Absa Bank Limited v Evertrade 56 (Pty) Ltd (2012/20695) [2016] ZAGPJHC 205 (20 July 2016)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA,

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 2012/20695

In the matter between:

ABSA BANK LIMITED

Plaintiff

and

EVERTRADE 56 (PTY) LTD

Defendant

(REG NO: 2001/01503/07)

J U D G M E N T

MOSHIDI, J:

INTRODUCTION

[1] This is an action for restitutio in integrum. More specifically, the plaintiff has instituted action against the defendant for repayment of the amount of R601 950,00 (six hundred and one thousand nine hundred and fifty rand) which it paid to the defendant based on an alleged agreement, during January 2011. The alternative claim is for damages in the above amount which the plaintiff alleged are damages flowing directly and naturally from the defendant’s failure to deliver to it a 2010 model Land Rover Discovery 43.00 TD V6 S motor vehicle (“the vehicle”).

THE FACTUAL BACKGROUND

[2] The factual background leading to the litigation may be summarised as follows: during May 2010, at the request of the defendant, the parties entered into a Master Dealer Agreement (“MDA”), for the purchase of goods for on sale, lease and hire.

[3] The pertinent and material, express, alternatively, tacit terms of the MDA are, inter alia, as follows (clause 3.2):

“3.2.1 From time to time consumers will select goods from the dealer and the agent designate will assist the consumer in completing a finance application for submission to the bank;

3.2.2 If the bank approves the finance application, it will request the dealer to provide it with a full and proper description of the goods as well as the purchase price, to enable the bank to produce a quotation and pre-agreement statement;

3.2.3 If the consumer accepts the quotation and pre-agreement statement, the bank will request the dealer to invoice the bank for the goods;

3.2.4 Notwithstanding the issue of the invoice, no binding agreement to purchase the goods will come into force between the bank and the dealer until the consumer has accepted delivery of the goods in accordance with paragraph 6.1 below.

…

3.2.5.4 Once the consumer has signed a contract and the delivery note, the bank shall pay the invoice amount to the dealer.”

[4] In respect of the delivery of the goods to a consumer, the parties agree that:

“6.1 The dealer, acting as the agent of the bank for the purposes of delivery of the goods to the consumer, must ensure that the consumer has taken and accepted delivery of the goods. In this regard, the consumer must have signed a delivery note and a contract (both of which must be witnesses), as prescribed by the bank, before taking delivery of the goods.”

In addition, the defendant supplied various warranties to the plaintiff in order to convince the plaintiff to enter into the aforesaid

agreement with the defendant, which include, inter alia, the following:

“7.1 The delivery irrevocably warrants to the bank that:

7.1.1 The dealer or the agent designate will ensure that the consumer is made aware of its obligation to fully and truthfully complete the finance application and supply all the ancillary documents thereto, as required by the bank from time to time.

7.1.5 The contract was signed at the dealer’s premises that are registered as the business premises of the bank with the National

Credit Regulator, and that no consumer will have the right of termination as set out in section 121 of the NCA.

7.1.6 To the best of the knowledge [sic]), the dealer or the agent designate, the consumer has furnished the dealer with the true and correct information and the dealer has no reason to doubt the accuracy or correctness of same.

7.1.9 It will comply with the bank’s instructions and/or requirements pertaining to Financial Intelligence Centre Act, 38 of 2001, the Financial Advisory and Intermediary Services Act 37 of 2002 and/or any other legislation.

7.1.10 There are no material facts or circumstances relating to any contract, or the goods, or the consumer, that the dealer or the agent designate has not disclosed to the bank.”

[5] In respect of ownership as well as delivery, the defendant warranted as follows:

“7.2 The dealer further warrants that it was the owner of the goods immediately before the purchase of the goods by the bank, and that full and unencumbered ownership in the goods shall pass to the bank on delivery of the goods to the consumer, and that no person other than the dealer shall have any rights to the goods.

7.2 Upon delivery of the goods to the consumer, the dealer warrants that the goods:

7.3.9 Were delivered to the consumer or his authorised representative in accordance with the contract.”

[6] The defendant, in order to enter into the aforesaid agreement, indemnified the plaintiff as follows:

“8.1 The dealer hereby indemnifies the bank and keeps it indemnified against all and any loss, damage, expenses and costs, including attorney and client legal costs, that the bank may suffer arising out of or in connection with the dealer breaching any provision of any law, or any of the undertakings and warranties given by the dealer in this agreement.

