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[2013] ZAKZDHC 23
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First Rand Bank Ltd t/a Wesbank v Dual Discount Wholesalers CC (2142/2009) [2013] ZAKZDHC 23 (16 May 2013)
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
Case
No: 2142/2009
In
the matter between:
FIRST RAND BANK LIMITED t/a WESBANK
...........................................
PLAINTIFF
and
DUAL DISCOUNT WHOLESALERS CC
..............................................
DEFENDANT
JUDGMENT
Delivered
on: 16 May 2013
MNGUNI
J
[1] The plaintiff is an incorporated
company with limited liability which, at all times material hereto
and particularly during
September 2007, operated as a bank and
service provider having its principal place of business at 17
th
floor, Embassy Building, corner of Smith and Aliwal Streets, Durban.
[2] The defendant is a close
corporation duly incorporated in terms of close corporation laws of
the Republic of South Africa which,
at all times material hereto and
particularly during September 2007, carried on business as a
dealership of motor vehicles under
the name and style Esplanade Cars,
having its principal place of business at 182 West Street, Durban.
[3] On 8 September 2007 the plaintiff
and the defendant concluded a written master and representation
agreement (main agreement)
regulating, from time to time, the terms
on which all individual sale agreements relating to the goods which
are entered into between
the plaintiff (as purchaser) and the
defendant (as seller) are concluded during its duration. The relevant
clauses of the main
agreement appear below:
‘
3.
Purchase and Sale
3.1
The dealer will, on the terms and conditions set out herein, sell to
the bank (in terms of individual sale agreement) such goods
as may be
selected by individual consumers from time to time, as confirmed by
the bank or its representative in each instance,
including:
3.1.1
motor vehicles, motor cycles, boats and other movable assets;
3.1.2
accessories to the aforementioned and/or the items as listed in
section 102(1)(a) to (f) of the National Credit Act, where
that
applies;
…
.
3.3
Upon final confirmation by the bank or its representative as
contemplated in 3.1 above, the dealer will in respect of each
individual sale agreement, issue an invoice to the bank in respect of
the goods concerned reflecting:
3.3.1
a full and accurate description of all goods sold in terms of the
individual sale agreement concerned;
3.3.2
all serial numbers of the manufacture, Vehicle Identification Numbers
(VIN) and other relevant identification numbers;
3.3.3
the purchase price of each item of the goods;
3.3.4
the deposit and/or initiation fee which the dealer receives on behalf
of the bank, which deposit and/or initiation fee stands
to be set off
against the purchase price due by the bank to the dealer for the
goods concerned in terms of 4 below;
3.3.5
the person to whom delivery is to be effected on the bank’s
behalf.
…
.
3.4
No portion of the purchase price will be deferred. The bank shall pay
the full purchase price to the dealer without deduction
or set-off
(other than that contemplated in 4 below) in such manner as may be
agreed between the parties from time to time.
3.5
The purchase price will not exceed the price normally charged by the
dealer for products which are the same or substantially
the same as
the goods, in the ordinary course of business on the basis of a cash
transaction.
…
.
6.
WARRANTIES
6.1
The dealer warrants in favour of the bank that:
6.1.1
if the dealer is a juristic person, each signatory to this agreement
is empowered by its memorandum and articles of association
to enter
into this agreement and that such signatory is duly authorised to
execute this agreement for such juristic person;
6.1.2
the dealer will in each instance be entitled and able to give free
and unencumbered title to the goods concerned to the bank
on delivery
and no person other than the bank, the dealer and the consumer has
any right to such goods;
6.1.3
upon delivery of the goods in terms of the individual sale agreement
concerned:
6.1.3.1
the goods will conform to the terms, description and specification
set out in the relevant invoice;
…
.
7.
INDEMNITY
7.1
Subject to 6.2 and 7.5, the dealer will indemnify the bank against
actual losses, liabilities, damages and costs which the bank
may
reasonably suffer or incur as a result of or in connection with:
7.1.1
a breach of a warranty by the dealer, or
7.1.2
the negligent or wilful breach by an accredited person employed or
appointed by the dealer of the terms of annexure A (save
where such
breach occurs by virtue of an instruction issued by the bank),
18.
