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[2008] ZAWCHC 291
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Standard Bank of South Africa Ltd v Fakier (10334/2005) [2008] ZAWCHC 291 (13 November 2008)
JUDGMENT
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISIONS
CASE NUMBER
:
10334/2005
DATE
:
13
NOVEMBER 2008
In
the matter between:
THE
STANDARD BANK OF
SOUTH
AFRICA LTD
APPLICANT
and
MAHMOUD
MOHAMED FAKIER
RESPONDENT
JUDGMENT
GAUNTLETT,
A J
:
The
plaintiff bank sues the defendant on a cession and substitute
factoring agreement by its client. Sago Industries (Pty) Limited,
previously Veron Trading (Pty) Limited ("Sago"). Sago
supplied the defendant (whose citation has now been amended by
consent to read "Mahmoud Mohamed Fakier") with trade goods
on account.
The
issues between the parties are narrow on the pleadings, and narrowed
further through the pre-trial process. The essential dispute
reEates
to the adequacy of notice of cession given to the defendant as
debtor. The notice reads thus:
"14
September 2004 [etcetera]. We would fike to advise that we have
purchased and/or hold a valid cession of all amounts owed
by you to
Sago Industries (Pty) Limited.
Accordingly,
all amounts due by you must be made [sic] directly to us. May
we
stress
that, only by paying directly to us
r
will you discharge your indebtedness. Payments to any other party
will not constitute an answer to our claim for payment.
The
evidence was brief. Mr Mark Seland, head of the debtor finance
division of the bank, testified in support of the reduced quantum
of
the claim. He also explained the conversion of the Sago account from
one effectively managed by Sago itseff (from 2001 to 2004)
to one in
respect of which all amounts owing were to be paid directfy to the
bank by the debtor.
His
evidence was folfowed by that of the defendant, and Mr Dawood Ismail,
who plays an important role in the conduct of the defendant's
business. To the extent that this evidence was relevant, I deal with
it shortly in due course.
Counsel
- to whom 1 am indebted for their comprehensive and very helpful
argument - were agreed that what is central to the case
is the
meaning and effect of the notice of cession given initially by the
bank to the defendant in its letter dated 14 September
2004. The
defendant sought in his oral evidence to suggest that this notice
only came to his attention in November of that year,
but conceded
under cross-examination that not only was this inconsistent with his
evidence in a section 417 Inquiry, but also with
his pleaded case, (t
was accepted in argument on, both sides, that the defendant was first
so notified by the bank by 30 September
2004.
Cessions
effect transfers of personal rights between the parties to them. The
problem arises in practice as regards the time when
such transfers
become effective against the debtor, who is not required to be a
party to the cession, and may have no knowledge
at all that it has
been effected at the time of its conclusion. The solution has been
sought, at least since the
denuntiatio
of
Roman law, in the notification of the debtor (see Grosskopf,
GeskiedenJs van die Sessie van Vorderingsregte [Leiden LLD diss.
1952] 192). In Roman Dutch common law, notice was recognised as the
means by which the cessionary can protect his interest (see
Voet Comm
ad Pand. 18.4.5, and generally Scott, Law of Cession [2
nd
ed 1991] 92 et seq].
When
a debtor pays the cedent, notwithstanding notice, a difficult
question of legal policy arises. On the one hand the debtor has
sought to pay the debt. On the other hand, the cession has been
traduced and payment has not been received by the true current
holder
of the right.
In
the present case, the bank has correctly accepted that it cannot
claim certain payments made by the defendant prior to 30 September
2004, because it must rely on notice. But it does rely on its
entitlement to receive payments in respect of sums paid after
receipt
of the notice dated 14 September 2004 and received, as \ have said,
by agreement by no later than 30 September 2004. These sums
fall into
four categories; in respect of the latter three, as adumbrated in
oral argument, further notices ensued, to which I shall
later refer.
It
was not disputed in argument that if the bank's legal contentions are
correct, it is entitfed to judgment in the reduced total
amount of
R273 669,43. For reasons which will become apparent, it is not
necessary to analyse the individual make-up of this globular
reduced
total further.
The
defendant has pleaded that the September 2004 notice "related
only to amounts to Sago ... as at the date of notice, but
did not
make reference to amounts owing to Sago ... that would become due
after that date/ Thus the defence is one of construction
of the
September notice: as counsel for the defendant accepted in oral
argument, what the notice reasonably conveys to the reader
in the
debtor's position.
The
current legal inquiry, it seems to me, is however somewhat wider than
that; The debtor will be released, notwithstanding notice
given to
him, if in making payment to the cedent despite the notice he
genuinely and reasonably believes the cedent to be his debtor
(cf
Joubert et al Law of South Africa [2
nd
Edition 2003] para 48
?
in Volume
2,
Part
2, and authorities collected in footnote 1),
Thus
this posits an inquiry in turn wider than the notice itself, as to
the relevant circumstances which would establish a misconceived,
but
genuine and reasonable payment to the cedent.
tn
this regard, the defendant's evidence was even more unsatisfactory
than his earlier hedging as regards the time period when he
received
the September 2004 notice. He said that he expected Sago to pay the
bank, when he continued to pay Sago notwithstanding
the notice. He
admitted that he had told the section 417 Inquiry, that he "did
not take much notice of that", referring
to the express legend
on every invoice, reading "this debt has been ceded to Standard
Bank SA". He said furthermore
that in reaction to the
September notice, he took only two steps: he asked an assistant to
"check with the bank", while
he himself established (he
said) that nothing was in fact owing at the time to Sago.