8.2 If the dealer breaches any of the warranties or undertakings contained in this agreement, or if a consumer alleges that a dealer has breached any of the warranties … and the dealer fails to rectify the breach within 30 days of being notified of same, the bank shall have the right to:

8.2.1 Either claim all of its actual damages, or losses and expenses from the dealer under the indemnity in clause 8.1 above; or

8.2.2 At its election, require the dealer to pay the bank the outstanding capital balance under the contract in question, plus any and all costs and expenses including costs between attorney and client, which the bank may have incurred in respect thereof.”

[7] In respect of the issue of “risk” the parties agreed that:

“11. Notwithstanding anything to the contrary implied in law, the risk in the goods shall pass from the dealer to the consumer upon delivery of the goods to the consumer or the consumer’s signature of the contract, whichever the earlier.”

In addition the parties further agreed that:

“12.1 The dealer, in its capacity as agent for the bank, shall be vicariously liable for any failure by its agent designate(s) to comply with the provisions of this agreement.

12.3 No variation of any of the terms of this agreement shall be of any force or effect unless reduced to writing and signed by the parties.”

[8] It is not in dispute that the plaintiff complied with all of its obligations in terms of the MDA. It is further not in dispute that during January 2011, the defendant, as dealership, submitted to the plaintiff an application for credit facilities purportedly on behalf of one of the plaintiff’s clients, Mr Maurice Mpho Maile (“Maile”), and indicated that Maile thereby apply for financial assistance in order to purchase the vehicle. As a consequence of the documentation provided to the plaintiff by the agent designate, who acted on behalf the defendant, the plaintiff was contend that Maile indeed selected the vehicle from the defendant’s showroom. The plaintiff duly approved the finance application, and requested the defendant to supply it with the full and proper description of the vehicle, as well as the purchase price in order to enable the plaintiff to produce a quotation and pre-agreement statement.

[9] The plaintiff was advised that Maile accepted the quotation and pre-agreement statement, whereupon the plaintiff requested the

defendant to submit to it an invoice for the purchase of the vehicle. The defendant, acting through its in-house agent, completed the written instalment sale agreement, in terms whereof: Maile purportedly purchased the vehicle from the plaintiff for a total amount of R777 991,68 (seven hundred and seventy thousand nine hundred and ninety one rand and sixty eight cents); Maile purportedly undertook to pay interest on the aforesaid amount in the total of R180 297,68 (one hundred and eighty thousand two hundred and ninety seven rand and sixty eight cents) over the period of the instalment sale agreement, being 72 months, and Maile purportedly further undertook to repay the total amount owing to the plaintiff in monthly instalments of R12 374,34 (twelve thousand three hundred and seventy four rand and thirty four cents), the first whereof to be paid on 1 March 2011, and thereafter on the same day of each and every succeeding month until the full amount owing had been paid.

[10] Through the evidence led, as shown below, the plaintiff alleged that the defendant represented to it that, in concluding the instalment agreement, Maile acted in person, and that the plaintiff was represented by the defendant’s agent designate.

[11] It was not in dispute that, in terms of the instalment sale agreement, the ownership of the vehicle shall at all times vest in the plaintiff until payment of the purchase price in full. Further, Maile, in terms of the agreement, purportedly agreed to keep the vehicle in his possession and control and maintain the vehicle in a good and roadworthy condition and, not allow the vehicle to be used by another person. The defendant submitted to the plaintiff a document entitled “Acknowledgment of Delivery” which document purportedly indicates that Maile took possession of the vehicle on behalf of the plaintiff, and that he was holding possession thereof on behalf of the plaintiff, as owner thereof. It is not in dispute that the plaintiff complied with its obligations in terms of the agreement, and paid to the defendant the agreed amount for the purchase of the vehicle, being the aforesaid amount of R601 950,00.

[12] In the particulars of claim, and the evidence led, the plaintiff alleged that the defendant breached the terms of the agreement, in that, contrary to the representation contained in the document called Acknowledgment of Delivery, the defendant to deliver the vehicle to Maile; that Maile at no stage, signed any document either whereby he concluded the instalment sale agreement or, the application for credit facilities or, the Acknowledgment of Delivery document at the defendant’s premises. As a result of the defendant’s failure to delivery the vehicle to the plaintiff, the plaintiff alleged that it at no stage obtained full and unencumbered ownership in and to the vehicle, and that the amount (R601 950,00) paid by the plaintiff to the defendant for the purchase of the vehicle, ought to be repaid to the plaintiff. The plaintiff alleged in the particulars of claim, that the failure to delivery the vehicle to the plaintiff, either as agreed or at all, amounts to non-performance of the terms of the agreement and, a breach of the warranties given to the plaintiff by the defendant.