GENERAL
18.1
This agreement constitutes the sole record of the agreement between
the parties in relation to the subject matter hereof. Neither
party
shall be bound by any express, tacit or implied term, representation,
warranty, promise or the like not recorded herein.
This agreement
supersedes and replaces all prior commitments, undertakings or
representations, whether oral or written, between
the parties in
respect of the subject matter hereof. All previous agreements between
the parties are hereby cancelled by agreement.
18.2
No addition to, variation, novation or agreed cancellation of any
provision of this agreement shall be binding upon the parties
unless
reduced to writing and signed by or on behalf of the parties.
…
.’
[4] On 14 or 18 February 2008 at
Durban, the parties concluded a partly written and partly oral
agreement (the ancillary agreement)
in terms of which the defendant
sold a Mercedes Benz motor vehicle (vehicle) to the plaintiff. In
concluding the agreement the
plaintiff was represented by a duly
authorised employee and the defendant by Bob Singh (Singh).
[5] Pursuant thereto, the defendant
generated and submitted annexure “B” to the plaintiff in
compliance with clause
3.3 of the main agreement and the plaintiff
duly paid the purchase price. Annexure “B” gives the
vehicle’s details,
a stock number, registration number TBA, the
date on which the vehicle was sold, which is 14 February 2008. Under
the date of sale,
there is a model designation, which is model SL 55
AMG and the make of the vehicle is reflected as, Mercedes Benz with
engine number
11399160019174 and chassis number WDB220074243895248.
The colour is reflected as silver and the year of registration is
2003. There
is reference to M&M code which is an abbreviation of
Mead and McGrouther, also called the Auto Dealer’s Guide for
purposes
of vehicle valuations. The price for which the vehicle was
sold is reflected as R922 427. Under miscellaneous item, the
defendant
added licence and registration fees before deducting the
deposit of R100 000 paid by the customer. The overall amount due
and payable by the plaintiff was R823 427 which the defendant
presented to the plaintiff, represented the selling price for
a model
SL vehicle. The customer took the delivery of the vehicle and the
plaintiff duly paid the purchase price.
[6] The procedure agreed between the
parties was that a potential customer would approach the dealership,
identify a particular
vehicle that he was interested in buying. The
potential customer would thereafter approach the finance and
insurance manager (manager)
who was usually resident on the floor at
the dealership. The manager would then take down the application and
fax it through to
the plaintiff together with an offer to purchase.
The images of the application would then be displayed on the
plaintiff’s
systems. The plaintiff would then consider the
application, verify the truthfulness and correctness of that
information and assess
the credit worthiness of the potential
customer. Upon receipt of all answers to the questions that the
plaintiff had asked from
the dealership and after satisfying itself
about the credit worthiness of the potential customer, the plaintiff
would fax back
the approval to the dealership and the dealership
would in turn fax to the plaintiff an invoice from which the
plaintiff would
draw up the actual contract. The plaintiff would then
send the contract back to the dealership, which would then collect
all the
necessary documentation signed by the potential customer. The
dealership would then provide the plaintiff with the required fee
and
other relevant information to pay the dealership out of the
transaction. It is not customary for the plaintiff’s officials
to have sight of the vehicle. The plaintiff would load the
information given to it by the dealership through the offer to
purchase
or application into its system.
[7] On 18 February 2008 the customer
signed the delivery receipt and took the delivery of the vehicle. The
delivery receipt appears
at page 57 of bundle “A” and
gives the description of the vehicle delivered to the customer as the
Mercedes Benz SL
55 AMG with engine number 11399160019174 and chassis
number WDB2200742A385246.
[8] The detailed statement which
appears on page 109 of bundle “A”, showing the history of
the transaction reveals that
the customer paid only two instalments.
