Lusizi v Transnet Limited t/a Spoornet and Another (4816/2001, 5637/2001) [2001] ZAWCHC 4 (13 November 2001)

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[2001] ZAWCHC 4
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Lusizi v Transnet Limited t/a Spoornet and Another (4816/2001, 5637/2001) [2001] ZAWCHC 4; [2002] 3 All SA 635 (C) (13 November 2001)

IN THE HIGH COURT OF SOUTH
AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO : 4816 / 2001
+
5637
/ 2001
In
the matter between:
MPHATISI
LUSIZI
Applicant
and
TRANSNET
LIMITED t/a SPOORNET
First
Respondent
SAAMBOU BANK LIMITED
Second Respondent
JUDGMENT
DELIVERED : 13
th
November 2001
JOSMAN,
J
The
facts in this matter are relatively simple. The applicant borrowed
money in the form of a micro-loan from the second respondent
(Saambou), which was to be repaid monthly over a period of time.
Applicant was working for the first respondent (Spoornet) and he
authorized Saambou to arrange with Spoornet for a deduction from his
monthly salary of the amount of the repayment each month. Thereafter
applicant encountered financial difficulties, and was placed under an
administration order in terms of section 74 of the Magistrate’s
Court Act. In order to qualify for such an order he requested
Spoornet to cease making the deductions from his salary in repayment
of Saambou’s micro-loan.
Spoornet
adopted the attitude that it was unable to stop the deductions
without Saambou’s consent and Saambou withheld its consent.

Applicant therefore brought this application in which he sought an
order compelling both Spoornet and Saambou to take all steps
necessary to ensure that the deductions from his salary in favour of
Saambou are cancelled. Saambou’s attitude is that the applicant
had irrevocably instructed Spoornet to make the deduction and that
Saambou and Spoornet had an agreement that Spoornet would make
(“permit”) such deductions for the period of the contract.
The
authority to deduct the payments was not given directly by applicant
to Spoornet but rather is contained in cl. D 2.2 of the standard
terms and conditions of the loan agreement between Saambou and
applicant. It reads as follows:
“
The
Lender is irrevocably authorized to arrange with the Borrower’s
employer for the deduction of his installments from his remuneration
or for the application of a debit order against the account specified
in the application in accordance with the applicable repayment
arrangement”
Applicant
challenges the stance adopted by Saambou. At this stage Spoornet has
adopted a neutral stance and is abiding the decision
of this court
and it is Saambou that is opposing the matter. The two issues that I
have to consider are: (i) whether applicant is
entitled to revoke his
instructions to make the deductions from his salary in favour of
Saambou; and (ii) whether Saambou is entitled
to prevent Spoornet
from implementing the applicant’s instructions.
Applicant’s first
challenge is to the enforceability of cl. D 2.2 of the standard terms
and conditions of the loan. At the outset
the applicant challenges
the enforceability of the entire agreement alleging that it is
contra
bonos mores
because the applicant is illiterate, totally uneducated, and was
unaware of the complex interlocking clauses in the contract.
Applicant
does not seek however to avoid the entire contract but
merely wishes an order declaring cl. D 2.2 to be unenforceable to the
extent
that it creates an irrevocable authority to Spoornet to make
the deductions in favour of Saambou. Whether it has this effect is
an issue that will be considered separately.
The
next basis of challenge is that in terms of section 34 of the Basic
Conditions of Employment Act no. 75 of 1977 an employer is
prohibited
from making deductions from an employee’s remuneration unless the
latter has agreed to such deduction in writing in
respect of a debt
specified in the agreement. Applicant contends that cl. D 2.2 does
not form part of any written agreement between
himself and Spoornet.
The
third issue raised is that since the instruction to Spoornet
constituted a mandate from the applicant, applicant as principal
is
entitled to revoke that mandate. The mere fact that the mandate was
described as being irrevocable does not operate to deprive
the
grantor of the power to revoke.
I
will deal with these issues separately, starting with the last one.
IS THE MANDATE
REVOCABLE
In
June 2001 Spoornet and Saambou entered into an agreement whereby
Spoornet undertook to assist with the repayment of loans made
to its
employees by Saambou. The purpose of the agreement was to ensure
that Spoornet would grant a salary deduction at the request
of each
employee from his or her salary in favour of Saambou. In terms of
cl. 3.2 of the agreement Spoornet undertook to execute
each salary
deduction for the duration of the relevant loan, granted to such
Spoornet employee “unless same is terminated as
provided for in
this agreement”. Cl. 3.3 provides that such salary deductions
would only be made at the written request of a
Spoornet employee,
and that only if all the conditions detailed in the agreement had
been compiled with.
