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[1994] ZASCA 41
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Quenty's Motors (Pty) Ltd. v Standard Credit Corporation Ltd. (141/92) [1994] ZASCA 41; 1994 (3) SA 188 (AD); [1994] 2 All SA 340 (A) (28 March 1994)
42/94
Case No 141/92 /MC
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION
)
In the matter between
QUENTY'S MOTORS (PTY) LIMITED
Appellant
- and -
STANDARD CREDIT
CORPORATION
LIMITED
Respondent
CORAM
: BOTHA, EKSTEEN, HOWIE JJA et NICHOLAS, OLIVIER AJJA.
HEARD
: 24 February 1994
DELIVERED
: 28 March 1994
JUDGMENT
NICHOLAS AJA:
This appeal is against an order made in motion proceedings in the Natal
Provincial Division. The
2
application arose out of the activities of three persons, namely
-
1.
Quenty's Motors
(Pty) Ltd ("Quenty's Motors"), the applicant in the Court a quo and the present
appellant. It carries on business
as a motor dealer in Pretoria. Mohamed Ahmed
is a director and his father, Suleman Ahmed Aboo, although retired, assists in
the business.
2.
Standard
Credit Corporation Limited ("Stannic"), the respondent in the Court a quo and in
the appeal, is a general banker and is well
known as a financial institution
which deals extensively with the sale and leasing of new and used motor
vehicles.
3.
Love Motors
Durban CC ("Love Motors"). At the relevant time it carried on business as a
motor dealer in Smith Street, Durban and its
sole member was Howard
Love.
In September 1990
Quenty's Motors acquired the
3
ownership of two Mercedes Benz motor cars. One, which
was a
380 SEA 1984 model, bore the registration number
YBA 7072. The
other, which was a 250 SEA 1985 model,
bore the registration number
KPB 040 T. During
September/October 1990 Quenty's Motors entered into two
agreements with Howard Love. The first related to
vehicle No YBA 7072, and the other to vehicle No |
KPB 040 T. In paragraph 10 of Quenty's Motors'
founding affidavit, which was deposed to by Mohamed
Ahmed, the following account was given of the conclusion
of the first agreement -
"10. During or about the end of September 1990 my father during the course
of a telephone conversation with Howard Love agreed that:
10.1 The motor vehicle, Mercedes Benz 380 SEA, 1984 model and bearing
registration number YBA 7072 would be delivered to Howard Love
on
consignment.
4
10.2
The relevant
registration documents would accompany the vehicle for the purposes of
inspection by prospective
purchasers.
10.3
Howard Love
would pay Applicant for the vehicle once he sold the
same.
10.4
Transfer of
ownership of this vehicle would only take place upon payment by Howard Love to
Applicant and upon which event the necessary
transfer documents would be duly
completed.
10.5
Howard Love
would arrange to have the vehicle driven to Love Motor's
premises."
The second agreement, which
related to vehicle No KPB 404 T, was in substantially the same
terms.
Howard Love duly took delivery of the vehicles. He was told
by Mohamed Ahmed that the price which Quenty's Motors required for
vehicle
5
No KBP 040 T was R59 000. (Nothing was said in the founding affidavit as
to the price required for vehicle No YBA 7072). Quenty's
Motors did not receive
any payment in respect of either of the two vehicles, nor did it transfer
ownership therein.
In about the middle of November 1990 Howard Love informed Mohamed Ahmed
and Suleman Aboo in the course of telephone conversations
that he had not so far
sold either of the vehicles and that he was going on holiday to England until 28
November. Towards the end
of that month Mohamed Ahmed received reports which
gave him cause for grave concern. He went to Durban to investigate the
situation,
arriving at Love Motors' premises at about 11 pm on 26 November. The
motor vehicles were not to be seen there. On the following day
he again visited
the premises. He was unable to make contact with Howard Love, but he received
information which led him to go to
Stannic's
6
repossession centre in Sidney Road, Durban, where he saw the two motor
cars. On the same day Quenty's Motors made a demand on Stannic
for their
delivery and, when there was no satisfactory response, it applied as a matter of
urgency for the issue of a rule nisi,
operating as an interim interdict, which
called upon Stannic to show cause why an order should not be made inter alia
declaring Quenty's
Motors to be the lawful owner of vehicles No YBA 7072 and No
KPB 040 T, and directing Stannic to forthwith return the vehicles to
Quenty's
Motors. Stannic did not oppose the grant of a rule nisi, but did oppose the
grant of interim relief. On 12 December 1990
a rule nisi was granted on terms to
which Stannic consented, returnable on 27 February 1992. Stannic had indicated
that it would
oppose the confirmation of the rule
"on the grounds that the Applicant is estopped
7
as against the Respondent from alleging
that
the [Respondent] has not
acquired the
ownership of the vehicles and that by
virtue
of the said estoppel
the Applicant is
precluded from denying the authority of Howard
Love or Love Motors Durban
CC to sell the
vehicles to the Respondent."