Thereafter the subsequent debit orders were not met and that resulted
in the plaintiff
instituting action against the customer. Eventually,
the sale agreement was cancelled and the plaintiff repossessed the
vehicle.
The plaintiff instructed the valuator to valuate the vehicle
and during this process, the plaintiff discovered that the vehicle
it
financed was the model reflected on annexure “B” instead
the one being valuated was an S model. It is against the
background
of this synopsis of facts that on 10 February 2009 the plaintiff
instituted the present action against the defendant
alleging that the
defendant breached the main and ancillary agreements, in that it:
‘
(a)
delivered a Mercedes Benz S55AMG;
(b)
failed to deliver a Mercedes Benz SL55AMG;
(c)
charged a price which exceeded the price normally charged for such
vehicle by R578 827.00;
(d)
delivered a vehicle which did not confirm with the description and
specification in the invoice.’
In the alternative, the plaintiff
instituted a detictual claim based on a fraudulent misreprentation.
[9] In its plea, the defendant denied
the plaintiff’s assertions. In amplification of the denial, it
averred that on 14 February
2008, the parties concluded an oral
agreement in terms of which the defendant sold, and the plaintiff
purchased a Mercedes Benz
motor vehicle selected by the plaintiff’s
client, to whom the vehicle was in turn sold by the defendant on an
instalment
sale basis.
[10] At the commencement of the trial,
I ruled that the issue of liability be first adjudicated upon and I
deferred the issue of
the quantum of the claim for later
determination. Counsel also handed up three bundles of documents
which were marked, respectively,
“A”, “B” and
“C”. One witness testified for each party, namely, Julie
Anne Middleton (Operations
Manager for KZN) for the plaintiff and Bob
Singh for the defendant (General Manager (Umhlanga)) at that time.
[11] Mrs Middleton testified that she
is in charge of the staff that receives processes and validates the
applications from the
dealerships. The staff would also enter into
contracts on the approved applications on behalf of the plaintiff.
They would then
pay out on those particular deals once all the
necessary documentation from the dealership is received. Marius van
der Merwe of
Wesbank Fraud Section requested her to investigate this
particular deal.
[12] It is important for the plaintiff
to know the model of the vehicle that it is financing because the
model determines the value
in terms of what its trade in value is.
This enables the plaintiff to determine whether it has enough equity
in the goods that
it is financing. It is also important for the
plaintiff to know the manufacturer because it has to know what type
of the vehicle
it is financing. The vehicle, SL 55 AMG with M&M
code 44084120 was presented by the defendant to the plaintiff as
having a
retail value of about R920 000 in the M&M book. The
plaintiff’s financing policy dictates that the financed amount
should
be in keeping with the value of the vehicle.
[13] In exceptional circumstances, the
plaintiff would do a pre-approval for a particular vehicle but even
in this instance, the
approved dealership is required to have the
vehicle on stock, put the vehicle through Certificate of
Roadworthiness, and to make
sure that the description of the vehicle
correctly reflects the vehicle which the plaintiff has approved. The
contract must reflect
the goods that the dealership has on its floor
and the plaintiff has a separate section which deals with the deals
involving the
financing of the private sales. The main agreement does
not form part of that section.
[14] In instances where the code is
not listed in the M&M book, the plaintiff will, instead of using
the code reflected on annexure
“B” use the code 88888888
which will automatically default on the plaintiff’s systems to
what is called a non
score deal and the deal will then be processed
through the Head Office Credit. The Head Office Credit, will then
request her section
to conduct further investigation and obtain the
deemed market value of the vehicle. This will require on her part to
contact the
Mercedes Benz South Africa and/or one of the other
franchise dealers, and/or the Mercedes Benz outlets to get an
approximate value
of the vehicle. The information obtained pursuant
to this investigation will then be used to ascertain the fair trade
in value
and retail price of the vehicle. When she was asked to
investigate this deal, she found that the aforementioned procedure
was not
followed.
