Brief Summary

Contract — Instalment sale agreement — Summary judgment application — Plaintiff sought summary judgment for arrears on motor vehicle instalment sale agreement, alleging cancellation due to defendant's default — Agreement lacked an express cancellation clause — Court held that failure to pay instalments constituted a material breach, allowing for cancellation at common law — Plaintiff complied with notice requirements under the National Credit Act, validly cancelling the agreement prior to issuing summons — Summary judgment granted in favor of the plaintiff.

Comprehensive Summary

Summary of Judgment

1. Introduction

This judgment concerned an application for summary judgment in the Eastern Cape Local Division, Mthatha. The applicant (plaintiff) was Standard Bank SA Ltd, and the respondent (defendant) was Nomzingsi Princess Mnyipiza.

The proceedings arose after the bank instituted action based on a standardised instalment sale agreement for the purchase of a motor vehicle and then sought summary judgment on the basis that the defendant had no bona fide defence. The matter came before Griffiths J as a summary judgment application, following the issuing and service of summons and particulars of claim in which the plaintiff alleged default and cancellation of the agreement.

The general subject-matter of the dispute was the plaintiff’s entitlement, following alleged default, to rely on cancellation of the instalment sale agreement and obtain relief confirming termination and compelling return of the financed vehicle, together with costs. A central complication was that the plaintiff’s particulars of claim alleged the agreement contained a cancellation clause, but on reading the agreement it appeared that no express cancellation clause existed.

2. Material Facts

The parties concluded a written instalment sale agreement relating to the purchase of a motor vehicle. The plaintiff alleged that the defendant defaulted on her payment obligations by failing to pay instalments when due, and that the total outstanding premiums/arrears as at 13 January 2015 were R18,245.45 (with the demand letter referring to an overdue amount of R18,285.45).

It was undisputed (as treated by the court) that the written agreement attached to the particulars of claim did not contain an express cancellation clause, notwithstanding that the plaintiff pleaded that the agreement provided that, upon default, the plaintiff would be entitled to cancel, repossess and sell the asset, and retain payments already made. Counsel for the plaintiff conceded in argument that no express cancellation clause existed.

The court treated it as material that the plaintiff gave the defendant a notice pursuant to section 129 read with section 130 of the National Credit Act 34 of 2005, and that in the notice the plaintiff stated that if the defendant failed to respond within ten business days, the agreement would be cancelled and judgment would be obtained for return of the asset. The defendant did not dispute receipt of this notice at a time when she was in arrears, nor that she failed to remedy the arrears before cancellation (whether before summons or by service of the particulars of claim).

In her opposing affidavit, the defendant did not specifically allege that she was not in arrears in respect of the instalments the plaintiff claimed were unpaid. The defendant relied, instead, on contentions that the plaintiff was allegedly uncertain about the amount due (pointing to different figures mentioned for arrears versus the accelerated balance), and that she made payments after service of summons (including a payment of R22,000 on 9 March 2015). The court treated the alleged later payments as occurring after the summons had been served and at a time when, on the plaintiff’s case, cancellation had already occurred due to default.

The defendant also raised a technical contention that the person who signed the particulars of claim and summary judgment application was not a duly admitted or qualified attorney. The court considered that, on the face of the documents, the person in question appeared to be a qualified attorney certified under section 4(2) of Act 62 of 1995 to appear in the High Court.

3. Legal Issues

The central legal questions were whether, in circumstances where the instalment sale agreement did not contain an express cancellation clause, the plaintiff nevertheless had a valid right to cancel the agreement and seek relief premised on that cancellation, including return of the motor vehicle.

A related issue was whether the plaintiff’s pleading (which alleged an express cancellation clause in the agreement, but also pleaded cancellation in alternative terms) was sufficient to sustain summary judgment notwithstanding the absence of an express cancellation provision in the written contract.

In addition, the court had to determine whether the defendant had raised a bona fide defence sufficient to resist summary judgment. This involved a mixed inquiry: the application of legal principles governing cancellation (including material breach and default procedures) to the facts, and an evaluation of whether the defendant’s stated defences were genuine and legally cognisable for purposes of summary judgment.

