Cox NO and Others v Scania Finance Southern Africa (Pty) Ltd; Scania Finance Southern Africa (Pty) Ltd v Cox NO and Another (17481/2013; 34264/2014) [2018] ZAGPJHC 484 (7 August 2018)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 17481/2013

34264/2014

In the matter between:

PIETTRUS JOHN COX N.O. First Plaintiff

MILET COX N.O. Second Plaintiff

JOMI TRUST Third Plaintiff

And

SCANIA FINANCE SOUTHERN AFRICA (PTY) LTD Defendant

SCANIA FINANCE SOUTHERN AFRICA (PTY) LTD Plaintiff

PIETTRUS JOHN COX N.O First defendant

MILET COX N.O Second Defendant

J U D G M E N T

UNTERHALTER J

INTRODUCTION

1. The Jomi Trust (“the Trust”) entered into ten agreements (“the January agreements”) on 18 January 2012 with Scania Finance Southern Africa (Pty) Ltd (“Scania”). The Trust is the Plaintiff in case number 17481/2013 and Scania the Defendant. In terms of the January agreements, Scania leased to the Trust certain vehicles. The January agreements were, to use

2. the language of Scania’s correspondence, not activated and terminated. On 13 April 2012, the Trust and Scania concluded ten

further agreements in terms of which Scania leased the same vehicles (“the vehicles”) (“the April agreements”).

3. The Trust made two claims against Scania under case number 17481/2013. First, it sought the restitution of payments made by the Trust in terms of the January agreements. Second, the Trust claimed that the April agreements were void and that the Trust had incurred expenses by way of licensing, maintaining and repairing the vehicles in the bone fide belief that the Trust was doing so in consequence of the April agreements. Since the agreements were void, Scania was unjustifiably enriched by the expenditure of the Trust on the vehicles.

4. Scania denied liability and brought a counterclaim. Scania pleads that the Trust failed to make payments due under the April agreements as a result of which Scania cancelled the April agreements. Scania seeks the payment of arrears and liquidated damages for the unexpired portion of the April agreements.

5. Under case 34264/2014 Scania instituted a further action to hold Piettrus John Cox and Milet Cox liable as sureties and co-principal debtors for the obligations of the Trust.

6. The two cases were consolidated.

7. In the course of the evidence before me, Scania sought to introduce documents: a certificate of balance and certain schedules substantiating the certificate. The Trust contended that it would need time to consider these documents. Counsel for the parties proposed that to avoid delay, the trial should proceed on the issues of liability, leaving over for determination the quantification of the claims. I ordered a separation of issues as requested so as to make effective use of the time set aside for the trial.

8. As a result of the evidence led at trial and the assessment by the parties of the cases that they wish to make, the issues for determination by me have crystalised and been helpfully reduced in number. I proceed to deal with each in turn.

THE TRUST’S CLAIM

9. Mr Cox was called to give evidence for the Trust. He is one of the trustees of the Trust. He is cited as the first plaintiff in the Trust’s action against Scania. He is also the first defendant in Scania’s claim based on the suretyships.

10. The following emerges from the testimony of Mr Cox and the relevant documents. In November 2011, Scania agreed to release certain

vehicles to the Trust on stated conditions. These conditions included the requirement that the Trust conclude finance agreements in respect of the vehicles with Scania and that the Trust accept the vehicles voetstoots. The Trust concluded the January agreements. In March 2012, Scania wrote to the Trust indicating that the Trust had failed to pay the deposit required under the January agreements. In consequence, Scania decided “not to give effect to the agreements and the agreements are not operative”.[1] Scania and the Trust then concluded the April agreements,

11. Mr Cox explained and the Trust’s pleaded case contended that the Trust had paid license fees in respect of the vehicles in terms of the January agreements. The license fees paid by the Trust were for arears (and any penalties) due, as well as for license fees payable for the future use of the vehicles.

12. There is some question as to the amount of the fees paid before the conclusion of the April agreement. In one e-mail dated 7 March

2012,[2] Milet Cox, writing for the Trust, records various payments made by the Trust. One item reflects an amount of R 73 828.10 paid in respect of license fees, of a total amount of R 672 405.30 paid by the Trust as at that date. Other documents reflect a total amount of license fees paid in terms of the April agreement as being R 244 137.40. These amounts are also in conformity with the case pleaded by the Trust. However, in evidence and argument before me reference has been made to an amount of R 270 599.90 paid as license fees under the Trust’s claim in respect of the January agreements.

13. It is unnecessary for me to resolve this matter because these differences can be determined as a separated issue of quantification,

should this be required. The issue before me is whether the Trust has a claim for the restitution of the license fees paid by it in terms of the January agreements.

