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[2018] ZASCA 31
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Automated office Technology (Pty) Ltd t/a AOT Finance v International Colleges Group (Pty) Ltd (385/2017) [2018] ZASCA 31 (8 March 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 385/2017
In
the matter between:
AUTOMATED
OFFICE TECHNOLOGY
(PTY)
LTD t/a AOT
FINANCE
APPELLANT
and
INTERNATIONAL
COLLEGES GROUP (PTY) LTD
RESPONDENT
Neutral
citation
:
Automated
Office Technology (Pty) Ltd t/a AOT Finance v International Colleges
Group (Pty) Ltd
(385/2017)
[2018] ZASCA 31
(26
March 2018)
Coram
:
Navsa, Seriti and Swain JJA and Pillay and Makgoka AJJA
Heard
:
8 March 2018
Delivered:
26
March 2018
Summary:
Master rental agreement –
written cession – interpretation of cession in context –
subsequent rental agreements
validly ceded.
Order
On
appeal from:
Western Cape
Division of the High Court, Cape Town (Nuku J with Allie J
concurring, sitting as a court of appeal).
1
The appeal succeeds with costs on a scale as between attorney and
client.
2
The order of the Court a quo is set aside and replaced with the
following
order:
‘
(a)
The appeal succeeds with costs, on a scale
as between attorney and client.
(b)
The order of the trial Court is set
aside and replaced with the following order:
(i)
Judgment is granted in favour of the
plaintiff for payment of the aggregate amount of arrear
rentals, in
respect of the first to the ninth rental agreements, in the sum of
R479 257,35.
(ii)
Judgment is granted in favour of the
plaintiff for payment of the aggregate amount of future
rentals, in
respect of the first to the ninth rental agreements, in the sum of
R54 510,78.
(iii)
Interest is granted on the aforesaid
amounts, payable from the date of judgment being 27 November
2013 to
date of payment, calculated at the prescribed statutory rate.
(iv)
The defendant is ordered to pay the plaintiff's
costs of suit on a scale as between attorney and client.
(v)
The plaintiff is ordered to pay the defendant’s wasted costs on
the magistrates court party and party scale,
occasioned by the
adjournment of the trial on the 20 February 2013.’
JUDGMENT
Swain
JA
(Navsa and Seriti JJA
and Pillay and Makgoka AJJA)
[1]
Whether rental is owed by the respondent, International Colleges
Group (Pty) Ltd to the appellant, Automated Office Technology
(Pty)
Ltd t/a AOT Finance, for the hire of items of office equipment,
comprising a number of copiers and fax machines, is the origin
of a
war of attrition which has raged between the parties for the last ten
years. Problems first arose between the parties in January
2008 when
the respondent summarily ceased making payment of the rentals.
[2]
Concerned at the unexpected turn of events, the appellant sought an
explanation from the respondent, only to be informed that
new owners
had taken over and wished to review all of the rental agreements,
before making any further payments. The appellant
heard nothing
further and the arrears on the accounts increased. Letters of demand
for payment by the respondent of the outstanding
rentals were
ignored, save that a payment of R 200 000 was received during 2008,
which was allocated to a portion of the arrears.
No further payments
were received and no clarification was furnished by the respondent,
as to why payment was withheld.
[3]
The appellant accordingly issued summons against the respondent in
the Magistrates Court for the district of Cape Town during
May 2010.
Return of the equipment together with arrear and future rentals was
claimed on the basis that as a result of the failure
by the
respondent to make payment of the rental due in terms of each of the
nine written rental agreements, the appellant had cancelled
them
all.