Howard
Love had left the country in order, so rumour had it, to avoid the importunities
of his numerous creditors. His estate was
sequestrated and Love Motors was
liquidated. The liquidator of Love Motors having been joined as second
respondent, he stated on
affidavit that he abided the decision of the
court.
The deponent to Stannic's opposing affidavit was Stephen Frederick
Potgieter, who was Stannic's "Area Manager Credit Control" in Durban.
The
affidavit included the following statements -
"11. ...LOVE MOTORS DURBAN CC is a well known
8
firm of motor dealers in Smith Street,
Durban with which the
Respondent has
dealt extensively.
The premises of LOVE MOTORS DURBAN CC is solely that of a motor dealer,
in other words there is no repair shop to which members of
the public take their
vehicles for repair and LOVE MOTORS DURBAN CC sells vehicles as its sole
business.
13.
Ad Paragraph 10
It is clear from the allegations herein, the details of which are not
known to the Respondent, that the Applicant has entrusted to
the said LOVE who
is a well known dealer in motor vehicles the said vehicles and well knew that
the said LOVE would place same in
his showroom and expose them for sale as
ordinary stock-in-trade of LOVE's business LOVE MOTORS DURBAN CC.
14. I aver that both vehicles were in fact
9
brought onto the floor of the showroom of LOVE MOTORS DURBAN CC and
appeared as exposed for sale as ordinary stock-in-trade of the
business.
15. Pursuant to this and by virtue of an agreement between the Respondent
and LOVE MOTORS DURBAN CC in terms of an agreement known
as a 'Used Goods Floor
Plan Agreement' the Respondent purchased from LOVE MOTORS DURBAN CC all motor
vehicles brought into the business
of LOVE MOTORS DURBAN CC.
I annex hereto marked 'SCC1' a copy of the agreement subsisting between
the Respondent and the said close corporation. I further annex
hereto marked
'SCC2' an invoice from the close corporation (which traded purely as LOVE
MOTORS) in respect of the 380 SE Mercedes
Benz and I annex hereto marked 'SCC3'
a similar invoice in respect of the 280 SE Mercedes Benz both of which is dated
the 17th October
1990 for the prices therein mentioned."
10
(Clause 3 of Annexure SCC1 provided -
"3
REQUEST, INVOICE AND
DELIVERY
3.1
The
Dealer may from time to time request Stannic to purchase goods from the Dealer
for the purpose of selling the same back to the
Dealer who will purchase the
goods from Stannic in terms of this agreement for the sole purpose of
resale.
3.2
If Stannic
accedes in principle to a request referred to in 3.1 the Dealer will sign a
completed Agreement of Sale relating to the
goods in question and deliver the
signed original of the same to Stannic as soon as possible after the request
referred to in 3.1
has been
made.
3.3
The Dealer will
provide Stannic with an invoice for the goods stating the full description of
the goods and the purchase price payable
by Stannic to the
Dealer.
3.4 Upon receipt of the signed agreement
referred to in 3.2 and
the invoice
referred to in 3.3 Stannic shall
pay
11
the purchase price to the Dealer who shall henceforth hold and procure
that any other persons who may from time to time obtain possession
of the goods
shall hold the same for Stannic with the intent that Stannic shall become and
remain the owner thereof."
In terms of clause 5 -
"The Dealer shall -
5.1 until ownership
of the goods passes to the Dealer,
5.1.1
hold the
goods on behalf of Stannic as
owner;
5.1.2
not sell,
dispose of or in any other manner whatsoever deal in or with the goods on terms
which oblige or may oblige the Dealer to
part with possession thereof before
Stannic has received payment in full of
all
amounts owing in terms of the relevant Agreement of
Sale;
5.1.3 at its cost and expense keep the
goods
in good working order and condition,
properly
maintained, serviced and
12
lubricated;
5.1.4 not use the goods for any
purpose
whatsoever except to display the same
in the
Dealer's premises on the
showroom floor and shall in
particular
not permit the goods to be used or
driven;
The object of the Used Goods Floorplan Agreement was manifestly to enable
Love Motors to obtain finance from Stannic against the security
of the vehicles
sold.