[13] In the plea, the defendant denied inter alia, that it breached any provision of the agreement, but relied on the plaintiff in concluding the sale agreement; the defendant pleaded that pursuant to submitting to the plaintiff the application for credit facilities, the plaintiff provided the defendant with a document, annexure “P1”. In this annexure, dated 11 January 2011, the plaintiff stated:

“We are pleased to confirm that the application for finance by your client whose details are set out below, has been approved, subject to the approval requirements and conditions specified below. Thank you for giving us the opportunity of being of service on this deal. We look forward to concluding the transaction. This offer is valid for 7 days from date of approval.”

Further that the plaintiff required from the defendant, the following documents: the client’s proof of income – bank statements/salary slip; copy of card driver’s licence; proof of comprehensive insurance; signed debit order; copy of bar coded identity document; proof of residential address (FICA requirements); and proof that all extras (radio, mag wheels, etc) are comprehensively insured. The defendant pleaded that it fully comply with the plaintiff’s requirements, and provided the above required documentation, and that it was the plaintiff who decided to approve the credit which it extended to the client, and not the defendant, and that it was the plaintiff who concluded the instalment sale agreement with the client. The defendant pleaded that it duly delivered possession of the vehicle to the client, obtained the client’s signature on the relevant annexures. The plea also denied that the defendant was liable to make payment of the amount claimed in the summons. The plea further alleged that, by preparing a quotation and/or instalment sale agreement, as well a release note and Acknowledgment of Delivery, the plaintiff represented to the defendant that: the defendant had conducted its enquiry; was satisfied that the client was in fact Maile; and that defendant was desirous to conclude the transaction for the sale of the vehicle with the customer. The defendant pleaded that it accepted the plaintiff’s representations, and acted on such by delivering the vehicle to the client, thereby parting with possession thereof. The vehicle has been lost and the defendant cannot again obtain possession thereof, and that accordingly, the plaintiff is estopped from pursuing any damages claim against the defendant,

since the defendant acted to its prejudice, by relying on the plaintiff’s representations.

[14] From the evidence in the trial, the most common facts are: the MDA regulates the relationship between the parties; the defendant, and in particular, the agent designated, Ms Jenny Botha (“Botha”), acted as plaintiff’s agent; one of the most crucial clauses of the MDA, relied upon by the defendant, is clause 7.1.6 thereof, as quoted above. Maile, an existing client of the plaintiff, at the time, factually did not apply for finance, did not seek to purchase the vehicle, and did not present either his documents or himself personally to the defendant; the plaintiff had Maile’s profile, including his contact details in its system; more particularly, the plaintiff, as banker, had Maile’s FICA documents (i.e. copy of identity document, driver’s licence, and proof of residence) at its storage facility; that during the transaction in question, the plaintiff did not contact Maile to verify his intentions; the defendant provided to the plaintiff the documents required by the plaintiff as stated above; Botha is an accredited and trained National Credit Regulator (“NCR”) certified agent, to serve all the banks doing business with the defendant; as a consequence, Botha’s responsibility is to verify the potential client visiting the defendant’s dealership; and most importantly, in this trial, that Maile visited,

selected the motor vehicle, and negotiated the sale and signed the instalment stale agreement at the defendant’s dealership, was not the plaintiff’s existing client, but an imposter who had stolen the identity documents of Maile and presented himself as Maile (“the imposter Maile”).

THE EVIDENCE

[15] The first witness for the plaintiff was Mr Gerard van Wyk (“Van Wyk”). I must, at the outset observe that his evidence was of little help in pertinently resolving the disputed issues. He was Absa Bank’s General Manager, Customer Care, at the time. He had no direct knowledge of the specific deal under discussion, but testified generally about the MDA and procedures related thereto. The MDA is the normal business process by which the bank contracts with an approved dealership. The agent designated on the dealership floor is usually the finance insurance manager and has to verify the identity of the customer in various ways. The customer has to sign the credit agreement at the dealership. The bank requests certain documentation from the dealership and such documentation is provided by the dealership, including identification book, (bar coded), salary slip, driver’s licence and proof of residence and insurance. In the absence of these documents, the bank would not process payment to the dealership. It is the dealership, and not the bank that conducts a face-to-face with the customer.

[16] As he did in cross-examination, Van Wyk testified that at the time of the transaction in question, Absa Bank had a profile of the real Maile. The profile included identification particulars, proof of residence, cellphone numbers, and other credit records, as an existing client of the bank. Despite this, the bank still relies on the dealership to property verify a new customer. Absa does not verify all the customers who approach the dealership to buy motor vehicles or goods.