[1]
[4]
It was common cause that:
4.1
A company, Katlego Solutions (Pty) Ltd (Katlego), had
entered into a master rental agreement with the
respondent on 3
November 2005 for the hire of equipment to the respondent, a copy of
which was annexed to the appellant's particulars
of claim;
4.2
In terms of the master rental agreement, the equipment to
be hired ‘from time to time’ by
Katlego to the respondent
would be ‘described in signed Addendums’ in accordance
with the ‘Proforma Addendum’
annexed to the master rental
agreement, which would be subject to the terms and conditions
recorded in the master rental agreement;
4.3
The respondent concluded nine written rental addenda with
Katlego, copies of which were annexed to the
appellant's particulars
of claim marked ‘A’ to ‘J’. Each was
headed ‘Rental Addendum –
Annexure A’, specified
that it was an addendum to the master rental agreement, described
‘The Equipment’ hired
as well as the rental payable and
provided that ‘The terms and conditions of the Master Rental
Agreement shall apply hereto,
as though specifically set forth
herein’;
4.4
On 28 April 2006, Katlego concluded an agreement
with the appellant headed ‘Cession of Master
Rental Agreement
and Addenda’ which provided that Katlego, ‘hereafter
referred to as the Cedent, hereby cede and transfer
all of the
Cedent’s rights, title and interest in the Master Rental
Agreement signed on 26 October 2005 and the addenda signed
hereto
between the Cedent. . .’ and the respondent to the appellant
and;
4.5
A valid cession and transfer of the rights of Katlego in
the first, second and third rental agreements
was effected to the
appellant.
[5]
The defence advanced by the respondent fell within a highly technical
narrow compass. It was simply that a valid cession of
Katlego’s
rights in the remaining six rental agreements was not effected to the
appellant, because they were all concluded
after the written cession
agreement. In other words, these later rental agreements were not
included in the cession, because the
reference to ‘the addenda
signed hereto’ in the written cession agreement only referred
to the first three rental agreements
in existence at the time of the
cession. In other words, the written cession did not operate in
respect of rental agreements to
be concluded in the future.
[6]
Accordingly, the only issue to be determined by the trial court was
whether the appellant had discharged the onus of proving
that the
rights, title and interest of Katlego in the six rental agreements
had been validly ceded to the appellant. It held that
the appellant
had failed to do so and therefore granted judgment in favour of the
appellant only for the payment of arrear and
future rental in respect
of the three rental agreements not in dispute, but dismissed its
claim in respect of the remaining six
rental agreements, with costs.
A subsequent appeal to the Western Cape Division of the High Court,
Cape Town was dismissed with
costs. The appeal is with the special
leave of this court.
[7]
The only evidence upon which the trial court and the court a quo
relied in dismissing the claims of the appellant in respect
of the
six rental agreements in issue, was the evidence of Mr Gregg Coull, a
director of the appellant, as the respondent closed
its case without
leading any evidence. He stated that he had signed the master rental
agreement and all nine rental agreements
on behalf of Katlego. He was
duly authorised to do so, because Katlego was a Johannesburg based
company and when they opened a
branch in the Western Cape, they did
not have sufficient resources and asked him to be a signatory on
their rental agreements.
[8]
The relationship between the appellant and Katlego dated back to 2003
when Mr Coull had represented the appellant in orally
agreeing
with Katlego that each time Katlego entered into a rental agreement,
it would automatically be financed and ceded to the
appellant. He
expressed the view that the rights, title and interest in the first
three rental agreements were ceded to the appellant
on the date of
the written cession, being 28 April 2006 and that the rights, title
and interest in the remaining six rental agreements
in issue, were
ceded to the appellant on the dates that he signed each of them on
behalf of Katlego, and simultaneously accepted
their cession to the
appellant, on its behalf. He was of the view, however, that the
cession of the rights, title and interest
in the six rental
agreements in issue, took place in accordance with the 2003 oral
agreement.
[9]
When cross-examined, he however, stated that when Katlego signed each
rental agreement with the customer, it could on an ad
hoc basis
choose to sell and cede the agreement to the appellant, in order to
finance the transaction and raise funds upfront.
He was unable to
explain how it could be at Katlego’s choice if there was an
oral agreement in 2003 that the rental agreements
would automatically
be ceded to the appellant, but later reiterated that from the
inception of the agreement, the rights in the
rental agreements would
automatically be ceded. When asked about the purpose of the written
cession agreement in 2006, he replied
it was to record the oral
cession agreement.
