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[1995] ZASCA 40
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Ex Parte: Minister of Justice In Re: Nedbank Ltd v Abstein Distributors (Pty) Ltd and Others (240/93) [1995] ZASCA 40; [1995] 2 All SA 420 (A) (30 March 1995)
CASE NO. 240/93
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between:
EX PARTE MINISTER OF JUSTICE IN RE:
NEDBANK LTD v ABSTEIN DISTRIBUTORS (PTY) LTD AND OTHERS
AND
DONELLY v BARCLAYS NATIONAL BANK LTD
CORAM
: CORBETT, CJ, NESTADT, VIVIER, STEYN,
JJA et NICHOLAS, AJA
HEARD
: 10 MARCH 1995
DELIVERED
: 30 MARCH 1995
JUDGMENT
STEYN JA/
2
STEYN JA:
This is a matter submitted by the Minister of Justice for
determination by this Court under section 23 of the Supreme Court Act, 59
of
1959. The section provides that
"Whenever a decision in civil proceedings on a question of law is given by a
provincial or local division which is in conflict with
a decision in civil
proceedings on a question of law given by any other such division, the Minister
may, after consultation with
the South African Law Commission, submit such
conflicting decisions to the appellate division and cause the matter to be
argued before
that division, in order that it may determine the said question of
law for the future guidance of all courts."
The submission is as follows:
2.
2.1 In Nedbank Ltd v Abstein Distributors (Pty)
Ltd
and Others,
1989 (3) SA 750(T)
, it was held (at
page 754 D-E) that a clause in a deed of suretyship, which
3
reads as follows:
'... that the indebtedness of the said debtors) to the said bank shall at any
time be determined and proved by written certificate
of a general manager or the
manager for the time being of any branch of the said bank, and such certificate
shall be binding on me/us
and be conclusive proof of the amount of my/our
indebtedness and will be valid as a liquid document against me/us in any
competent
Court...'
was to be regarded as contra bonos mores and therefore void in accordance with
the judgment in SASFIN (PTY) LTD v BEUKES,
1989 (1) SA 1(A).
For the sake of
convenience the above-quoted clause and any similarly worded clause will be
referred to as a 'conclusive proof clause'.
2 2 In DONELLY v
BARCLAYS NATIONAL BANK
LTD, 1990(1) SA 375 (W), it was held that a conclusive proof clause in a deed of
suretyship, which reads as follows:
'I/We hereby agree and declare that the amount due, owing and payable
(hereinafter referred to as 'the indebtedness') by the debtor
and by me/us
hereunder to the bank at any time (including interest and the rate of interest)
shall be determined
4
and proved by a certificate signed by any 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 stating the amount of the indebtedness of the
debtor and of myself/ourselves
hereunder shall be binding on me/us and shall be
conclusive proof that the amount of my/our indebtedness hereunder is due, owing
and payable at the date of signature thereof, which certificate shall be valid
as a liquid document against me/us in any competent
court for the purposes of
obtaining provisional sentence or summary judgment against me/us
thereon.'
was not rendered bad in law by the judgment in SASFIN (PTY) LTD v BEUKES, supra.
In arriving at this Ending the Court stated, inter
alia, that it could find no
indication in the judgment of SASFIN (PTY) LTD v BEUKES, supra, that it has such
an extensive meaning
that any conclusive proof clause in any contract is
contrary to public policy and therefore bad and unenforceable (at pages 393
F-H).
3.
The decisions in NEDBANK LTD v ABSTEIN DISTRIBUTORS AND OTHERS, supra, and
DONELLY v
BARCLAYS NATIONAL BANK LTD, supra, are in conflict
5
on a question of law, viz whether a conclusive proof clause in favour of a
creditor in any contract per se offends against public
policy, or not.
4.
As a result of the aforementioned conflicting decisions the South African Law
Commission has been consulted, and it has recommended
that the question referred
to in paragraph 5, below, should be submitted to the Appellate Division for
determination.
5.
In the aforementioned premises, the aforesaid conflicting decisions are
submitted to the Appellate Division so that the matter can
be argued in order
that a determination be made on the following question of law for the future
guidance of all courts, viz:
'Which of two conflicting interpretations of the decision of the Appellate
Division of the Supreme Court of South Africa in the matter
of SASFIN (PTY) LTD
v BEUKES,
1989 (1) SA 1
(A) relating to the validity of a so-called 'conclusive
proof clause' in favour of a creditor in an agreement correctly reflects
the
law, namely -
(a) the interpretation of the Court in NEDBANK
LTD
6
v ABSTEIN DISTRIBUTORS(PTY)LTD AND
OTHERS, 1989(3) SA 750(T), that such a clause is contra bonos mores and
therefore void regardless of the context of the agreement
in which it finds
itself; or
(b) the interpretation applied in DONELLY V BARCLAYS NATIONAL
BANK LTD, 1990 (1)
SA 375(W), where the Court found no indication in the judgment in the
SASFIN-case of the proposition advanced by the defence in the
DONELLY-case that
any such clause in any contract between any parties is contrary to public policy
and therefore bad and unenforceable.'
"
In this judgment the expression "conclusive proof clause" will have the same
meaning as that set out in par 2.1 of the submission.
SASFIN (PTY) LTD v BEUKES,
1989 (1) SA 1
(A), will be referred to as Sasfin and the aforementioned two
conflicting decisions as Nedbank and Donelly respectively.
The question of
law submitted in effect poses this inquiry, viz; in which of the two decisions
is the Sasfin judgment correctly interpreted?
7
The correctness of the Sasfin decision is not here in issue. It is clearly
accepted as correct in the submission. All this Court is
asked to do is to
determine which of the two conflicting decisions (if either) correctly stated
the effect thereof.
In Sasfin it was held that a deed of cession executed by
the debtor, Beukes, in favour of the financier, Sasfin (Pty) Ltd and certain
of
his creditors, was unconscionable, incompatible with the public interest and,
therefore, void. A number of clauses in the deed
were examined and found to be
contrary to public policy. Clauses 3.24.1 and 3.24.2 were among those so found.
Their terms, as set
out in the majority judgment (p 11 E-I), are the
following:
"3.24.1 (T)he amount owing to the creditors by me/us at any time, the fact
that it is due and payable, the rate of interest payable
thereon, (and) the date
from which interest is reckoned,... shall be deemed to be determined and proved
by a certificate under the
signature of any of and director of any of the
creditors. It shall not be necessary to prove the
8
appointment of the person signing any such certificate. 3.24.2 Such
certificate shall -
3.24.2.1 be binding upon me/us
and
3.24.2.2
be conclusive proof of the amount due, owing and payable by
me/us to the creditors and of the facts stated therein;
and
3.24.2.3
be deemed to be a liquid document
for the purpose of obtaining provisional sentence and/or any other judgment or
order against me/us;
and
3.24.2.4
constitute
sufficient particularity for the purposes of pleading and trial in any action
instituted by you against me/us; and
3.24.2.5
constitute sufficient proof to enable the creditors
to
3.24.2.5.1
discharge any onus
which may be cast upon it/them in law in any action;
and
3.24.2.5.2
obtain any judgment or
order;
The creditors shall, accordingly, not be
obliged to tender any additional evidence over
9
and above and/or in addition to such certificate at any hearing in any action
or proceedings for a judgment or order. " [The italicizing
is Sasfin's]
There were two judgments in Sasfin. The majority and minority of the Court
were however ad idem on the aforementioned finding in respect
of clauses 3.24.1
and 2. The majority finding is in these terms (pp 14I-15D, 1989 (1) SA):
"In terms of clause 3.24.1, the amount owing by Beukes to Sasfin at any time,
the fact that it is due and payable and the rate of
interest
thereon
'shall be deemed to be determined and proved by a certificate under the
signature of any of the directors of any of the
creditors'.