14. This, I was informed by counsel for the Trust, Mr Becker, is the only claim that the trust pursues. This is so because the Trust accepts that other moneys paid by the Trust under the January

agreements were applied as a deposit for the benefit of the Trust under the April agreements. In consequence, no restitution is due. And as to claims made by the Trust in respect of payments made under the April agreements, these enrichment claims are abandoned. The Trust accepts that the expenses incurred by the Trust as to repairs and maintenance of the vehicles were for the Trust’s account under the April agreements. As to the license fees, the claim, I have been informed, cannot be sustained because this would amount to a duplication of the license fees paid under the January agreements.

15. I am far from clear that the factual basis of the abandonment of the claim for license fees in the Trust’s second pleaded claim is sound (since the license fees do not appear to have all been paid before the conclusion of the April agreements). But it is only the claim for license fees in the Trust’s first claim that I am asked to determine.

16. The Trust contends that it has a restitutionary claim in respect of the license fees paid by it in terms of the January agreements. The January agreements were rendered “non-operative “ by Scania. If the January agreements were thereby rendered void, then it is contended the Trust should be entitled to the restoration of the license fees that it paid.

17. To this Scania has two defences. First, it contends that the evidence is that all amounts paid by the Trust in terms of the January agreements were credited to the Trust for the purposes of the April agreements. The Trust has accordingly enjoyed the benefit of the payments it made and cannot claim these payments. The Trust accepts the logical force of this contention, since it has not persisted in claiming other payments credited to the Trust in respect of the April agreements. The Trust simply says that the license fees paid were not in fact credited to the Trust.

18. Scania’s second defence is that the Trust was liable to pay these license fees in terms of the April agreements, and cannot have restored to it payments that it had undertaken to make. The Trust submits that its liability to pay license fees in terms of the April agreements was confined to license fees for the use of the vehicles over the course of the lease, that is after April, but not in respect of arrears arising before that date.

19. Mr Cox was cross examined in respect of the Trust’s pleaded first claim as to how payments made by the Trust in respect of what was termed the first transaction (ie the January agreements) were credited to the Trust in respect of the second transaction (ie the April agreements). Mr Cox stated that it was a condition of the second transaction that payments made under the first transaction

were recognized as a deposit for the purposes of the second transaction.

20. In chief, Mr Cox was taken to the letter written by the Trust’s attorney of 20 November 2012 in which it is recorded that the Trust had by March 2012 paid an amount of R672 405.30 in respect of the agreements in respect of “so called deposits”.[3] This passage references the Trust’s own e mail, referred to above, in which the amount of R 672 405.30 includes license fees. Mr Cox simply said of this that the deposit for the first agreement was applied to the second agreement.

21. Mr Jeffery, the credit manager of Scania at the relevant time, was called to give evidence by Scania. In chief, he was taken to page 2 of Exhibit A which sets out a reconciliation of the Trust’s account with Scania. He indicated that the column reflecting credits were amounts paid by the Trust under the first transaction and these were all allocated to the credit of the Trust for the purposes of the second transaction. And so the trust had received the benefit of these payments.

22. Nothing in the cross examination of Mr Jeffery established that this conclusion and the accounts on which it was based were incorrect.

23. My assessment of this evidence is this: it does appear that the Trust was credited under the April agreements with the payments it made under the January agreements. First, the credits reflected on the second page of Exhibit 1 exceed R 700 000, and this Mr Jeffery made plain was all credited to the account of the Trust in respect of its liabilities under the April agreement. No evidence was put up to rebut this position. Second, Mr Cox in his testimony did not clearly state much less establish that the Trust was not given the benefit of the license fees under the April agreement. Third, it appears likely that, as Mr Cox said, the basis upon which Scania was willing to proceed with the April agreements was that amounts already paid by the Trust would be applied to the April agreements. I find therefore on the evidence that the Trust did receive the benefit of the license fee payments that it made. Those benefits accrued to it under the April agreements because the Trust was given credit for these payments. And consequently, its claim for restitution must fail.

24. Mr Cox did advance the proposition that ,at least in respect of license fees paid for arrears, these are not amounts for which the Trust is liable because the vehicles should have been leased with arrear license fees paid.

25. That however is a question of what the April agreements have to say on this score. In clause 36 of the General Terms and Conditions that form part of the April agreements, the lessee is obliged to obtain “all and any licenses …required for or in connection with the possession or use of the Goods”. This language is very wide. If it is required that to obtain a license to use the vehicles arrears must be paid then clause 36 would seem to me to place that risk on the lessee, however harsh that may be.