Neither
answer impresses as regards the requirements of genuine and
reasonable belief. His assistant was not called as to whether
or not
she indeed called the bank to clarify the notice received. Worse, the
defendant did not suggest that he sought her out to
ask her for a
subsequent report on the inquiry he had, he said, delegated to her.
And as regards the suggestion that he established
that nothing was
currently owing, this is hardly compelling in the context of the
inquiry which has to be made; he ran an open
account with Sago, he
clearly intended to continue to make future purchases after the date
of the notice, and thus he knew that
at least future indebtednesses
were bound to arise, in the ordinary course of things, shortly.
Shortly
put, in the words of
Murphy
,
J in
Van
Staden N.O. v First Rand Limited & Another
2008(3) SA 530 (T) at 539 D:
"A
court will impute constructive knowledge to a debtor where Et has
unreasonably shut its eyes to the truth by not heeding
indicators of
that truth."
{See
further
Stannic
v Samib Underwriting Managers fPtv) Limited
[2003]3 Afl SA 257 (SCA)}.
Afso
unsatisfactory was the defendant's attempt to contend that he did not
understand what a cession was. The first notice itseJf
explains it:
for present purposes, a sale of debts. The defendant has been in
business for some 50 years, and in the automotive
industry for the
past 20, and he struck me as an alert individual with commercial
acumen. If he truly did not understand, he would
in all probability
have sought legal advice - particularly when the notice was followed
by a final demand for nearly R1 million.
He was unable to explain his
failure to do so. In fact he showed again a disquieting tendency to
hedge and to suggest some sort
of possibility that he may well have
sought such legal advice, which I reject.
Thus
for several reasons it is not in my view open to the defendant to
rely only on the wording of the September notice for the
defence
r
that he genuinely and reasonably believed that any cession referred
to applied only to future debts. I do not consider that the
evidence
given before me this morning, establishes that defence is genuine and
I do not consider that his conduct in that regards
is to be
classified as reasonable.
I
would come to the same conclusion even on a consideration simply of
the notice of September 2004, in other words treating the
inquiry
before me as a matter of mere construction of the notice. Counsel for
the defendant drew my attention to its lack of expressed
futurity, in
referring to "debts due". In my view, however, the language
used is indicative of an encompassing category
of debts, precisely
without further sub-distinction regarding the time at which they had
accrued. More shortly put, I beiieve that
on a simple treatment of
the language, this contemplates past, present and future debts. In
this regard, reference should be had
to the judgment in
First
National Bank of SA Limited v Lvnn N.O.
1996(2) SA 339 (A) at 351 C to D, where this was noted:
""Due"
does not necessarily mean "immediately payable", as
reference to any dictionary reveals... "A
debt is said to be due
the instant that it has existence as a debt; it may be payable at a
future time"
Secondly
it is En my view clear from the notice as a whole, in other words not
merely the language used treated purely linguistically,
that the
notice was not confined to past debts I have already quoted the terms
of the notice, and it is quite apparent from the
proceeding and
subsequent sentences that the reference to debt was intended to
encompass, and wouid reasonable have been so interpreted
as
encompassing, past and future, as well as any present debts. Thirdly,
the construction t have suggested in my view arises not
only as a
matter of language, but also as one of wider context; the context was
an open account, with the likelihood of future
debts to be incurred.
Two
things have been stressed time and again in this regard, firstly
that, in the words of
Lord
Stevn
in
R
v Daly
,
"in law context is everything".
The
second is that in the construction of Segal and particularly
commercial contractual documents, sense cannot reasonably be given
without a proper contextual interpretation, in the course of which
the court imputes to the reasonable reader a knowledge of the
immediately relevant circumstances. Fourthly, no sensible, commercial
purpose would in my view be served by the distinction which
has been
suggested on behalf of the defendant, namely between past and future
debts. This, as I have stressed, was so particularly
given the fact
that an open and continuing account was being administered and there
would have been no sensible commercial purpose
for the notification
would have confined itself in relation to past debts only. The
terms of the underlying cession, of course,
reflect this; the notice
does not, with the amplitude it has, lend itself to that
interpretation.
Some
reference was made in argument to the wider explicit terms of the
cession by way of comparison, but it seems to me that this
is not
helpful for several reasons. The first is that the cession, of
course, was not in any way attached to or referred to in
the course
of the notice (counsel for the defendant fairly acknowledging that
his argument would have been assisted in this regard
had it been).
Furthermore the defendant suggested in now way that the terms of the
cession were known to him and that it impinged
upon his understanding
of the notice. Generally then the notice, to the extent that regard
is to be had to it, must be considered
in the light of its own
wording, viewed in the context as ! have suggested it must be.
Thus
I consider that whether the matter is approached on the slightly
wider basis of ascertaining whether in alE the circumstances
it is
evident that the defendant's payment to the cedent, notice of the
cession notwithstanding, was genuine and reasonable, or
whether this
inquiry is made with reference simply to the terms of the notice
construed in context, the conclusion remains the
same. This is that I
consider that the plaintiff discharged the onus of proof {which t
accept rested upon it) of establishing knowledge
on the part of the
defendant that the cession had been effected, and that he was
required, from 30 September 2004, to pay the bank
It
is unnecessary in the circumstances to deal with the further notices
of the cession in the subsequent communications by the bank
and Sago
to the debtor and which would have had particular reference or
relevance, as I have indicated, to the latter three categories
of
sums claimed by the bank.
The
order to be made according is as follows:
"The
defendant is ordered to pay the plaintiff the sum of R273 669,43,
within interest
a
tempore morae,
and
costs of suit. The plaintiff's witness, Mr Milosevic is declared a
necessary witness."
GAUNTLETT,
A J