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[2006] ZASCA 161
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Plit v Imperial Bank Ltd. (70/05) [2006] ZASCA 161; 2007 (1) SA 315 (SCA) (26 September 2006)
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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
Case no: 70/05
In the
matter between:
HAROLD
PLIT APPELLANT
and
IMPERIAL
BANK LIMITED RESPONDENT
________________________________________________________________
Coram: FARLAM,
MTHIYANE, MLAMBO JJA COMBRINCK
et
CACHALIA AJJA
Date of hearing: 15 September 2006
Date of delivery: 26 September 2006
Summary: Purchase and sale – warranty against eviction –
whether excluded in instalment sales agreement with bank
Neutral Citation: This judgment may be referred to as
Plit v Imperial Bank Ltd [2006] SCA 113 RSA
JUDGMENT
________________________________________________________________
COMBRINCK AJA/…..
COMBRINCK AJA:
[1] At issue in this appeal is whether on a proper interpretation of
two written instalment sale agreements concluded between the
parties
the implied warranty against eviction was excluded.
[2] The respondent (‘the Bank’) sued the appellant (‘the
defendant’) for payment of R1 851 534.73 and R1
144 895.59
being the amounts outstanding on the two agreements. The first
agreement concluded on the 24
th
December 1999 reflected
the sale by the Bank to the defendant of a used light aircraft,
described as a ‘LET 410 UVP aircraft’.
The second was in
respect of the sale of two aircraft engines (2 x new M601 B engines)
for fitment to the aircraft which was the
subject matter of the first
sale. This second agreement was concluded on the 17
th
February 2000. In its particulars of claim the Bank alleged that the
defendant was in breach of both agreements in that he had failed
to
make punctual payment of the instalments due. In addition, and in
further breach of the agreements, he had allowed the aircraft
and
engines to be attached and/or removed from his possession. Invoking
the acceleration clause in the agreements the Bank
claimed the full outstanding balance in respect of both agreements.
[3] The defendant in his plea denied liability for
payment of the amounts claimed. He raised two defences. The first was
that he had
been induced to conclude both agreements by fraudulent
misrepresentations as to the ownership of the aircraft and engines
made by
employees of the Bank. On becoming aware of the falsity he
cancelled the agreements. The second defence was that the aircraft
and
engines had during December 2000 or January 2001 been attached by
the Sheriff pursuant to a judgment obtained by the true owner,
a
company known as PINACLE TRADE AND COMMERCE LTD. The Bank, so
defendant alleged, had failed to warrant him against eviction.
Consequently
he was not liable for any further payment. On these
grounds the defendant then counter-claimed for repayment of the
instalments he
had paid on the two agreements. In addition he sought
a declaratory order to the effect that the agreement had been validly
cancelled.
The Bank filed a lengthy replication in essence denying
the material allegations contained in the plea. For the purpose of
this judgment
it is not necessary to repeat the allegations of fact
made in this pleading.
[4] What gave rise to the dispute in the court
a
quo
is a notice to amend his plea filed
by the defendant on 23 September 2004. The proposed amendment reads
thus:
‘
Alternatively
3.8 The written instalment sale was subject to the
implied warranty that the defendant would enjoy full and undisturbed
possession
of the aircraft.
3.9 In and during December 2000 or January 2001 the
aircraft was attached by the Sheriff of the High Court of South
Africa, pursuant
to a judgment granted by the High Court of South
Africa (Transvaal Provincial Division) in an application brought by
Pinacle Trade
and Commerce Limited against Aircraft Services Africa
(GESA) (Pty) Limited, as first respondent, and Aircraft Management
Services
International (Pty) Limited, as second respondent.
3.10 The said Pinacle Trade and Commercial Limited was
at all times material hereto the owner of the aircraft.
3.11 Pinacle Trade and Commerce Limited’s claim to
title of the aircraft was unassailable.
3.12 As a result of the attachment of
the aircraft as aforesaid, the defendant’s full and undisturbed
possession of the aircraft
was lost and as a result thereof the
plaintiff was in breach of its implied warranty aforementioned, as
the defendant was precluded
from enjoying vacua possessio of the
aircraft.
3.13 As result of the plaintiff’s
breach aforementioned, the defendant has cancelled the agreement,
alternatively
hereby cancels the agreement.’
An amendment in identical terms was sought in the
same notice in respect of the agreement concerning the two engines.
