively given to the
respondent prior
to the launch of the application.
[8]
However, should it be found that any
bona
fide
factual dispute exists as to
whether the respondent received the default letter, an interim order
should nevertheless be granted,
pending the finalisation of the
dispute.
[9]
The respondent resists the application on the grounds that the notice
placing it in
mora
:
(i)
was not properly served at its
domicilium
citandi et executandi
as recorded
in each of the agreements;
(ii)
did not come its attention; and
(iii)
was not clear and unequivocal and therefore
invalid in law.
The
applicant had therefore not placed the respondent
in
mora
and could not rely on the
subsequent cancellation of the agreements for the relief sought.
[10]
The respondent also contends that the further notice delivered by the
applicant was not effective in respect of all the agreements.
Relying
on its submission that there is a material dispute of fact, namely
whether the breach notice relied upon by the applicant
was received
by the respondent, the respondent seeks an order referring the matter
for the hearing of oral evidence, should the
application not be
dismissed.
[11]
The first ground advanced by the respondent viz, that service at the
respondent’s
domicilum
was
a necessary prerequisite, was not persisted in during argument, with
Mr Hollis, who appeared for the respondent, acknowledging
that
the significance of a
domicilium
address lay in the facilitation of service of notices etc for the
benefit of the creditor.
[1]
I am
in agreement with the applicant’s submission that provided that
the notice was actually received, it is irrelevant that
it came to
the respondent’s attention in a manner other than by service at
the
domicilium
address.
The
relevant legal principles
[12]
The agreements expressly provide that if the respondent breaches the
agreements
inter
alia
by failing to effect due payment timeously, and having been placed
in
mora
by
the delivery of a notice giving the respondent a specified period of
7 days to rectify the default, the respondent fails to do
so, the
applicant is entitled to cancel the contracts.
[2]
The provision, termed a ‘
lex
commissoria,
’
is valid and enforceable strictly according to its terms, and ‘the
court has no equitable jurisdiction to relieve
a debtor from
automatic forfeiture resulting from such a clause’,
[3]
when a debtor has failed to remedy his default within the further
prescribed time.
[13]
The court must be satisfied that the debtor is sufficiently aware of
his obligation.
[4]
Firstly, as
mora
only commences from the date of receipt of the letter of demand or
breach notice, the receipt of such demand or notice is significant
and the creditor must prove that the debtor received the peremptory
notice.
[5]
Secondly the demand
or notice must inform the debtor what obligation he is required to
perform and when he is required to perform
it
[6]
and the substance of the notice must be appropriate for the purpose
for which the creditor afterwards relies on it.
[7]
[14]
Therefore a creditor who intends to cancel the contract on the ground
of the debtor’s
mora
must also warn the debtor that in the event of his failure to rectify
his default within the stipulated period, the creditor reserves
the
right to cancel the contract.
[8]
The exact wording is immaterial provided it clearly and unequivocally
informs the debtor that his failure to perform timeously
may result
in the cancellation of the contract.
[9]
Admissibility
of the letter dated 18 March 2015 from the Respondent’s
Attorney
[15]
In limine,
the
respondent seeks an order that any reference to its attorney’s
letter dated 18 March 2015 should be struck out as inadmissible
because the letter is marked ‘without prejudice’ and is
integral to the settlement negotiations between the parties.
Mr
Hollis sought to persuade me that the entire letter ought to be ruled
inadmissible, not just the portions which refer to the
settlement
proposals, and that consequently, the applicant cannot rely thereon
to prove that the default notice was received by
the respondent.
[16]
Mr Van der Merwe who represented the applicant, submitted that the
privilege operates only to exclude the settlement offer
made by the
respondent and does not cover the acknowledgement of the receipt, and
that even if the references to the letter are
struck out, the
allegation made in the founding affidavit that the default letter was
received and the respondent’s admission
that the letter was
received remain.
