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[2012] ZAFSHC 248
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Senatla Trading Enterprise 26 CC v Madisebo Catering CC and Others (508/2011) [2012] ZAFSHC 248 (20 December 2012)
FREE
STATE HIGH COURT, BLOEMFONTEIN
REPUBLIC
OF SOUTH-AFRICA
Case no. 508/2011
In
the matter between:
SENATLA
TRADING ENTERPRISE 26 CC
and
MADISEBO
CATERING CC
BLOEM
WATER
THE
FREE STATE DEVELOPMENT CORPORATION
Applicant
1
st
Respondent
2
nd
Respondent
3
rd
Respondent
_____________________________________________________
HEARD ON:
21 AUGUST 2012
_____________________________________________________
CORAM:
DANZFUSS, AJ
JUDGMENT BY:
DANZFUSS, AJ
_____________________________________________________
DATE OF JUDGMENT:
20 DECEMBER 2012
_____________________________________________________
The applicant approached
this court on an urgent basis, lead
viva voce
evidence and a
rule
nisi
was issued calling upon the respondents to show
cause why a final order should not be made. On the return day an
order was made
by agreement between the parties that the full amount
owing to the third respondent (
R236 469,40
) be paid to it.
(This debt owing to the third respondent was not disputed by the
other parties). In addition certain identified
disputes (by
agreement) were referred for oral evidence in terms of rule 6(5)(g)
of the Uniform Rules of Court.
In summary the relevant
facts are as follows:
(i) The second respondent
(Bloem Water) appointed the first respondent to do construction work
in terms of an agreement between
those two parties.
(ii) The applicant, a
civil construction contractor, entered into an agreement with the
first respondent in terms of which the applicant
was appointed as
subcontractor for the said construction work on terms and conditions
recorded in a written Memorandum of Agreement.
(iii) One of the relevant
terms was that the second respondent (Bloem Water) shall pay the
contract price owing by it to the first
respondent directly to the
applicant instead of to the first respondent.
(iv) In addition the
first respondent on
5 August 2010
ceded its entire claim
against the second respondent (Bloem Water) to the applicant.
(v) The applicant in
terms of its agreement with first respondent and the cession of first
respondent’s claim against the
second respondent (Bloem Water)
demanded payment from second respondent (Bloem Water) who was at all
relevant times notified and
informed of the existence of the said
cession.
(vi) After several
attempts to obtain payment the applicant was informed that second
respondent (Bloem Water) was going to pay the
money to third
respondent (the Free State Development Corporation (“
FSDC”
)
). It now appeared that the third respondent (FSDC) advanced a loan
to the first respondent to finance the said project and that
an
amount of
R236 469,40
was still owing to the third respondent.
This amount is much less than the amount the second respondent (Bloem
Water) owed the
first respondent in terms of their agreement.
(vii) It also now
appeared that on
19 November 2009
the first respondent ceded
its claim against second respondent (Bloem Water) in favour of the
third respondent (FSDC).
(viii) The cession by the
first respondent in favour of third respondent (FSDC) therefore
predates the cession in favour of the
applicant.
Several disputes arose
between the parties in the opposing and replying papers including
what the exact contents of the agreement
between the applicant and
the first respondent was; whether it was null and void; whether
there was a proper demand for payment;
etc.
The main disputes were
relevant to the validity and the contents of the underlying
obligationary agreements between the parties
and what was the affect
thereof on the cession in favour of the applicant. According to the
second respondent it was a so-called
“double cession”
resulting in the second cession to be null and void.
Applicant received
information that the second respondent (Bloem Water) was going to pay
the money to the third respondent on
2 February 2011
and made
application to this court on the same day for urgent relief because
of the risk that third respondent may receive payment,
deduct the
amount owing to it and pay the balance to the first respondent which
is according to the applicant a close corporation
without any assets
(a so-called “man of straw”).
As already said the
disputes were referred for oral evidence. It came before me and I
ruled that the matter can be adjudicated
without hearing oral
evidence. I am of the opinion that:
5.1 a final decision of
the real disputes between the parties is possible on the papers
without hearing oral evidence;
5.2 the real disputes
between the parties were not referred for oral evidence;
5.3 decision of the
identified disputes would not enable the court to pass a final
judgment.
When a matter referred
for the hearing of oral evidence comes before a court for the
hearing, it is open to the court to hold
that it is unnecessary to
hear oral evidence and to decide the matter on the papers.
See:
WALLACH
v LEW GEFFEN ESTATES CC
,
[1993] ZASCA 39
;
1993 (3) SA 258
(AD) at 263
H;
SHOPRITE HOLDINGS
LTD v OBLOVITZ
,
(2006) 3 ALL SA 491
C at 500 f –
501 b;
Although a court will not
lightly take such a step, it would do so where it is clear that the
hearing of oral evidence will not
affect the outcome of the matter
and will only lead to unnecessary delay and unnecessary costs being
incurred.
See:
WALLACH
,
supra
, at 262 I and 263 H;
SHOPRITE HOLDINGS
,
supra
, at 500 f – 501 b.
