National Sorghum Breweries Ltd v Corpcapital Bank Ltd (050/05) [2006] ZASCA 1; [2006] 2 All SA 376 (SCA); 2006 (6) SA 208 (SCA) (23 February 2006)

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National Sorghum Breweries Ltd v Corpcapital Bank Ltd (050/05) [2006] ZASCA 1; [2006] 2 All SA 376 (SCA); 2006 (6) SA 208 (SCA) (23 February 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO 50/2005
In
the matter between
NATIONAL SORGHUM BREWERIES LTD Appellant
and
CORPCAPITAL BANK LTD Respondent
______________________________________________________________
CORUM: MPATI DP, NUGENT, JAFTA JJA and
COMBRINCK, MAYA AJJA
HEARD: 21 NOVEMBER 2005
DELIVERED: 23
FEBRUARY 2006
Neutral
citation: This judgment may be referred to as National Sorghum
Breweries Ltd v Corpcapital Bank Ltd [2006] SCA 1 (RSA)
______________________________________________________________
Summary
: Contract - interpretation - non-variation clauses found not
applicable to subsequent cession agreements.
______________________________________________________________
______________________________________________________________
JUDGMENT
______________________________________________________________
JAFTA JA
[1] As a general rule a creditor is free to cede its
rights in whatever form it chooses. It does not need its debtor’s
consent nor
is it necessary for it to give notice to the debtor. But
this power can be restricted by means of a contract to which the
creditor
is a party. In that case the creditor would be required to
comply with the terms of the restriction when ceding its rights. The
issue
in this appeal is whether the creditors’ powers to cede
rights were restricted by non-variation clauses contained in
contracts
they had concluded with third parties.
[2] The respondent, Corpcapital Bank, instituted an
action against the appellant (which I will refer to as the defendant)
in the Johannesburg
High Court for the recovery of damages arising
from the alleged breach of various
lease agreements. Corpcapital Bank was formerly known as
Fulcrum Science and Technology Bank Ltd, and was at times referred to
simply
as Fulcrum Bank, but for convenience I will refer to it
throughout this judgment as Corpcapital Bank.
[3] Corpcapital Bank instituted the action in its
capacity as the cessionary of the rights in various lease agreements
(referred to
in the evidence as ‘full maintenance rental
agreements’) that were concluded between the defendant and a
company called Afinta
Financial Services (Pty) Ltd (Afinta Financial
Services). In terms of those agreements the latter company leased
vehicles to the
defendant. The defendant challenged Corpcapital
Bank’s right to sue, contending that the rights of Afinta Financial
Services had
not been validly ceded. The court
a quo
(Cachalia
J) was asked to determine that issue separately from the other
issues. It dismissed the defence with costs and the defendant
appeals
against that order with the leave of the court
a quo
.
[4] The facts are briefly these. Afinta Financial
Services carried on a vehicle leasing business and leased vehicles to
various customers,
including the defendant. In February 1999 Afinta
Financial Services and Corpcapital Bank Ltd became parties to a joint
venture that
was to continue the leasing business. The joint venture
was to be conducted through the medium of a company called Afinta
Finance
Ltd (Afinta Finance) that was owned by the joint venturers.
[5] The joint venturers agreed that at the outset Afinta
Financial Services would transfer certain of its existing lease
agreements
to Afinta Finance and that it would thereafter direct all
new business to Afinta Finance. The business was to be financed by
loans
to be made to Afinta Finance by Corpcapital Bank that were to
be secured by a cession to Corpcapital Bank of the debtors of Afinta
Finance.
[6] To that end the various parties signed two
standard-form agreements referred to as ‘Master Cession Agreements’
on 26 February
1999. One purported to be a cession from Afinta
Financial Services to Afinta Finance. The document however reflected
a cession in
securitatem debiti
when the intention was to
effect an out and out cession. The other cession between Afinta
Finance and Corpcapital Bank correctly
reflected a cession in
securitatem debiti
as intended by the parties. Both agreements
were substantially the same and provided for the cession from the
cedent to the cessionary
of
‘
the [lease agreements] listed on a document completed
and signed by the Cedent in the form of the Schedule annexed hereto
as Annexure
“A”’.