[17] Van Wyk confirmed an affidavit made subsequently by the real Maile, who denied ever approaching the dealership and buying the vehicle or buying the vehicle on instalment sale agreement. At the time, Maile was employed by the South African Reserve Bank, as a Market Risk Manager, Financial Markets Department, in Pretoria. His affidavit confirmed that during April 2007 he lost his identity document with personal luggage whilst in transit to the United Kingdom. The photograph used by the fraudster Maile or imposter Maile on his identity book, was not his.

[18] In cross-examination, Van Wyk could not dispute that the documents presented by the customer at the dealership were presented to the South African police station who certified and commissioned the documents. Van Wyk was not directly involved in the transaction. He however opined that Absa Bank followed correct and normal procedures, that Absa Bank was misled by the dealership, but could not pinpoint exactly what wrong the defendant committed. Maile never took delivery of the motor vehicle.

[19] Further witnesses for the plaintiff were Mr Deon Kruger the Portfolio Manager at Absa (“Kruger”) and Mr Romain Grever, the motor vehicle sales administrator at Absa Bank (“Grever”). At the end of the evidence of these witnesses, signalling the close of the plaintiff’s case, the defendant launched, but abandoned an application for absolution from the instance. I need say no more about the application save that the abandonment was correctly made, in my view.

[20] Kruger, in essence, testified about events subsequent to the transaction. He received from the bank’s forensic

section, a forensic report about the incident. He and a colleague later approached the dealership for payment of the amount now

claimed, but were sent packing. He confirmed the instalment sale agreement in the trial bundle. Maile, the bank’s

client, was not a party to the agreement, but the fraudster or imposter Maile was. The latter was subsequently arrested by the police. However, the vehicle vanished apparently across the country’s borders. In cross-examination, he conceded that he had no independent knowledge of the transaction save for the contents of the forensic report. Transactions such as the present are done by the bank through an electronic system. Swift action was called for in order to clinch the deal. Although in this transaction, it was relatively easy for Absa Bank to verify the identity of an existing client, the bank relied on the dealership defendant to properly verify a new customer. Absa Bank was not insured for incidents like the present.

[21] Grever testified that his duties included the validation of documents exchanged with the dealerships, who vary and equate to about 100 in number. He did not send to the dealership the application for finance in this case. He conceded readily in cross-examination that he could not recall the transaction in question without reference to the documentation.

THE DEFENDANT’S WITNESSES

[22] For the defendant, two witnesses testified. These were M C Willemse, employed by the defendant in administration (“Willemse”), and Mrs Jenny Botha (“Botha”). Although their evidence was linked somewhat, Botha, as the accredited and designated agent, played a much more crucial role in the transaction. Willemse received from Botha the identity document and copies thereof of the customer, which he took to the police station alone. The police official, like Willemse, observed no fiddling or tempering with the documents. The police official duly certified the copies, which were returned to Botha.

[23] In cross-examination, Willemse showed that his knowledge of the process of verifying a customer as envisaged in FICA, was limited.

He, however, confirmed one important aspect of this case, this is that the vehicle, belonged, not to the dealership, but to an employee Mr or Mrs Prinsloo. This was common cause in the trial, as discussed more fully later below.

[24] When she testified, Botha confirmed that she was the financial and insurance manager at the defendant, acting as an agent of the plaintiff. She is duly registered under the National Credit Act 34 of 2005 (“the NCA”) and also successfully completed examinations by various banking institutions in order to know how to verify customers for the banks’ purposes, as envisaged in FICA. She confirmed her qualifications as reflected at pages 17 and 18 of bundle “C” of the trial bundle. These show that in terms of the National Credit Regulator (“NCR”), she is accredited by the various banks (including Absa, Nedbank and Wesbank), as agent, to, inter alia, “complete consumer applications for credit transactions, verify the identity and resident’s details of consumers as prescribed by the Financial Intelligence Centre Act 38 of 2001, to provide customers with a Credit Provider’s quotation and pre-agreement statements, to explain and conclude the signing of Credit transactions; and provide consumers with the Credit Provider’s dominant reason for credit being refused where applicable”. Indeed, these are crucial responsibilities in the context of this matter, as Botha was the only person at the dealership who had a face-to-face interview with the customer, and fraudster, imposter during the transaction.

[25] Botha, admittedly, completed the credit application forms, which she circulated to all the banks electronically, as was normal practice. The only time she saw the fraudster/imposter, Maile, was when he came into the dealership and signed the documents. She confirmed that the vehicle in question belongs to employees of the defendant, the Prinsloos. Thereafter and telephonically, she required the customer to submit his ID document, proof of residence and income documents etc. Thereafter and through an email, dated 10 January 2011, one Bongani Nyembee, purportedly acting on behalf of the customer “Moris”, forwarded to Botha copies of certain documentation. These included the identification book, driver’s licence and payslip purportedly issued by the South African Reserve Bank. The documents were forwarded to Absa Bank, without the cheque account details as Maile was an existing client of the bank. As stated above, on 11 January 2011, Absa Bank’s Ms Estha Swart emailed to Botha notification of the approval for finance. Botha testified that at that stage of the transaction, she had not yet viewed the original identification book.