I am convinced that the
hearing of oral evidence will not affect the outcome of this matter
and will only delay and cause unnecessary
costs.
DOUBLE
CESSION:
Although both cessions
were for the entire amount owing by the second respondent to the
first respondent both cessions were
in securitatem debiti
.
The second cession is on the face of it an out-and-out cession but
it is clear from the evidence by the applicant that it was
intended
as security. I am of the opinion that the wording of the cession
document is not decisive in this regard. Form should
not be allowed
to override substance if on proper analysis of the transaction as a
whole the cession was made with the purpose
of securing a debt owed
by the cedent to the cessionary.
See:
NATIONAL
BANK OF SOUTH AFRICA LTD v COHEN’S TRUSTEE
,
1911
AD 235
at 246;
BANK OF LISBON AND
SOUTH AFRICA LTD v THE MASTER AND OTHERS
,
1987 (1) SA
276
AD at 294 D;
GROBLER v
OOSTHUIZEN
,
2009 (5) SA 500
SCA at 505 E.
Extrinsic evidence to
show that the cession was intended to serve as security (and not to
permanently transfer, dispose of or
alienate the claim) is
admissible.
See:
AFRICAN
CONSOLIDATED AGENCIES (PTY) LTD v SIEMENS NIXDORF INFORMATION SYSTEMS
(PTY) LTD
,
1992 (2) SA 739
C at 744 F;
FISHER N.O. v
SCHLEMMER
,
1962 (4) SA 651
(T).
The second cession by
the first respondent in favour of the applicant is framed in the
following terms:
“……
..the
cedent hereby cedes to and in favour of the cessionary all its rights
to payment in terms of the goods and services …….”
At that stage the first
respondent had already ceded its claim against the second respondent
to the third respondent (FSDC).
After out-and-out
cession of its claim to a cessionary, the cedent is divested of its
rights to collect the claim from the debtor.
A subsequent cession
can confer no legal rights on the second cessionary and would
therefore be ineffectual.
See:
RANDBANK
BEPERK v MORRIS N.O.
,
1977 (2) SA 21
(SECL) at 26 H;
TRUST BANK OF
AFRICA LTD v STANDARD BANK OF SA LTD
,
1968 (3) SA 166
(A) at
175 A – D and 185 F;
BARNHOORN v
DUVENHAGE
,
1964 (2) SA 486
(A) at 494 H.
In case of a cession
in
securitatem debiti
the cedent after cession retains a
reversionary interest in the claim against the debtor. I have
already indicated that both cessions
by first respondent and
therefore also the cession in favour of third respondent (FSDC) were
in securitatem debiti
. Therefore the first respondent after
cession retained a reversionary interest in the debt.
REVERSIONARY
INTEREST:
Cession
in
securitatem debiti
is a form of pledge. When the principal debt
is “pledged” to the cessionary the cedent retains the
“bare dominium”
or “reversionary interest”
in the claim against the principal debtor.
DEVELOPMENT BANK OF
SOUTHERN AFRICA LTD v VAN RENSBURG AND OTHERS NN.O.
,
2002 (5)
SA 425
(SCA), at 447, par. 50;
LAND EN LANDBOUBANK
VAN SUID-AFRIKA v DIE MEESTER EN ANDERE
,
1991 (2) SA 761
(AD)
at 771 C – G;
GROBLER v
OOSTHUIZEN
,
supra,
at 507 A.
The cessionary’s
rights are limited to recover payment from the debtor if the cedent
is in default of payment to the cessionary.
The reversionary
interest remains with the cedent.
This reversionary
interest is explained by
Nienaber JA
in the
DEVELOPMENT
BANK
matter,
supra
, at 447, par. 50 namely:
“
This
reversionary interest, properly understood, refers to the cedent’s
interest in the debtor’s performance (i.e. satisfaction
of the
principal debt by the debtor) rather than to his interest in the
cessionary’s performance (i.e. re-cession of the
principal debt
on satisfaction of the secured debt – which is a right
ex
contractu
against
the cessionary).”
This reversionary
interest is as such capable of being ceded – also
in
securitatem debiti
. By ceding the “dominium”
(reversionary interest) the cessionary thereof obtains the right to
the balance of the
proceeds of the claim upon full payment of the
amount due to the first cessionary namely the entity to whom the
claim was initially
ceded. This right would have reverted to the
first cedent (first respondent) if there was no second cession.
Because of the second
cession it is transferred to the second
cessionary (applicant). No re-cession (to first respondent) is
necessary. It happens
automatically.
See:
GROBLER
v OOSTHUIZEN
,
supra
, at 510 E (par. 23).
In casu
it means
that as the first respondent ceded:
“……
.all
its rights to payment”
to the applicant after he
has already ceded the claim to third respondent , all that was (and
could have been) ceded was the reversionary
interest. When third
respondent was paid in full the claim to the balance of the amount
owing automatically reverted to the first
respondent but as a result
of the second cession to the applicant. The applicant as cessionary
became the only party entitled to
the proceeds of the remaining
portion of the first respondent’s claim (falling due) against
second respondent (Bloem Water).