The effect of the provisions of clause 3.24.2 is that
such
10
certificate cannot effectively be challenged on any ground save fraud. It
constitutes the sole memorial of Beukes' indebtedness,
and is conclusive proof
of such indebtedness and the amount thereof. These clauses purport to oust the
Court's jurisdiction to enquire
into the validity or accuracy of the
certificate, to determine the weight to be attached thereto or to entertain any
challenge directed
at it other than on the ground of fraud. As such they run
counter to public policy (cf Schierhout v Minister of Justice
1925 AD 417
at
424). Although perhaps not per se contrary to public policy, the provisions of
clause 3.24.3.1 are indicative of the extreme lengths
to which the deed of
cession goes in curtailing the rights of Beukes. Clause 3.24.3.1 provides, inter
alia,
'I/we hereby irrevocably appoint and
authorise any of the
directors of any of the creditors who signs any
certificate
issued in terms of 3.24.1 also to be my/our agent in rem
suam
for the purpose of signing and issuing such
certificate. In signing and
issuing such certificate the
signatory shall be deemed to act also as my/our
agent for
the purposes thereof.'
Not content with the far-reaching
consequences of the certificate
as spelt out in clause 3.24.2, the deed of
cession goes as far as
to deem it that of Beukes' agent!"
In the minority judgment the following is said (at p
23
CD):
11
"(4) Klousule 3.24.2
Ek stem saam dat die klousule in stryd met die openbare beleid is. Daar is 'n
duidelike onderskeid tussen 'n bepaling wat meebring
dat 'n sertiflkaat van 'n
skuldeiser prima facie bewys van die omvang van 'n skuld is, en een wat aan die
sertifikaat onweerlegbare
bewyswaarde verleen. Ek deel egter nie my Kollega se
twyfel aangaande klousule 3.24.3.1 nie. Indien dit alleen gestaan het, sou dit
slegs meegebring het dat 'n sertifikaat prima facie bewys van die respondent se
verskuldigheid sou daarstel. 'n Skuldenaar kan immers
bewys dat 'n erkenning
deur hom of sy verteenwoordiger aangaande die bestaan of omvang van 'n skuld
verkeerdelik gemaak is. Vgl Du
Plessis v Van Deventer
1960 (2) SA 544
(A)."
Sasfin (Pty) Ltd did not claim payment from
Beukes and no such certificate was ever issued. Clause 3.24 however clearly
provides that
if and when issued, the author of the certificate would be a
creditor of Beukes.
The central issue here is whether the Sasfin decision
enunciated a general principle to the effect that in any contract a conclusive
proof clause providing for a certificate of balance of which
12
a creditor is the author is contrary to public policy or whether it was an
"ad hoc finding", restricted to the particular facts of
that case.
In Nedbank
the court opted for the former interpretation and in Donelly for the
latter.
In Nedbank the plaintiff bank proceeded against certain sureties for
payment of the overdraft debt owed it by the principal debtor
which had been
liquidated. The sureties pleaded i a that a conclusive proof certificate signed
by the bank manager was contra bonos
mores and void. Having dealt i a with
Nedbank Ltd v Van der Berg and Another
1987 (3) SA 449
(W) and Standard Bank of
SA Ltd v Neugarten and Others
1987 (3) SA 695
(W), Le Roux AJ proceeded as
follows at 753F-754E:
"Both counsel referred to the recent case of Sasfin (Pty) Ltd v Beukes
1989 (1)
SA 1
(A). In that case various clauses in a deed of cession were found to be
against public interest and the deed therefore void. One
of the clauses found to
be objectionable was one providing for a conclusive certificate of indebtedness.
The relevant clause was
dealt with at
14J-15D,
13
where Smalberger JA said: (The above-quoted passage is here set out.)
Mr Maritz argued that the particular clause was found to be void not in
isolation but in conjunction with and having regard to all
the other offending
clauses. This he infers, inter alia, from the sentence reading 'although not per
se contrary to public policy,
...' in the passage quoted above.
On my reading of this passage the learned Judge of Appeal merely wanted to
indicate how harsh the consequences of the certificate
were. One cannot infer
from that reference an intention to convey that, standing alone, clause 3.24.2
would not be void. Any doubt
is, however, removed when one has regard to the
minority judgment at 23C where Van Heerden JA, in dealing with clause 3.24.2,
states:
(The above-quoted passage is here set out.)
Mr Maritz further submitted that because the Judges of Appeal, despite having
been referred to the two WLD cases mentioned above,
did not refer to them in the
judgment specifically, those decisions are not overruled. However, those cases
are not confirmed either.
They are simply not mentioned. I am inclined to the
view that, in accordance with the judgment in the Sasfin case, the clause under
discussion must be regarded as contra bonos mores and therefore
void."
The judgment in Donelly was delivered in an
appeal from
a magistrate's court decision. The plaintiff bank had obtained
14
judgment against a surety in the amount of the overdraft debt owed it by the
principal debtor. Shortly before the hearing of the appeal
a defence was raised
that the conclusive proof clause in issue "was contrary to public policy and as
such illegal and unenforceable".
Kriegler J dealt as follows with this defence and with the import of the
Sasfin judgment, firstly at 381D-382A:
"In casu Donelly seeks to raise a question of public policy. We would be remiss
if we did not entertain the argument in support of
that contention. It is proper
that it should be adjudicated upon. Moreover, to my knowledge, this is the third
time in as many weeks
that this self-same defence has been raised. In each
instance it was purportedly based on the as yet unreported Appellate Division
judgment in the case of Sasfin (Pfy) Ltd v Hendrik Johannes Stephanus Beukes,
delivered on 19 September 1988, case no 149/87.
It seems that that judgment has come to be regarded as a free pardon for
recalcitrant and otherwise defenceless debtors. It is decidedly
not that. The
judgment should be read in context and as a whole. First and foremost one should
note, at p 12 of the typescript, an
important caveat in the majority judgment of
Smalberger JA. It is to this effect:
15
'One must be careful not to conclude that a contract is contrary to public
policy merely because its terms (or some of them) offend
one's individual sense
of propriety and fairness. In the words of Lord Atkin in Fender v St
John-Mildmay
[1938] AC 1
at 12 'the doctrine should only be invoked in clear
cases in which the harm to the public is substantially incontestable and does
not depend upon the idiosyncratic inferences of a few judicial
minds'.'
It should also be emphasised, before turning to deal with the particular facts
of the Sasfin case, that the maxim pacto sunt servanda
is still a cornerstone of
our law of contract. Nothing said or implied in the Sasfin case in any way
serves to derogate from that
important principle. Also, as was pointed out at p
13 of the judgment, 'public policy generally favours the utmost freedom of
contract'.
It is clear from a reading of the judgments in the Sasfin case that the Court
was there concerned with a most unusual contract."
Having quoted
the relevant portions of clause 3.24 (as set out in Sasfin) the learned Judge
proceeded as follows on pp 382F-384J:
"Having read the clause in its entirety, one is not surprised
at
16
the words of the learned Judge of Appeal. However, one then looks at the
whole of the judgment to see whether there is any warrant
therein, express or
implied, for the proposition now advanced on behalf of Donelly by Mr Kruger.
That proposition is that the Appellate
Division ruled in the case of ,Sasfin
(Pty) Ltd v Beukes that any certificate of balance clause in any contract
between any parties
providing that the certificate would be conclusive proof of
the amount of an indebtedness, is contrary to public policy and therefore
bad
and unenforceable.