[17]
Both counsel relied on the judgment of
Trollip
JA
in
Naidoo
v Marine and Trade Insurance Co Ltd,
[10]
in which it was held that in accordance with the general ‘without
prejudice’ rule, once a party objects to any correspondence
conducted ‘without prejudice’ in the
bona
fide
efforts of the parties to settle a claim, being adduced in evidence,
the correspondence is wholly inadmissible. However any admissions
that are quite unconnected with or irrelevant to the settlement
negotiations are not covered by the protection of the rule and
are
admissible in evidence.
[11]
The presence or absence of such connection or relevance is
essentially a question of fact in which the intention of the party
making the admission, as objectively manifested, may be of
importance.
[18]
The first two paragraphs of the letter dated 18 March 2015, from the
respondent’s
attorneys of record, Naidoo & Company Incorporated, reads :
‘
1
We act for A Team Africa CC.
2
Your letter of the 17
th
February 2015 addressed to our client has been handed to us for
attention and reply.’
[19]
In my view, the statement by the respondent’s attorney that the
applicant’s letter dated 17 February 2015 has been
handed to
him, merely constitutes part of the formal portion of the letter in
which the attorney places himself on record for the
respondent, and
indicates the point at which he has entered the fray between the
parties. The mere reference to the impugned letter
cannot be held to
be an integral part of the settlement negotiations, although it may
have constituted the impetus for the respondent
appointing an
attorney to represent him.
[20]
Consequently, I am satisfied that a reasonable objective approach
does not sustain the argument that because the admission
of the
receipt of the applicant’s letter from the respondent by the
attorney, is included in a letter marked ‘without
prejudice’
and is followed by certain proposals on behalf of the respondent, the
entire letter, including such admission
of receipt, is rendered
inadmissible. In my view, the argument is ill-conceived and intended
only to circumvent the fact that the
default notice did indeed reach
the respondent, thereby frustrating the applicant’s reliance on
the attorney’s admission
to prove that the respondent had
received the letter dated 17 February 2015, and was aware that he had
been placed in
mora.
[12]
[21]
I note in passing, from a perusal of the correspondence annexed to
the application, that it appears to be a standard practice
of the
respondent’s attorney to include the words “Without
Prejudice” on all correspondence, even when arranging
for the
goods in the possession of the respondent to be inspected by the
appraiser appointed by the applicant, which right is reserved
in
terms of the agreements.
Is
the notice placing the respondent in
mora
clear and unequivocal?
[22]
The letter dated 17 February 2015 refers to the 17 credit agreements,
listed in
the
table marked ‘A’, annexed to the letter. The relevant
portions of the letter state:
‘
3.
We have been instructed that you have failed to make payment of
and/or are in arrears with your monthly instalments in respect
of
each of the instalment sale agreements in the amount stated in R927,
490.91 being the sum total of the instalments due in respect
of each
instalment sale agreement as more fully set out in the attached
table.
4.
Accordingly, you are in default of your obligations in terms of each
of the said instalment sale agreements.’
[23]
Paragraphs 5 and 6 of the letter set out the recourse available to
the applicant in terms of the Companies Act No 61 of 1973
read with
the
Close Corporations Act No 69 of 1984
, and give the respondent
notice that liquidation proceedings against it are contemplated.
[24]
The letter continues :
‘
7.
Kindly note that this letter
also
(my
emphasis)
serves as notice in terms of
each of the instalment sale agreements for you to rectify your
default within 7 business days, which
business days shall run
concurrently within the 21 calendar days referred to in paragraph 6
above. In the circumstances, our client
reserves its rights in terms
of each of the instalment sale agreements to terminate each of the
said agreements should the relevant
arrears remain unpaid after seven
business days of delivery of this letter.’
