Mosselbaai Boeredienste (Pty) Ltd t/a Mosselbaai Toyota v OKB Motors CC t/a Bultfontein Toyota (A43/2021) [2021] ZAFSHC 286 (18 November 2021)

IN THE HIGH COURT OF SOUTH AFRICA

FREE STATE DIVISION, BLOEMFONTEIN

Case Number: A43/2021

In the matter of:

MOSSELBAAI BOEREDIENSTE (PTY) LTD APPELLANT

t/a MOSSELBAAI TOYOTA

and

OKB MOTORS CC T/A BULTFONTEIN TOYOTA RESPONDENT

CORAM: NAIDOO, J et De KOCK, AJ

HEARD ON: 15 NOVEMBER 2021

DELIVERED ON: 18 NOVEMBER 2021

JUDGMENT BY: NAIDOO J

JUDGMENT - APPLICATION FOR CONDONATION

[1] The appellant filed a Notice to Appeal against the judgment of the Magistrates Court, Bultfontein, but failed to file the record of

proceedings and other documents necessary to prosecute the appeal timeously. In terms of the Rules of Court, the appeal consequently lapsed. Before us, therefore, is an application for condonation for by the appellant for failing to prosecute the appeal timeously. The application for condonation is opposed by the respondent. Adv CD Pienaar represented the appellant, and Adv A Berry the respondent.

[2] The appellant sought an order in the following terms:

2.1 That condonation be granted for the applicant’s failure to comply with the provisions of Rule 50(4)(a), for its failure to file a notice contemplated in Rule 50(4)(a) for the assignment of a date for the hearing of the appeal within 40 days of noting of the appeal;

2.2 That condonation be granted for the applicant’s failure to comply with the provisions of Rule 50(7)(a), for the appellant’s failure to lodge with the Registrar two copies of the record od appeal within the time provided in terms of Rule 50(7)(a) read with Rule 50(4)(a).

2.3 That condonation be granted for the applicant’s failure to comply with the provisions of Rule 7(2), for the applicant’s failure to file a power of attorney, authorising the appellant’s attorneys to appeal, with the Rule 50(4)(a) notice.

2.4 An order reinstating the applicant’s appeal.

2.5 That leave be granted to the applicant to supplement the record of appeal delivered on 20 July 2021.

2.6 That the costs of this application be costs in the appeal.

[3] A brief background to contextualise this application will, perhaps, be useful. The appellant and respondent are both Toyota motor car dealers, the appellant trading in Mossel Bay and the respondent trading in Bultfontein in the Free State. The respondent required a specific motor vehicle, namely a Toyota Etios 1.5 Sprint. On enquiry, the appellant indicated that it had such a motor vehicle in stock and the parties entered into a verbal agreement for the vehicle to be purchased from the appellant. Payment had to be made into the appellant’s bank account before it would release the motor vehicle to the respondent. After e-mail and telephonic communications between the relevant employees of the appellant and respondent, the appellant’s sales manager, Mr Maritz, sent a copy of the invoice to Ms Marlie Steyn, a sales assistant employed by the respondent.

[4] The respondent effected payment of the purchase price of R159 353.76 into the bank account reflected on the invoice, after Ms Steyn requested Mr Maritz to furnish her with the appellant’s banking details. Proof of payment was then sent via email to Mr Maritz and the vehicle, in which the original invoice was placed, was released to the respondent and driven back to its premises in Bultfontein. A few days later it was discovered that the invoice received by Ms Steyn was in fact a fraudulent document on which the banking details of the appellant were substituted with someone

else’s banking details and it was into this latter bank account that the purchase price was deposited. I mention that the banking details on the proof of payment which Ms Steyn sent to Mr Maritz were also altered to now reflect the correct bank account number of the appellant and not the account into which the money was deposited.

[5] There appears to have been communication between the parties in an attempt to resolve the issue, but when this seemed impossible, the appellant issued summons against the respondent in the Magistrates Court for payment to it of the purchase price. The court ruled against the appellant, precipitating the lodging of the appeal against that judgment in this matter.