[15] Although the defendant had played
its cards quite close to its chest, during her cross examination, the
kernel of its defence
started to emerge. The following was put to
her. Singh was employed by the defendant at the time when the
transaction was concluded.
He was the person who dealt with this
transaction. Singh was advised that the finance for this particular
vehicle had been pre-approved
by Mr Andrè Reddy of the
plaintiff. Singh was told that the transaction needed to be processed
through the accredited dealership.
As the defendant was one of the
accredited dealerships, it processed the transaction. There was no
M&M code available on the
book for SL 55 AMG and Reddy told Singh
that in order to process this particular transaction, he should use
the M&M code number
appearing on annexure “B”. He
therefore processed the transaction on Reddy’s instruction
using the said code.
[16] Singh testified that in February
2008 he was approached by Sean Naidoo who was a broker. Naidoo told
him that the plaintiff
had pre-approved finance for him to purchase
an S 55 AMG vehicle but the bank could not finance a private sale.
Singh had not sold
an S 55 AMG before this transaction. Naidoo told
him that the contact person at the plaintiff’s institution was
Andrè
Reddy and gave him Reddy’s contact number which
started with numbers 086. Indeed, he contacted Reddy and asked him to
send
the details to him. Reddy confirmed to him that the plaintiff
had already approved the deal. He advised Reddy that the vehicle
which was the subject of the transaction was an S 55 AMG model not an
SL 55 AMG model. Despite that, Reddy told him to process the
vehicle
as an SL 55 AMG model. He also told him that the M&M book did not
have a code for the SL 55 AMG. Reddy gave him the
code reflected on
annexure “B” and told him to process the transaction
using the said code, which he did. On receipt
of payment from the
plaintiff, the defendant settled the amount owed to seller’s
bank, kept an amount of R20 000 for
its fees and the balance was
paid to Naidoo as his commission. Towards the end of March 2008 Mr
Lass, the employee of the plaintiff
approached him to find out
whether he dealt with Reddy. He confirmed to Mr Lass that he dealt
with Reddy on this transaction and
he further told him what Reddy had
said about the deal. He told Lass that S 55 AMG and not SL 55 AMG was
the vehicle which was
the subject of the transaction and Reddy was
aware of that. He had given the description reflected on annexure “B”
on Reddy’s instruction.
[17] Under cross examination he
testified that he worked as a Motor Sales Manager for the defendant
for 18 years and was familiar
with the Auto Dealers Guide which gives
the suggested trade in and resale values of the motor vehicles. He
conceded that S and
SL are totally different models with a different
M&M codes. He regarded the difference between the two models as
important
and that is the reason why he decided to disclose to Reddy
that the model which was a subject of the transaction was not an SL
55 AMG. He conceded that because of this transaction, the plaintiff
paid R823 000. The defendant paid approximately R500 000
to
Naidoo as his commission because he found the vehicle, the buyer and
was instrumental in obtaining the finance approval for
the deal.
Although in his evidence in chief he had testified that it was his
first time dealing with Naidoo when he consulted him
on this
transaction, it however transpired, when he was referred to page 42
of bundle “A”, that his earlier evidence
in that regard
was not true. He denied that he processed the transaction knowing
that it was a fraudulent transaction.
[18] It is common cause that the
description of the vehicle given on annexure “B” is a
Mercedes Benz SL 55 AMG with
engine and chassis numbers
11399160019174 and WDB22007424386246 respectively. The evidence
reveals that Singh of the defendant
made out annexure “B”
to the plaintiff. The perusal and consideration of p125 of bundle “A”
demonstrates
that Anthony John Kleve sold S 55 AMG for R352 000.
Singh conceded that the two vehicle models are totally different from
each other in appearance and in price.
[19] The plaintiff paid R823 427
to the defendant for the transaction. Singh’s evidence was that
the defendant’s
benefit in the transaction was limited to
R20 000. After paying the amount due to the seller’s bank,
the balance of
the money was paid to Naidoo. As the plaintiff’s
case is founded on contract, and it is, therefore, not necessary for
the
Court to make a finding on who benefited from the transaction.