The Bank then
filed a notice, objecting to the proposed amendment in
these terms:
‘
1.2 In terms of the agreement
1.2.1 The defendant shall hold the goods on behalf of
the plaintiff, as owner, for the duration of the agreement. (Clause
2.2)
1.2.2 If the instalment sale agreement was not subject
to the Credit Agreements Act (Act 75 of 1980) (“CAA”) the
defendant
agreed that no warranties or representations had been given
or made as to the state, condition or fitness of the goods. The
defendant
accepted the goods with all patent and latent defects and
faults and accepts all risks of whatsoever nature in the goods
voetstoots.
(Clause 2.5)
1.2.3 As between the defendant and the plaintiff all
risk in the goods shall pass to the defendant on the earlier of
signature of
the agreement (by) the defendant or the date when the
supplier ceases to bear the risk. (Clause 3)
1.2.4 Purchaser shall not allow the goods to become
subject to any lien, hypothec, pledge or other encumbrance or
judicial attachment
nor part with possession nor abandon same nor
offer nor attempt to do any of the aforegoing. Should the goods
become subject to any
lien, hypothec or other encumbrance, defendant
shall within 7 days from such claim, procure the release of the goods
from same. (Clause
5.4)
1.3 The agreement is not subject to the CAA.
1.4 In the premises the implied warranty relied upon by
the defendant is excluded by the agreement.
1.5 Consequently the proposed amendment will result in
the plea and counterclaim being excipiable.’
[5] The matter came before C J Claassen J in the Witwatersrand Local
Division for trial. At the pre-trial conference the parties
agreed
that the only issue which would come before the court would be the
defendant’s application to amend his plea. At the
commencement
of the trial the parties requested a separation of issues and an
order was made in terms of Rule 33(4) of the Uniform
Rules of Court
in these terms:
‘
1. The question whether the written instalment
sale agreements were subject to an implied warranty that the
defendant would enjoy
full and undisturbed possession of the aircraft
and the engines would be decided first.
2. All other issues are postponed
sine
die
.’
[6] The matter was argued on the papers. No evidence was led. The
finding of the court was the following:
‘
It is declared that the written Instalment Sale
Agreements, Annexures “A” and “C” to
plaintiff’s particulars
of claim are not subject to the implied
warranty that the defendant would enjoy full and undisturbed
possession of the aircraft and
engines sold in terms thereof.’
With leave of the Court
a quo
the defendant now appeals to
this court against the order.
[7] The learned judge commences his judgment by setting out what he
termed ‘the background facts’. These facts were gleaned
from the pleadings. He then dealt with the warranty against eviction
which he correctly stated was imposed by law in agreements of
purchase and sale. He recorded that parties can, however, expressly
or implicitly exclude such warranty from their contract. In support
hereof he quoted an extract from De Wet and Van Wyk:
Die
Suid-Afrikaanse Kontrakte en Handelsreg
5 Ed Vol 1 pp 331-2.
Against the background facts he then analysed the various clauses of
the agreement and came to the conclusion
that the warranty against
eviction was excluded.
[8] The defendant in his notice of appeal and heads of argument
launched a three pronged attack on the judgment. The first was that
in interpreting the agreements the judge had taken into account
surrounding circumstances which he could and should not have done.
Furthermore the facts which he recorded as being common cause were
disputed by the defendant on the pleadings. The assertions made
by
the defendant in his plea were not considered. This, so the argument
went, constituted a misdirection. It also led to the judge
incorrectly accepting that the defendant had taken the risk of the
uncertainty of the Bank’s title in the aircraft and engines
upon himself. The second was that his reliance on the passage from De
Wet and Van Wyk was misplaced. In addition he failed to distinguish
between the sale of a right which was inherently uncertain and the
sale of a
res aliena
where both parties were aware that the
seller was not the owner of the merx at the time of the sale. The
third was that the judge’s
interpretation of the relevant
clauses of the agreements was flawed.
[9] The implied warranty against eviction was succinctly stated by
Botha JA in
Alpha Trust (Edms) Bpk v Van der Watt
1975 (3) SA
734
(A) at 743H-744A to be the following:
‘
Dit is duidelik dat dit vir ‘n geldige
koopkontrak volgens ons reg geen vereiste is dat die verkoper van die
koopsaak eienaar
daarvan moet wees nie. Ofskoon dit die doel van die
koopkontrak is dat die koper eienaar van die verkoopte saak moet
word, is die
verkoper egter nie verplig om die koper eienaar daarvan
te maak nie. Hy moet die koper slegs in besit stel en hom teen
uitwinning
vrywaar. Dit beteken dat die verkoper daarvoor instaan dat
niemand met ‘n beter reg daartoe die koper wettiglik van die
verkoopte
saak sal ontneem nie, en dat hy, die verkoper, die koper in
sy besit van die saak sal beskerm.’