26. But it seems to me that my finding that the Trust received the benefit of the license fees that it paid suffices to dispose of the Trust’s claim for restitution. Once the Trust received this benefit, whether in paying the deposit for the April agreements or otherwise, it cannot seek to claim that benefit again by way of restitution upon the failure of the January agreements. If the arrear license fees were not payable by the Trust in terms of the January agreements, this is not a case the Trust has pleaded. Quite the opposite. The Trust’s particulars of claim state that the Trust was liable to pay the license fees.[4] But even if this was not so, the Trust obtained the benefit of the payments made and cannot be reimbursed again.

27. Accordingly, the Trust’s claim must fail.

SCANIA’S CLAIMS

28. Scania brings counterclaims against the Trust. Scania alleges that the trust failed to make any payments to Scania as it was obliged to do in terms of the April agreements. As a result of this breach, Scania cancelled the April agreements on 23 August 2012. Scania claims the amount of arrears due as at the date of cancellation. It also claims damages as a result of cancellation of the April agreements, being the payments to which it would have been entitled had the lease run its full course.

29. Following the separation of issues, at this stage, I must determine whether Scania lawfully cancelled the April agreements or whether, as the Trust alleges, the April agreements were rendered unenforceable for want of compliance with the National Credit Act 34 of 2005 (“the Act”). The Trust also contends that Scania was in breach of the April agreements and so Scania could not cancel the April agreements. Its efforts to do so constitute a repudiation which the Trust’s attorney accepted and thereby terminated the April agreements.

30. I consider first whether the April agreements are unenforceable for want of compliance with the Act.

THE ACT

31. Although the Trust in its pleadings relied upon a number of provisions of the Act, when it came to closing argument the case before me on this aspect of the matter had become greatly simplified. The Trust relied upon Scania’s failure to comply with section 129 of the Act. Scania does not deny this but says that the Act is not of application to the April agreements. Thus, the sole question for me is whether this is so.

32. The Trust submitted that the April agreements fall within the definition of a lease in the Act which constitutes one species of credit agreement to which the Act applies.[5] A lease is defined in Section 1 of the Act. The relevant portion of that definition for the purposes of what I have to decide is whether at the end of the term of the agreement, ownership of the property either passes to the consumer absolutely or passes to the consumer upon the satisfaction of specific conditions set out in the agreement.

33. In ABSA[6], the SCA held that a true lease, that is one obliging the lessee to return the thing hired at the end of the contract is not covered by the definition of a credit agreement as defined by the Act. Furthermore, whether an agreement falls within the definition of a credit agreement is a question of determining the correct interpretation of the agreement to which the strictures of the parol evidence rule apply.

34. And so it is to the April agreements that I must turn to determine whether those agreements fall within the statutory definition of a lease.

35. Clause 42 of the General Terms and Conditions provides, in relevant part, that at the option of the Lessor, the Lessee shall return the goods to the Lessor. This provision must be read with clause 9. Clause 9 states that the Lessor will remain the owner of the goods, notwithstanding any cession or transfer of rights. Further, nothing in the lease shall be construed as conferring any rights on the Lessee in the goods, other than the right to lease the goods on the terms of the agreement. What that entails is regulated principally in clauses 31 – 38 concerning how the lessee may make use of the goods hired under the lease. Clause 64 requires that upon cancellation for breach the lessee shall restore possession of the goods to the lessor.

36. These provisions, read together, make it clear that the April agreements make no provision for ownership of the vehicles to pass to the Trust, whether absolutely or on a specific condition. Ownership remains vested in the lessor. The lessee enjoys use rights. The option referred to in clause 42, upon a proper interpretation, is not an option, if exercised, for Scania to retain ownership. Scania’s retention of ownership is determined and confirmed by clause 9. Rather, the option in clause 42 is simply to give Scania the choice as to whether the goods should be returned to the lessor’s domiciium or another address that the lessor might nominate. The option concerns where the goods should be returned, not whether they should

be returned. Any other construction would give rise to the curious construction of the agreement that would oblige the lessee to

continue to keep the goods, absent the exercise by the lessee of the option to ask for their return. That would force the lessee to keep vehicles it may have no wish to store and would be inconsistent with the use rights conferred on the lessee that arise from the lease not having been terminated. Furthermore, the use rights conferred on the lessee carry quite onerous obligations. It would be a harsh interpretation of the lease that required the lessee to continue to discharge these obligations after the lease had been terminated.

37. These provisions of the April agreements do not bring the April agreements within the definition of a lease under the Act.