I can find no indication in the judgment of such a wide statement. 1 would
indeed have been surprised if the Appellate Division had
intended so to do
without at the same time dealing with innumerable cases in which such
certificates of balance have been held to
be good. I refer only to the two most
recent ones, namely Nedbank Ltd v Von der Berg and Another
1987 (3) SA 449
(W)
and Standard Bank of SA Ltd v Neugarten and Others
1987 (3) SA 695
(W).
To my mind the learned Judges, both in the majority and minority judgments,
made it plain that their respective findings as to fatal
non-compliance with the
dictates of public policy were based on principle but applied to the peculiar
terms of the contract before
it.
The Appellate Division is not unaware of the existence of certificate of
balance clauses containing such a conclusive proof provision
in innumerable
deeds of suretyship and mortgage bonds. If the Sasfin judgments were to say what
Mr Kruger
17
leads in them, the result would be that vast numbers of default judgment,
summary judgment and provisional sentence claims dealt with
in this Division and
in the Transvaal Provincial Division would be rendered bad in law if the
contention put forward by Mr Kruger
were good.
I would also find it most surprising if the Appellate Division had in Sasfin
v Beukes impliedly held but omitted to declare unequivocally
that an established
banking practice, that has existed for many years, here and in the United
Kingdom, is bad in law. In this regard
I would refer to the case of Bache and Co
(London) Ltd v Banque Vernes et Commerciale Paris SA [1973] 2 L1LR 437. In that
case the
Court of Appeal dealt with a certificate of balance clause in a
contract between commodity brokers on the London Commodity Exchange
and a French
bank that had issued a guarantee. Lord Denning, McGaw LJ and Scarman LJ, in
three separate judgments, had no difficulty
in confirming that such certificates
which would serve as conclusive proof were not bad in law. In particular Lord
Denning, at 440,
drew attention to the fact that one of the reasons why such a
certificate is not bad is that the debtor is at liberty, should he
subsequently
discover that the certificate was wrong, to institute the appropriate action. In
the course of argument I put to Mr
Kruger whether he contended that that would
not apply in a case such as the instant one. He was constrained to concede that
it would
apply.
Moreover, we are not dealing here with a money-lender who has
18
taken complete control of the debtor's book of a professional man and
thereafter is empowered to deal with the debtors without any
recourse to the
professional man. What we have here is a banker/client relationship in which the
terms of the overdraft facility
were clearly spelt out. We have here a
banker/client relationship between a recognised, reputable commercial bank of
more than a
century's standing in this country, which issued regular bank
statements to the principal debtor. Those bank statements were before
the court
a quo. Two of them are before us. It is clear that they are in the standard
form, reflecting credits and debits and identifying
them.
It is also clear on the evidence of this case that the surety sought to be
bound by the certificate of balance clause containing the
conclusive evidence
provision was not a stranger to the principal debt. Donelly was the controlling
director or one of the two controlling
directors and shareholders of the
principal debtor. He was one of the two signatories on the principal debtor's
banking account.
It cannot be suggested that Donelly did not know full well
precisely what was going on in that banking account from time to time.
Moreover, it is clear from the manner in which the trial was conducted that
there was never any challenge of any substance to the
accuracy of the
certificate. There was not one word from either Donelly or his wife in support
of such a challenge and, apart from
the peripheral snippet of cross-examination
as to the rate of interest referred to above, Greyling's evidence was not
19
challenged at all.
In my view this case differs toto caelo from Sasfin v Beukes and there is no
principle laid down in that case which is applicable
to the certificate of
balance clause in this case."
In Nedbank and Donelly the factual
position was in all material respects the same, viz that of a bank proceeding
against a surety
or sureties for payment of the amount of an overdraft owing to
the bank by the principal debtor. The different decisions in those
two cases
were consequently determined by the conflicting interpretations of the Sasfin
judgment, and not by the nature and effect
of the respective facts.
An
important common feature in Sasfin, Nedbank and Donelly was that the conclusive
proof clause in each case provided that the amount
owing to the creditor by the
debtor would be proved by a certificate of which the creditor was the
author.
In Nedbank Ltd v Van der Berg and Another
1987 (3) SA 449
(W), relied upon by
Kriegler J, the certificate of balance was
20
issued under the hand of an employee of the bank in pursuance of the
conclusive proof clause there in issue. The creditor was therefore
in effect the
author of the certificate. It was contended "that the term regarding the
certificate might be contra bonos mores",
but it was held (at 451-452) that the
objection was met by what was said in Astra Furnishers (Pty) Ltd v Arend and
Another
1973 (1) SA 446
(C) at 450 A-D. There, however, it was provided in the
deed of suretyship (on which the plaintiff company's claim against the surety
(second defendant) was based) that the surety undertook "to accept a certificate
by the auditors of Astra Furnishers (Pty) Ltd as
to the amount/s payable [by the
principal debtor] as being the correct amount due and payable by myself. The
author of this certificate
was a third party and it can be equated to one signed
by an engineer or architect. It is also at least arguable that the clause
provided
for nothing more than prima facie proof of the amount due. Astra
Furnishers was consequently not a sound precedent for the Van der
Berg
decision.
21
(Astra Furnishers was upset on appeal but not on this point vide: Arend and
Another v Astra Furnishers (Pty) Ltd
1974 (1) SA 298
(C)
In Standard Bank of SA Ltd v Neugarten and Others
1987 (3) SA 695
(W) the conclusive proof clause also provided that
the
amount due be proved "by a certificate signed by any manager ...
of the
bank". Here also the creditor was in effect the author of the
certificate. Hemming J however upheld the clause in these terms at
700 A-D2:
"No evidence would be necessary to resolve the dispute about the extent of
applicant's claim if the 'certificate of indebtedness'
is absolutely conclusive.
The clause underlying the issue thereof spells out incontrovertibility of its
evidential content. Cf S
v Moroney
1978 (4) SA 389
(A). Unqualified finality
strengthens the argument that applicant has become the exclusive judge of its
own cause. But the submission
that the underlying contract is because of such a
result or for any other reason 'unconscionable' and invalid is against the
weight
of available relevant overseas authority. There such a
final
22
certificate has been regarded as being substantially on a par with
determinations made by (non-employees), eg arbitrators or architects,
and the
underlying clause as being designed not to oust the jurisdiction of the Court
but as an evidentiary device, optionally available,
to avoid the necessity of
itemized proof of individual debits. Dobbs v National Bank of Australasia Ltd
1935 CLR 643
, a decision of the Australian High Court; Bache & Co (London)
Ltd v Banque Vernes et Commerciale de Paris SA 1973 Lloyd's LR
437; Corbin
Contracts (1962) s 1432 at 387. I respectfully regard the reasoning as
sound."
The "overseas authorities" relied upon by the learned
Judge were, however, by virtue of the reasoning therein on this aspect, not
cogent authorities. In the Dobbs case, which was an appeal from the Supreme
Court at New South Wales, the plaintiff bank sued a surety
for payment of the
amount owed it by the principal debtor. The bank relied on a conclusive proof
clause. The defendant denied the
correctness of the amount stated in the
certificate which, in accordance with the said clause, had been signed by a
manager of the
bank.