[25]
It was contended by Mr Hollis that Basil Hendricks, the member of the
respondent, as a lay person, would not have been able
to comprehend
the import of the letter or distinguish between the legal effect of
the demand in terms of
Section 69(1)(a)
of the
Close Corporations Act
which
gave him 21 calendar days to effect payment of the arrears, and
the notice in terms of the agreements placing him in
mora
,
which gave him 7 business days to remedy his breach, because both
notices were incorporated in a single letter, and the periods
for
remedy of the defaults were to run concurrently. Therefore the
mora
notice could not be said to be clear and unequivocal.
[26]
In determining the merits of this contention, I have taken
cogniscence of the fact that Hendricks is not merely a lay person
with no experience of commercial transactions or credit agreements,
but a businessman. It is common cause that Hendricks as the
member of
the respondent, signed the seventeen (17) instalment sale agreements,
the terms and conditions of which, particularly
the clauses relating
to breach by the purchaser and the remedies therefor, were
essentially the same in all the agreements.
[27]
The pertinent and prudent enquiry therefore should not be whether a
reasonable layperson would have understood the contents
and import of
the letter, but whether a reasonable businessman, in the position of
the respondent, would have found the notice
to be clear and
unequivocal and been able to appreciate the import of the letter.
[28]
In making this enquiry, I have taken into consideration the following
:
(i)
The format and content of the letter :
a)
paragraphs 3 and 4 refer to the 17 instalment sale agreements and set
out clearly the nature of the default, and the arrear amount.
b)
The relevant notices are clearly delineated thereafter in separate
paragraphs;
c)
that more than one action is contemplated by the applicant is
apparent from the use ‘also’ in paragraph 7;
d)
each notice specifies the period for the remedy of the default,
whether in business days or calendar days.
e)
clause 7 stipulates that the applicant reserves the right to cancel
the agreements, should the respondent fail to remedy the
default
within 7 business days.
(ii)
The language in which the letter is
written. A comparison of clauses 9 and 10 in the agreements, (as set
out earlier in this judgement)
and the notice in paragraph 7 does not
disclose a startling difference in language and expression. Paragraph
7 is essentially a
paraphrase of the two clauses.
(iii)
The respondent does not (and cannot) claim that he is not bound by
the agreements because he did not understand the contents
thereof. He
has admitted that he had fallen into arrears and was in default of
his obligations under the agreements. He would therefore
have been
fully aware of the legal recourse available to the applicant
consequent upon his default, and a
ny claim
by the respondent that he was not aware of or did not understand the
nature of the remedies available to the applicant
in the event of his
default, would be disingenuous. Nor could he have been under any
illusion that the applicant would not exercise
its rights as a result
of his substantial breach, and the delivery of a notice in terms of
the agreements could not have been unexpected.
[29]
Therefore in the context of the respondent’s default and
Hendrik’s business experience, there is little reason
to accept
as a valid complaint the respondent’s contention that the
contents of the letter, in particular the
mora
notice, were not clear and unequivocal, and it might be claimed that
the respondent
had
not received such notice as was contemplated by clause 9 of the
agreements.
[13]
[30]
I am therefore satisfied that the applicant fulfilled the conditions
upon which its
right
to terminate the agreements with the respondent were dependent and
that as a
result
of the failure of the respondent to comply with the default notice as
contained
in
the letter dated 17 February 2015, the applicant was entitled to
terminate the
agreements.
[31]
In the premises the applicant is entitled to the return of the goods
in the
possession
of the respondent.
[32]
There is no reason why costs should not follow the result on a scale
as
stipulated
in clause 12 of the agreements.
Order:
1.
The respondent is directed to place the
following assets in the applicant’s possession forthwith:
1.1
A Volvo FM 12 380 6x2 Sleeper with
engine number [D1………] and chassis number
[IYV…….]
1.2
A Volvo FM 12 380 6x2 Sleeper with
engine number [D1……….] and chassis number
[YV………]
1.3
A Nissan UD440 with engine / serial number
[GE……..] and chassis number [ADDT…….]
1.4
A Nissan UD440 with engine / serial number
[GE……] and chassis number [ADDT1……..]