The warranty is imposed
ex lege
and has nothing to do with the
consensus or absence thereof between the parties to the contract.
(
Van der Westhuizen v Arnold
2002 (6) SA 453
(SCA) at para 43
per Marais JA
.
) The parties may agree that the warranty shall
be excluded. What must be decided in this case is whether on an
interpretation of
these contracts they did so.
[10] At the hearing of the appeal appellant‘s counsel abandoned
the argument that the judge
a quo
had misdirected himself by
taking into account disputed surrounding circumstances when
interpreting the arguments. He conceded not
only the correctness of
the facts taken into account but also that they were background
circumstances which the judge was entitled
to have regard. The latter
concession was rightly made. See the passage from
Reardon Smith
Line v Hansen-Tangen
[1976] 3 All ER 570
(HL) quoted with
approval in
Cinema City (Pty) Ltd v Morgenstern Family Estates
(Pty) Ltd
1980 (1) SA 796
(A) at 805B:
‘
No contracts are made in a vacuum: there is
always a setting in which they have to be placed. The nature of what
is legitimate to
have regard to is usually described as “the
surrounding circumstances” but this phrase is imprecise: it can
be illustrated
but hardly defined. In a commercial contract it is
certainly right that the court should know the commercial purpose of
the contract
and this in turn presupposes knowledge of the genesis of
the transaction, the background, the context, the market in which the
parties
are operating.’
The ‘surrounding circumstances’ referred to are what we
understand as background facts.
[11] The circumstances which the judge
a quo
had regard to can
be summarized as follows: the Bank is registered as such. Its
business is to advance finance to clients to enable
them to buy
goods. The client sources and selects the goods from the supplier.
The Bank in most cases never sees the goods as delivery
is effected
directly from the supplier to the client. In order to provide
security for the financing of the transaction the Bank
concludes an
instalment sale agreement with the client where the Bank is the
seller and the client the purchaser. Reservation of
ownership in the
goods by the Bank until the full purchase price and finance charges
are paid secures the Bank’s ‘loan’.
In this matter
the defendant through an agent, Peter Henderson personally and/or his
company, identified an aircraft and later two
engines for the
aircraft, which would be fit for defendant’s purpose, namely
the hiring out of the aircraft to others for reward.
The aircraft and
engines were delivered to Henderson acting as defendant’s agent
by the supplier, Planetrade (Pty) Ltd t/a
Aircraft Sales
International. The Bank played no part in the sourcing, selection and
delivery of the aircraft and engines. It received
invoices from the
supplier which it paid. In my view the judge correctly sought to
interpret the agreements against the backdrop
of these facts.
[12] Before turning to the interpretation of the agreements I need to
deal with the second attack referred to above by the defendant
on the
judgment
viz
the misplaced reliance on the passage in De Wet
and Van Wyk. The argument was that the judge’s general approach
when interpreting
the arguments was to place substantial reliance on
his finding that the Bank had known that the defendant was not the
owner of the
aircraft and engines when the defendant selected them.
On the strength thereof the judge eventually concluded that the
defendant
had taken the risk of uncertainty of the Bank’s title
upon himself. To understand the argument it is perhaps necessary to
quote
the passage in De Wet and Van Wyk referred to by the learned
judge:
‘
Die verkoper se aanspreeklikheid vir uitwinning
is ‘n natuurlike gevolg van die koopkontrak, wat deur afspraak
van partye gewysig
kan word. Partye kan dus afspreek dat die verkoper
nie vir eviksie aanspreeklik sal wees nie. Die effek van so ‘n
afspraak
is dat die koper na uitwinning geen skadevergoeding op die
verkoper kan verhaal nie, maar darem terugbetaling van die koopprys
kan
vorder. Die koper kan selfs nie die koopprys terugvorder nie waar
hy die risiko van die onsekerheid van die verkoper se titel op
hom
geneem het. Weet die koper dat die verkoper geen titel het nie, kan
hy, in geval hy uitgewin word, hoegenaamd niks op die verkoper
verhaal nie, tensy die verkoper onderneem het om vir uitwinning
aanspreeklik te wees. Weet die verkoper dat hy ‘n gebrekkige
titel het, maar doen hy hom nogtans as geregtigde voor, maak hy hom
natuurlik skuldig aan wanvoorstelling, en is hy in elk geval
weens
wanvoorstelling aanspreeklik, of die koper nou uitgewin word of nie.’