The Court dismissed this objection. It dealt therewith
in
23
these terms at 651-653:
"The eighth clause is as follows:- 'A certificate signed by the manager or
acting manager for the time being of your head office
or of any other office of
your bank at which the banking account of the customer shall for the time being
be kept stating the balance
of principal and interest due to you by the customer
shall be conclusive evidence of the indebtedness at such date of the customer
to
you.' This clause does not purport to impose upon the bank the necessity of
obtaining the certificate it describes. It is not
a qualification of the
undertaking to pay contained in the first clause. It does not make a certificate
a condition precedent to
recovery. The promise remains a promise to pay the
amount owing; it does not become a promise to pay the amount owing if certified
or a promise to pay only what is certified as owing. The bank could recover
without the production of a certificate if, by ordinary
legal evidence, it
proved the actual indebtedness of the customer. But the clause, if valid,
enables the bank by producing a certificate
to dispense with such proof. It
means that, for the purpose of fixing the liability of a surety, the customer's
indebtedness may
be ascertained conclusively by a certificate. It was contended,
however, for the appellant that, upon its true construction, the
clause did not
make the certificate conclusive of the legal existence of the debt but only of
the amount. It is not easy to
24
see how the amount can be certified unless the certifier forms some
conclusion as to what items ought to be taken into account, and
such a
conclusion goes to the existence of the indebtedness. Perhaps such a clause
should not be interpreted as covering all grounds
which go to the validity of a
debt; for instance, illegality, a matter considered in Swan v. Blair [(1835) 3
Cl.
4 Fin. 610
, at pp 632, 635, 636]. But the manifest object of the clause was
to provide a ready means of establishing the existence and amount
of the
guaranteed debt and avoiding an inquiry upon legal evidence into the debits
going to make up the indebtedness. The clause
means what it says, that a
certificate of the balance due to the bank by the customer shall be conclusive
evidence of his indebtedness
to the bank. Upon this construction the appellant
contends that the clause is void. The contention is based upon the view that it
attempts to oust the jurisdiction of the Court upon an issue essential to the
guarantor's liability and to substitute for the judgment
of the Court the
determination or opinion of an officer of the bank. This argument appears to us
to involve a misunderstanding of
the the principle upon which it professes to
rely. It confuses two different things. A clear distinction has always been
maintained
between negative restrictions upon the right to invoke the
jurisdiction of the Courts and positive provisions giving efficacy to
the award
of an arbitrator when made or to some analogous definition or ascertainment of
private rights upon which otherwise the
Courts might have been required to
adjudicate. It has never been the policy of the law to
25
discourage the latter. The former have always been invalid. No
contractual
provision which attempts to disable a party from
resorting to the Courts of
law was ever recognized as valid. It
is not possible for a contract to create
rights and at the same
time to deny to the other party in whom they vest the
right to
invoke the jurisdiction of the Courts to enforce them
Parties may contract with the intention of affecting their legal relations, but
yet make the acquisition of rights under the contract
dependent upon the
arbitrament or discretionary judgment of an ascertained or ascertainable person.
Then no cause of action can arise
before the exercise by that person of the
functions committed to him. There is nothing to enforce; no cause of action
accrues. But
the contract does not attempt to oust the jurisdiction (Scott v.
Avery [(1856)
[1856] EngR 810
;
5 HLC 811
;
10 ER 1121]
; Caledonian Insurance Co. v. Gilmour
[(1893) AC 85]).
What no contract can do is to take from a party to whom a right actually
accrues, whether ex contractu or otherwise, his power of
invoking the
jurisdiction of the Courts to enforce it."
The Court then
considered the nature and effect of arbitration and concluded as follows at p
654:
"But it was never considered that the Court's jurisdiction
was
26
ousted by an award, notwithstanding that it concluded the parties with respect
to matters which otherwise would be determined by
the Court. It is therefore a
mistake to suppose that the policy of the law exemplified in the rule against
ousting the jurisdiction
of the Court prevents parties giving a contractual
conclusiveness to a third person's certificate of some matter upon which their
rights and obligations may depend. In Ex parte Young; In re Kitchin [(1881) 17
Ch D at p 672], James L.J. says:- 'If a surety chooses
to make himself liable to
pay what any person may say is the loss which the creditor has sustained, of
course he can do so, and if
he has entered into such a contract he must abide by
it.'
There are many familiar kinds of contracts containing provisions which make the
certificate of some person, or the issue of some
document, conclusive of some
possible question. The most conspicuous example, perhaps, is the certificate of
the engineer or architect
under contracts for the execution of works or the
construction of buildings.
For these reasons we think the certificate of the officer of the bank is
conclusive upon the parties of the amount and existence
of the customer's
indebtedness."
It is clear from the above passages that the Court
equated a bank manager (or for that matter, a particular person in the
employ
27
of the bank) with an arbitrator, engineer or architect, on the ground that
they are "ascertained or ascertainable" persons. It did
not, however, consider
the position where such a person is an employee of the plaintiff. Where such an
employee signs a conclusive
proof certificate, the creditor is in effect the
author thereof. It is an entirely different position where the author of the
certificate
is an independent third person, as was pointed out by Smalberger JA
in Ocean Diners (Pty) Ltd v Golden Hill Construction CC
[1993] ZASCA 41
;
1993 (3) SA 331
(A) at
342F-343B.
In the Banque Vernes case the plaintiffs were commodity brokers
who relied upon a conclusive proof clause in claiming from the bank
(Banque
Vernes et Commerciale de Paris SA) the amount owing by the principal debtor,
Oversea Trading Company. Judgment had been given
against the surety. He appealed
against that order. The terms of the conclusive evidence clause there in issue
were set out in the
judgment as follows (438 col (2)):
28
"Notice of default shall from time to time, be given by you to us, [— That
is by the London brokers to us, the French bankers
—] and on receipt of
any such notice, we [— the French bankers —] will forthwith pay to
you the amount stated therein
as due, such notice of default being as between
you and us conclusive evidence that our liability hereunder has accrued in
respect
of the amount claimed."
Lord Denning, MR dealt as follows
(pp 439 col 2 - 440 col 1) with the question of the validity thereof:
"The question is whether that conclusive evidence clause is conclusive against
the party who signs the guarantee. Is he compelled
to pay under it even though
he alleges that the accounts are erroneous? As matter of principle I should
think the clause is binding
according to its terms. In Halsbury's Laws of
England, vol. 15 at p. 278, it is said that
... the tendering of evidence which by statute or by agreement of the parties is
declared to be conclusive, precludes evidence to
the contrary, which is
inadmissible, unless the evidence adduced is inaccurate on the face of it or
fraud is shown ...
Mr. Libbert, on behalf of the French bank, urges that such a clause is invalid
because it is contrary to public policy. He suggests
that it is an attempt to
oust the jurisdiction of the Court
29
by preventing the Court from itself inquiring into the rightness or wrongness
of the amount. Alternatively he says that it is contrary
to public policy
because it makes the brokers judges in their own cause, and therefore it should
be held by the Courts to be invalid.
Mr. Libbert very helpfully drew our attention to what seems to be the nearest
case on the point. It is in the High Court of Australia:Dobbs
v. National Bank
of Australasia Ltd,
[1935] HCA 49
;
[1935] 53 C.L.R. 643.
...
Mr. Libbert accepts the decision in that case; but he seeks to distinguish
this present case because he says that in that case the
certificate was to be
given by the manager or officer of the branch at which the customer kept his
account. Such a person was comparable
to a named architect or an engineer. But
in the present case, he said, it was no definite or nominated person. It was
just the brokers
themselves who gave the certificate for their own benefit. I
cannot accept this distinction. The brokers must act by a manager in
the office,
just as a bank does. So here it seems to me the notice of default given by the
English brokers is perfectly good. There
is no public policy against it. On the
contrary, public policy is in favour of enforcing it. The evidence shows that
'it is customary
within the trade for a member of the association, dealing with
a principal who is foreign, or whose reserves are uncertain, to demand
a bank
guarantee, not only to protect himself against his principal's
30
possible impecuniosity, but also so as to be able to put himself in funds
straight away in the event of his being called upon to honour
his personal
liability on his principal's behalf. This was such a guarantee and was called
upon only when the plaintiffs were themselves
called upon to account to the
clearing house which they did.'