Each agreement contained a non-variation clause in the
following terms:
‘
1. no variation, alteration, consensual cancellation,
addition to or novation of this cession and no waiver by [the
cessionary] of
any of its rights hereunder shall be of any force or
effect unless reduced to writing and signed by [the cessionary’s]
authorised
representative and [the cedent or the cedent’s] duly
authorised representative.’
[7] The lease agreements that were to be transferred at
the outset had to meet the credit criteria of Corpcapital Bank. For
purposes
of identifying such agreements a firm of auditors was
appointed to conduct a due diligence investigation, which was
completed only
in June 1999. By then Afinta Financial Services and
Afinta Finance were no longer satisfied that the master cession they
had signed
on 26 February 1999 was an appropriate instrument for
achieving their purpose, probably because they realised that the
master cession
had been a cession in
securitatem debiti
and
not an out and out cession. As a result a new agreement (which they
referred to as a ‘sale’ agreement) was concluded by Afinta
Financial Services and Afinta Finance on 14 July 1999.
[8] The sale agreement provided in Clause 1 as follows:
‘
[Afinta Finance] hereby purchases from [Afinta
Financial Services] all right, title and interest in and to the
Vehicle Finance debts
set out in column “F” of annexure A hereto
(“debts’) and
all of its claims and rights of action against the
debtors set out in column “D” of annexure A hereto (“debtors”)
including
the cession and transfer of all rights in and to the
debts’.
It also incorporated, by reference to another agreement
that the parties had concluded, a non-variation clause in the
following terms:
‘
1. No amendment or consensual cancellation of this
agreement or any provision or term thereof or of any agreement or
other document
issued or executed pursuant to or in terms of this
agreement and no settlement of any disputes arising under this
agreement and no
extension of time, waiver or relaxation or
suspension of any of the provisions or terms of this agreement or
other document issued
pursuant to or in terms of this agreement shall
be binding unless recorded in a written document signed by the
parties.’
[9] Attached to the sale agreement as annexure A was a
list of about eighty lease agreements that had been concluded between
Afinta
Financial Services and its customers, included amongst which
were eleven lease agreements with the defendant.
[10] Subsequent to the conclusion of the sale agreement
some of debts that had been ‘sold’ were found to be irrecoverable
and
by agreement between Afinta Financial Services and Afinta Finance
a list was prepared of other lease agreements that were to be ceded
in their stead. Later a further list was compiled under similar
circumstances. Those lists between them reflected seven further
lease
agreements with the defendant. Neither of the lists was signed by
either Afinta Financial Services or Afinta Finance.
[11] Earlier I pointed out that a ‘master cession’
was signed by Afinta Finance and Corpcapital Bank on 26 February 1999
in contemplation
of the cession of debts from the former to the
latter as security for loans that were to be advanced by Corpcapital
Bank. Because
the rights that were to be transferred by Afinta
Financial Services to Afinta Finance at the outset – and thereafter
ceded to Corpcapital
Bank – had yet to be identified the master
cession naturally did not reflect any ceded debts at the time the
document was signed.
But once the relevant lease agreements had been
identified, and Afinta Financial Services had purported to transfer
them to Afinta
Finance, various schedules were prepared purporting to
record a cession of the rights in those agreements to Corpcapital
Bank pursuant
to the master cession. In February 2000 those schedules
were consolidated into a single schedule. It is not disputed that the
consolidated
schedule was signed on behalf of Afinta Finance, but it
was not signed by or on behalf of Corpcapital Bank. Amongst the lease
agreements
reflected on the schedule were the eighteen lease
agreements with the defendant to which I referred earlier and those
lease agreements
are the subject of the action with which this appeal
is concerned. It is alleged that the defendant breached the
agreements, with
resultant damage, which Corpcapital Bank seeks to
recover as cessionary.
[12] The argument advanced on defendant’s behalf, both
in this court and the court below was that there was no valid cession
of
debts from Afinta Financial Services to Afinta Finance in respect
of the seven lease agreements that were not reflected in the original
annexure to the ‘sale’ agreement because, so it was contended,
the purported addition of those lease agreements constituted a
variation of the ‘sale’ agreement that did not
comply with the formalities of the non-variation clause in the sale
agreement.