VALIDITY AND
CONTENTS OF THE AGREEMENT: THE EFFECT ON THE CESSIONS:
Nevertheless, the first
respondent nor the second respondent seeks the setting aside of the
Deed of Cession concluded in favour
of the applicant and takes no
factual issue with the correctness of the cession documents, the
intention of the parties as evidenced
by these documents or anything
of the like. No substantive relief is sought by means of a counter
application launched in connection
with the validity of the cession.
I am therefore of the opinion that whether the underlying agreement
is null and void or binding
or whatever the true contents of the
agreement is, are irrelevant to the validity of the cession as long
as the cession as such
is valid. The invalidity of the obligationary
agreement underlying the cession, the cancellation or setting aside
thereof will
give rise to a claim by the cedent against the
cessionary for re-cession to the cedent and to disgorge whatever
benefits he or
she may have received from the debt. But in the
absence of such re-cession or of a court order to that effect, the
cession remains
valid and binding.
See:
LAWSA
,
2
nd
edition, volume 2, part 2, p. 24, par. 32;
VAN DER MERWE, et al:
CONTRACT: GENERAL PRINCIPLES
,
2
nd
edition, p. 480, par. 12.6 says:
“
A duty to
re-cede will also arise where the obligationary agreement underlying
the cession is void
ab
initio
,
is avoided or a valid ground for cancellation, or cancelled by
agreement between the cedent and the cessionary. Re-cession is
in
itself a cession and requires compliance with all the usual
requirements.”
JOHNSON v
INCORPORATED GENERAL INSURANCE LTD
,
1983
(1) SA 318
(AD)
.
The same applies to a
cession
in securitatem debiti
.
Van der Merwe et al,
supra
,
at 480 opines:
“
It is clear,
however, that in the case of a security transfer the duty of the
cessionary to effect a re-cession of the right becomes
enforceable
upon the redemption of the principle obligation.”
As already said no one
of the respondents endeavour to attack the validity of the cession
to the applicant. The only attack is
aimed at the validity and
contents of the underlying obligationary agreement. It is not
contended that as a result of the alleged
invalidity of the
obligationary agreement, the cessionary is obliged to re-cede to the
cedent.
I am accordingly of the
opinion that for as long as the cession remains in place, the
applicant is entitled to payment of the
proceeds of the ceded claim
to the extent of the first respondent’s liability to the
applicant.
CONCLUSION:
The amount of
R236
469,40
has been paid to the third respondent (FSDC) and its
entitlement to the amount is not disputed. I am not called upon to
pass
judgment as far as liability towards the third respondent
(FSDC) is concerned.
In terms of the rule
nisi (with interim effect) issued on
2 February 2011
an
amount of
R937 609,41
has been paid by the second respondent
into the trust account of the applicant’s attorneys
Peyper
Sesele Attorneys Inc
. In terms of the interim order issued on
2
June 2011
the amount of
R542 455,27
has been paid by the
said attorneys to the applicant. Although these amounts were paid in
terms of the interim order of
2 June 2011
pending the
finalisation of the hearing of oral evidence the applicant and the
second respondent submitted a draft order to be
made an order of
court. In this draft order it has been agreed that:
(i) the balance of the
money together with the accrued interest remaining after payment to
applicant has been made in terms of the
order granted by this court
on
2 February 2012
and as contemplated in paragraph 1.3 of the
order dated
2 June 2011
is to be paid out to the applicant;
(ii) The first respondent
be ordered to pay the costs of the application.
The first respondent was
not a party to the agreement in connection with the draft order. It
in fact did not appear at the hearing
at all. I am nevertheless of
the opinion that the first respondent is to be burdened with the
costs:
(i) First respondent
opposed this application without good reason and without disclosing
any acceptable defence;
(ii) First defendant was
the party owing the money to applicant as well as to third
respondent.
(iii) First respondent
ceded its claim against the second respondent to the third respondent
and then without disclosing this preceding
cession signed a second
deed of cession. This is the decisive fact which gave rise to this
litigation.
(iv) First respondent did
not advance any reasons why it should not be burdened with the costs.
ORDER:
Wherefore I make the
following order:
25.1 The balance of the
money paid by second respondent into the trust account of the
attorneys for the applicant
Peyper Sesele Attorneys Inc
in
terms of the order of this court of
2 February 2012
and as
contemplated in paragraph 1.3 of the order of this court dated
2
June 2011
together with accrued interest to be paid out to the
applicant;
25.2 The first respondent
is ordered to pay the costs of this application.
______________________
F. W. A. DANZFUSS,
AJ
On behalf of the
applicant: Adv. S. Grobler
Instructed by:
Peyper Sesele Inc
On behalf of the first
respondent: No appearance
On behalf of the second
respondent: Ms N.T. Ngubane
Moroka Attorneys
On behalf of the third
respondent: No appearance