Such being the commercial practice, it is only right that brokers should be
able to turn to the French bank and say: 'On our giving
you notice of default,
you must pay.'
The French bank can in turn recover the sum from their own customer, the
French trading company. No doubt they have taken security
for the purpose.
This does not lead to any injustice because if the figure should be
erroneous, it is always open to the French trading company to
have it corrected
by instituting proceedings against the brokers, in England or in France, to get
it corrected as between them.
I would only add this: this commercial practice (of inserting conclusive
evidence clauses) is only acceptable because the bankers
or brokers who insert
them are known to be honest and reliable men of business who are most unlikely
to make a mistake. Their standing
is so high that their word is to be trusted.
So much so that a notice of default given by a bank or a broker must be
honoured. It
ranks as equivalent to, if not higher than, the certificate of an
arbitrator or engineer in a
31
building contract. As we have repeatedly held, such a certificate must be
honoured, leaving any cross-claims to be settled later
by an arbitrator. So if a
banker or broker gives a notice of default in pursuance of a conclusive evidence
clause, the guarantor
must honour it, leaving any cross-claims by the customer
to be adjusted in separate proceedings.
In my opinion the Judge was quite right in giving full effect to the conclusive
evidence clause."
At p 441 col (1), Megaw LJ, concurring, added
the following:
"It is in my judgment not arguable that this clause in this contract offends
against public policy. I would merely add this: it emerges
from the judgment of
Mr. Justice Starke in the case in the High Court of Australia Dobbs v. National
Bank of Australasia Ltd. to
which my Lord has referred, the passage in question
being on p. 657, that in that well-known volume, the Encyclopaedia of Forms and
Precedents, as long ago as, at any rate, the year 1925, there was included as a
standard form of guarantee a guarantee which, for
present purposes, is in this
same form. Not only does that go back to 1925: it continues in the current
edition of the Encyclopaedia
of Forms and Precedents: the words are somewhat
different from the present guarantee, but, for the reasons which my Lord has
given,
not
32
materially or relevantly different. Further, we have been told by Mr. Lloyd that
within very recent times a guarantee given to a
Swiss bank carrying on a part of
its business in London, is substantially in the form which appears in the
Encyclopaedia of Forms
and Precedents."
And finally, at p 441 col
(1) in fin - col (2), Scarman LJ said this:
"On the point of construction I would respectfully adapt to this case language
used by Mr. Justice Simonds in a very different case.
In Kerr v. John
Mottram,Ltd,
[1940] 1 Ch. 657
, Mr. Justice Simonds, at p. 660,
said:
... I have no doubt that the words 'conclusive evidence' mean what they say;
that they are to be a bar to any evidence being tendered
to show that the
statements in the minutes are not correct
...
Applying that language to the facts of this case, it is, I think, clear beyond
dispute that the words 'conclusive evidence' in this
contract of guarantee are
to be a bar to any evidence being tendered to show that the statements in the
notice of default were not
correct.
On the question of policy I do not wish to add anything to what has already been
said by my Lord, the Master of the Rolls,
and
33
Lord Justice Megaw. Had I the slightest doubt about the effect of the clause, I
think it would have been right to have accepted the
submission of Mr. Libbert
that there was a triable issue; but there is nothing in the clause which
precludes a subsequent adjustment
as between the English broker and the French
customer of the bank. The result of that adjustment, if it takes place, will
ultimately
enure to the benefit of the bank, always assuming that the bank has
used its opportunities to regulate its relationship with its
customer in a
businesslike way."
In the judgment delivered by Lord Denning a
broker's "manager in the office" is equated with a bank manager, architect or
engineer
for purposes of a conclusive certificate of balance. I respectfully
disagree with the reasoning of the learned Master of the Rolls.
What I said
above in this connection applies here and need not be repeated.
I likewise
disagree with his statement that "this commercial practice (of inserting
conclusive evidence clauses) is only acceptable
because the bankers or brokers
who insert them are known to be honest and reliable men of business who are most
unlikely to
34
make a mistake". It is common knowledge by now that banks have computerised
their operations. The reliability of a computer, no matter
how sophisticated,
depends not only on the quality and condition of the instrument itself, but also
on the quality and performance
of the operator thereof. Mistakes do occur. That
banks indeed do make mistakes is illustrated by what occurred in Neugarten
supra,
where the bank admitted that the rate of interest had been incorrectly
stated in the certificate of balance.
The identity of the creditor (and for
that matter, the debtor), is to my mind irrelevant to the validity or otherwise
of a conclusive
proof clause. Were that ever to be allowed to be a relevant
consideration, we would soon find ourselves in the legal quagmire so
graphically
and correctly described by a full bench of the Cape Provincial Division in
Standard Bank of SA Ltd v Wilkinson
1993 (3) SA 822
(C). In dealing with the
decision in Pangbourne Properties Ltd v Nitor Construction (Pty) Ltd and Others
4
35
Commercial Law Digest 314 at 316-317, (subsequently reported in
1993 (4) SA
206
W at 212) the Court expressed itself as follows at 830G-831B:
"In the Pangbourne Properties case supra, Marais J opined (at 316-7) that what
seemed important in deciding whether a contract of
suretyship was immoral and/or
contrary to public policy were the circumstances surrounding the contract and
the relationships between
the various actors. He sought to distinguish the case
of the surety who enters into a suretyship agreement in which he binds himself
for the debts of a newly-founded company with no assets and a share capital of
R100 and the case of a surety who is only a friend
or relative of the debtor and
is persuaded to sign because a financial institution will not as a matter of
policy lend to a debtor
unless a surety is provided.
We can, with respect, see no justification for the distinction. In both cases
the surety enters into the agreement freely and voluntarily.
It is true that in
one instance the surety is really guaranteeing his own debt. He will benefit
from the loan. In the other he will
not. It may well be that to help a friend or
relative who possibly would not otherwise obtain a much needed loan, he is
persuaded
to enter into the agreement. But he does not have to. He does so of
his own free will (see Voet (loc cit); Proksch v Die Meester
en Andere (Loc cit)
).
36
If once clauses come to be judged, as suggested by Marais J, against the purpose
of the contract, its setting and the relationship
between the parties, creditors
will come to be faced by a multiplicity of defences by 'recalcitrant debtors'
and sureties seeking
to have their agreements, freely and voluntarily entered
into, declared contra bonos mores. It will, we fear, give rise to a plethora
of
litigation based upon the 'last resort' defence of public policy. It will also
no doubt, in such event, produce the many conflicting
decisions on individual
clauses that presently exist."
Which creditors, after all, are to
be regarded as "honest and reliable" (Denning MR) or as "recognised and
reputable" (Kriegler J)
and which not? In a useful article in the South African
Law Journal vol 110 (1993) Prof Kerr deals with this subject as follows on
pp
672-673:
"5 Are recognized reputable commercial institutions in a privileged
position?
Banks are among the most frequent litigants in cases such as those under
discussion, as reference to decisions mentioned above shows.
...