[10]
The grounds upon which the trial court dismissed the appellant's
claim in respect of the six rental agreements in dispute,
were as
follows:
10.1
The appellant, in its particulars of claim, had pleaded
and relied upon the written cession of agreement concluded
on 28
April 2006 and had failed to plead and rely upon the oral cession
concluded in 2003, which provided that all the agreements
entered
into by Katlego would be financed by and ceded to the appellant, as a
matter of practice.
10.2
The appellant failed to call a witness from Katlego to
confirm the oral cession agreement and the court was unable
to rely
upon the evidence of Mr Coull, because he represented the appellant
and not Katlego in the conclusion of this agreement.
[11]
On appeal the court a quo dismissed the appeal for the same reasons,
making the following findings:
11.1
The appellant's case was based upon the written cession
agreement concluded between the appellant and Katlego
on 28 April
2006, but the evidence of Mr Coull that the six rental agreements in
issue were ceded to the appellant as a result
of the 2003 oral
cession agreement, did not accord with the case as pleaded by the
appellant. His evidence accordingly could not
assist the appellant as
it was trite that a litigant is bound by its pleadings.
11.2
Although Mr Coull testified that he was authorised to
sign the master rental agreement as well as the addenda on
behalf of
Katlego, he did not testify that he was authorised to cede the
agreements on behalf of Katlego.
11.3
The appellant had therefore failed to prove the cessions of the
six rental agreements in issue, by Katlego in favour
of the
appellant.
[12]
In reaching these conclusions the trial court and the court a quo
erred, for the following reasons:
12.1
Whether the six rental agreements in issue were validly
ceded to the appellant, requires an interpretation of
the written
cession agreement, read together with the master rental agreement and
the individual rental agreements. The written
cession agreement was
pleaded in the following terms, in the appellant's particulars of
claim:
‘
15.
On 28 April 2006 and at Cape Town, Plaintiff and Katlego entered into
a cession agreement in terms of which Katlego agreed to
cede and
transfer all of its rights title and interest in the master rental
agreement, and the addendums thereto, to the Plaintiff.
15.1
A true copy of the aforesaid cession agreement is annexed hereto,
marked "D".
16.
Pursuant to the aforesaid cession agreement:
16.1
Katlego ceded and transferred all of its rights, title and interest
in the master rental agreement, and in the first, second
and third
agreements, to the Plaintiff on about 28 April 2006;
16.2
Katlego ceded and transferred all of its rights, title and interest
in:
16.2.1
the Fourth agreement to the Plaintiff on about 8 May 2006;
16.2.2
the Fifth and Sixth agreements to the Plaintiff on about 6 August
2006;
16.2.3
the Seventh, Eighth and Ninth agreements to the Plaintiff on about 31
August 2006.’
In
other words, the first three rental agreements were ceded to the
appellant on the date of the written cession agreement, but
the
remaining six rental agreements in issue were ceded to the appellant
in terms of the written cession agreement, on the dates
when each of
them were concluded.
12.2
The view of Mr Coull that the six rental agreements concluded after
the written cession agreement, were ceded in
terms of the 2003 oral
cession and not the written cession agreement, is irrelevant to an
interpretation of the 2006 written cession
agreement, particularly as
he stated that the purpose of the written agreement was to record the
oral cession agreement. In addition
as stated in
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
[2015] ZASCA 111
;
2016 (1) SA 518
(SCA) para 27, it is the role of
the court and not witnesses to interpret a document.
12.3
When interpreting the written cession agreement, the
significance of the prior oral cession agreement lies in the
context
and circumstances in which the written cession agreement came into
being. As stated in
Bothma-Batho Transport (Edms) Bpk v S Bothma &
Seun Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA)
para 12:
‘
Whilst
the starting point remains the words of the document, which are the
only relevant medium through which the parties have expressed
their
contractual intentions, the process of interpretation does not stop
at a perceived literal meaning of those words, but considers
them in
the light of all relevant and admissible context, including the
circumstances in which the document came into being. The
former
distinction between permissible background and surrounding
circumstances, never very clear, has fallen away. Interpretation
is
no longer a process that occurs in stages but is "essentially
one unitary exercise”.’