This
obligation is expressed in the following terms in para 5.1.4 of the
agreement, namely that Spoornet shall “deduct the monthly
installments from the salary of each qualifying Spoornet employee
for whom Spoornet holds a written authority by such Spoornet
employee to do so, and continue to make such deduction for the
period so authorized, unless the employee is entitled in law to
unilaterally terminate such authority to Spoornet or when an order
of court authorizes termination thereof.”
It
is relevant the employees are not parties to this agreement and the
relevant clauses referred to above raise the issue as to when
an
employee is entitled in law to terminate the authority given to
Spoornet unilaterally.
The
other relevant documents are a credit application and agreement dated
the 27
th
August 1999, in which the applicant applied for credit and provided
details of his employment with Spoornet. The standard conditions
containing cl. D. 2.2 are annexed to the credit application and
agreement. Also forming part of the papers and presumably part
of
the credit application is a document containing two subheadings, the
first is “Bank details/debit order” giving details of
the
applicant’s bank and the second is headed “salary stop order”
which appears to have been partially completed. It refers
to his
rank and his salary number but does not refer to the amount to be
deducted, it is not dated, and it is not signed by the counting
officer (whomever he might be). The page is signed at bottom by the
applicant. The salary stop-order contains the following sentence
in
bold print: “This authority can only be cancelled if Saambou Bank
agrees thereto in writing”. It formed part of the salary
stop
order section which as previously stated was not completed.
It
is necessary to analyse the nature of the arrangement contained in
para. D 2.2. In the first place it is an irrevocable mandate
to
Saambou to arrange with Spoornet for the deduction of installments
from the applicant’s salary by means of a debit order against
his
account. Clearly this is an arrangement that the applicant could
have made himself but instead of doing so, he constituted Saambou
his
agent to do so. Counsel for both the applicant and Saambou are in
agreement that this was a onetime authorization to put the
arrangement into effect. It is not an ongoing authorization
operating each month. Where the parties differ however is that
Saambou
alleges that Spoornet’s undertaking to deduct the payments
from applicant’s salary is irrevocable, whereas applicant contends
that only his instruction to Saambou to put the arrangement in place
was irrevocable.
On
a proper analysis there are two agencies that are created here; the
first derives from a mandate to Saambou to arrange for Spoornet
to
make the required deductions from his salary; the second is a
continuing mandate to Spoornet to make the deductions thereafter.
As
previously stated the latter mandate could have been created directly
with Spoornet by the applicant but he chose, or rather
Saambou
required, that Saambou be constituted his agent for the purposes of
establishing this agency. The real issue therefore is
whether
applicant’s mandate to Spoornet, however constituted, is revocable.
In
Ward v Barrett N.O.
and another
1962
(4) SA 732
(N) Caney J authoratedly considered the question of when a
mandate given to an agent is revocable. At p737 D he said:
“
Generally,
the authority of an agent is revocable by his principal and
terminates on the death or insolvency of himself or of the
principal.
The question whether a power of attorney or the authority of an
agent howsoever conferred is irrevocable depends, it
seems to me,
upon an interpretation of the transaction into which the principal
has entered with the agent and an application of
the general
principles of law to that transaction. There seems to be no
particular magic in the use of the terms “irrevocable”
or
“
procuratio
in rem suam
”
or “a power coupled with an interest”; it is essential to
discover precisely what was the transaction. The principal may
have
bound himself to the agent in terms, express or implied, which oblige
him contractually not to revoke the agent’s authority
save on pain
of liability in damages. Such a case was
Glover
v Bothma,
1948
(1) SA 611
(W), see pp. 626, 627. Or the transaction may have been
one of providing security for meeting a liability to the agent, and
this
may have been effected in such a manner as not to affect
creditors in a
concursus
creditorum.”
He
added at p738 A: “It is clear that a power of attorney given by a
principal as security for recovery of what is owing to the
grantee is
irrevocable.” I will deal with this in greater detail below.
In
Glover v Bothma
1948 (1) SA 611
, at p626 Roper J said the following:
“
A
procurator
in rem
suam
is defined by
Voet
(3.3.8)
as “one who does not carry on business for the benefit of the
principal but for his own benefit.” The effect of the rule
as
stated by
Voet
appears to be substantially the same as that of the English rule that
an agency cannot be revoked where it is coupled with an interest.
