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[1990] ZASCA 120
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Densam (Pty) Ltd. v Cywilnat (Pty) Ltd. (470/1988) [1990] ZASCA 120; 1991 (1) SA 100 (AD); [1991] 1 All SA 275 (A) (28 September 1990)
LL
Case No 470/1988
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION
In the matter between:
DENSAM (PROPRIETARY) LIMITED
Appellant
and
CYWILNAT
(PROPRIETARY) LIMITED
Respondent
CORAM
: BOTHA, EKSTEEN, F.H. GROSSKOPF JJA,
FRIEDMAN et NIENABER AJJA
HEARD
: 23 AUGUST
1990
DELIVERED
: 28 SEPTEMBER 1990
JUDGMENT
BOTHA JA
:-
2. The litigation giving rise to this appeal
commenced with an
ex parte
application brought by the respondent
("Cywilnat") against the appellant ("Densam") in the Witwatersrand Local
Division on 16 August
1988. The application came before LEVY AJ, who granted a
rule
nisi
against Densam in accordance with the prayer contained in
Cywilnat's notice of motion. The rule called upon Densam to show cause
on 23
August 1988 why an order should not be granted with the following
provisions:
1. interdicting Densam from collecting any moneys owing to it by its
debtors;
2. directing Densam to hand to Cywilnat forthwith all moneys and/or cheques upon
receipt of same from the debtors of Densam;
3. directing Densam to deliver to Cywilnat full and complete schedules setting
out the names and addresses and amounts owing by Densam's
debtors on the last
day of July 1988;
3.
4. directing Densam to allow Cywilnat to inspect all Densam's ledgers, invoices,
delivery books and other books of account and records
for the purpose of
extracting therefrom and ascertaining the amounts owing by Densam's debtors and
allowing Cywilnat to make copies
of any such documents;
5. directing Densam to make available and produce to Cywilnat all its books and
records relating to any of its debtors;
6. directing Densam to pay the costs of the
application.
The provisions of the rule mentiohed in
paragraphs 1 and 2 above were ordered to operate as interim orders having
immediate effect.
The relevant facts deposed to in the affidavits filed in
support of Cywilnat's application will be detailed in due course. . At this
stage, for the purpose of outlining the course of the litigation in
4. the
Local Division, it needs to be mentioned only that Cywilnat relied
inter
alia
on the following allega-tions: Densam was indebted to the Trust Bank of
Africa Limited ("the Bank") in respect of an amount of money
lent and advanced
by the Bank to Densam on overdraft; the Bank held certain securities in respect
of Densam's indebtedness to it;
those securities included a cession by Densam to
the Bank of the former's claims against all its debtors, such cession being
incorporated
in a document headed "Cession of Debtors" (annexure "N5" in the
application papers); the Bank had ceded to Cywilnat its claim against
Densam for
payment of the amount of the overdraft; and the Bank had also ceded and
transferred to Cywilnat its rights against Densam
flowing from the latter's
"Cession of Debtors" in favour of the Bank. The relief sought by Cywilnat
against Densam was founded on
the terms of the contract embodied in the "Cession
of Debtors".
After service upon it of the rule
nisi
and
5. the papers comprising the application, Densam filed answering affidavits
in which it opposed the relief claimed by Cywilnat on
a number of grounds. On
the return day of the rule it was extended, in order to allow Cywilnat to file
replying affidavits, to 30
August 1988. The matter then came before WEYERS J.
After hearing argument WEYERS J made an order, on 1 September 1988, in terms of
which,
inter alia
, the matter was "referred for the hearing of oral
evidence, at a time to be arranged with the Registrar", on a number of specified
issues, and the rule was extended to 20 September 1988. In so far as it is
relevant for the purposes of this appeal, that part of
the order specifying the
issues on which evidence was to be heard, reads as follows:
"1.1 whether Trust Bank was entitled to sell/cede its claim against the
Respondent" (i e Densam) "as well as the securities referred
to in Annexures
"N3", "N4", "N5" and "N6";
1.2 if so:
1.2.1 what was sold/ceded
and to
6.
whom?
1.3
1.4
1.5
1.6 who owns the claim if there was a
sale
and/or cession?
1.7 "
Pursuant to the order made by WEYERS J, the
matter was set down for hearing on 19 September 1988, before GOLDSTEIN J. At the
commencement
of the proceedings on that day, before any evidence was led,
counsel then appearing for Densam addressed an argument to the Court,
by way of
what was referred to as a point
in limine
. It was contended that the
Bank's claim against Densam was not cedable. After hearing argu-ment, GOLDSTEIN
J delivered a judgment
which he concluded by dismissing the point
in
limine
. Thereafter the evidence was heard of a number of witnesses.
Eventually, on 28 September 1988, GOLDSTEIN J delivered a further judgment,
at
the end of which he made an order as follows:
"1. The rule is confirmed.
7.
2. Paragraphs 1.1 to 1.5 of the order are to operate until applicant's claim
against respondent in the sum of R71 125,69 has been
satisfied."
It is this order against which Densam now appeals to
this Court, leave to
do so having been granted by the
learned Judge a
quo
.
In argument before us counsel for Densam
relied on four grounds in support of the appeal, as
follows:
A. The Bank's claim against Densam for the
repayment of the amount of the
loan was not
cedable;
B. The security held by the Bank in the form of
the cession by Densam to the
Bank of Densam's
claims against its debtors was not cedable;
C. The Bank's cession to Cywilnat of its claim
against Densam related to a
part only of the
latter's debt to the Bank and was
accordingly
invalid;
8.
D. Cywilnat, when it took cession of the Bank's claim against Densam, did so as
an agent acting on behalf of other persons and was
not entitled to enforce the
claim in its own name.