1.5
A Bin Side Tipper with engine / serial
number [AHBDS…….] and chassis number [AHBD…….]
1.6
A Nissan UD440 with engine / serial number
[GE…….] and chassis number [ADDT………]
1.7
A SA Truck Bodies Twin Side Tipper with
engine / serial number [AHB…….] and chassis number
[AHB…….]
1.8
A Nissan UD440 with engine / serial number
[GE……] and chassis number [ADDT…..]
1.9
A Toyota Hilux 2.5D 4D with engine / serial
number [2K………] and chassis number [AH………..]
1.10
A Toyota Hilux 2.5D 4D with engine / serial
number [2KD……] and chassis number [AH……….]
1.11
A Toyota Hilux 2.5D 4D Raider with engine /
serial number [1K……..] and chassis number [AH…….]
1.12
A Toyota Hilux 3.D 4D Raider with engine /
serial number [1…….] and chassis number [AH……]
1.13
An Automated Brick and Block Plant with
engine / serial number [JS…….]
1.14
An Agram SA33Auto Brick/Block with engine /
serial number [2……]
1.15
A SA Truck Bodies Side Tipper with engine /
serial number [AH………] and chassis number
[AHB……..]
1.16
An Afrit Double Axle Sloper with number
[ADV……..]
1.17
An Martin Tri Axle 40 Ton with chassis
number[ AA………]
2.
The respondent is directed to pay the costs of this application on
the scale as between attorney and client.
MOODLEY
J
Counsel
for the Applicant:
Adv H Van der Merwe
Instructed
by:
MARTINS WEIR-SMITH INC
Ground
Floor, Block D West
Han
Merensky Office Park
32
Van Buuren Road
Bedfordview
2007
c/o
REDFERN AND FINDLAY
24
Montrose Park Boulevard
Victoria
Country Club Estate
Pietermaritzburg
3200
Counsel
for the Respondent:
Adv N Hollis
Instructed
by:
NAIDOO & CO. INCORPORATED
La
Lucia Ridge Office Park
Docex
40
Umhlanga
4051
[1]
Judson
Timber Co (Pty) Ltd v Ronnie Bass & Co (Pty) Ltd and Another
1985 (4) SA 531
(W) at 538 A ‘The purpose of choosing a
domicilium
citandi
,
for the giving of a prescribed notice under a contract, is the same
as it is for the service of process, namely to relieve the
party
giving the notice from the burden of proving receipt.’
[2]
v
iz
mora
ex re
:
The
Law of Contract in South Africa :
Christie
& Bradfield 6
th
Ed page 521
[3]
Christie
& Bradfield page 527
[4]
Phone-A-Copy
Worldwide (Pty) Ltd v Orkin & Another 1986(1) SA (A) 729
at 749 I-J :
the
breach clause was peremptory in 2 respects : (1) the delivery
of notice to the defaulting purchaser himself –
unless the
purchaser receives it is ineffectual; (2) the notice
must inform the purchaser of his failure to fulfil
any obligation
under the contract and the time within which he is required to
remedy it.
[5]
Hano
Trading CC v JR 209 Investments (Pty) Ltd and Another
2013 (1) SA
161
(SCA) 168D para 31
[6]
Kragga
Kamma Estates CC v Flanagan
[1994] ZASCA 137
;
1995 2 SA 367
(A) 374D- 375(B)
[7]
Johnstone
v Harrison
1946 NPD 239
245
[8]
Nel
v Cloete
1972 2 SA 150
(A) 159H
[9]
Kragga
Kamma Estates CC v Flanagan 375C-F
[10]
1978(3)
SA 666 AD
[11]
680C
‘…..the admission to be protected must be reasonably
incidental to the “without prejudice” settlement
negotiations.’
[12]
Phone-A-Copy
Worldwide (Pty) Ltd v Orkin & Another page 749
[13]
Phone-A-Copy
Worldwide (Pty) Ltd v Orkin & Another page 750 F-I