[6] The attorney who deposed to the Founding Affidavit in the condonation application, Francois Jonathan Harding Le Riche (Mr Le Riche) is the correspondent attorney from Bloemfontein, the instructing attorney, Mr Marais, being from Mossel Bay. With regard to the condonation in respect of the non-compliance with the provisions of Rule 50(4)(a) and 50(7)(a), Mr Le Riche set out in detail the difficulty in obtaining the transcripts of proceedings in the court a quo, which prevented him from filing a notice in terms of Rule 50(4)(a) for the assignment of a date for the hearing of the appeal, and to lodge two copies of the record of appeal [as required by Rule 50(7(a)] with the Rule 50(4)(a) notice.

[7] The judgment in this matter was delivered by the trial court on 17 March 2021, and Mr Pretorius instructed Mr Le Riche on 19 April 2021 to prosecute the appeal and to file the Notice of Appeal on behalf of the appellant. He provided Mr Marais with an estimate of the costs related to the transcript, based on a pro forma quotation from the transcribers. On 5 May 2021, Mr Marais confirmed the instruction to obtain a transcription. On 14 May 2021, Mr Le Riche requested the transcribers to provide an actual quote for the transcription, and when he received no response by 24 May 2021, Ms Greyling, a legal secretary at his firm followed up the matter and was informed by the transcribers that they had still not received the recordings from the Magistrates’ court and could not provide a quotation. Thus began a string of correspondence which ultimately resulted in a quotation being provided to Mr Le Riche on 25 June 2021.

[8] By this time, a month had elapsed and the time limits prescribed in the Rules were running out. He requested the record to be typed urgently, which attracted a higher tariff, and the promise was that the transcription would be done in 72 hours. Payment was made to the transcriber on 29 June 2021 and the expectation was that the transcript would be available by no later than 5 July 2021, which would still be within the 60-day period prescribed in the Rules for the proper prosecution of the appeal. The transcripts were only received on 19 July 2021 and it was subsequently discovered that parts of the record were missing and had not been transcribed.

[9] Ultimately, after the problems in relation to the transcripts were remedied, the record was filed in court and served on the respondent’s attorneys on 20 July 2021, which was four (4) court days outside the 60-day period I mentioned earlier. As I indicated, the appeal had, ex lege, lapsed, hence one of the prayers for relief vis the re-instatement of the appeal. I pause to mention that there were other problems with the record, necessitating condonation not just for non-compliance with the time periods prescribed in the Rules vbut other requirements as well, as reflected in the relief sought by the appellant. I will return to this aspect below. The respondent was clearly not prepared to accept this and thus this substantive application for condonation was brought by the appellant. The application is opposed by the respondent essentially on the basis that the appellant has not made out a case for condonation, in failing to sufficiently explain not only the delay in prosecuting the appeal but also in launching the application for condonation.

[10] With regard to the explanation in a condonation application (as in the present matter), for failure to comply with the Rules of Court timeously or properly prosecuting an appeal, it is well settled in our law that the applicant is required to give a full and candid explanation in this regard. The remarks of the court in Melane v Santam Insurance Co Ltd 1962(4) SA 531 (A), regarding the test for granting condonation, made almost 60 years ago, are still relevant today:

“In deciding whether sufficient cause has been shown, the basic principle is that the Court has a discretion, to be exercised judicially upon a consideration of all the facts, and in essence it is a matter of fairness to both sides. Among the facts usually relevant are the degree of lateness, the explanation therefor, the prospects of success and the importance of the case. Ordinarily these facts are interrelated, they are not individually decisive, save of course that if there are no prospects of success there would be no point in granting condonation. Any attempt to formulate a rule of thumb would only serve to harden the arteries of what should be a flexible discretion. What is needed is an objective conspectus of all the facts. Thus a slight delay and a good explanation may help to compensate prospects which are not strong. Or the importance of the issue and strong prospects of success may tend to compensate for a long delay. And the respondent’s interests in finality must not be overlooked.”

[11] A similar view was held in the matter of United Plant Hire (Pty) Ltd v Hills 1990 (1) SA 717 (A) at 720 E-G, where the court stated the position succinctly as follows:

“It is well settled that, in considering applications for condonation, the Court has a discretion to be exercised judicially upon a consideration of all the facts; and that in essence it is a question of fairness to both sides. In this enquiry, relevant considerations may include the degree of non-compliance with the relevant Rules, the explanation therefore, the prospects of success on appeal, the importance of the case, the respondent’s interest in the finality of his judgment, the convenience of the Court, and the avoidance of unnecessary delay in the administration of justice. The list is not exhaustive.