Moreover, it was argued on behalf of the defendant that
there was no valid cession by Afinta Finance to Corpcapital Bank of
the rights
arising from any of the eighteen lease agreements because
the later addition of the schedule constituted a variation of the
master
cession that similarly did not comply with the required
formalities.
[13] The court
a quo
found that the purported
cession to Afinta Finance of the seven lease agreements, and the
purported cession to Corpcapital of all
eighteen lease agreements,
constituted amendments of the ‘sale’ agreement and the master
cession respectively. It went on to
find, however, relying on a
remark to that effect in
Aussenkehr Farms (Pty) Ltd v Trio
Transport
2002 (4) SA 483 (SCA) 494A
1
,
which the learned judge considered to be binding upon him, that the
non-variations clauses in each case could not be relied upon
by a
third party (the defendant) where ‘the parties to the agreement
(the cedent and the cessionary) were not relying on the provisions
of
their contract requiring written variations or amendments’. In the
circumstances, the learned judge concluded, it was ‘not
open to the
defendant to attack the consensus achieved by Afinta Finance and
Afinta Financial Services, (and similarly the consensus
achieved
between Afinta Finance and Corpcapital Bank) and, as a third party,
to insist upon formalities between them’.
[14] I have some doubt that contractually created rights
and obligations may vary depending upon the perspective from which
they are
viewed. The remark to that effect in
Aussenkehr Farms
,
which the learned judge relied upon, was clearly
obiter
, and
may also have overlooked the earlier decision of this court in
Traub
v Barclays National Bank Limited
1983 (3) SA 619
(A) 631E-633A in
which the topic was more extensively considered albeit in another
context. But it is not necessary to consider that
issue further in
the present case because in my view the court
a quo
erred in
any event in relation to the construction of the various agreements.
[15] The ‘sale’ agreement between Afinta Financial
Services and Afinta Finance regulated the transfer of the rights in
the lease
agreements referred to in the annexure (annexure A). Their
later agreements – concluded by their conduct in preparing the two
further
lists when seen in the context in which they did so – to
transfer the rights in seven further leases did not purport to amend
any
of the terms of the former transaction. They were no more than
later transactions in similar terms, which the sale agreement did
not
preclude them from concluding, and which required no formalities to
be valid. The defendant’s reliance on the non-variation
clause in
the ‘sale’ agreement was quite misconceived because no amendment
to that agreement purported to be effected at all.
It follows that
the rights relating to all eighteen vehicles leased to the defendant
were properly transferred to Afinta Finance.
[16] Similarly the master cession concluded between
Afinta Finance and Corpcapital Bank on 26 February 1999 did not
purport to preclude
the parties from ceding rights in the future.
Indeed, the master cession contemplated that future cessions would be
effected, and
its very purpose was to regulate the terms that would
govern those cessions. What was required to effect such future
cessions on
the terms agreed to in the master cession was no more
than that the relevant lease agreements should be listed in a
schedule compiled
and signed by Afinta Finance, which is what
occurred in relation to the eighteen lease agreements that are now in
issue. The parties
did not thereby purport to vary or alter, or even
add to, the master cession. On the contrary, they purported only to
give the master
cession its intended effect.
[17] It was also submitted on behalf of the defendant
that Corpcapital Bank’s pleaded case did not rely upon cessions
effected by
the parties subsequent to the conclusion of each of the
written agreements. That is not correct. On the contrary, the very
case that
Corpcapital Bank pleaded was that the relevant cessions
were effected subsequent to the conclusion of the respective written
agreements.
Indeed, it is difficult to see how its case could have
been pleaded in any other form.
[18] In the circumstances the court
a quo
correctly dismissed the defence, albeit on incorrect grounds. The
appeal is dismissed with costs, including costs occasioned by the
employment of two counsel.
_____________________
C N JAFTA
JUDGE OF APPEAL
CONCUR: ) MPATI DP
) NUGENT JA
) COMBRINCK AJA
) MAYA AJA
1
‘… if the parties were not contending that a
written termination was needed it was not open to the defendant to
argue invalidity
of the act.’