38. The Trust argued that the April Agreements were to be understood as financial leases, rather than operational leases. The April

agreements in the Transactional Schedule give ample indications that the nature of the agreement is a financial lease rather than an operational lease. I was also told that the provisions dealing with the payment back of VAT as a lump sum is also consistent with this characterization.

39. But even if the April agreements are financial leases that does not avoid the clear provisions of the General Terms and Conditions that were accepted to form part of the April agreements. Financial leases these agreements may be, but their terms do not pass ownership to the lessee either absolutely or upon satisfaction of a specific condition.

40. The Trust equated an operational lease with a lease simpliciter. But it does not follow that a financial lease is thus a lease that conforms to the definition of a lease in terms of the Act. The April agreements are financial leases that do not so conform, by reason of the clear provisions of the General Terms and Conditions to which I have referred.

41. Accordingly, I find that the Act is not of application to the April agreements and these agreements are thus not unenforceable by reason of Section 129 of the Act.

REPUDIATION

42. The Trust alleges that Scania breached a material term of the April agreements by failing to provide the Trust with original contracts as it was required to do, thereby precluding the Trust from securing the timeous repayment of VAT. This breach, it is said, excused

performance by the Trust of its obligations to perform. When, on 23 August 2012, Scania sought to terminate for breach, it was not entitled to do so. Its purported termination constituted a repudiation which the Trust’s attorneys accepted in November

2012. The Trust accordingly contends that Scania’s claims fall to be dismissed.

43. Mr Cox gave detailed evidence of the failure by Scania timeously to provide the Trust with original contracts, as required by SARS, so that the Trust could claim the repayment of input VAT. Mr Cox explained his efforts to prevail on Scania to provide the original

contracts. Scania did not do so for months. And treated Mr Cox’s requests with such robust disregard that according to Mr Cox he was forcibly removed from Scania’s premises. Whatever complaints Scania may have had of the Trust or Mr Cox it could not delay the timeous production of the original contracts. Scania only produced the original documents in October 2012 by which time Scania had already cancelled the April agreements and the claim upon SARS for the VAT appears to have been stillborn. Scania’s delay was a breach of the April agreements. Mr Cox also emphasised that securing this VAT repayment was of the first importance to the Trust because of the large amounts of money involved. The VAT repayments was material to the Trust’s ability to make good its financial obligations under the April agreements. I accept this evidence which was not in any significant way contradicted.

44. I find also that the April agreements are to be interpreted so as to require both lessor and lessee to take reasonable steps to permit the original contracts to be utilized so as to make a proper claim upon SARS for the VAT refund. That appears to me to be a proper interpretation of the meaning to be given to the language under the heading “NOTE” on page two of the Transaction Schedule. It is supported by the more general duty of contracting parties to co-operate so as to achieve valuable outcomes contemplated by the agreements; in this case the repayment of VAT.

45. The question is whether the failure by Scania to provide the original contracts timeously excused the performance by the Trust of its obligations under the April agreements?

46. The Trust says it was excused the performance of its obligations, and in particular the payments due under the April agreements, because of Scania’s breach of its obligation to provide the original contracts.

47. The exceptio non adimpleti contractus (“the exceptio”) is a defence that permits one party to a contract to withhold performance until such time as the other party has performed or tendered performance. It is a defence aimed at securing performance of the contract.

48. The trust did not plead the exception but says that it adequately raised the defence in evidence. Even if that be so, I am unable to find that the defence is available to the Trust.

49. The exceptio, as I understand the law,[7] requires that performance is reciprocal and that the obligation to perform is either simultaneous or requires the party against whom the defence is raised to perform first.

50. The Trust cannot meet these requirements. Scania’s obligation to assist in providing the original contracts was required to be performed, I find, within a reasonable time so as to make a claim for input Vat over periods 4.

51. Mr Cox testified that he held a meeting with representatives of Scania in June 2012 in the course of which Mr Cox requested the original documents because SARS would not accept copies. He was told that the originals would be provided.

52. However, by June 2012 three payments had already become due and payable by the Trust. Mr Cox acknowledged that the Trust had made no payments because he considered that until Scania had complied with its obligation to provide the original contracts, the Trust was excused its duty to make payment – an invocation of the exceptio.