12.4
The central enquiry is the meaning of the sentence contained in the
written cession agreement which provides as
follows:
‘
.
. . hereby cede and transfer all of the Cedent’s rights, title
and interest in the Master Rental Agreement signed on 26
October 2005
and the addenda signed hereto between. . .’
Katlego and the respondent, to the
appellant.
In
other words, do the words ‘addenda signed hereto’ refer
only to those written rental agreements ie addenda, in existence
and
signed at the time of signature of the written cession agreement, or
do they include written rental agreements to be concluded
in the
future?
12.5
It is clear that the rights, title and interest of Katlego in the
master rental agreement were validly ceded to
the appellant, in terms
of the written cession agreement. In terms of the master rental
agreement, it is provided that ‘the
customer’ ie the
respondent:
‘
.
. . agrees to hire from Katlego the equipment which will be described
in signed Addendums, as per the Proforma Addendum annexed
hereto
marked "A", subject to terms and conditions recorded
overleaf.’
On
the reverse of the master rental agreement detailed terms and
conditions are set out which govern the rental of any equipment
by
the respondent from Katlego. The master rental agreement also
provides that:
‘
The
description of The Equipment, serial numbers, and Rental charge
payable will be as agreed to in the Rental Addendums.’
12.6
Each of the written rental agreements is headed ‘Rental
Addendum – Annexure "A"’ with
the subheading,
‘Addendum No ---------- To the Master Rental Agreement.’
A description of ‘The Equipment’,
the serial numbers of
the equipment, the quantity of each item of equipment supplied and
the rental payable, is set out in each
written rental agreement. The
following clause is included, with provision for signature by the
parties to acknowledge its existence:
‘
The
terms and conditions of the Master Rental Agreement shall apply
hereto, as though specifically set forth herein.’
12.7
It is therefore clear that the rights and obligations of
Katlego and the respondent in respect of the hire of
particular
equipment by the respondent from Katlego, could only be determined by
reading the master rental agreement together with
each rental
agreement, applicable to the equipment in question. Each of the
written rental agreements could not stand alone and
had to be read in
conjunction with the master rental agreement.
12.8
As stated in
Natal Joint Municipal Pension Fund v Endumeni
Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 26:
‘
An
interpretation will not be given that leads to impractical,
unbusinesslike or oppressive consequences or that will stultify the
broader operation of the legislation or contract under
consideration.’
To
place an interpretation on the words, ‘. . . and the addenda
signed hereto . . .’ in the written cession agreement,
to mean
that only signed rental agreements in existence at the time of the
cession were ceded, would lead to impractical, unbusinesslike
and
oppressive consequences and would stultify the broader operation of
the master rental agreement, as well as the individual
rental
agreements concluded after the written cession agreement. This is
because the later rental agreements would be inchoate
and
unenforceable, because Katlego no longer possessed any rights, title
and interest in and to the master rental agreement, having
ceded them
to the appellant.
12.9
Counsel for the respondent, however, submitted that the clause in
each of the rental agreements which provided
that, ‘The terms
and conditions of the Master Rental Agreement shall apply hereto, as
though specifically set forth herein’
meant that the terms of
the master rental agreement were incorporated by reference into each
of the six rental agreements, by agreement
between Katlego and the
respondent. As a result these rental agreements were not inchoate and
unenforceable. The submission is
without foundation. Having divested
itself of all of its rights, title and interest in and to master
rental agreement in favour
of the appellant, Katlego could not
re-acquire them simply by agreement with the respondent. What was
required was a re-cession
of the ceded rights, title and interest by
the appellant as cessionary, back to Katlego, their previous holder.
There is no evidence
that the appellant as cessionary agreed to
transfer the ceded rights, title and interest it held in the master
rental agreement
to Katlego, at the time each of the later rental
agreements was concluded.