Counsel's contentions under A
and B above were based on facts which are not in dispute. In setting out the
relevant facts, as they
appear from the affidavits filed on behalf of Cywilnat,
I shall assume for the moment that the whole of the Bank's claim against
Densam
had been ceded to Cywilnat, leaving for later consideration the contention to
the contrary under C above.
Densam was a customer of the Bank in respect of a
cheque account which was operated at the Bank's Main Street branch in
Johannesburg.
Prior to July 1988 the Bank had granted overdraft facilities to
Densam, with a limit of R70 000,00. On 29 July 1988 the account was
overdrawn in
an amount of R71 125,69. On
9. that day the Bank, represented by the manager
of its Main Street branch, Mr Nelson, and Cywilnat, represented by its attorney,
Mr Frack, entered into an agreement in terms of which Cywilnat purchased from
the Bank, for a sum of R70 000,00, the Bank's claim
against Densam for repayment
by the latter of the amount owing by it on the overdrawn account. The agreement
was reduced to writing
and signed on behalf of the parties to it. The document
is headed "Cession of Claim", and it reads as follows: "1.
PARTIES
1.1
THE TRUSTBANK OF AFRICA LIMITED
(hereinafter referred to as
the
Bank)
of 88 Main Street JOHANNESBURG
1.2
CYWILNAT (PTY) LTD
("Cywilnat")
of 14th Floor Kelhof 112 Pritchard Street JOHANNESBURG.
2.
RECITAL
2.1 Densam (Pty) Ltd t/a Herb's
Motors ("Densam") is indebted to the Bank in the sum of R70 000 ("the claim").
The Bank holds as security
the guarantees of SAMUEL
10.
LEVINRAD and E J NEEDHAM and book debts belonglng to Densam ("the security").
2.2 The Bank has agreed to cede and assign the claim
to Cywilnat together with
the Bank's said security upon such conditions as set out below.
3.
AGREEMENT
3.1 The Bank hereby cedes, assigns, transfers and makes over to Cywilnat the
claim against Densam together with the security as aforesaid.
3.2 As a consideration for the cession and assignment of the aforesaid claim and
security, Cywilnat shall pay to the Bank the sum
of R70 000, payable in cash or
an acceptable bank guaranteed cheque.
3.3 Payment of the sum of R70 000 shall be made by Cywilnat on the signing
hereof against which the Bank delivers to Cywilnat the
security together with a
certificate of balance.
3.4 This Cession is given without any recourse to the Bank and the Bank gives no
warranties of whatsoever nature in this
regard.
SIGNED AT JOHANNESBURG ON THIS THE 29TH DAY
OF JULY 1988."
The agreement of cession was entered into
11.
without Densam's consent. In fact, Densam had not been consulted about the
cession and became aware of it only upon receipt of a letter
of demand from
Cywilnat some three days later. The circumstances which gave rise to the cession
may be summarized as follows. Cywilnat
was a company which was ordinarily used
by the firm of attorneys in which Frack was a partner, for taking cession of
claims from
clients of the firm who did not wish to institute legal proceedings
in their own names. In this instance, Frack was acting on behalf
of two
brothers, Michael Levinrad and Maxim Levinrad, who had become involved in a
dispute with a third brother, Samuel Levinrad.
The dispute arose out of a
compli-cated series of business transactions of the three brothers, relating to
a number of companies
in which they held interests. It is not necessary to
unravel the details. Suffice it to say that Samuel Levinrad had caused Densam
to
advance money to a company, "CCTV", in which the three brothers had been
joint
12. shareholders; Densam's claim against CCTV for repayment of the loan
had been ceded to the Bank as security for its indebtedness
on the overdraft;
the Bank had threatened to enforce the claim; and if the claim were to be
enforced, Michael and Maxim Levinrad
stood to lose a substantial amount of
money. Frack advised his clients to obtain a cession from the Bank of its claim
against Densam,
together with the securities held by the Bank; by acquiring
control over Densam's claim against CCTV, the enforcement of it could
be
averted. Michael and Maxim Levinrad were prepared to act on Frack's advice, but
not "in the family name"; so it was decided that
Cywilnat would be used as a
vehicle for obtaining cession of the Bank's claim and the securities. Frack
approached the Bank's manager,
Nelson, and offered to buy the claim and the
securities for R70 000,00. At that stage the Bank had become dissatisfied with
the manner
in which Densam's account was being conducted (the overdraft limit
had
13. been exceeded and several cheques had been dishonoured) and the Bank
wanted to recover the money it had advanced to Densam. In
those circumstances,
according to the evidence given by Nelson, it was normal banking practice for
the Bank "to try and get rid of
the account", and the Bank was "fortunate to get
the R70 000,00 from Cywilnat". The Bank accordingly accepted the offer conveyed
to it by Frack, and thus the cession came into being.
Pursuant to the
cession, Frack, acting on behalf of Cywilnat, paid the sum of R70 000,00 to the
Bank (the money had been made available
by Michael and Maxim Levinrad). At the
same time the Bank delivered to Frack the securities held by it, which included
the "Cession
of Debtors" mentioned above. This is referred to in paragraph 2.1
of the cession (quoted above) as the "book debts belonging to Densam".
In
argument counsel referred to the document, as well as the legal relationship
embodied in it, as "the cession of book
14.
debts". The phrase is legally inept, of course, but
for convenience I
shall follow suit. The relevant
portions of the document read as follows:
"1. We, the undersigned DENSAM (PTY) LTD, T/AS HERBS MOTORS of COR. GOCH &
JEPPE STS., NEWTOWN, JHB herein represented by MR.