[26] The customer completed and signed all the necessary documentation, including the credit application, the matrimonial declaration,

insurance, National Credit Regulator’s disclosures and authorities, Absa’s statement of quotation, the credit agreement, and Acknowledgment of Delivery of the vehicle and, initialled all pages, all on one day, i.e. 11 January 2011. This in the presence of Botha.

[27] Botha testified in cross-examination that she verified all the necessary documentation on the last-mentioned occasion and was

contend with what she saw. She had the one face-to-face interview with the customer as the bank’s do not do so. The

documents were emailed to her by the abovementioned Bongani Nyembee on 10 January 2011, on behalf of the customer, as the customer was reportedly on vacation. She conceded that the signature of the customer on pages 52 and 53 of bundle “C” and elsewhere were different. The reason for this was that the customer appeared to be nervous since he was buying a new motor vehicle. Botha said she was not bothered about the difference in signatures. On page 26 of bundle “C”, the email from Bongani Nyembee on 10 January 2011, made reference to the customer as “Moris”, as opposed to “Maurice”. Once more, Botha responded that she was not concerned since people sometimes also misspell her own name. Botha confirmed that the vehicle sold to the customer belonged to one of their sales staff, Mr or Mrs Prinsloo. It was however regarded as part of the dealer’s stock. Absa Bank made payment to the defendant in respect of the transaction in the amount of R601 950,00 on 12 January 2011. By the time she became aware of the fraud perpetrated by the customer, it was too late to reverse the deal. Botha received training under the NCA and FICA, and on how to know and verify a customer and documentation.

[28] From the above evidence, the following is common cause: the parties entered into the MDA in terms whereof the plaintiff

negotiated the right to purchase vehicles from the defendant, as a dealer, and for the plaintiff to obtain title in vehicles so

purchased by it from the defendant. It also allows the defendant to on-sell the vehicles to the defendant’s customers who then become the plaintiff’s customers on the basis of the instalment sale agreement subsequently concluded; the plaintiff paid and purchased a vehicle in question from the defendant, acting as its agent, but never received ownership thereto, and could not reserve ownership in the vehicle in any agreement with any client whatsoever; Maile, the existing client of the plaintiff, never intended to enter into an agreement with the plaintiff, and can hardly be described as a customer; the fraudster/imposter Maile transacted with the defendant, committed a fraud, and took delivery of the vehicle; he was subsequently arrested, but the vehicle is irretraceable.

[29] Prior to discussing other matters raised in this trial, as well the legal principles applicable thereto, it is my view that, one aspect is capable of resolving the present dispute, on the evidence presented, one way or the other, with relative ease. This is the plaintiff’s contention that the vehicle sold to it by the defendant was not the property of the defendant as dealer, but that of Mr/Mrs Prinsloo of the defendant. On this, the plaintiff contended that, as it did not know this, the sale was illegal. This contention, in its attractiveness, needs careful consideration.

[30] In essence, the plaintiff contends that it was either not told about the ownership of the vehicle, or it was represented to it, knowingly or otherwise that it was purchasing a vehicle belonging to the defendant.

[31] In clause 7.1.10 of the MDA the defendant warranted that ‘there are no material facts or circumstances relating to any contract or the goods …’ in respect of the ownership, the defendant warranted that it was the owner of the vehicle as quoted in clause 7.2 above. On this basis, the plaintiff contended that the defendant misrepresented to it that the vehicle belonged to it. See in this regard Hulett and Others v Hulett [1992] ZASCA 111; 1992 (4) SA 291 (A) at 309, which concerned the sale of shares. In Karabus Motors (1959) Ltd v Van Eck 1962 (1) SA 451 (C) at 453, the Court said:

“It is a general rule of our law that if the fraud which induces a contract does not proceed from one of the parties, but from an

independent person, it will have no effect upon the contract. The fraud must be the fraud of one of the parties or a third party acting in collusion with, or as the agent of, one of the parties (see Wessels Law of Contract, para. 112). In the present case there is no suggestion that Imperial Car Sales was the agent of plaintiff, nor that the plaintiff acted in collusion with Imperial Car Sales, nor that plaintiff was aware that defendant was labouring under any misapprehension induced by Imperial Car Sales. I cannot, therefore, on principle see that defendant has any defence to plaintiff’s claim.”