37
Kriegler J in Donelly's case at 384F-G referred to the respondent as 'a
recognised, reputable commercial bank of more than a century's
standing in this
country'. I agree that such institutions can be trusted to give accurate
certificates in the vast majority of instances;
but (a) there is a small
minority of instances in which such an institution can make a mistake: see the
Standard Bank case, discussed
in the next section of this note; (b) there are
new banks recently established; and (c) there are persons or institutions other
than
banks and members of stock exchanges (or other exchanges, as in the Bache
and Co (London) case) that are as worthy of trust. There
is, as far as I am
aware, no South African case (apart from the reference in Donelly's case at
384F, already quoted) in which it
is stated, or from which it can be inferred,
that a distinction is to be drawn between different kinds of creditors, and I am
unable
to suggest any, as I am of the opinion that there should be no such
distinction in law (cf Standard Bank of SA Ltd v Wilkinson
1993 (3) SA 822
(C at
830F-832E)."
In Donelly Kriegler J relied upon the
fact that the debtor, Donelly, knew full well precisely "what was going on" in
the account in
question (384H).
38
But the fact that the surety was not a stranger to the principal debt, is to
my mind equally irrelevant. If he has sufficient knowledge
of that debt he may
well be in a good position to detect an error in the calculation of the amount
stated in the certificate. But
would he on that score be entitled to attack the
accuracy of a certificate issued under a conclusive proof clause? I think not.
That
much appears from what was said in Dobbs and Banque Vernes supra, and from
the meaning of the expression "conclusive proof" as explained
in S v Moroney
1978 (4) SA 389
(A). Van Winsen AJA said the following at p 406 F-H:
" 'Sufficient proof of a fact connotes proof which in the absence of
countervailing evidence may be accepted by a court as establishing
such fact.
'Conclusive proof of a fact connotes proof which a court is obliged to accept,
to the exclusion of all countervailing
evidence, as establishing such fact. When
a statutory enactment prescribes that a document or a certificate by its
production to
a court constitutes 'sufficient proof of some stated fact or
conclusion the effect of such enactment is
that
39
such document or certificate can in the absence of countervailing evidence
constitute proof of such fact. 'Sufficient proof', unless
the context in which
it is used compels another conclusion, is equivalent to prima facie proof.
However, where the enactment provides
that a document or certificate will on
production constitute conclusive proof of some stated fact then the effect of
the enactment
is to create a presumptio juris et de jure that the document or
certificate establishes incontrovertibly the truth of that fact.
No evidence may
be led to contradict it. The distinction between 'sufficient' and 'conclusive'
in relation to 'proof or to 'evidence'
is well established."
This
passage to my mind applies equally to a conclusive proof clause in contracts, Cf
Nedbank Ltd v Van der Berg and Another, supra,
at 451 H-J. On the other hand,
the validity of such a clause will not be established by the failure of the
debtor to question accounts,
statements, etc, before commencement of litigation.
Such failure does not necessarily amount to an acknowledgement of indebtedness
in the amount claimed, and may be due to a variety of reasons.
In Neugarten Flemming J said at p 701 A that
"((h)aving
40
had regard also to the decision in Senekal v Trust Bank of Africa Ltd
1978
(3) SA 375
(A) at 382 G-H, in the present case a pro tanto giving effect to the
clause will be done for reasons which will appear)" The passage
quoted is the
following:
"There might be several items to which such a certificate relates, some of which
may appear to be unassailable while others may either
be shown to be inaccurate
or appear to be of dubious reliability, or might require some modification or
adjustment. I can find no
reason why in such circumstances the certificate is to
be entirely disregarded merely because it is found or thought to be inaccurate
or unreliable in certain respects."
The certificate in the
Senekal case was, however, one of prima facie proof. Different considerations
apply to such a certificate.
The possibility of recovery by a surety of amounts wrongly reflected in the
certificate as owing by him, was one of the considerations
relied upon by
Kriegler J in Donelly, as appears from the quotation from his judgment, supra.
He relied upon the judgment
41
of Lord Denning MR in the Banque Vernes matter. For convenience of reference
that passage in Kriegler J's judgment, which appears
at p 384 D-E of the report,
is here repeated. It is as follows:
"In particular Lord Denning, at 440, drew attention to the fact that one of the
reasons why such a certificate is not bad is that
the debtor is at liberty,
should he subsequently discover that the certificate was wrong, to institute the
appropriate action. In
the course of argument I put to Mr Kruger whether he
contended that that would not apply in a case such as the instant one. He was
constrained to concede that it would apply."
In my opinion that
is not a cogent consideration. It is difficult to conceive what the "appropriate
action" could be. An action would
of course lie against the principal debtor.
But a surety is usually, and almost always, called upon to pay because of the
principal
debtor's inability to do so. It would almost invariably be throwing
good money after bad were the surety to sue the principal debtor
for the amount
he, the surety, had been obliged to pay. By virtue of the
42
conclusive proof clause he would be debarred from proceeding against the
creditor where his claim is based on a merely negligent mistake
in calculating
the amount stated in the certificate, where such mistake is not apparent on the
face of such certificate.
In his afore-mentioned article Prof Kerr deals with
this question as follows at 674-675:
Christie 422, quoted with approval in the Bankorp case at 378C-D, lists
'mistake' as separate from 'inaccuracy on the face of the
certificate', and
Corbin on Contracts loc cit lists 'mistake', without referring to inaccuracy on
the face of the certificate; while
on the other hand Halsbury loc cit says only
'unless the so-called conclusive evidence is inaccurate on its face, or fraud
can be
shown'. The relevant document in the Standard Bank case is not quoted in
the report in full, but it appears that one can infer that
nothing on its face
indicated that the calculation of interest was incorrect - it was evidence that
did that: see section 6 of this
note. It follows that our law appears to be that
a so-called conclusive-proof clause can be challenged on the ground of mistake
which
does not appear on the face of the document. A fortiori, a
mistake
43
that does appear on the face of the document can ground a challenge.
When evidence was heard in the Standard Bank case it became apparent that the
mistake in the certificate was acknowledged. The court
pointed out at 702D-G
that once that stage had been reached there would be bad faith on the
applicant's part if it proceeded with
the action, and an exceptio doli could be
raised by the respondent."
(Section 6 of the article
is entitled "Can a creditor in whose favour a
conclusive-proof clause exists
make a mistake?", and reference is
made therein to Neugarten.)
That a creditor can make a mistake in a certificate under
a conclusive proof clause is undoubted. Humanum est errare. But to
my mind
a debtor can only avail himself of a non-fraudulent
inaccuracy or mistake in
a conclusive proof certificate if the creditor
admits the non-fraudulent error. As set out above, that was the
position
in Neugarten. The reason therefor is that such an admission
destroys the
conclusiveness of the certificate and renders the
conclusive proof clause
inoperative. It is only in such a case that "a
44
so-called conclusive-proof clause can be challenged on the ground of mistake
which does not appear on the face of the document".
A debtor could, however,
challenge such a certificate on the ground that it is not the certificate
provided for in the clause in issue.
Extraneous evidence would be admissible to
prove such fact. Should the challenge be successful there would be no valid
certificate
and, therefore, no conclusive proof of the amount owing. But that
would not release the surety from his debt.
The debtor would also, to my
mind, not be able to found his action against the creditor on the absence of an
underlying liability,
for the reason that proof of the amount owing, as stated
in such a certificate, includes proof of liability. This appears from the
above-quoted passages in the judgment in Dobbs, supra. Here also, for the sake
of convenient reference, the particular passage, which
appears at p 651 of the
report, is repeated. It is in these terms:
"It was contended, however, for the appellant that, upon its
true
45
construction, the clause did not make the certificate conclusive of the legal
existence of the debt but only of the amount. It is
not easy to see how the
amount can be certified unless the certifier forms some conclusion as to what
items ought to be taken into
account, and such a conclusion goes to the
existence of the indebtedness."
In a separate judgment in Dobbs,
Starke J added the following at p 657:
"It was contended that, upon a proper construction of the clause, the
certificate was conclusive only of amount and not of liability.