These factors are not individually decisive but are interrelated and must be weighed one against the other; thus a slight delay and a good explanation may help to compensate for prospects of success which are not strong”.

[12] From the explanation for the non-compliance with relevant provisions of Rule 50, mentioned earlier, it is clear that such was due, in large measure, to the delay on the part of the transcribers in preparing the transcripts of the court proceedings. There were certain lapses in time, which have not been fully explained, for example, although Mr Marais confirmed on 5 May 2021 that the transcripts should be ordered, Mr Le Riche only reacted on 14 May 2021 by sending a request for a quotation to the transcribers. In the Founding Affidavit, Mr Le Riche sets out the steps taken in following up with the transcribers the typing of the record and that it was established that there were difficulties in obtaining the court recordings from the Magistrates Court.

[13] The quotation was received on 25 June and the transcripts on 19 July 2021, in spite of payment of the higher tariff, on 29 June 2021, for the transcript to be done within 72 hours. The steps taken thereafter still resulted in the 60-day period being exceeded by 4 days. The respondent argues that the appellant did not furnish any explanation for the late filing of the application for condonation. There was email communication between the legal representatives of the parties from 3 August 2021 regarding the appellant’s inability to lodge the appeal record and obtain a date for the hearing of the appeal. In an email from the respondent’s attorney, dated 10 August 2021, indicating that only the court can grant condonation, it was obvious that a substantive application for condonation would have to be brought. However, further deficits and defects in the appeal record were discovered upon consulting with counsel, on 17 August 2021, for the purposes of the condonation application, which caused further delays in launching the application. The condonation application was ultimately launched on 26 August 2021.

[14] In spite of the delays occasioned as I have indicated, I would have been inclined to grant condonation if it was sought only in respect of certain aspects of non-compliance, namely the failure to apply for a date for the hearing of the appeal within 40 days of noting the appeal and the failure to file two copies of the record with the Rule 50(4)(a) notice, as required by Rule 50(7)(a). However, that is not the position in this matter, and the discovery of further deficits in the appeal record are indicative of tardiness on the part of the legal representatives.

[15] This court is obliged to consider a host of different factors, as established in a long line of cases, two of which I referred to earlier. I deal now with the prayer for condonation in respect of the failure to file a power of attorney with the Rule 50(4)(a) notice, as required by Rule 7(2). The Founding Affidavit is completely silent on this aspect, no explanation whatsoever having been furnished for this failure. A copy of such power of attorney was also not included in the papers before us. During Mr Pienaar’s oral address in court, the aspect of the power of attorney was raised with him, the court enquiring why the instructing attorney had not filed a supporting or confirmatory affidavit, tendering as explanation for the failure to file the power of attorney. The reply was that Mr Le Riche was tasked with prosecuting the appeal and took full responsibility for it

[16] At that stage, no mention was made of the fact that the power of attorney was in Mr Pienaar’s possession and bore the stamp of the Registrar of this court. During Mr Berry’s oral address to court, he raised the issue of the power of attorney, indicating that a copy had been served on the respondent’s attorneys, but was undated. It was at this stage that Mr Pienaar handed up a copy to the court, from which it appeared that the power of attorney was indeed signed but not dated. The filing sheet, under cover of which the power of attorney was served, is dated 1 September 2021. The power of attorney was served on the respondent’s attorney on 2 September 2021. The date stamp of the Registrar indicates that it was presented to the Registrar on 10 September 2021. It is unclear whether a copy was filed with the registrar, and why it was not included in the court’s file. No further explanation was forthcoming in respect of the date of signature of the power of attorney.

[17] While it is not necessarily the case that everything that was done prior to the signing of the power of attorney is a nullity, in the absence of any information or explanation of when the power of attorney was signed, what the signatory’s position is and whether he was authorised to sign the power of attorney, the question does arise whether the attorneys representing the appellant had the necessary mandate to prosecute this appeal. This is a significant factor and may well be dispositive of the entire matter. This is a factor that I bear in mind in my assessment of the evidence in this matter.