The
following passage occurs in Wille and Millin’s
Mercantile
Law of SA
(11
th
Ed., p. 362):
“
An
authority coupled with an interest is one given for the purpose of
protecting or securing any interest of the agent. Such an authority
or power is usually styled ‘irrevocable’ in the instrument
conferring it, and it often takes the form of what is called a
procuratorship
in
rem suam
,
i.e., an agency in which the agent is given authority to sue in his
own name and in which he transacts the business committed to
him for
his own benefit and not for the benefit of the principal. In a case
of this
sort
,
as well as in every other case where the power has been given by way
of security, irrevocability will be implied, even if the power
is not
expressed on the point. On the other hand,
merely
to call a power ‘irrevocable’ is not to make it so.
Subject to an action for damages an ordinary power styled
irrevocable may be revoked…The test is whether it is intended for
protection
or securing of an interest of the agent. If it is, it is
irrevocable, until such time as the protection or security is no
longer
needed.”
I
am satisfied that this correctly sets out the results of our
authorities (citations omitted).” (emphasis added)
In
Glover’s
case the distinction was drawn between an interest on the part of the
agent in the exercise of his authority as opposed to an interest
in
the thing actually vesting in the agent. Only the latter qualifies
as an agency coupled with an interest, a good example of that
is
found in the case of
Netherlands
Bank v Yull’s Trustee
1914 WLD at p.131. In that matter a pledge of book debts to a person
as security for a debt, coupled with the vesting of power or
authority in that person (the agent) to collect the debts was held to
constitute an agency with an interest and was therefore irrevocable.

The words
in rem
suam
are often
used to connote such a power and in
Yull’s
case it was intended to mean that the agent was able to sue in his
own name in order to collect the book debts.
In the case of
Consolidated Frame
Cotton Corporation Ltd v Stihole and others
1985 (2) SA 18(N)
, the court considered a situation not too
dissimilar from the matter
in
casu
in which
nineteen employees’ of a cotton mill who were members of a trade
union had agreed that the weekly dues to the union could
be deducted
from their salary and a stop order authorization had been signed by
each of them. This was contained in the application
for membership
of the union and on the same form there was an acknowledgement and an
acceptance to abide by the constitution of the
union. Upon
resignation from the union the employees withdrew their written
authorization to their employer to make the deductions
with immediate
affect. The constitution of the union required one month’s notice
of cancellation and the employer accordingly
declined to give effect
to the cancellation. The employees thereupon sought a declaratory
order that the continued deduction of
dues was unlawful and an order
interdicting the employer from making such deductions.
The
matter was heard in the magistrate’s court and the employees were
successful. Thereafter the employer took the matter on appeal.
At
that stage it was argued that the entire arrangement was a contract
for the benefit of the union, which benefit had been accepted
and
could therefore no longer be withdrawn. The essence of this
construction was that the union thereby acquired a right to claim
payment of the members’ subscription directly from the employer.
Nienaber J, as he then
was, reiterated the general rule that a principal may freely
terminate the authority of his agent, even if
the mandate
establishing the authority provided that it is not to be revoked;
breach of that provision giving rise to a claim for
damages but not
preventing the principal from terminating the agency. He then went
on to consider exceptions to the rule, but he
dismissed the
contention that an authority coupled with an interest had been
created in the circumstances. He did so on the basis
that the
interest had to be that of the agent (the employer) and not of an
outsider such as the union. Indeed this contention was
not even
argued strenuously on appeal. One of the reasons advanced was that
the employer did not face a claim for damages from the
union if it
failed to continue to deduct the union dues. No such arrangement
existed in that matter and Nienaber J pointed out that
the employer’s
undertaking, insofar as there was any undertaking towards the union,
was to make the deductions until such time
as the stop-order
authorization ceased to have force. The employer had not undertaken
to make the deductions until such time as
the members ceased to be a
members of the union. It will be necessary to consider the matter
in
casu
to determine
whether the circumstances are different in this instance.
With
regard to the issue of whether it was a contract for the benefit of a
third party Nienaber J pointed out that the essence of
this type of
contract is that it would have been entered into between the employer
and the employees with the intention that the
union, upon acceptance
of the benefit, would be able to enforce its claim for subscriptions
directly against the employer. This
would have entailed a finding
that the constitution of the union was incorporated into the contract
between the employer and the
employee. The fact that the stop order
authorization contained an undertaking to abide by the terms of the
union’s constitution
was not sufficient. Nienaber J regarded the
juxtaposition of these two documents as a matter of convenience only
which had no contractual
significance. What is more the constitution
of the union did not provide that the only manner of payment of the
dues was to be by
stop-order against the employees’ salary. There
was no compelling reason why a member should not be free to make
alternative arrangements
for payment of the dues.