The words,
however, are 'conclusive evidence of the indebtedness ... of the customer to
you': That provision involves a consideration
not only of the items that should
go into the account, but of the liability of the appellant in respect of
them."
In Donelly the clause in question provided i a that "such
certificate stating the amount of the indebtedness of the debtor and of
myself
... shall be conclusive proof that the amount of my ... indebtedness hereunder
is due, owing and payable ...". It is clearly
to
46
the same effect as the clause in Dobbs, supra, and the above-quoted remarks
are, therefore, also applicable to the Donelly clause.
In Donelly Kriegler J
also relied upon the basic rule pertaining to contracts that agreements are to
be observed, as militating against
conclusive proof clauses being regarded as
contra bonos mores even where the creditor is the author of the certificate of
balance
issued under such a clause. This is apparent from the following passage
in his judgment at 381 H-I:
"It should also be emphasised, before turning to deal with the particular facts
of the Sasfin case, that the maxim pacta sunt servanda
is still a cornerstone of
our law of contract. Nothing said or implied in the Sasfin case in any way
serves to derogate from that
important principle. Also, as was pointed out at p
13 of the judgment, 'public policy generally favours the utmost freedom of
contract'.
"
This, in my opinion, is also not a sound
consideration, as appears from the following comment thereon by Prof Kerr in his
said article
at p 671:
47
"At 381H-I the learned judge drew attention to the fact that 'the maxim pacta
sunt servanda is still a cornerstone of our law of
contract'. This is readily
agreed; but the maxim applies only to agreements that are lawful contracts: see
the authorities referred
to in Contract chapter 7, especially at 150-1. Hence
one cannot use the maxim as a ground for upholding an agreement which is alleged
by one of the parties not to be a contract or for upholding a clause which is
alleged to be against public policy."
Nothing more need be said
about it.
In all the abovementioned decisions where the creditor was actually
or in effect the author of a conclusive proof certificate, the
relevant clause
was upheld on the ground that the jurisdiction of the courts was not excluded.
That was held to be so by virtue of
the fact that such a clause did not exclude
fraud and mistake ex facie the certificate from such jurisdiction. Those are,
however,
matters which will not usually be present in claims under such clauses.
The area where disputes are most likely to occur, viz non-fraudulent
mistakes by
the creditor in arriving at the amount owing, which is set out in the
48
certificate of which he is the author, is, however, excluded from the courts'
jurisdiction. It is precisely in that area where injustices
are most likely to
occur and where a debtor most needs the protection of the courts. In a note
entitled "Conclusive Nature of a Certificate
of Balance Revisited" in
1990 SAW
414-415
, Advocate Hutchinson puts the point well in the following passage at
415:
"In Bache & Co (London Ltd v Banqwe Vernes et Commerciale de Paris SA [1973]
2 Lloyd's LR 437 Lord Denning MR said (at 440) that
'this commercial practice'
(in certain conclusive-evidence clauses) 'is only acceptable because the bankers
or brokers who insert
them are known to be honest and reliable men of business
who are most unlikely to make a mistake'. In substance this was one of the
same
considerations raised by Kriegler J in distinguishing Donelly's case from
Sasfin's. This reasoning, however, only tends to strengthen
the case for
declaring such clauses as contra bonos mores. If a certificate is inaccurate in
the nature of things, its inaccuracy
would more likely stem from a bona fide
human error and not fraud. Reputability is no guarantee against such an error,
and it is
precisely for this reason that the court's jurisdiction to adjudicate
on such an issue should not be ousted."
49
This passage is a fortiori applicable in a case where the creditor concerned
is the author of the certificate of balance.
It is interesting to note that
in the United States of America conclusive evidence clauses in contracts are
held to be void by virtue
of the serious limitation of the court's jurisdiction.
In Williston on Contracts 3rd ed vol 14 p 906, par 1723 (1972) the following
is,
for example, said:
"A provision in a contract of indemnity that the surety's voucher or certificate
of expenditures shall be conclusive evidence of
the indebtedness of the
principal to the surety is held illegal
; 8
but a contractual
provision that certain acts or certain papers shall constitute prima facie
evidence of liability or of a specified
fact is not an illegal interference with
the power of the courts over evidence."
In note 8 to this
paragraph reference is made to a judgment of the Kansas Supreme Court of
February 8 1930 in the matter of Fidelity
and Deposit Company of Maryland v
Davis. That was an appeal
from a District Court. The report of that case is i a to be found in the
50
American Law Reports (Annotated) vol 68 at 321. The headnote to that judgment
(at 321) reads as follows:
"A clause in a contract of indemnity given by a principal to his surety, reading
as follows ...
'And I further agree that all vouchers and other evidence of payment of any such
loss, liability, costs, damages, charges or expenses
of whatsoever nature
incurred by the company or its attorneys shall be taken as conclusive evidence
against me and my estate, of
the fact and extent of my liability to the
company',
is contrary to public policy, and is void."
At p 323 col (2) of
the report the following is said in the judgment:
"Both sides admit that this Court has never decided upon the question of the
validity of the 'conclusive evidence' clause, supra."
After
examining certain decisions of other courts and disagreeing with an article by
Wigmore in vol 16 of the Illinois Law Review,
the Court
51
proceeded as follows at p 325 col (2):-
"The agreement under consideration is more than a mere enlargement of
contractual rights, or the establishment of a rule of evidence.
It provides that
the plaintiff may by his own ex parte acts, conclusively establish and determine
the existence of his own cause
of action. In short, he is made the supreme judge
in his own case. ...
In the present case the attempt is to provide that, after the alleged cause of
action has accrued, the plaintiff shall be the sole
and exclusive judge of both
its existence and extent. Such an agreement is clearly against public
policy."
This reasoning is in my estimation equally applicable to
the type of contract here under consideration. It must be noted, however,
that
there is a division of opinion in the American courts on this question, (vid
Williston op cit p 906 note 8 under "Contra")
Kriegler J found in Donelly that this Court's decision in Sasfin that the
relevant conclusive evidence clause was contra bonos mores
was based not only on
principle but also on the "peculiar terms' of the deed of cession and,
therefore, in essence, an ad hoc decision
52
not intended to be of general application. This emerges clearly from the
following (already quoted) passage in his judgment at 383
F-I:
"Having read the clause in its entirety, one is not surprised at the words of
the learned Judge of Appeal. However, one then looks
at the whole of the
judgment to see whether there is any warrant therein, express or implied, for
the proposition now advanced on
behalf of Donelly by Mr Kruger. That proposition
is that the Appellate Division ruled in the case of Sasfin (Pty) Ltd v Beukes
that
any certificate of balance clause in any contract between any parties
providing that the certificate would be conclusive proof of
the amount of an
indebtedness, is contrary to public policy and therefore bad and
unenforceable.
I can find no indication in the judgment of such a wide statement. I would
indeed have been surprised if the Appellate Division had
intended so to do
without at the same time dealing with innumerable cases in which such
certificates of balance have been held to
be good. I refer only to the two most
recent ones, namely Nedbank Ltd v Van der Berg and Another
1987 (3) SA 449
(W)
and Standard Bank of SA Ltd v Neugarten and Others
1987 (3) SA 695
(W).
To my mind the learned Judges, both in the majority and minority judgments, made
it plain that their respective findings as to fatal
non-compliance with the
dictates of public policy were based on principle
but applied to the peculiar
terms of the
53
contract before it
." [My underlining]
In Ocean Diners,
supra, Smalberger JA commented as follows at 342 D-G on Sasfin (wherein he wrote
the majority judgment):
"The remaining defence pleaded relates to the validity and enforceability of
clause 25.7. Mr Duminy argued that, if the words 'conclusive
evidence' in clause
25.7 meant (as they obviously do) 'finally decisive of the matter in issue' (ie
the value of the works), the
provision was contrary to public policy as it
ousted the Court's jurisdiction to enquire into the accuracy and validity of the
matter.