SAMUEL LEVINRAD a director of
the company duly authorised thereto under and by virtue of a resolution passed
by
the directors of the company on a
certified copy of which resolution is hereunto annexed, do hereby cede and
pledge to THE TRUST BANK OF AFRICA LIMITED, its order
or assigns (hereinafter
referred to as the Bank) all our rights, title and interest in and to all debts
due to us from whatsoever
cause arising and more particularly and without
detracting from the generality of the aforegoing, the existing debtors reflected
in annexure "A" hereto. These debts are ceded to the Bank as security for each
and every amount which we are at present indebted
to the Bank or may in future
become indebted to the Bank whether as borrower or as surety and whether alone
or joint-ly with others
or from whatsoever cause arising and notwithstanding any
fluctua-tion in the amount or even temporary extinction thereof as well
as for
the due and proper performance of all other obligations which we have or may
hereafter incur in favour of the
Bank.
15.
All our debtors, both present and future, including those reflected in annexure
'A' hereto are hereafter referred to as 'our said
debtors'.
2. We hereby acknowlege, bind ourselves, agree and undertake to the Bank
-
(a) That if so required by the Bank, we will by not later than the 15th day of
each month or on such other dates as the Bank may
indicate, deliver to the Bank
full and complete schedules setting out the names and addresses and amounts
owing by our said debtors
on the last day of the preceding month, but the
failure by us to deliver such schedules or the omission therefrom of any
information
in regard to any such debtor/s or the supply of any incorrect
information shall not affect the rights of the Bank under this Cession.
(b) That all monies which we may after the date hereof collect from our said
debtors shall be so collected and received by us as
agents f or and on behalf of
the Bank and we undertake to cease to collect and receive any such payments from
our said debtors from
the date that the Bank will notify us and/or our said
debtors that the Bank will in future themselves collect the monies owing by
our
said debtors and ceded hereunder.
(c) That the Bank shall at any time
16.
hereafter be entitled to give notice of this Cession to all or any of our
said debtors and to institute action against any of our
said debtors for amounts
owing by them and f rom date of such notice we will cease collection of any
monies from our said debtors
and shall, if so required by the Bank, cede or
endorse in favour of the Bank and deliver to the Bank all acknowledgements of
debt,
bills of exchange, promissory notes, and other negotiable instruments and
all other documents then and thereafter held by us in respect
of any amounts
payable by our said debtors.
(d)
That the Bank shall be
entitled at all times through their nominee/s to inspect all our debtor's
ledgers, invoices, delivery books
and other books of account and re-cords for
the purpose of extracting therefrom and ascertaining the amounts owing by our
said debtors
and to make copies of any such documents.
(e)
That we will at all times make available and produce to the
nominee/s of the Bank or in any Court all our books and records insofar
as they
are relevant to any legal proceedings which may be instituted by the Bank,
against any of our said
debtors.
17.
.....
7. For the purpose of enabling the Bank to exercise their rights under this
Cession, we hereby irrevocably nominate, constitute and
appoint the Bank with
power of substitution to be our Agents with full and unlimited power to sign all
such documents and to do all
such acts, matters and things as the Bank in its
discretion may deem necessary to give due and proper effect to the terms of this
Cession.
11. We further agree that the amount of our indebtedness to the Bank at any time
(including interest, costs and the rate of interest)
shall be determined and
proved by a certificate signed by any Director, General Manager, Secretary,
Branch Manager or Accountant
of the Bank. It shall not be necessary to prove the
appointment of the person signing any such certificate, and such certificate
shall be binding on us and shall be conclusive proof of the amount of the
indebtedness of the Principal Debtor and shall be valid
as a liquid document
against us in any competent Court for the purpose of obtaining provisional
sentence or summary judgment against
us thereon."
On 1 August
1988 Frack caused a letter of
18.
demand to be delivered to Densam, in which Densam was
notified that
Cywilnat had taken cession of the Bank's
claim against it, together with the
securities held by
the Bank, and that Cywilnat intended to
enforce
forthwith the rights it had acquired in terms of the
cession of
book debts. Densam responded quickly. On 3
August 1988 its attorney addressed
a letter to Frack,
in which it was made plain that Densam would resist
all
claims made by Cywilnat. This led to the launching by
Cywilnat of the
ex parte
application mentioned at the
outset of this judgment.
I turn to a consideration of the contentions
advanced on behalf of Densam, as summarized above.
With regard to the contention under A above,
the crucial submission made by counsel for Densam was
formulated in his written heads of argument as follows:
"The character of the contract between a banker and its customer is so personal
in nature that the element described as
delectus personae
is present,
rendering any claim which the banker might have against
its
19.
customer not cedable without the consent of the
customer."
In support of his argument counsel
relied, in the first
place, on the decision in
G S George Consultants
and
Investments (Pty) Ltd and Others v Datasys (Pty) Ltd
1988
(3) SA 726
(W). In that case STEGMANN J was
called upon to consider the
validity of a cession of a
banker's claim against its customer for repayment
of
the amount of an overdraft. The learned Judge came to
the conclusion
(at 737 E-F) that
" in the absence of agreement to the
contrary, the contract of a banker and customer obliges the banker to guard
information relating to his customer's business with
the banker as confidential,
subject to various exceptions, none of which is presently relevant; that such
duty of secrecy imparts
the element of
delectus personae
into the
contract; and that the banker's claims against his customers are accordingly not
cedable without the consent of the
customer."