The judgment also implicated the exercise of a discretion to grant or refuse summary judgment, and an assessment of whether relief of the type sought (including confirmation of termination and return of an asset) should be granted in the circumstances.

4. Court’s Reasoning

The court began by identifying a difficulty in the plaintiff’s case: the particulars of claim alleged that the written agreement expressly entitled the plaintiff, upon default, to cancel the agreement and repossess and sell the asset. However, on a reading of the agreement, it was clear that no express cancellation clause was contained in the contract. This was conceded on behalf of the plaintiff.

The defendant’s opposing affidavit, considered in isolation, was found to disclose no substantive defence on the merits. Nonetheless, the defendant argued that summary judgment should be refused because, without an express cancellation clause, the plaintiff could not validly cancel in the manner alleged. In addressing this contention, the court considered authority emphasising that, although a lex commissoria (express cancellation term) is often relied upon, cancellation is not only possible where there is an express clause: cancellation may also occur at common law where there is breach of a material term, or where a term is made material by notice. The court noted, however, that a right to cancel is required before cancellation can occur.

The court considered the approach in ABSA Bank Ltd v Havenga and Similar Cases 2010 (5) SA 533 (GNP), which criticised careless pleading where a template contract without a cancellation clause was nonetheless pleaded as containing one, and which recognised that the relief sought is discretionary and may be refused where pleadings incorrectly allege an express cancellation provision. The court then considered a recent decision of the same division, Standard Bank SA Ltd v Mbane (Case No. 58/2015, Eastern Cape Local Division, Mthatha, 23 April 2015), which was described as being practically on all fours. In that matter, the court distinguished Havenga on the basis that the plaintiff had pleaded an express term, alternatively a tacit term, alternatively an implied term permitting cancellation.

In the present matter, the pleadings were materially the same as those in Mbane. The court considered itself bound to follow Mbane unless convinced it was clearly wrong, and concluded it could not find that decision clearly wrong. On that basis, the absence of an express cancellation clause did not, in the court’s view, automatically preclude cancellation, because the pleaded alternatives (tacit or implied term) and the operation of common law principles could permit cancellation in appropriate circumstances.

The court then addressed whether the defendant’s failure to pay instalments on due date entitled the plaintiff to cancel at common law, engaging the distinction between contracts where time is of the essence and where it is not. The court referred to Kangisser and Another v Rieton (Pty) Ltd 1952 (4) SA 424 (T) for the proposition that where time is not of the essence but performance is delayed, a right to resile is limited to failures going to the root of the contract (including excessive delay amounting to repudiation), and that notice to perform within a reasonable period may be required before resiling.

Applying these principles, the court stated that it could not conclude that time was necessarily of the essence regarding payment. However, it considered there was little doubt that failure to pay instalments when due would constitute a material breach in this contractual setting. The court relied on provisions of the agreement indicating that default had serious consequences, including a clause (identified as clause 18.4) contemplating recovery of all amounts owing under the agreement by following the default procedure. The court inferred from these provisions and “various other clauses” that the parties contemplated that failure to pay an instalment on due date would be sufficiently serious to trigger acceleration and justify cancellation, provided the default procedures were followed, particularly by giving notice of an intention to cancel.

A significant aspect of the court’s application of these principles was the plaintiff’s compliance with statutory and contractual default processes. The court found that the plaintiff gave notice under sections 129 and 130 of the National Credit Act, warning that the agreement would be cancelled if the defendant did not respond within ten business days. The court treated it as clear that the defendant received this notice while in arrears and did not remedy the arrears before cancellation. On that basis, the court concluded that the plaintiff validly cancelled the agreement in terms of the common law and in terms of the agreement itself.

The court then evaluated the remaining defences raised in opposition to summary judgment. The defendant’s contention that the plaintiff was unaware of the true amount due relied on an asserted discrepancy between the arrears figure in the demand letter and the accelerated full balance stated in the summary judgment affidavit. The court rejected this as a misunderstanding: the figures related to different concepts (overdue instalments versus the accelerated outstanding balance), and therefore did not reveal inaccuracy.