It is the second part of this passage starting with the words:
‘Die
koper kan selfs nie die koopprys . . . .’
which the
defendant says the judge relied upon. The argument is in my view
misconceived. The judge prefaced the quotation by the
words:
‘The
parties can however expressly or impliedly exclude the warranty from
their contract.’
It is in support of this proposition
that he quoted the passage from De Wet and Van Wyk. The passage he
quoted is one complete paragraph
in the book and it seems that for
the sake of completeness he quoted the whole paragraph. No-where in
his judgment does he refer
to the fact that the defendant had assumed
the risk of the Bank’s uncertain title. The attempt by counsel
to spell this out
of certain passages is unpersuasive.
[13] I deal now with the interpretation of the agreements. The judge
a quo
relied on clauses 2.1, 2.2, 2.3, 2.5, 3 and 5.4 of the
agreements for his conclusion that the warranty against eviction was
excluded.
I consider clauses 2.1 and 2.2 to be conclusive of the
issue and consequently do not deem it necessary to rely on the other
clauses.
Prima facie
I have some doubt as to whether clauses
2.3, 2.5, 3 and 5.4 assist the Bank. Clause 2.3 takes the matter no
further and merely repeats
what is stated in clause 2.2. In 2.5 the
words relied upon are
‘ . . . (purchaser) accepts
all risks of whatsoever nature in the goods voetstoots’.
These words, read
eiusdem generis
with the preceding words in
the clause, would seem to refer to the aedilition remedies rather
than the risk of defective title. In
clause 3 the agreement deals
with the ordinary incidence of risk
once the contract becomes
perfecta
. It does not have a bearing on defective title.
Clause 5.4 imposes an obligation on the purchaser
‘.
. . not to allow the goods to become subject to . . . judicial
attachment.’
It is difficult to see how the purchaser
could have any choice in such an event. Read in context I do not
think it is an indication
that the warranty is excluded.
[14] Clauses 2.1 and 2.2 read as follows:
‘
2.1 Purchaser has selected the goods and seller
has no knowledge of the purpose for which the goods are required by
the purchaser
and does not guarantee that the goods are suitable for
that purpose.
2.2 Purchaser shall at its own cost, procure and take
delivery of the goods from Seller or Supplier in such manner that
Seller becomes
owner and shall hold the goods on behalf of the
Seller, as owner, for the duration of the agreement. Delivery or
tender of delivery
by Seller or Supplier to Purchaser within 30
(thirty) days from date hereof shall be deemed to be delivery of the
goods by Seller
to Purchaser. Supplier shall not act as Seller’s
agent except for the purposes of delivery.’
In my judgment these two clauses read together against the background
facts set out earlier make it clear that the parties intended
to
exclude the warranty. In clause 2.1 the parties record that the Bank
has in effect had no part in the selection of the goods.
In claim
2.2 it is acknowledged that the Bank is not the owner and an
obligation is then placed on the defendant to ensure that
the Bank
becomes the owner. It is repeated in clause 3. As stated by the
learned judge, it makes commercial sense for the parties
to place
such an obligation on the defendant, onerous as it may be, to ensure
for the purpose of its security, that the Bank becomes
the owner of
the goods on delivery. This obligation is inimical to the concept
that the bank in accordance with the implied warranty
will protect
the defendant in his possession of the aircraft and engines.
[15] I conclude therefore that the court
a quo
rightly
answered the question posed in terms of Rule 33(4) in favour of the
Bank. Counsel for defendant expressed concern that the
declaratory
order was too widely stated and as it stood it in effect excluded a
claim by the defendant for return of the part payment
of the purchase
price. After making the order the learned judge added the following
sentence:
‘
I have only been called upon to decide the
aforesaid issue and specifically refrain from expressing any opinion
as to the parties’
rights which may flow from such agreements
containing no warranty against eviction.’
This judgment must similarly not be construed as expressing any view
on the defendant’s aforesaid rights.
[16] The appeal is dismissed with costs, such costs to include the
costs consequent upon the employment of two counsel.
______________
P C COMBRINCK
ACTING JUDGE OF APPEAL
CONCUR:
FARLAM JA
MTHIYANE JA
MLAMBO JA
CACHALIA AJA