The first part of the
learned Judge's
conclusion, viz the finding that an obligation rests on
the banker as against the customer to maintain
20.
confidentiality and secrecy, followed upon a discussion in
the judgment at 734 H - 736 H of the nature of the contractual relationship
between a banker and a customer. From an analysis of the discussion it appears
that the learned Judge found that in the contract
between banker and customer
there exists a "tacit or implied term of secrecy" (at 736 F/G), arising "as a
matter of law, or as representing
the tacit
consensus
of the parties" (at
734 I), but that such term was "not an absolute provision", there being .
circumstances in which a banker may
be relieved of the duty of secrecy (at 736
G); and that for both these findings the learned Judge relied mainly on the
English case
of
Tournier v National Provincial and Union Bank
of
England
(1924) 1 KB 461
(CA) (at 735 B-D and 736 G/H). In this Court counsel
for Densam was content to support the findings of the learned Judge that I have
mentioned, on the basis of
Tournier
's case
supra
and the more
recent case in which
Tournier
's case was
21 . reaffirmed,
Barclays
Bank Plc (Trading as Barclaycard) v Taylor
(1989) 1 WLR 1066
(CA). Counsel
for Cywilnat, however, argued that in our law, unlike as in the English law,
there was no duty of secrecy as between
banker and customer, and that our law
demanded of a banker no more than (as counsel put it) to act in good faith and
not fraudulently.
In the view I take of the present case there is no need to
embark upon a consideration of the juristic nature of the contract between
banker and customer, nor upon an investigation as to whether the banker owes the
customer a duty of confidentiality or secrecy, and,
if so, what its origin or
limits may be. For the purposes of deciding this appeal I shall simply assume in
favour of Densam (but,
I must make it plain, without deciding) that the Bank was
contractually obliged to it to maintain secrecy and confidentiality about
its
affairs, in accordance with the decision in
Tournier
's case
supra
.
With that assumption in mind, I revert to the
22.
judgment of STEGMANN J in the
George Consultants
case
supra
.
Having referred to
Tournier
's case in the context of circumstances which
relieve a banker of the duty of secrecy owed to its customer, the learned Judge
(at
736 G-H) said that in the case before him there was no suggestion that any
such circumstance was present. On that score GOLDSTEIN
J in the Court a
quo
in the present case consideredthat STEGMANN J had erred. It will be
recalled that when the matter came before GOLDSTEIN J on 19 September
1988 for
the hearing of evidence, counsel for Densam argued
in limine
that the
Bank's claim was not cedable, and that GOLDSTEIN J delivered a judgment in which
he dismissed the point in
limine
. That judgment has been reported: see
Cywilnat (Pty) Ltd v Densam (Pty) Ltd
1989 (3) SA 59
(W). As appears from
the reported judgment at 59 I - 60 B GOLDSTEIN J referred to the four categories
of cases enumerated by BANKES
LJ in
Tournier
's case
supra
(at 473)
in which the general rule as to secrecy is
23.
relaxed, the third of which is "where the interests of
the bank require
disclosure", and he held that such
circumstance did exist in the
George
Consultants
case,
on the ground that
"the bank wished to dispose of its claim, and thus had an interest to disclose
it to the proposed cedent [
sic
: cessionary] of such
claim."
GOLDSTEIN J said further (at 60 B):
"If a bank wishes to sue its customer, it may do so thus revealing the amount of
the overdraft to the world.. I cannot see why the
interposition of a cessionary
should change the principle."
In this Court counsel
for Densam submitted that it was
wrong to extend the concept of "the
interests of the
bank" to a case where the bank wished to dispose of
its
claim by means of a cession; since the element of
confidentiality
pervaded the whole of the relationship
between the bank and its customer, so it was argued,
the relaxation of the duty of secrecy in this context
should be confined to cases where the bank itself
24.
sought directly to enforce its claim. I do not agree.
In
Tournier
's
case
supra
at 481 SCRUTTON LJ stated the
principle thus:
"I think it is clear that the bank may disclose the customer's account and
affairs to an extent reasonable and proper for its own
protection, as in
collecting or suing for an overdraft."
(See also per
ATKIN LJ at 486). In my view, generally
speaking, it is reasonable and proper
for a bank to
further its own interests in regard to "collecting
an
overdraft", by ceding its claim to a third party. To
that extent I
agree with the views expressed by
GOLDSTEIN J, as mentioned above. It is
conceivable,
however, that a bank may want to cede its claim for
an
ulterior purpose, unrelated to the furtherance of its
own interests, as
was suggested by counsel for Densam;
and it is to be noted that it does not appear from the
judgment in the
George Consultants
case why, or under
what circumstances, the bahk there had ceded the claims
with which STEGMANN J was concerned. It seems to me
25. that GOLDSTEIN J
assumed that the bank had ceded its claims in order to promote its own
interests. I am inclined to think that
his assumption was justified: the mere
fact that a bank has ceded its claim would raise a
prima facie
inference,
if nothing appeared pointing in a contrary direction, that the bank had decided
to dispose of its claim in order to realize
and to liquidate it, in its own
interests. But for the purposes of the present case there is no need to pursue
this point any further.
Here the facts are clear. I referred earlier to the
evidence given by Nelson, the Bank's manager. That evidence was given after
GOLDSTEIN
J had delivered his judgment on the so-called point
in limine
,
but of course in this appeal we must take that evidence into account. On that
evidence the Bank wished to "get rid of" the claim
against Densam for its own
benefit, and it decided to accept Cywilnat's offer to take cession of the claim,
because it considered
itself "fortunate" to receive virtually
26.
the entire amount of the claim, in consideration for the cession.
Consequently the application of the principles laid down in
Tournier
's
case
supra
to the facts of the present case leads to the conclusion that
the Bank was not precluded from ceding its claim against Densam to
Cywilnat, and
the decision in the
George Consultants
case
supra
cannot avail
Densam.