12.10
This interpretation is in accordance with the background and context
in which the written cession agreement
was concluded namely, the
prior oral cession agreement transacted in 2003 in terms of
which Katlego, according to the evidence
of Mr Coull, agreed to cede
to the appellant its rights, title and interest in future rental
agreements to the appellant. The vacillation
in his evidence as to
whether in terms of the prior oral cession agreement Katlego’s
rights in future rental agreements were
automatically ceded, or
whether this only occurred on the election of Katlego, cannot lead to
an unbusinesslike and impractical
interpretation being placed upon
the terms of the written cession agreement, read together with the
master rental agreement and
the six rental agreements in issue. In
addition, as pointed out in
Novartis
,
it is the role of the court, not witnesses, to interpret a document.
[13]
Accordingly, in terms of the written cession agreement properly
construed, the rights, title and interest of Katlego in each
of the
six rental agreements in issue, were validly ceded to the appellant
on the date on which each of these rental agreements
were concluded.
The appeal must accordingly succeed.
[14]
As regards the issue of costs, clause 18 of the master rental
agreement provides that:
‘
In
the event of Katlego instructing its attorneys to take steps to
enforce any of its rights under the agreement, The Customer shall
pay
to Katlego on demand all collection charges and other legal costs
which it incurs with its attorney, on the attorney and client
scale.’
In
Sapirstein and others v Anglo African Shipping Co (SA) Ltd
1978 (4) SA 1
(A) at page 14 E-F, the following was stated:
‘
I
do not consider it necessary to decide whether the Court retains a
residual discretion to refuse to enforce such an agreement
in certain
circumstances, or to deprive a successful party, relying on such an
agreement, or any portion of his costs, because,
whatever the
position may be, in the present instance no grounds exist for
depriving the plaintiff of such costs or any portion
thereof. From
these authorities it is clear, in my view, that the approach is not,
as suggested by Mr Louw, that the agreement
to pay attorney and
client costs will only be enforced where there is reprehensible
conduct on the part of the unsuccessful litigant
(the appellant in
the present appeal) but rather that the Court is bound to enforce
such an agreement unless the Court finds that
there is conduct which
justifies it in depriving the successful litigant (the respondent in
the present appeal) of part or all
of its costs.’
There
is no conduct on the part of the appellant which would justify an
order depriving the appellant of part, or all of its costs,
on the
attorney and client scale.
[15]
The following order is granted:
1
The appeal succeeds with costs on a scale as between attorney and
client.
2
The order of the Court a quo is set aside and replaced with the
following
order:
‘
(a)
The appeal succeeds with costs, on a scale
as between attorney and client.
(b)
The order of the trial Court is set
aside and replaced with the following order:
(i)
Judgment is granted in favour of the
plaintiff for payment of the aggregate amount of arrear
rentals, in
respect of the first to the ninth rental agreements, in the sum of
R479 257,35.
(ii)
Judgment is granted in favour of the
plaintiff for payment of the aggregate amount of future
rentals, in
respect of the first to the ninth rental agreements, in the sum of
R54 510,78.
(iii)
Interest is granted on the aforesaid
amounts, payable from the date of judgment being 27 November
2013 to
date of payment, calculated at the prescribed statutory rate.
(iv)
The defendant is ordered to pay the plaintiff's costs of suit on a
scale as between attorney and client.
(v)
The plaintiff is ordered to pay the defendant’s wasted
costs on the magistrates court party and party
scale, occasioned by
the adjournment of the trial on the 20 February 2013.’
___________________________
K
G B Swain
Judge of Appeal
Appearances:
For the
Appellant:
P A Botha
Instructed by:
Laubscher & Hatting
c/o
CK Friedlander Shandler Vloks, Cape Town
Kramer Weihmann & Joubert,
Bloemfontein
For the Respondent:
E A Limberis SC
Instructed by:
Cuzen Randeree,
Johannesburg
McIntyre & Van
Der Post, Bloemfontein
[1]
In
terms of an order granted by consent and without prejudice, the
respondent was ordered by the Magistrates Court to return the
equipment to the appellant.