There had be shown, on
the balance of probabilities, that the employer and the employee
intended by the authorization of the stop-order
to vest a right in
the union to enforce a claim against the employer directly should it
fail to transmit the subscriptions. Furthermore
that right had to
endure for as long as the employee remained a member of the union.
It was his conclusion that a more feasible
interpretation of the
entire arrangement was that it was regarded as a convenient means of
facilitating payment of the dues, (presumably
to ensure regular and
timeous payment), in a manner that did not contravene the Basic
Conditions of Employment Act, which required
such authorization to be
in writing. An alternate argument advanced in that case was that if
the circumstances did not show a
stipulatio
alteri
then there
was a tri-partite agreement between all three parties, the employer,
the employees and the union. Nienaber J concluded
that nothing in
the papers suggested the existence of such an overriding tripartite
agreement in which it is essential that each
of the three parties
should intend to be a party to the agreement. The employer had
argued in that matter that the tripartite agreement
was partly oral,
partly in writing and partly to be inferred from conduct. Nienaber J
concluded that the circumstances before him
were not so unequivocal
as to render the construction contended for by the employer more
plausible than any other. At p.25 I he
said the following;
“
Even
if each stop order authorization is viewed not in isolation but in a
setting of all surrounding facts, no comprehensive tripartite
agreement is revealed of which the stop order is but a single
component. The better view, in my opinion, is to regard each stop
order authorization as a separate transaction between (the employer)
and (each employee) in terms whereof (the employer), as the
debtor of
(each employee) in respect of wages, is appointed as his agent with
the express power to effect payment on his behalf to
his creditor,
(the union). (The union), being the nominated recipient of the
money, can properly be termed an
adjectus
solutionis causa
(citation omitted). This is a mutually convenient arrangement. (The
employee) concerned is not bothered to arrange for a weekly
payment
and (the union) is not bothered to arrange for its collection. But
that does not mean that (the employee) is irrevocably
committed to
the arrangement or that (the union), or (the employer) for that
matter, can enforce it against his continued will.
Nothing in the
constitution of (the union) obliges him to effect payment in this
manner only.”
He
went on to add that the stop order contained nothing to suggest that
it was irrevocable and therefore that each employee was perfectly
free to revoke the authority by addressing an appropriate
communication to the employer. Whether the employees remain liable
to
the union in terms of its constitution was another matter which
did not arise in the appeal. I would add that even if the stop order
authorization had purported to be irrevocable, this would not have
given rise to a claim for damages by the union against the employer,
but left the union with a claim against the employees.
It remains to compare
the circumstances
in
casu
with those in
the
Consolidated
Frame
case. It
was contended on behalf of Saambou that it was indeed an agent
coupled with an interest and that for this reason applicant
was not
entitled to revoke the instruction to Spoornet. The fallacy in this
argument is clear since the agent for making payment
is Spoornet and
not Saambou. The interest that Saambou has in receiving payment does
not derive from the agency between applicant
and Spoornet, but rather
from its own contract with the applicant. In order to create an
interest that was enforceable vis a vis
Spoornet, Saambou would have
to show either a
stipulatio alteri
entered into between applicant and Spoornet for its benefit, which
benefit it had accepted, or it would have to show a tripartite
agreement between all three parties. In my opinion neither has been
shown.
The mandate to Saambou
was simply to arrange with Spoornet for the stop-order and salary
deduction arrangement to be put in place.
This mandate was expressed
to be irrevocable. It did not allow Saambou to establish an
irrevocable mandate for Spoornet to pay
Saambou on appellant’s
behalf. It lacks the essential stipulation that the deductions
were to be made for as long as applicant
remained an employee of
Spoornet or until the loan was repaid, whichever were to happen
first. Had it done so failure to make the
deductions would then
have rendered Spoornet liable in damages to Saambou. This would then
have constituted Spoornet an agent with
an interest to make the
payment and as such the mandate would then have been irrevocable. No
such stipulation can be read into cl.2.2
of the loan agreement
between applicant and Saambou. Spoornet had no independent interest
to continue to deduct the amounts from
applicant’s salary. This
arrangement also does not qualify as a
stipulatio
alteri.
Mr. Burger who
appeared with Mr. Kirk-Cohen for Saambou argued that there are three
distinct relationships which feature in this
matter, the first being
the loan agreement between applicant and Saambou, the second being
the employment relationship between applicant
and Spoornet and the
third being what he refers to as the ‘umbrella’ agreement between
Saambou and Spoornet. This triad of agreements
he calls a ‘globular
arrangement’ the result of which being that applicant’s
authorization to Saambou to arrange for the salary
deductions with
Spoornet are intended to operate for the entire period of the loan,
and by implication, cannot be revoked by applicant.