There is a further, and more important, aspect of the judgment of
STEGMANN J in the
George Consultants
case
supra
which calls for
consideration. In the second part of the passage at.737 E-P, which has been
quoted above, the learned Judge stated
as his conclusion that the duty of
secrecy which a banker owes its customer imports the element of
delectus
personae
into the contract. In my judgment, with respect to the learned
Judge, this conclusion of his is wrong in law. In the discussion of
it which
follows, I am proceeding still on the assumption (without deciding) that a
banker owes its customer a duty of secrecy and
27.
confidentiality, as held by STEGMANN J, in accordance
with
Tournier
's case
supra
, but for present purposes I
disregard the
so-called exceptions to the general rule
as laid down in that case.
Earlier in his judgment STEGMANN J said the
following (at 736 I/J - 737 B):
"In my judgment, whenever parties conclude a contract in terms of which either
owes the other a duty to guard the secrecy of confidential
information, the
character of the contract, and in particular the performance of the obligation
to maintain confidentiality, is
ipso facto
so personal in nature that the
element described as
delectus personae
is present. It is unthinkable that
a businessman, or even a private individual such as a housewife, would both
entrust confidential
information relating to his or her financial position and
dealings to a banker (or anyone else) on terms obliging the latter to guard
the
privacy thereof, and at the same time remain indifferent to the identity of the
person entrusted with that duty of secrecy."
It is
clear, I think, that the learned Judge in effect
based his view with regard
to the element of
delectus
personae
only on the banker's obligation to maintain
28.
confidentiality; the nature of the customer's obliga-tion to pay the amount
of the banker' s claim was not mentioned. This approach
I consider to be
contrary to principle and authority. The question whether a claim (that is, a
right flowing from a contract) is
not cedable because the contract involves a
delectus personae
, falls to be answered with reference, not to the nature
of the cedent's obligation vis-á-vis the debtor, which remains unaffected
by the cession, but to the nature of the debtor's obligation vis-á-vis
the cedent, which is the counterpart of the cedent's
right, the subject-matter
of the transfer comprising the cession. The point can be demonstrated by means
of the lecture-room example
of a contract between master and servant, which
involves the rendering of personal services by the servant to his master: the
master
may not cede his right (or claim) to receive the services from the
servant to a third party, without the servant's consent, because
of the nature
of the
29.
latter's obligation to render the services; but at
common law the servant
may freely cede to a third party
his right (or claim) to be remunerated for
his ser-
vices, because of the nature of the master's correspon-
ding
obligation to pay for them, and despite the nature
of the servant's
obligation to render them. In
Eastern
Rand Exploration Co Ltd v Nel
and Others
1903 TS 42
at
53 INNES CJ stated the principle of our law as
follows:
"Now, speaking generally, the question of whether one of two contracting parties
can by cession of his interest, establish a cessionary
in his place without the
consent of the other contracting party depends upon whether or not the contract
is so personal in its character
that it can make any reasonable or substantial
difference to the other party whether the cedent or the cessionary is entitled
to
enforce it. Subject to certain exceptions founded upon the above principle
rights of action may, by our law, be freely
ceded."
When the learned CHIEF JUSTICE referred to
the contract
being personal in its character, it is clear, in my
view,
that he had in mind the obligation of the debtor
("the other party"), for it is only in relation to the
30.
performance of that obligation that it can make any difference to the debtor
whether it is the cedent or the cessionary who is entitled
to enforce the
contract. Applying the principle to the facts of the present case, Densam' s
obligation to the Bank was to pay the
amount of the overdraft; it could make no
difference at all to Densam whether it was the Bank or Cywilnat who exercised
the right
to enforce payment. Accordingly the Bank's claim against Densam was
cedable. (As to the concept of
delectus personae
in the context of the
cedability of rights generally, see further
Cullinan v Pistorius
3 ORC 33
at 38;
Friedlander v De Aar Municipality
1944 AD 79
at 93;
Hersch v
Nel
1948 (3) SA 686
(A) at 698-9; and
Dettmann v Goldfain and Another
1975 (3) SA 385
(A) at 394 H -395 F.)
Counsel for Densam argued that the Bank's obligation to preserve
confidentiality and Densam's obligation to pay the overdraft were
so closely
linked
31 .
together that they could not be separated. I do not agree. In
Sasfin (Pty)
Ltd v Beukes
1989 (1) SA 1
(A) VAN HEERDEN JA, in a minority judgment, at 31
F - 33 G, considered the cedability of a medical doctor's claims against
patients
to whom he had rendered professional services, for payment of his fees.
(This topic was not dealt with in the judgment of the majority
of the Court.)
The learned Judge rejected a contention that such claims were not cedable
because of the confidential relationship
between a doctor and his patient. In
the course of his reasoning (at 32 D-G) VAN HEERDEN JA voiced doubts about the
correctness of
the decision of STEGMANN J in the
George Consultants
case
supra
on the point now under discussion, but found it unnecessary to
express a definite opinion on the question. He did, however, express
his
disagreement (at 32 G-I) with the generalized
dictum
of STEGMANN J at 736
I - 737 A of his judgment (quoted above), on the ground that a contractual
obligation of confidentiality
32.
was not necessarily breached by the cession of a claim
arising out of the
contract. I respectfully agree with
the remarks of VAN HEERDEN JA in that regard. It seems
to me, however,
that it is of more fundamental
importance to the decision in the present case, to have
regard to VAN
HEERDEN JA's general statement of the law
with regard to the cedability of
contractual rights,
and to his application of that statement to the
facts
with which he was concerned. As to the former, he said
(at 31 G-H):
"Dit is natuurlik erkende reg dat hoewel vor-deringsregte in die reël
vryelik oordraagbaar is, dit nie die geval is nie indien
'n sessie van so 'n reg
'n wesentlik ander verpligting vir die skuldenaar sal meebring, of, anders
gestel, indien die skuldverhouding
na aard 'n
delectus personae
behels."