The invoices Annexures SCC2 and SCC3 are, except for the
respective descriptions of the motor vehicle concerned, substantially identical.
They do not have a printed heading and what is recorded therein is in
manuscript. Omitting matter which appears to have been added
in another hand
(presumably by employees of Stannic) SCC2 reads as follows:
13 "INVOICE/FAKTUUR
STANNIC / MOTORTOWN
195 WEST STREET, DURBAN 4001
Bought Of QUENTYS MOTORS Gekoop van
510 MITCHELL STREET, PRETORIA 2000.
1 x 84 Mercedes Benz
380 SE 62000-00
TO DELIVER ON YOUR BEHALF TO ;
LOVE MOTORS
143 SMITH STREET
DURBAN
4001 62000-00")
Potgieter's affidavit
continued -
"16. I also annex hereto marked 'SCC4' and 'SCC5' two agreements in terms
of which the Respondent in turn re-sold to the close corporation
under a
suspensive sale agreement the vehicles in question and in terms of which the
full purchase price was to be paid by the close
corporation to the
14
Respondent on the 15th January 1991. I personally saw the vehicles on the
showroom floor of the close corporation, and accordingly
assumed they were
ordinary stock-in-trade. The Respondent would not have acted as it did had not
the vehicles been regarded as ordinary
stock-in-trade.
17. In terms of the two invoices for R62 000,00 and R60 000,00
respectively the Respondent paid the close corporation therefor. Accordingly
the
Respondent maintains that it is the owner of the said vehicles alternatively
that when the Applicant delivered the vehicles to
the close corporation for the
purpose of selling them the Applicant must have contemplated that the said LOVE
or his close corporation
would exhibit the vehicles for sale at his business
premises with its other stock-in-trade. Furthermore it is clear that the close
corporation dealt with the vehicles with the Applicant's consent in such a
manner as to proclaim that
15
either the dominium therein was vested in the close corporation or at the
very least that the close corporation had the
ius disponendi
.
18.
I aver that
acting through me the Respondent firmly believed that since the vehicles had
been brought onto the premises of the close
corporation that in truth and in
fact and by virtue of the nature of the trade of the dealer namely the close
corporation that the
close corporation was in fact the owner thereof and had the
ius disponendi
thereof. It was the reliance [on] this by the Respondent
(acting through me) that occasioned the transactions
above-mentioned.
19.
On the
strength of the representations made to the Respondent by the Applicant in
allowing the close corporation to have the vehicles
on its premises for sale and
as a direct result of such representations the Respondent has acted to its
prejudice in acquiring and
paying for the
said
16
vehicles.
20.
There was
nothing to indicate to the Respondent that the goods were merely consignment
stock. There were no markings on the vehicles
in question to show that the
vehicles had been delivered to the close corporation other than as ordinary
stock-in-trade.
21.
Ad Paragraph 10
I have no
knowledge of the allegations herein nor of the private arrangements made between
the Applicant and HOWARD LOVE personally
or his corporation."
In a supplementary opposing affidavit which
was filed by
consent, Potgieter referred again to
annexes SCC2 and SCC3. He said
:
"4. These two invoices in form and content are the normal invoices
Respondent regularly received from Love Motors and also from other
dealers. It
is respectfully submitted that they
17
indicate a sale of goods to Respondent and the words 'Bought of Quenty's
Motors' indicate the source of the vehicle. It does not,
it is submitted,
indicate a reservation of ownership in favour of Applicant.
5. In accordance with the instructions given to us by Love Motors this is
the name of the person to whom he wished the cheque to be
made out by
Respondent. The paperwork would then be attended to and Howard Love,
representing Love Motors, would take delivery of
the cheque as the agent for
whoever was the seller of the vehicle."
He also annexed a copy of Stannic's cheque for R122 000 dated 17 October
1990 and payable to the order of Quenty's Motors.
In Quenty's Motors' replying affidavit, Mohamed Ahmed said that the
invoices did not emanate from Quenty's which does not use such
handwritten
18
invoices but uses pre-printed stationery. The
handwriting on
the invoices is not that of any employee of Quenty's.
For the rest Quenty's Motors' replying affidavit, as well as the
supplementary replying affidavit filed by it, consisted of argumentation
and
contained no new allegations of fact.