I must hasten to observe that the facts in the last-mentioned case were distinguishable from those in the instant matter. In the present matter, although the defendant acted as agent for the plaintiff, there is no conclusive evidence that the defendant made a fraudulent misrepresentation to the plaintiff. The fraud here rather relates to a third party, as discussed later. The principle of misrepresentation, however, remains applicable. See also Knot Investments 777 v Du Toit 2011 (4) SA 72 (SCA) at para [8].

[32] In addition to the above, sec 53A of the Regulations promulgated under the National Road Transportation Act 93 of 1996 (on which the plaintiff relied) provides that:

“No motor dealer shall display a motor vehicle for the purposes of sale on his/her premises unless such motor vehicle has been registered

into his or her name as dealer stock.”

In order to qualify as the stock of the dealer, the vehicle has to be entered into the database of the Department of Transport and

referring to the dealer as the titleholder and the owner. In the present matter, there was no such evidence tendered by the

defendant. On the contrary, the defendant’s witnesses, in particular Botha, admitted that the vehicle belonged to Mr or Mrs Prinsloo. Botha also admitted that the plaintiff was not informed that the vehicle belonged to a person or persons other than the defendant, as dealer. It was not dealer stock. The plaintiff was clearly under a reasonable misapprehension that it was buying a vehicle belonging to the defendant. See and compare Goldberg and Another v Carstens 1997 (2) SA 854 (C), at 585G-I. It follows therefore that the contract in terms of which the plaintiff purchased the vehicle from the defendant cannot be legal as it was in breach of the warranties, vitiated by a misrepresentation and, later compounded by the fraud of a third party. In my view, on this ground alone, the plaintiff should succeed in its action against the defendant.

[33] However, if I am incorrect in my above determination of lack of ownership on the part of the defendant, I believe that the plaintiff should also succeed on the other aspects of the matter.

[34] On the evidence presented, it is common cause that the customer that transacted with Botha of the defendant, perpetrated a fraud. Both parties disavowed the fraud, based on opposing justifications. In Union Government v National Bank of South Africa Ltd 1921 (A) 121 at 138, reference was made to the principle that:

“Whenever one of two innocent parties suffers by the act of a third person, he who has enabled such person to occasion the loss must sustain it.”

In Lebedina v Schechter and Haskell 1931 (W) 247 at 252, the Court said:

“It seems to me that it is the defrauded party’s reputation which puts an end to the contract and the Court merely decides that this party was entitled to put it to an end. In practice this appears to be recognised, because it is quite common in our Courts that where a party is suing on a cause of action which arises out of his having entered into a contract which is induced by fraud, he does not ask formally for rescission of a contract, but merely asks for such remedies as follow from a rescission of a contract. And this is even clearer in the case of a defence to a claim on a contract which is said to have been induced by fraud. It is very unusual for a defendant in such a case to ask that the contract should be set aside: he merely states that he has put an end to the contract, sets out his reasons, and claims that he is free from the consequences of the contract.”

In North West Provincial Government v Tswaing Consultancy CC 2007 (4) SA 452 (SCA) at para [21] the Court said:

“Once the province established the fraud, and its entitlement to rescind the contract, it became entitled to repayment in the absence of evidence affording a basis for a finding that a restitution would be unjust. See also Feinstein v Niggli and Another 1981 (2) SA 684 (A) at 700 (FH).”

[35] The role and function of Botha, as the defendant’s designated agent, was of vital importance. This was more so in the light of the applicable provisions of FICA, the NCA, and the Financial Advisory and Intermediary Services Act 37 of 2002 (“FAISA”). Botha, as a trained person in terms of the above legislation, and defendant’s agent was required to combat fraud, and to meticulously investigate and scrutinise documentation handed to her. This was crucial in order to correctly and properly validate transactions, and appropriately verify the identity of prospective customers, more particularly customers who come off the street, as happened here. In terms of the provisions of sec 163(2) of the NCA, the plaintiff was entitled to make use of the defendant, as its agent, in transactions of this nature.

[36] In addition, Botha was obliged in terms of the provisions of sec 21 of FICA to, “establish and verify the identity of the client; if the client is acting on behalf of another person, to establish and verify – (i) the identity of that other person; and (ii) the client’s authority to establish the business relationship or to conclude the single transaction on behalf of that other person; and (iii) if another person is acting on behalf of the client, to establish and verify (i) the identity of that other person; and (ii) that other person’s authority to act on behalf of the client”. Furthermore, the provisions of sec 22 of FICA, required the plaintiff, as represented by the agent, to keep records of the identity of the client.