Applying the law
to the facts, VAN HEERDEN JA said (at
31 I - 32 A):
"Dit is egter duidelik, meen ek, dat hierdie uitsondering op die algemene
reël nie in die onderhawige geval toepassing kan vind
nie. Vir 'n
pasiënt kan dit geen verskil maak of hy die rekening vir sy geneesheer se
dienste aan
33.
hom of iemand anders moet betaal nie. Wat sy prestasie betref, bly sy
verpligting dus die-selfde of hy nou ook al betaling moet maak
aan die
geneesheer of iemand aan wie die geneesheer sy vorderingsreg op betaling
gesedeer het. Daar kan gevolglik geen sprake wees
dat h sessie h wesentlik ander
verpligting op hom plaas nie."
With respect, I fully
agree, and in my view the above-
quoted remarks apply with equal force to
the
contractual relationship between a banker and its
customer. On that
footing, the
George Consultants
case
supra
was wrongly decided,
and it cannot avail Densam
in the present case.
Moving away from the notion of confiden-
tiality,
counsel for Densam submitted that a very
personal relationship existed
between a banker and its
customer. Counsel spent some time in painting
a
glowing picture of a bank as a reputable institution of
a special kind,
with a character and personality all of
its own, particularly when exercising a sympathetic,
patient and wise discretion in the matter of calling up
34. overdrafts,
and so forth. (In passing: there was no evidence on record to support counsel's
eulogy.) All this, assuming it to
be correct, cannot advance Densam's case, for
in the end it turned out that this was but another way of arguing that the
contract
was "so personal in character" that the banker was not allowed to cede
its rights under it. As I have already attempted to show,
the notion of "the
contract" being personal in this context cannot be divorced from a consideration
of the nature of the obligation
resting upon the debtor. The mere fact that the
cedent creditor may possess outstanding qualities of forbearance and the like,
as
opposed to the cessionary, is irrelevant in law, at least in relation to the
concept of
delectus personae
. In this connection it was suggested to
counsel in the course of his argument that he might be confusing the
non-cedability of a
claim by reason of the nature of the obligation of the
debtor, with the non-cedability of a claim by reason of
35. a tacit agreement
not to cede (
pactum de non cedendo
). Thereupon counsel was pleased to
advance an alternative argument, viz that the Bank had tacitly undertaken not to
cede its claim
against Densam. But this avenue of escape was not open. An
agreement between a banker and its customer that the former will not cede
its
claim against the latter cannot be implied in the contract between them as a
matter of law; if there is no express agreemént
to that effect it can be
found to exist only by way of tacit
consensus
between the parties, which
is to be inferred from all the relevant surrounding circumstances. Such a tacit
agreement must be alleged
and proved like any other tacit agreement, or tacit
term of a contract. In the present case, however, it was at no stage
foreshadowed,
either in the affidavits filed on Densam's behalf, or in the
evidence heard before GOLDSTEIN J, that Densam would seek to rely on
the
existence of an alleged tacit agreement not to cede. Had it been intimated on
Densam's behalf that
36. it would rely on a tacit agreement, I have little
doubt that it would have been sought on behalf of Cywilnat to counter such a
case by means of appropriate evidence. As it stands, the evidence ón
record in any event does not justify the finding of such
a tacit
agreement.
For all these reasons the contention on behalf of Densam under A
above is rejected.
I turn to the contention under B above, viz that the
Bank's rights against Densam, flowing from Densam's cession of its book debts
to
the Bank, were not cedable. Counsel for Densam argued in support of this
contention, on a number of grounds. In the view I take
of the contention (as
will appear presently), there is no need to do more than to paraphrase briefly
counsel's submissions, as follows:
the rights afforded to the Bank in terms of
the cession of book debts were so personal in character that they could not have
been
validly transferred to Cywilnat, without Densam's consent, in accordance
with the principle laid down in
37.
the
Eastern Rand Exploration Co
case
supra
; in every contract
of the kind embodied in the cession of book debts, there must always be implied,
as a matter of law, a
pactum de non cedendo
; the cession of book debts
was one
in securitatem debiti
, Densam retained a reversionary interest in
the rights ceded, in accordance with the decision in
Bank of Lisbon and South
Africa Ltd v The Master and Others
1987 (1) SA 276
(A), and such interest
could not be transferred without Densam's consent; the cession of book debts
constituted a pledge, which was
not cedable (
Deutschman v Mpeta
1917 CPD
79
;
Oertel N 0 v Brink
1972 (3) SA 669
(W) at 675 G - H); and, generally,
the matter is covered by the reasoning of STEGMANN J in that part of his
judgment in the
George Consultants
case
supra
in which he
discussed the cession and pledge of shares, with which he was concerned in that
case (at 739 D -740 H).
In my judgment, all of the above submissions
38.
are untenable, in the face of the wording of the
cession of book debts.
The relevant part of it is the
following:
"We, the undersigned DENSAM (PTY) LTD
do hereby cede and pledge to THE TRUST BANK
OF APRICA LTD, its order or assigns all
our rights, title and interest in and to all debts due to us from whatsoever
cause arising
In my opinion the meaning of the words
"its order or assigns" is plain: the Bank is expressly authorised to make over
and transfer
its rights in terms of the deed to a third party. The transfer of
the Bank's rights to a third party bý means of a cession
is clearly
contem-plated. Densam has, in advance, expressly consented to a cession of the
Bank's rights. That being so, there is
simply no room for allowing any of
counsel's submissions.