Mohamed Ahmed said that the form and contents of the invoices should have
drawn Stannic's attention to the fact that Love Motors was
not the owner of the
vehicles and did not have the right to deal with them. Even minimal enquiry by
Stannic would have revealed the
falsity of the invoices. Stannic ought to have
satisfied itself as to Howard Love's ownership. Having regard to the business
which
it conducted Stannic would know that it was accepted business practice
amongst motor dealers to move stock from one dealer to another
and that "the
mere presence of a vehicle upon certain
19
premises would not indicate ownership or for that matter a right to
dispose thereof". Stannic was unbelievably naive, particularly
in today's
business world, in suggesting that the mere presence of the vehicle on a
showroom floor, without an inspection of documents
and enquiry as to ownerhsip,
would justify the assumption that the vehicles were ordinary stock-in-trade.
Ahmed denied that Stannic
could have been prejudiced by any action on the part
of Quenty's Motors and averred that any prejudice arose solely from its own
actions. If Stannic was in fact misled, this was a result of the fraudulent
actions of Howard Love, in which Quenty's Motors had
no part.
The rule nisi was extended from time to time, and the matter was
eventually argued on 2 August 1991. The judge a quo dismissed Quenty's
Motors'
application with costs. The matter is now before this Court on appeal.
20
The principles to be applied are clear. They were stated by Holmes JA in
Oakland Nominees (Pty) Ltd v Gelria Mining and Investment
Co (Pty) Ltd 1976(1)
SA 441(A) at 452A-G :
"Our law jealously protects the right of ownership and the correlative right
of the owner in regard to his property, unless, of course,
the possessor has
some enforceable right against the owner. Consistent with this, it has been
authoritatively laid down by this Court
that an owner is estopped from asserting
his rights to his property only -
(a) where the person who acquired his
property did so because,
by the
culpa of the owner, he was misled
into the belief
that the person,
from whom he acquired it, was
the owner
or was entitled to
dispose of it;
or
(b)
21
As to (a), supra, it may be stated that the owner will be frustrated by
estoppel upon proof of the following requirements -
(i) There must be a representation by the owner, by conduct or otherwise,
that the person who disposed of his property was the owner
of it or was entitled
to dispose of it. A helpful decision in this regard is Electrolux (Pty.) Ltd. v
Khota and Another, 1961(4)
S.A. 244 (W), with its reference at p. 247 to the
entrusting of possession of property with the indicia of dominium or jus
disponendi.
(ii) The representation must have been made negligently in the
circumstances.
(iii) The representation must have been relied upon by the person raising
the estoppel.
(iv) Such person's reliance upon the representation must be the
cause
22
of his acting to his detriment.
In the Electrolux case referred to by Holmes JA, Trollip J said at 247
B-E :
"To give rise to the representation of dominium or jus disponendi, the
owner' s
conduct must be not only the entrusting of possession to the possessor but
also the entrusting of it with the indicia of the dominium
or jus disponendi.
Such indicia may be the documents of title and/or of authority to dispose of the
articles, as for example, the
share certificate with a
blank
transfer form annexed ; or such
indicia
may be the actual manner or circumstances in which the owner allows the
possessor to possess the articles, as for example, the owner/wholesaler
allowing
the retailer to exhibit the articles in question for sale with
his other stock, in trade In all such
cases the owner
'provides all the scenic apparatus by which his agent or
debtor may pose as
23
entirely unaccountable to himself, and in concealment pulls the strings by
which the puppet is made to assume the appearance of independent
activity. This
amounts to a representation, by silence and inaction ... as well as by conduct,
that the person so armed with the
external indications of independence is in
fact unrelated and unaccountable to the representor, as agent, debtor, or
otherwise.'
(Spencer
Bower on
Estoppel by Representation,
p. 208)."
Trollip J said further (at
247 in fine to 248 in pr.) :
".... It follows that to create the effective representation the dealer or
trader must, in addition, deal with the goods with the
owner's consent or
connivance in such manner as to proclaim that the dominium or jus disponendi is
vested in him; as for example,
by displaying, with the owner's consent or
connivance, the articles for sale with his own goods. It is that additional
circumstance
that provides the necessary 'scenic apparatus' for begetting the
effective
representation."
24
It is clear from Ahmed's affidavit that Quenty's Motors entrusted the
possession of the two motor cars to Love Motors. He stated that
the delivery was
"on consignment". This phrase belongs to the vocabulary of commerce. It imports
"the consigning of goods ...esp.
to an agent for sale or disposal". (
Oxford
English Dictionary
s.v.
consignment
4.)