Cl.2.2 does not
state this nor does it provide that the obligation to pay is
contingent upon applicant’s continued employment
with Spoornet.
Such a term is not to be implied since it would effectively preclude
applicant from making alternate arrangements
for repayment of the
loan, as suggested by Nienaber J in the
Consolidated
Frame
case.
It
remains to consider whether the so-called ‘umbrella’ agreement
between Spoornet and Saambou assists Saambou. In the preamble
to the
agreement Saambou makes it clear that it is prepared to grant loans
to Spoornet employees on the basis that Spoornet would
grant a salary
deduction “at the request of the employee from the salary of such
Spoornet employees in favour of Saambou”. In
cl.3.2 dealing with
salary deductions Spoornet undertakes “to execute such salary
deduction for the duration of each and every
loan agreement entered
into by a Spoornet employee with Saambou unless same is terminated as
provided for in this agreement”.
Cl.3.3 provides: “Such salary
deductions will only be done on the written request by a Spoornet
employee, and further once all
the conditions as detailed herein have
been complied with”. Clearly there is an undertaking by Spoornet to
continue to make the
payments for the duration of the loan.
Cl.5.1.4
is also relevant. It requires Spoornet to “deduct the monthly
instalments from the salary of each qualifying Spoornet
employee for
whom Spoornet holds a written authority by such Spoornet employee to
do so, and continue to make such deductions for
the period so
authorized,
unless
the employee is entitled in law to unilaterally terminate such
authority
to
Spoornet or where an order authorizes the termination thereof. Such
authorizations shall reflect the total amount of the loan,
monthly
instalment to be deducted and the period thereof”. (emphasis
added).
In
the definition section of the agreement “termination of employment”
is defined as including termination as a result of retrenchment,
dismissal, termination of employment in accordance with a voluntary
severance package, etc. Clearly as between Spoornet and Saambou
it
is intended that the deductions will continue for as long as the
employee remains employed by Spoornet and the loan is still
outstanding.
The difficulty I have with Mr. Burger’s argument
however is to the applicant is not a party to this agreement, nor
even is there
anything to show that he is aware of the existence of
the agreement. In the absence of this, applicant is entitled to
revoke its
mandate to Spoornet on the principles set out above and if
the mandate is revoked then Saambou’s rights in terms of the
‘umbrella’
agreement with Spoornet are not enforceable.
Accordingly Spoornet would not be liable in damages to Saambou; as
such it does not
qualify as an agent with and interest.
Mr.
Saner who appeared for the applicant contended that there never was a
tripartite agreement between the three parties in this
matter and I
agree with him. Mr. Burger’s contention that the triad of
agreements comprises a globular agreement appears to be
missing a
link if he wishes it to be regarded as a tripartite agreement.
It is my conclusion
that there is no bar to applicant terminating its instruction to
Spoonet to terminate the salary deductions.
I am not without
sympathy for Saambou which regards the salary deduction agreement
with employers as an essential form of security
to underpin loans to
employees who would not otherwise qualify. What the facts of this
case reveal is that it is not sufficient
merely to authorize Saambou
to arrange with an employer such as Spoornet to make the deductions.
It is necessary to go further and
involve the employee in a
stipulatio alterio
for the benefit of
Saambou which provides Saambou with a right to claim the salary
deductions directly from the employer for as long
as the employee
remains in employment and until the loan is repaid. The alternative
is to make the employee aware of the ‘umbrella’
arrangement, such
as that between Saambou and Spoornet, and to require his consent to
being bound thereby.
One of the issues
raised in the papers relates to the fact that the applicant is
uneducated, illiterate and clearly did not understand
the terms of
the various agreements referred to above. Fortunately I am not
called upon to deal with this thorny in issue in the
light of the
conclusion that I have come to. The issue might well arise however
if Saambou seeks to make such an employee a party
to a
stipulatio
alteri
or a
tripartite agreement. It will no doubt have to take sufficient steps
to ensure that the employee understands the ambit of the
agreements.
Accordingly
I am prepared to grant an order in terms of prayer’s 2 of the
applicant’s notice of motion and to direct that Saambou
Bank
Limited, the second respondent in this matter be ordered to pay the
applicant’s costs.
This
matter was preceded by an interlocutory application which has not
been referred to in this judgment. I have however been asked
to make
a costs order in the respect thereof. In my opinion the appropriate
order in relation to the interlocutory application
is that each party
should pay its own costs.
__________
JOSMAN, J