53. In this Mr Cox was in error. By his own conduct, and on any interpretation of the April agreements, Scania was not required to provide the original contracts before or at the same time as the Trust was obliged to make payment in period one for the hire of the vehicles. Scania had a reasonable time within which to perform, and that time had certainly not expired by the time that the Trust was obliged to make its first payment. Accordingly, I cannot find that Scania’s performance must either have preceded or been simultaneous with the Trust’s duty to make its first payment or indeed even its second or third payment. That being so the exceptio is not available to the Trust. I am also doubtful that Scania’s performance is reciprocal with that of the Trust’s duty to make payment for the use of the vehicles, period by period. This much seems plain from the provisions of the General Terms and Conditions concerning payment (clauses 10 and 11).

54. Once that is so, upon the first failure by the Trust to make payment for its use of the vehicles in period one, the Trust was in breach. Clauses 63 and 64 of the General Terms and Conditions regulate breach. In essence, any breach of the agreement is deemed to be a breach going to the root of the contract, conferring upon Scania the right to cancel the agreement.

55. It follows that upon the failure by the Trust to make any payments, Scania enjoyed the right to cancel the April agreements. It exercised that right in August. But the right had accrued at the end of the first period as specified in the transaction schedule (see clause 10 of the General Terms and Conditions as to payment).

56. Although it may well be that by the time Scania’s attorney cancelled the April agreements for breach in August 2012, Scania was itself in breach of its obligation to provide the original contracts, that could not alter the incidence of the accrued right already enjoyed by Scania to cancel the April agreements. That is so first because, as indicated, the Trust was not excused of its duty to make payments; and second because Scania’s right to cancel had accrued before it could be said to be in breach of its obligation to provide the original contracts,

57. It follows that Scania’s cancellation of the April agreements was not a repudiation. It was following its rights. The Trust could have given Scania notice of breach in July 2012, but this would not have altered the rights already enjoyed by Scania.

58. The repudiation defence of the Trust fails, and Scania is entitled to the remedies that flow from its lawful cancellation of the April agreements.

THE SURETYSHIPS

59. In the pleadings, the defendants relied upon certain defences to Scania’s claims under the suretyships in case number 34264/2014. The trust does not persist in these defences.

CONCLUSION

60. I make the following findings. First, the Trust has not established that it has an entitlement to the restitution of the license fees that it paid in terms of the January agreements. Since this is the only claim that the Trust has persisted in, it follows

that the claims made by the Trust in its particulars of claim must be dismissed with costs.

61. Second, the defences pursued before me by the Trust to the counterclaims brought by Scania cannot prevail. Scania is accordingly entitled to declaratory relief that the Trust was in breach of the April agreements and Scania’s cancellation of the April agreements was lawful.

62. Lastly, since the defences offered in respect of the suretyship were abandoned, Scania is entitled to declaratory relief in respect of the liability of the sureties for the debts of the Trust.

63. The April agreements and the suretyship provide for attorney and client costs.

I make the following order:

1. For the purposes of this order, the plaintiffs in case no 17481/2013 are referred to as ”the Trust“ and the defendant as “Scania”;; and in case no 34264/2014 the plaintiff is referred to as ”Scania” and the defendants as “the sureties”.

2. The Trust’s claims under case no 17481/2013 are dismissed with costs.

3. The following declaratory relief is granted in favour of Scania in case no 17481/2013 and 34264/2014:

3.1 Declaring that the lease agreements (“the April agreements”) concluded between the Trust, and Scania on 13 April 2012 are not credit agreements as defined in the National Credit Act, 34 of 2005;

3.2 Declaring that Scania lawfully cancelled the April agreements on 23 August 2012 as a result of breaches by the Trust;

3.3 Declaring that the suretyship in respect of the debts of the Trust owing to Scania, signed by the sureties in their personal capacities, a copy whereof is annexure “POC 1” to Scania’s pleadings under case number 34264/2014, is valid and enforceable;;

4. The Trust and the sureties shall pay the costs of suit, jointly and severally, on an attorney and client scale, in respect of Scania’s counterclaims in case no 17481/2013 and Scania’s claims in case no 34264/2014.

___________________

David Unterhalter

Judge of the High Court

Gauteng Local Division: Johannesburg.

Date of Hearing: 1 August 2018

Judgment Delivered: 7 August 2018

Appearances:

For the Applicant: Adv. Becker SC instructed by R A Du Randt

For the Respondent: Adv. Potgieter SC instructed by Senekal Simmonds Inc

[1] Scania letter pleadings bundle 79.

[2] Bundle Vol 3 p 247.

[3] See Bundle vol 5 446 at 450 para 5.18.

[4] See para 6.6.

[5] See section 8(4)(e) read with the definition of a lease in section 1 of the Act.

[6] ABSA Technology Finance Solutions (Pty) Ltd v Michael’s Bid a House CC and Another 2013 (3) SA 426 (SCA).

[7] BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A) at 415.