[37] It is more than plain to me that Botha, did not comply with the above provisions in a number of respects. For example, she conceded that the plaintiff bank does not interview clients face-to-face. She did so here. She requested and received documentation from the customer telephonically and through emails. She only saw the client once when he collected the vehicle. When somebody else (Bongani Nyembee) sent documentation to her on behalf of the client, she clearly failed to pick up the red flag, when she reasonably should have. The email contained obvious mistakes. She failed to establish properly and in writing, the exact identity of Bongani Nyembee as well as his authority to act on behalf of the customer, who turned out to be a fraudster. She ought reasonably to have verified the information given to her that the customer was unavailable, allegedly on vacation, but was available immediately thereafter to take delivery of the vehicle. In my view, taking the original ID documents of the customer, and copies thereof, despatching same with a messenger (Willemse) to the police station to be certified, was plainly insufficient verification. Indeed the provisions of FICA, the NCA, and FAIS, impose far greater responsibilities on an agent. Botha, testified that she is the first person who interviews a prospective customer, and that it is the first person who can prevent fraud from taking place.

[38] The plaintiff has taken reasonable and sufficient measures to protect itself against becoming a victim of fraud through the provisions of the MDA. For example, the MDA contains vital clauses to ensure that the vehicle was delivered to it, represented by the prospective purchaser. This did not take place admittedly. The reliance by the defendant on the provisions of clause 7.1.6 of the MDA is of no assistance to it, and not well-grounded. Communication with the bank through emails also did not help to prevent the fraud. It follows that I must make a finding that in the present matter, on the overall evidence, Botha failed in her duties and responsibilities which allowed the fraud to be perpetrated by the customer, a third person. The plaintiff is an innocent victim. The contract is voidable at the instance of the plaintiff. The plaintiff’s claim, which is a restitution, was described in Johnson v Johadien 1982 (4) SA 599 at 605F as follows:

“The claim for restitution in integrum against the first defendant is a contractual remedy flowing from the cancellation of the contract.

The fraud which induced plaintiff to enter the contract rendered the contract voidable at his instance; plaintiff’s election to cancel gave rise to a claim for restitution in integrum which involved a repayment of the purchase price against the return of the vehicle.”

Of course, in the instant matter, it is common cause that the vehicle has disappeared beyond reach, and therefore makes it impossible for the plaintiff to tender return thereof to the defendant. In my view, this serves to make the plaintiff’s claim for restitution incredibly formidable. The claim for restitution must succeed. See Kerr The Principles of the Law of Contracts (6ed) at 331.

[39] Again, if I am incorrect in my determination of the above, I believe that the plaintiff must succeed in respect of the other issues in this matter. These contractual issues involve the non-delivery of the vehicle to the plaintiff, the suspensive condition of the agreement, the proper interpretation of the provisions of the contract and the estoppel defence raised by the defendant.

[40] For present purposes, and in the light of the above findings, it is necessary to deal briefly with only two of these issues. The first is the common cause fact that the plaintiff never received from the defendant delivery of the vehicle under the contract.

[41] It is trite law in contracts of this nature, that there should be performance by both parties of their respective obligations, unless there are grounds based on impossibility of performance. The plaintiff timeously paid the purchase price, but received no delivery. In this case the delivery of the vehicle should have occurred at the same time as the payment of the purchase price, unless it was some special agreement, such as in a sale of land agreement. See A A Farm Sales (Pty) Ltd t/a A A Farms v Kirklady 1980 (1) SA 13 (A) at 16G-H. The delivery that was required from the defendant was delivery of undisturbed possession (vacua possessio), accompanied with a guarantee against eviction, as argued by the plaintiff. See York and Co (Pty) Ltd v Jones NO (1) 1962 (1) SA 65 (SR) at 68. The delivery of the vehicle by the defendant to the plaintiff had to take place, in particular, in terms of clauses

3.2.4 and 6.1 of the MDA. In short, there was no delivery of the vehicle to the plaintiff. Neither was there delivery to Maile (the bank’s client), nor delivery by Mr and Mrs Prinsloo to such client. The defendant, through Botha, admittedly gave delivery of the vehicle to the fraudster/imposter Maile. The result is that the defendant breached the contract materially, and the plaintiff is entitled to the relief presently sought. In any event, under clause 8.1 of the MDA, the defendant indemnifies the plaintiff against all and any loss, damage, expenses, that the plaintiff may suffer arising out of the defendant’s breach of any law, undertakings and warranties undertaken in the agreement. I conclude therefore that, on the ground of the defendant’s

failure to perform by not delivering the vehicle to the plaintiff, the plaintiff must also succeed.