This argument was founded on passages in the judgments of this Court in
Sasfin(Pty) Ltd v Beukes
1989 (1) SA 1
(A) at 14I-15B and 23C-D. The remarks
there made must be seen in their proper context. What rendered the particular
provision under
consideration in the passages referred to contrary to public
policy was the authorship of the certificate sought to be relied upon
against
the debtor ('any of the directors of any of the creditors'), coupled with the
conclusive nature thereof, seen in the context
of the peculiar terms of the
contract with which this Court was there dealing."
It is to be
noted that whilst he clearly indicated in this passage that the
54
prime consideration in assessing clauses 3.24 (1) and (2) 2 was the
authorship of the certificate of balance (the creditor or creditors
of the
surety) he seems to suggest that that was not the only reason for adjudging the
section concerned to be contra bonos mores.
One must, however, view a gloss of
this nature with circumspection. The learned Judge was not there speaking on
behalf of his colleagues
who concurred in his judgment (and even less, for that
matter, on behalf of the minority who concurred in assessing sec 3.24 to be
bad
in law). He was also clearly not reconsidering the assessment of that section.
The said passage can, therefore, not be seen as
anything more than a form of
explanatory comment on the Sasfin finding.
Consequently, one must go back to the Sasfin judgments and establish from an
analysis of them what the process of reasoning was and
on what grounds clauses
3.24 (1) and (2) 2 were judged to be bad in law.
The passages in both judgments dealing with that
section
55
do not suggest that anything other than the content and effect thereof was
taken into consideration in assessing the section to be
contra bonos
mores.
On a perusal of both judgments it is to my mind clear that the court
considered a number of suspect clauses in the deed of cession,
assessed each
such clause separately, then considered the cumulative effect of the clauses
found to be contra bonos mores on the
validity of the deed of cession as a
whole, and came to the conclusion that the deed was thereby invalidated. I am
strengthened in
this view by the following passage from the majority judgment at
p 17 D-H:
"Most, if not all, of the clauses which offend against public policy are
fundamental to the nature and scope of the security which
Sasfin obviously
required. They contain provisions which are material, important and essential to
achieve Sasfin's ends; they go
to the principal purpose of the contract, and are
not merely subsidiary or collateral thereto. If those clauses were severed one
would be left with a truncated deed of
cession
56
containing little more than a bare cession. No doubt Beukes would have
contracted without the offending clauses, as they served only
additionally to
burden, and not to benefit, him. But would Sasfin have been prepared to forego
its substantially protected rights
and contracts on that basis? This is a matter
peculiarly within Sasfin's own knowledge. Yet, significantly, nowhere does it
appear
on the papers what Sasfin's attitude would have been in this regard. It
seems to me that on the probabilities one may readily infer
that without the
rights and protection afforded by the offending clauses in the deed of cession,
Sasfin would not have entered into
either it, or the discounting agreement. (By
saying this I am not suggesting that the invalidity of the deed of cession would
bring
down the discounting agreement— objectively determined the latter is
not dependent for its validity upon the former.)
More particularly is this so
when one has regard to the cumulative effect of the invalid clauses
. I am
fortified in this view by the fact that Sasfin sought to enforce the deed of
cession as a whole, notwithstanding that Beukes
had contended earlier that
certain clauses thereof were contrary to public policy, and that it was
therefore invalid and unenforceable.
This is indicative of how important the
deed of cession, in its entirety, was to Sasfin. I accordingly conclude that the
offending
provisions of the deed of cession are not severable."
[the underlining is mine]
57
It is clear, therefore, that clauses 3.24 (1) and (2) 2 were assessed
separately from the other suspect clauses and was found to be
per se contrary to
public policy. The reason for that finding is to my mind also clear, to wit,
that the author of the certificate
of balance was a creditor of the surety, and
that the creditors were therefore judges in their own cause by virtue of the
conclusive
proof stipulation whereby the jurisdiction of the courts was excluded
in a vitally important respect, namely determining, in the
absence of fraud, the
correctness or otherwise of the amount stated in the certificate.
Where
Smalberger J refers in the above-quoted passage from his judgment in Ocean
Diners to the contextual scene of sec 3.24, he probably
had in mind the
cumulative effect of the invalid clauses, as mentioned by him in the last-quoted
passage from his judgment in Sasfin.
I conclude, therefore, that in Sasfin this Court in essence decided that any
conclusive proof clause in terms of which the creditor
58
was the author of the certificate of balance was in any agreement per se
against public policy and, therefore, invalid.
In Nedbank Le Roux J came
essentially to the same conclusion as the one set out above. His interpretation
of the Sasfin decision consequently
reflects the law correctly.
The question
of law submitted to this Court for determination as set out in par 5 on p 5 of
the submission, is, however, not correctly
framed in that in Sasfin this Court
did not deal merely with a "conclusive proof clause in favour of a creditor in
an agreement",
nor did it find "that such a clause is contra bonos mores and
therefore void regardless of the context of the agreement in which
it finds
itself".
There are many such clauses which are not contra bonos mores. An example of
such a clause is to be found in the Ocean Diners case,
supra.
Conclusive proof clauses invariably provide that a
59
document, usually a certificate, will be conclusive proof of the amount
claimed, and usually indicate who the author thereof is to
be. In many cases the
author is to be an independent third person, such as eg an engineer, architect
or auditor. Such clauses have
repeatedly been held not to be contra bonos mores,
as was the case in Ocean Diners.
What this Court dealt with in Sasfin was
not, however, any such clause. It there dealt with a very particular type of
conclusive proof
clause, namely, where it is provided that the author of the
certificate of balance was to be the creditor.
As it stands the question of
law submitted cannot, therefore, be answered effectively by this Court because
it does not correctly
set out the cardinal facts. It was undoubtedly the
intention of the Minister of Justice in submitting the question of law to this
Court for determination to have the relevant facts correctly stated therein,
because what he wanted to have answered by this Court
was which of the two
conflicting interpretations correctly reflected the law
60
as enunciated in Sasfin.
A failure to answer the question in its present
faulty guise would render the whole submission futile. That should be avoided if
at
all possible. To my mind that can be avoided by correcting the question
submitted so as to truly reflect the Minister's intention.
This Court has the
competence to do so. The question will accordingly be corrected by inserting the
following words between the words
"agreement" and "correctly" in the second last
line of par 5 on page 5 of the submission, namely, "in terms whereof the
creditor
is to be the author of the certificate of balance issued under such
clause".
The question of law submitted to this Court for determination, is,
as corrected, therefore, answered as follows:
The interpretation of the Court in Nedbank Ltd v Abstein Distributors (Pty) Ltd
and Others
1989 (3) SA 750
(T) of the decision of the Appellate Division of the
Supreme Court of South Africa in the matter of Sasfin (Pty) Ltd v Beukes
1989
61
(1) SA 1
(A) relating to the validity of a so-called "conclusive proof clause"
in favour of a creditor in an agreement in terms whereof the
creditor is to be
the author of the certificate of balance issued under such a clause, correctly
reflects the law, namely, that such
a clause is in itself contra bonos mores and
therefore void regardless of the context of the agreement in which it finds
itself.
M T STEYN JA
CORBETT, CJ )
NESTADT, JA ) VIVIER,JA ) concur
NICHOLAS, AJA)