The defendant’s argument that the issue was whether she was in arrears was also treated as misconceived. The court noted that the defendant did not specifically deny being in arrears, and her reliance on having made payments after summons tended, in the court’s view, to acknowledge that she had been in default. The court further emphasised that she did not allege that she had paid the instalments on their due dates that the plaintiff alleged were unpaid, which the court considered relevant to whether a bona fide defence had been established.

As to the later payment of R22,000, the plaintiff’s attorney had responded that it was made by cheque and would only clear after 10–14 days, meaning effectively no payment had been made at that time. The court also observed that a further alleged payment was not properly supported, as the amount was unspecified and the relevant annexure referred to in the affidavit was not attached. In any event, the summons had been served long before those alleged payments, and the plaintiff’s case was that cancellation occurred due to default before summons or, at the latest, by service of the summons/particulars of claim at a time when the defendant was admittedly in arrears.

The technical objection regarding the signatory’s qualification was rejected on the basis that the signatory appeared prima facie to be a qualified attorney certified to appear in the High Court. The court also considered a post-hearing reference to Community Property Company (Pty) Ltd v Eastern Cape Burial Scheme CC and Another (ECLD, Mthatha, Case No. 1643/2014, 18 September 2014) and found it did not assist the defendant, as that matter turned on the claim not being founded on a liquidated amount of money, which the court held was not the position here.

Taking these considerations together, and mindful of the discretionary nature of summary judgment, the court was satisfied that the defendant had not established a bona fide defence and that summary judgment should be granted.

5. Outcome and Relief

The court granted summary judgment in favour of the plaintiff.

It ordered confirmation of the termination of the agreement between the parties. It directed the defendant to return the 2012 Mercedes Benz ML 250 Bluetek with engine number 65196031003923 and vehicle identification number WDC 1660042A 059691 to the plaintiff. The defendant was ordered to pay the costs of suit.

Cases Cited

ABSA Bank Ltd v Havenga and Similar Cases 2010 (5) SA 533 (GNP).

Absa Bank Ltd v De Villiers and Another 2009 (5) SA 40 (C).

Arend and Another v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C).

Standard Bank SA Ltd v Mbane (Case No. 58/2015, Eastern Cape Local Division, Mthatha, 23 April 2015).

Kangisser and Another v Rieton (Pty) Ltd 1952 (4) SA 424 (T).

Community Property Company (Pty) Ltd v Eastern Cape Burial Scheme CC and Another (ECLD, Mthatha, Case No. 1643/2014, 18 September 2014).

Legislation Cited

National Credit Act 34 of 2005.

Act 62 of 1995 (section 4(2)).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that, despite the absence of an express cancellation clause in the written instalment sale agreement, the plaintiff was entitled—on the pleadings and on the facts accepted for purposes of summary judgment—to cancel the agreement in consequence of the defendant’s material default, particularly where appropriate default notice had been given under the National Credit Act and the defendant failed to remedy the arrears.

The court further held that the defendant’s opposition did not disclose a bona fide defence. The alleged discrepancies in amounts were explained by the difference between arrears and the accelerated balance, the later payments were not shown to cure the default before cancellation, and the technical objection concerning the signatory’s professional status was not sustained.

LEGAL PRINCIPLES

A party seeking relief premised on cancellation of an instalment sale agreement must have a right to cancel; cancellation cannot occur in the absence of such entitlement. While an express lex commissoria is a common basis for cancellation, the right to cancel is not confined to cases where an express cancellation term exists; at common law, cancellation may follow from breach of a material term, or a term that has been made material by notice, subject to the applicable requirements.

Where time for performance is stipulated, the legal consequences of delay and the availability of cancellation depend on whether time is of the essence and whether the breach is material or goes to the root of the contract. In cases where time is not of the essence but delay is relied upon as a ground for resiling, notice to perform within a reasonable period may be required before cancellation, depending on the circumstances and the nature of the breach.

In summary judgment proceedings, the court retains a discretion to grant or refuse summary judgment, and the defendant must disclose a bona fide defence on affidavit. Defences that do not meaningfully dispute the alleged default, or that do not engage with the material allegations supporting cancellation and the relief claimed, may be insufficient to prevent summary judgment.

Standard Bank SA Ltd v Mnyipiza (468/2014) [2015] ZAECMHC 55 (14 May 2015)