[18] I have outlined some of the problems in this matter, for which condonation is sought. The state of the record bears mention. Even after all the attempts at correcting the record, a part of the record was still missing, namely, the last part of the evidence of Mr Botha, the IT expert engaged by the respondent. Both counsel agreed, however, that the matter could proceed without that portion of the record as a report by Mr Botha was filed, and the appellant did not dispute his evidence. In the transcripts of the cross-examination and re-examination of Mr Estherhuizen, the appellant’s expert, the transcriber confused Mr Pienaar with Mr Berry, so where the record

should have indicated Mr Berry as the speaker, it reflected Mr Pienaar and vice versa. The appellant was aware of the problem, which was mentioned by counsel in the appellant’s Heads of Argument, dated 25 October 2021, yet no attempt was made to rectify the record before the hearing on 15 November 2021.

[19] The papers contained documents and portions of the court proceedings that did not belong in the appeal bundle and documents which should have been included were omitted, hence the prayer for condonation to supplement the record. The total responsibility for the appeal fell on the shoulders of the correspondent attorney, Mr Le Riche, who, according to him, was not involved in the matter prior to his being instructed to prosecute the appeal. As I indicated to Mr Pienaar in court, it is disturbing that the instructing attorney seems to have relinquished his responsibilities in this matter, to the detriment of the appellant and the inconvenience of the court.

[20] Prospects of success in the appeal, while not the only or overriding factor, is nonetheless a very important factor in determining whether condonation should be granted in the present matter. It is trite that the applicant will have to make out a case for condonation. In order to assess the strength of such prospects, traversing the merits to some extent, is necessary.

[21] The appellant’s case is that the respondent was negligent in paying the purchase price due to the appellant into a bank account without verifying that such account was in fact that of the appellant. In the circumstances, the defendant should bear the consequences of its negligence and pay the amount claimed by the appellant. The respondent, conversely, argues that the security in respect of the appellant’s computer system was compromised, through the negligence of the appellant, enabling the false invoice to be sent to the respondent. Mr Botha’s evidence was not disputed and his finding was that there was no breach in the security of the respondent’s system, was accepted by the appellant and the trial vcourt. He also found that there was no “middle-man” intervention where an outside person had hacked the appellant’s computer system. Therefore, the breach was on the appellant’s side and the latter ought to have foreseen that this kind of activity (hacking) could occur and cause damage.

[22] The respondent raised the defence of estoppel, and also filed a conditional counterclaim, on the basis that it paid the money into the wrong bank account as a result of the appellant’s negligence in allowing its computer system to be compromised. The court a quo analysed the evidence thoroughly and in great detail. The court also referred to relevant case law as appears from the court’s judgment and applied the law to the facts of this matter. The principles applicable to the defence of estoppel were properly and correctly set out by the trial court and correctly applied to the facts of this matter. The court concluded that the invoice with the incorrect banking details was the misrepresentation required to establish the defence of estoppel.

[23] In arriving at this conclusion, the trial court referred to the evidence of Ms Steyn, the respondent’s sales assistant , who testified that she sent an email to Mr Maritz (on 6 February 2018) requesting him to remember (to send) banking details (of the appellant). His response came the next day in an email, to which he attached the invoice on which appeared the banking details. Ms Steyn believed this to be the invoice which related to the vehicle the respondent was purchasing, that it was sent by Mr Maritz as it was from his email address and it was in reply to her email. From a copy of the email communication filed with the papers before us, it is evident that Mr Maritz’s email was part of the email thread and in reply to Ms Steyn’s email of 6 February 2021. The court a quo remarked that the respondent (defendant) believed the information to be correct, and acted thereon by making payment. The respondent will suffer prejudice if the appellant is not estopped.

[24] In further evaluating the evidence, the trial court found that the appellant bore knowledge of the cybercrime that was being experienced by Toyota dealerships, as it received the same letter in 2017 that the respondent did, and Mr Maritz conceded this knowledge. In further exploring the appellant’s blameworthiness, the court highlighted the concession by the appellant that the only way that Mr Maritz’s email could have been used, is if the person using it had access to the username and password relevant to that email account. The appellant also conceded that only a person with that kind of knowledge could have attached the incorrect invoice. In this regard, the court dealt pertinently with Mr Esterhuizen’s evidence regarding the password that was used to gain access to the Afrihost domain which hosted the appellant’s server. He testified that the password had not been changed even when employees left and new employees joined the company (the evidence revealed that the same password was in use since 2014).