[20] The evidence revealed further
that the customer failed to meet his monthly repayments resulting in
the plaintiff instituting
action against him which culminated in the
repossession of the vehicle and its sale in execution for R237 120.
Having regard to
the totality of evidence, I am satisfied that the
defendant breached clause 3 and 6 of the main agreement. The goods
delivered
to the customer did not conform to the terms, description
and specification set out in the relevant invoice. In terms of clause
7 of the main agreement, the defendant undertook to indemnify the
plaintiff against actual losses, liabilities, damages and costs
which
the plaintiff may reasonably suffer or incur as a result of or in
connection with a breach of warranty.
[21] Singh’s evidence was that
he was aware that the vehicle which was the subject of the
transaction was an S 55 AMG model
and not SL 55 AMG as written on
annexure “B”. His evidence was that he was instructed by
Reddy to write down that description
and to use the M&M code
appearing thereon. I have carefully considered this evidence and, in
my view, it falls foul of clause
18 of the main agreement. The
validity and binding nature of clauses such as this was reaffirmed by
Harms JA in
Brisley v Drotsky
2002 (4) SA 1
SCA at 11C –
F as follows:
Partye
doen dit deur vooraf ooreen te kom dat ‘n kontrak alleen dan
tot stand kom wanneer aan sekere formaliteite voldoen
is. Die oogmerk
is om geskille te beperk of uit te skakel. Natuurlik staan dit partye
vry om die formaliteite te ignorereer en
te handel asof ‘n
bepaalde Wet nie bestaan nie. Ontsaan ‘n dispuut, is enigeen
geregtig – en die Hof verplig
– om die strikte reg toe te
pas. En hoekom moet dit anders wees in vrye kontraksverband? Daar is
ook ‘n algemeen heersende
mite dat hierdie tipe bepaling stegs
ten bate van die ekonomies magtige bestaan en dat die tot ongelykheid
in kontraksverband aanleiding
gee. Dit is waarskynlik waarom daar ‘n
beroep op die grondwetlike gelykheidsbeginsel gemaak word. Hierdie
bepaling dien ter
beskerming van beide partye. Mens kan maar net
wonder hoe die huurder sou gereageer het as die verhuurder sou beweer
het dat daar
mondeling op ‘n verhoogde huurgeld ooreengekom
is.’
I am unable to find any evidence that
the parties agreed or even applied their minds to the question of
deleting this clause. It
accordingly remains of force and effect. I
am further satisfied that because of the defendant’s breach
aforesaid, the plaintiff
has suffered or incurred damages in
connection with the said breach. In
Novick v Benjamin
1972 (2)
SA 842
(A)Trollip JA held:
‘
A
fundamental principle of our law is that for a breach of contract the
sufferer should be placed by an award of damages in the
same position
as he would have occupied had the contract been performed, so far as
that can be done by the payment of money, provided
(a) that the
sufferer is obliged to mitigate his loss or damage as far as he
reasonably can, and (b) that parties, when contracting,
contemplated
(actually or presumptively) that that loss or damage would probably
result from such a breach of contract (see
Victoria
Falls & Transvaal Power Co. Ltd. v Consolidated Langlaagte Mines,
Ltd.,
1915
AD 1
at p. 22;
Lavery
& Co. Ltd. v Jungheinrich
1931
AD 156).
’
In the result, I make the following
order.
Order
(a) The defendant is liable to pay to
the plaintiff such damages as the plaintiff may prove to have
suffered or incurred consequent
to the breach of the warranty
(b) The defendant is directed to pay
costs on the issue of liability.
__________
Mnguni
J
Appearances /..
Appearances:
For the Plaintiff :
Adv. A.V. Voormollen
Instructed by :
Easton-Berry Inc.
Durban
For the Defendant :
Adv. A. D. Collingwood
Instructed by :
Johnston & Partners
Durban
Date of Hearing :
03 May 2012
Date of
Filing of Judgment :
16 May 2013