ESTOPPEL PLEA

[42] Again, if I am incorrect in my determination of the non-delivery of the vehicle aspect, I believe that the plaintiff should also succeed on the remaining issues. The defendant’s plea of estoppel was set out in paras [24] to [36] of its plea. Although the defendant was perfectly entitled to raise the estoppel plea in the manner in which it did, it is trite law that the onus of proving the essentials thereof rests on the defendant. See, for example, Absa Bank Ltd v I W Blumberg and Wilkinson [1997] ZASCA 15; 1997 (3) SA 669 (SCA) at 676E-F.

[43] As argued by the plaintiff, and correctly so, in my view, there are several obstacles in the way of the estoppel plea in this case.

I deal briefly with a few only. Firstly, there was no evidence led to show either that the defendant suffered any prejudice, and/or that the plaintiff was negligent. See Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A).

[44] Secondly, I have already made a finding that the sale of the vehicle was illegal, accompanied by fraud which the defendant could and should have avoided, and that the agreement is voidable at the instance of the plaintiff. In Trust Bank van Afrika Bpk v Eksteen 1964 (4) SA 402 (A) at 415-416, the Court said:

“The doctrine of estoppel is an equitable one, developed in the public interest, and it seems to me that whenever a representor relies on a statutory illegality it is the duty of the Court to determine whether it is in the public interest that the representee should be allowed to plead estoppel. The Court will have regard to the mischief of the statute on the one hand, and the conduct of the parties and their relationship on the other.”

In the present matter, coupled with the clarity of the evidence that the suspensive condition of the contract was not fulfilled, and the finding that the defendant breached the agreement by failing to deliver the vehicle to the plaintiff, it will plainly not be in the public interest to uphold the estoppel plea. On a proper interpretation of the MDA, it could never have been the intention of the parties that the plaintiff should pay the purchase price of the vehicle, and not received delivery thereof on the grounds advanced by the defendant, as shown by the evidence. It is established law that the doctrine of estoppel should not be used, or I may add, or misused, to make legal what would otherwise be illegal, and/or replace statutory requirements. See, for example, Provincial Government of the Eastern Cape and Others v Contractprops 25 (Pty) Ltd [2001] 4 All SA 273 (A). In addition, and as contended for on behalf of the plaintiff, correctly so too, the MDA contains a non-variation clause. In these circumstances, there is little room for a mechanical assertion that aligns on estoppel in order to mitigate the effect of such non-variation clause.

[45] A few other observations regarding the estoppel plea. It is common cause, as observed earlier in the judgment, that the defendant was not the lawful owner of the vehicle. This begs the question, on what basis the defendant suffered prejudice in the transaction if it truly acted on the representations allegedly made by the plaintiff. There was clearly no evidence presented that the alleged representations were accompanied by fault or negligence on the part of the plaintiff. An additional observation is that the estoppel plea concedes that the vehicle was in fact not delivered to the plaintiff’s client, Maile. This is telling in many ways, all of which militates strongly against the merits of the estoppel plea, and argument. The plain fact of the matter, proved by the evidence, is that the defendant, through Botha, was lackadaisical and cursory in inspecting the documents of the customer, and without seeing and identifying properly the customer. For all these reasons, the plea of estoppel must fail.

CONCLUSION

[46] Having had regard to all the issues raised in this trial, together with the totality of the evidence, and the defendant’s

arguments, I have come to the conclusion that the plaintiff has succeeded, on a balance of probabilities, to make out a case for the relief claimed. Botha, as a person trained in what she was supposed to do, should have been aware of the famous words used in some case law that “fraud unravels all”. If the defendant genuinely believed that the plaintiff was at fault, or acted negligently, during the transaction, it should have instituted action for damages, or pleaded a counterclaim. However, the futility of such action would lie in the fact that it would be against the fraudster/imposter in this case, who is in police custody. The costs of the action, which is a discretionary matter, should follow the result, and be on the scale as between attorney and client as provided for in the agreement.

ORDER

[47] I make the following order:

47.1 The defendant shall repay to the plaintiff the sum of R601 950,00 (six hundred and one thousand nine hundred and fifty rand).

47.2 Interest on the aforesaid amount a tempore morae at the rate of 15,5% per annum, capitalised monthly from 12 January 2011 to date of payment.

47.3 Costs of suit on the scale as between attorney and client.

__________________________________________

D S S MOSHIDI

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

COUNSEL FOR THE PLAINTIFF G M MEYER

INSTRUCTED BY

JAY MOTHOBI INC

COUNSEL FOR THE DEFENDANT J W STEYN

INSTRUCTED BY

BENTO ATTORNEYS INC

DATE OF HEARING

5 MAY 2016

DATE OF JUDGMENT

20 JULY 2016