Webster's Third New
International Dictionary
gives (s.v.
consignment)
a more precise
definition of
on consignment
, namely,
"- on consignment:
adj
(or
adv
): shipped to a dealer who
acts as agent (as for a manufacturer) to sell, auction, or exhibit with the
agreement that he may take
title to and pay for what he sells, that he must
remit the proceeds of sales less commission to the shipper, and that he may
return
anything left unsold (goods shipped on
consignment
.)"
25
It is more or less in that sense, I think, that the phrase was used in
paragraph 10 of the founding affidavit. The vehicles were to
be delivered to
Howard Love; they were to be exhibited for sale at Love Motors; and it was
contemplated that they would be sold,
and that when each was sold Howard Love
would pay Quenty's Motors therefor. It is not disputed that the two vehicles
were displayed
in the showroom of Love Motors, together with other vehicles
displayed by it for sale. When Mohamed Ahmed went to Durban on 26 November
1990
he looked for the vehicles at the premises of Love Motors. Adapting the words of
Trollip J, Love Motors dealt with the vehicles
with Quenty Motors' consent in
such a manner as to proclaim that the dominium or jus disponendi was vested in
Love Motors. Holmes
JA's first requirement was satisfied.
In regard to the second requirement, Mohamed Ahmed should reasonably have
contemplated that a
26
prospective purchaser might act on the representation to his prejudice,
and he was negligent in not taking reasonable steps to prevent
it.
In regard to the third and fourth requirements, Potgleter said in
paragraphs 18 and 19 of his affidavit which are quoted above, that
he and hence
Stannic firmly believed that since the vehicle had been brought on to the
premises of Love Motors and because of the
nature of its business. Love Motors
was in fact the owner and had the jus disponendi of the vehicles, and that it
was because of
Stannlc's reliance on this that it entered into the transactions
with Love Motors and acted to its prejudice in acquiring and paying
for the
vehicles.
Mohamed Ahmed's arguments in his replying affidavits which are summarized
above, were not such as to raise a genuine dispute of fact.
In the Court a quo
Quenty's Motors in asking for final relief did not seek
27
to test Potgieter's evidence by cross-examining him. And it cannot be
said that that evidence was so farfetched or clearly untenable
that the Court
would have been justified in rejecting it merely on the papers. Consequently the
matter had to be approached on the
basis of the allegations in Potgieter's
affidavits. (Cf Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984(3)
SA 623(A)
at 634E-635C.)
In the appeal it was submitted on behalf of Quenty's Motors that in the
light of the circumstances relating to the invoices and the
issue of the cheque
Stannic could not have believed either that Love Motors was the owner of the
cars or that it was authorised to
dispose of them without Quenty's Motors
receiving-payment therefor.
In regard to the first leg of this submission, there is much to be said
for the view that the invoices must have indicated to Stannic
that Love
28
Motors was not the owner of the vehicles and that Stannic recognized this
by issuing the cheque in favour of Quenty's Motors.
In regard to the second leg, however, the documents contain nothing which
could have suggested to Stannic that Howard Love did not
have the jus
disponendi. Indeed, Howard Love's conduct in entering into the agreements of
sale with Stannic, and in issuing the invoices
and requesting that the cheque
for R120 000 be handed to himself all indicated to Stannic that he had the jus
disponendi.
Then it was argued that whatever representation might have been made to
"an ordinary purchaser" entering the showroom of Love Motors,
it was not made to
a purchaser such as Stannic who purchased under a Used Goods Floor Plan
Agreement. It is probably correct that
Quenty's Motors did not have such a sale
in contemplation, but the fact is that the
29
representation was made to all potential purchasers from Love
Motors.
In my opinion, therefore, the estoppel raised by Stannic was
clearly established, and the order by the Court a quo dismissing the
application
was correct.
There were before the Court two applications for condonation, one arising
from the late filing and lodgment of the record, and the
other arising from the
late delivery and lodging of security. Neither was opposed by the respondents.
The applications were not argued
in initio because it seemed that the only
question was whether the applicant had reasonable prospects of succeeding in the
appeal.
That question has now been decided against the applicant.
It is accordingly ordered that the
30
applications for condonation be dismissed with costs, including the costs
of the appeal.
BOTHA JA)
EKSTEEN JA)
HOWIE JA)
OLIVIER AJA) Concurred.