Counsel nevertheless sought to argue to the contrary,
by ascribing a restricted meaning to the words "its order or assigns". Those
words, counsel
39.
said, were intended to bear only on a delegation by the
Bank of its rights
and obligations under the contract,
which could be effected only with the
consent of
Densam. The argument ignores entirely the tenor and
effect of
the cession of book debts: it conferred
only rights on the Bank, not
obligations. Moreover, if
counsel's intepretation were correct, the words
in
question would serve no purpose at all; they would
constitute an
exercise in futility, which the parties
could not have intended. But, once
again, counsel
sought solace in the judgment of STEGMANN J in the
George
Consultants
case
supra
. In that case customers
of a bank had ceded
and pledged shares to the bank and
"its successors and assigns", as security for
overdrafts. The learned
Judge said the following (at
738 J - 739 C/D):
"In the opening words of the deed the
grantee of the rights is described as 'the bank, its successors and assigns'.
The parties clearly contemplated that the bank might
have successors and that
the rights
40.
under the deeds would pass to such successors; and also that the rights under
the deed could pass by virtue of assignment.
Although, in a particular context, the terms 'assignment' and 'cession' may
sometimes be used interchangeably, the distinction between
them is ordinarily
guite clear. Assignment relates to the transfer to a third party of obligations,
as well as of rights, existing
between two or more parties, and it requires the
concurrence and co-operation of all the parties concerned. Cession, on the other
hand, relates to the transfer to a third party of rights alone and it does not
necessarily require the concurrence or co-operation
of anyone other than the
holder of the rights (the cedent) and the third party to whom the rights are
transferred (the cessionary).
I find nothing in the deed of cession and pledge to indicate that the applicants
agreed therein that the bank's rights arising out
of such deed were to be
cedable against the will of the applicants."
With
respect, I am unable to accept the reasoning of the learned Judge. No doubt the
word "assignment" is often used to denote a transmission
of both rights and
obligations, in contradistinction to "cession", which signifies a transfer of
rights only, but to interpret the
word "assigns" in the deed under consideration
in
41.
that sense would be tantamount to regarding the word as
pro non
scripto
and thus to doing violence to the
intention of the parties. Moreover, the learned
Judge's conclusion seems
to me, with respect, to run
counter to the accepted commercial usage of the
word
"assigns" in a contract of the kind under considera-
tion, as also to
well-established and clear authority
on the point. In the
Eastern Rand
Exploration Co
case
supra
INNES CJ said (at 53 - 54):
"In the present case it is not necessary to decide the general question whether
a prospecting contract with an option to purchase,
and with no provision as to
assignment, can or cannot be freely ceded, because the contract between
Lowenstein and the owners of
the farm is one in which the parties agree mutually
to contract not only for themselves, but for their 'order, successors, heirs
or
assigns.' In face of these wordswhich occur at the very outset of the document,
it is impossible to maintain the contention that
the consent of the owners was
required before Lowenstein could cede and assign his rights. And that being so,
there is no need to
decide, upon the facts whether or not the Nels were notified
that the contract had been made over to the Company; because if the
cession was
valid without the
42.
express consent of the owners of the land, no
notice of such cession could be necessary
....."
In
Friedlander v De Aar
Municipality supra
GREENBERG JA
(at 93), having stated the principle that
prima facie
all
contractual rights can be transmitted, subject to
certain exceptions, went on
to remark, with reference
to the contract there under consideration, that
" the clause by its use of the
words
'their heirs, executors or
assigns' makes the
conclusion even more certain that the
right was transmissible "
In
Pizani and Another
v First Consolidated Holdings
(Pty) Ltd
1979 (1) SA 69
(A) the appellants had entered
into deeds
of suretyship in respect of a principal
debtor's obligations in terms of
certain leases, and
the creditor under the leases had ceded its rights in
terms thereof to the respondent. MILLER JA said, at
76 D and 79 C:
" the appellants bound themselves as
sureties not only to the named creditor but also to its 'successors or assigns'.
Unless there were contrary indications elsewhere
in
43.
the deeds (which there are not), the words
'successors or assigns' would include any cessionary of the creditor's rights
under the leases."
" there are explicit provisions in
the deeds of suretyship to the effect that the sureties were bound to the
creditor's successors and assigns and it was clearly contemplated
that rights
under the leases could be ceded."
Consequently the
decision in the
George Consultants
case
supra
on the point under
consideration must be overruled, and the contention on Densam's behalf under B
above must be rejected.
I proceed to deal with the contention under C above,
viz that the Bank's purported cession to Cywilnat of its claim against Densam
was invalid, on the ground that in fact only a part of the claim was ceded. The
contention was based on the wording of clause 3.1
read with clause 2.1 of the
cession: clause 3.1 provides that the Bank cedes "the claim" against Densam to
Cywilnat, but in clause
2.1 the expression "the claim" was in effect, so it was
argued,
44. defined with specific reference to an indebtedness of Densam to
the Bank "in the sum of R70 000", with the result that the cession
applied,
according to its express terms, only to a part, being R70 000,00, of the
actual'amount of the claim at the time of the cession,
which was R71 125,69.