[25] The court found this to be “a clear safety risk”, and that Mr Esterhuizen himself testified that, as a security measure, passwords are not given to the email users (such as Mr Maritz). At any given time, the three employees of Hashtag, which administered the appellant’s computer servers, data and the like, had the username and password that enabled them to access the appellant’s emails, electronic files, and other data. Logically, all former employees of Hashtag would also have knowledge of the login credentials and the

password for the appellant’s server. Hashtag is an IT company established by the owner of the appellant and which operates from the same premises as the appellant. Mr Esterhuizen, who was previously employed by the appellant and assisted with all IT related matters was then tasked with running Hashtag. He testified that it was only after the incident relevant to this matter, that the appellant upgraded its cybersecurity systems.

[26] The defendant took steps to investigate and examine its own computers, email etc to establish if its system was compromised, and Mr Botha found that it was not. The appellant did not properly investigate how entry was gained to its server and particularly Mr Maritz’s email, as it disposed of the relevant information that could have assisted in this inquiry a year after the incident in this matter. The disposition of the evidence was done by Mr Esterhuizen at a time after summons was issued against the respondent. The appellant further conceded that only the user or sender of the email account that Mr Maritz used could attach the documents to that email, that a third party had to have had the login credentials and password of that email account in order to attach the fraudulent invoice to that email, and that there was no way for the respondent to have known that the invoice was incorrect and had not come from Mr Maritz himself. I pause to mention that I am in agreement with the trial court’s rejection of Mr Estherhuizen as an expert and finding that his evidence regarding the security system of the appellant as improbable

[27] Based on the above evidence the court a quo concluded that the representation made by way of the incorrect invoice, sent from the

appellant’s email account to the respondent was a representation by conduct. The court further found that if the appellant had taken the necessary care with the password used to gain entry to the computer domain, it could have prevented its loss. The appellant was negligent and failed to put in place the security measures that a reasonable person would have, after being warned of the occurrence of cybercrime within its business environment. Its failure to do so was to its own detriment. The respondent had therefore successfully established, on a balance of probabilities, its defence of estoppel.

[28] I am unable to fault the trial court’s reasoning, evaluation of the evidence and the findings of the court. The grounds of appeal cannot, in my view be upheld. On a conspectus of all the evidence, the court a quo was correct in the conclusions it drew and in finding against the appellant. The appellant, would consequently not enjoy reasonable prospects of success on appeal. When all the factors I have considered and set out above are taken together, it is my view that it would serve no useful purpose to grant condonation in this matter. The tardiness of the appellant’s legal representatives in compiling the appeal record and in the prosecution of this appeal, the lack of any explanation regarding the validity of the power of attorney, coupled with the evident lack of reasonable or good prospects of success on appeal are the basis for this view.

[29] I should perhaps mention that Mr Pienaar relied on the unreported decision of the Limpopo High Court in Galactic Auto (Pty) Ltd v Andre Venter, case number 4052/2017, delivered on 14 June 2019 and published by SAFLII under reference [2019] ZALMPPHC 21, as authority for finding the respondent in this matter to have been negligent. This facts in Galactic Auto are similar to the present matter to the extent that it involved the sale of a vehicle by the plaintiff, a motor car dealer, to the defendant, a businessman. An email with the plaintiff’s proforma banking details was sent by the plaintiff to the defendant, The defendant made payment into the bank account reflected thereon. It was subsequently discovered that the document with the proforma banking details was intercepted and the banking details altered, so that the defendant paid the purchase price into the wrong bank account.

[30] The court found that the plaintiff’s computer system was secure and not the source of the breach, unlike the matter before us. The defendant was not only found to be an unsatisfactory witness but appears to have engaged a computer expert to examine his computer system, before the ‘scam’ relating to the proforma banking details was discovered, and he found some malware and unwanted programs on the defendant’s system, which were not running at the time. The court nevertheless found against the defendant who himself was an IT specialist and that the duty was on him to ensure the security of his computer system. This case is completely distinguishable from the current matter.

[31] In the circumstances I make the following order:

The application for condonation is dismissed with costs.

S NAIDOO J

I concur

D De Kock AJ

On Behalf of the Applicants: Adv CD Pienaar

Instructed by:

Oosthuizen Marais & Pretorius

c/o Phatshoane Henney Attorneys

35 Markgraaff Street

Westdene

Bloemfontein

(Ref: FJH Le Riche/cg/O1164/0010)

On Behalf of the First Respondent: Adv A Berry

Instructed by:

Badenhorst Attorneys

15 Groenvlei Avenue

Groenvlei

(Ref: PHH Badenhorst/OKB1/0007)