This contention was not raised nor fore-shadowed on behalf of Densam in any
of the affidavits filed for it in the application. In
the affidavits originally
filed on behalf of Cywilnat in support of the application, it relied on a
"certificate of balance" issued
under clause 3.3 of the cession, which reflected
the amount due as being some R72 000,00. In, its answering affidavits Densam
contested
the correctness of the certificate, the case put forward on its behalf
being that no money at all was owing by it
to the Bank at the time of the cession. In its replying affidavits the
deponents for Cywilnat explained that the figure given in the
certificate
had
45. been mistakenly calculated, and the calculation of the correct amount
of Densam's indebtedness was set out. Against this background,
when WEYERS J on
1 September 1988 referred the matter for the hearing of oral evidence,
inter
alia
on the question: "what was
sold/ceded ?", his order could not have
been
intended to cover the contention now under consideration. Had it been
raised in the affidavits, it is very likely that the evidence
adduced before
GOLDSTEIN J would have taken a different course. At worst for Cywilnat, however,
Densam cannot be heard to complain
if Cywilnat now seeks to rely on the evidence
which was heard by GOLDSTEIN J, for the purposes of meeting the contention
advanced
on Densam's behalf. And in my view the evidence on record is clearly
sufficient to put paid to the contention, for the reasons which
follow.
In my opinion the cession does not reflect a clear intention of the parties
to it that it would
46. apply only to R70 000,00 of a larger debt, as counsel
for Densam argued. On the contrary, if such had been the intention, one
would
certainly have expected clause 2.1 to read quite differently. As it stands, the
clause emphasizes the existence of a debt,
not the amount of it; and if clause
2.1 is read together with clause 3.1 , the overall impression is strong that it
was intended
to cede the whole claim of the Bank against Densam, and not part of
it only. The reference to "the sum of R70 000" in clausé
2.1 seems to me
to be merely descriptive, rather than definitive. Moreover, there are two strong
pointers to an intention that the
whole of the debt was to be comprised in the
cession: first, the security held by the Bank (
sc
for the whole of the
debt) was ceded together with the Bank's claim (clause 3.1); and, secondly, the
Bank was to deliver a certificate
of balance together with the security (clause
3.3). These provisions are not compatible with the idea of ceding a part of the
Bank's
claim only.
47. Counsel for Cywilnat argued that by mere
interpretation of the cession as a whole one is driven to the conclusion that
the whole
of the Bank's claim was ceded. I do not find it necessary to express a
firm view on that argument, for, at best for Densam, I am
satisfied that there
is either sufficient uncertainty about the meaning the parties intended the
words of the document to bear so
as to let in evidence of the circmstances
surrounding the conclusion of the contract, or an ambiguity in the words used,
as applied
to the facts, which lets in evidence of the negotiations between the
parties, preceding the conclusion of the contract. On either
basis we are
entitled to have regard to the evidence on record.
Both Frack and Nelson gave
relevant evidence in this regard. I do not propose to go into their evidence in
any detail. Suf f ice it
to say that it emerges clearly from their evidence that
both of them were aware of the following surrounding circumstances:
48.
Densam's overdraft facility was limited to R70 000,00,
but it wás
being exceeded from time to time; Densam
was unable to repay the amount of
the overdraft; and
the Bank wished to put an end to the overdraft. On
the
day before the cession was signed, Frack sent a draft
of the agreement
that he had prepared to Nelson, under
cover of a letter in which he said:
"Our client has made provision for only R70 000 and we trust that the purchase
consideration can therefore be limited to this amount.
We confirm that our client has R70 000 available to purchase the claim
immediately."
In my view, such uncertainty or
ambiguity as there may
be in the cession must be resolved against
the
contention advanced on behalf of Densam.
Counsel for Densam sought to avert the effect
of the evidence of Frack and Nelson by relying on the
fact that, after the Bank had received payment of
R70 000,00 from Frack,
that amount had simply been
credited to Densam's account with the Bank, by way of
49. an ordinary
deposit, thus leaving the difference between that amount and the sum of R71
125,69 as a debit on the account, which
Densam continued to operate thereafter.
There is no substance in this point. Nelson said in his evidence that the entry
in the account
had been made by a clerk of the Bank, and under cross-examination
it was never put to him pertinently that the Bank had retained
any claim against
Densam in respect of the debit balance which was allowed to remain on the
account. The tenor of Nelson's evidence
was that the accounting entry was a
mistake, and that was not refuted.
The contention on behalf of Densam under C
above is accordingly rejected.
Finally, I turn to the contention under D above, which can be disposed of
very briefly. It was argued that Cywilnat was acting as
agent on behalf of
Michael and Maxim Levinrad when it acquired the Bank's claim against Densam and
that Cywilnat was accordingly
50. not entitled to enforce the claim in its
own name. There is no merit in this contention: the conclusion of law sought to
be drawn
from the fact stated is a
non sequitur
. Shortly after the
cession had been signed, Cywilnat, acting through Frack, on the one hand, and
Michael and Maxim Levinrad, on the
other, entered into a written agreement in
which it was recorded that Cywilnat had purchased from the Bank Densam's claims
against
its debtors, that the Levinrads had advanced R70 000,00 to Cywilnat for
that purpose, and that the Levinrads were the beneficial
owners of the claims,
and it was agreed that Cywilnat would act as nominee for the Levinrads in
proposed litigation against Densam,
on certain terms set out in the document.
There was no suggestion in the affidavits, or in evidence, or in argument, that
Cywilnat,
through Frack, had purported to act as agent in the name of the
Levinrads vis-a-vis the Bank, through Nelson, at the time when the
cession was
agreed upon. As far as the Bank was concerned,
51. Cywilnat entered into the
cession as a principal, in its own name. There is no principle of law by which
Densam can preclude Cywilnat
from enforcing the claim in its own name. This
contention is also rejected.
In the result, the appeal is dismissed with
costs.
A.S. BOTHA JA
EKSTEEN JA
F.H. GROSSKOPF JA
CONCUR
FRIEDMAN AJA
NIENABER AJA