Mzansi Auto Parts and Repairs (Pty) Ltd v Wesbank Limited (A Division of Firstrand Bank Limited) (D9955/2023 ; D9141/2023 ; D9140/2023) [2024] ZAKZDHC 96 (12 November 2024)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION, DURBAN

CASE NO: D9955/2023

In the matter between: MZANSI AUTO PARTS AND REPAIRS (PTY) LTD APPLICANT And WESBANK LIMITED (A DIVISION OF FIRSTRAND BANK LIMITED) RESPONDENT

CASE NO: D9141/2023

In the matter between: TASHEELS AUTO REPAIR CENTRE (PTY) LTD APPLICANT and WESBANK LIMITED (A DIVISION OF FIRSTRAND BANK LIMITED) RESPONDENT

CASE NO: D9140/2023

In the matter between: AUTO STAR TRADING (PTY) LTD APPLICANT and WESBANK LIMITED (A DIVISION OF FIRSTRAND BANK LIMITED) RESPONDENT

ORDER

I grant the following orders:

A. In respect of case no D9955/23:

1. The relief set out in the notice of motion in paras 2, 3, 4 and 5 are granted.

2. Costs are awarded against the respondent on scale B.

B. In respect of case no D9140/23:

1. The relief set out in the notice of motion in paras 2, 3 4 and 5 am granted.

C. In respect of case no D9141/23:

1. The relief set out in the notice of motion in paras 1 and 2 are granted.

JUDGMENT

GWAGWA AJ

Introduction

[1] The applicant in case number D9955/23 is Mzansi Auto Parts and Repairs (Pty) Ltd, a proprietary limited company duly registered and incorporated in accordance with the laws of the Republic of South Africa, with its registered business address at […] K[…] Street, Unit […], Daaepark, lmbonini Park, Shakashead.

[2] The respondent is Wesbank Limited (a division of Firstrand Bank Limited), a financial institution duly incorporated and regulated in terms of the banking laws of the Republic of South Africa , and having its place of business at […] First Place, Bank City, Cnr S[…] & P[…] Street, Johannesburg and having its regional offices at […] K[…] Dr, Umhlanga Ridge, Umhlanga.

[3] In another matter of similar nature under case number D9141/2023, the applicant is Tasheels Auto Repair Centre (Pty) Ltd in an application against the same respondent.

[4] Furthermore, the third applicant is Auto Star Trading (Pty) Ltd filed a similar application under case number D9140/2023. Counsel for the applicants and the respondent requested the court to consider the similarity of the orders that would be sought in all three applications mentioned above. I consider this approach as the most appropriate and pragmatic for reasons that will transpire when the court makes its order in all cases below.

Background of the case

[5] This is an application brought by the applicants against the respondent for the setting aside of the purported cancellation of a maintenance service RT46 contract. There were various letters of cancellation sent to all the applicants. In this matter, the letter of termination was dated 4 September 2023 addressed to the applicant in case number D9955/23.

[6] The respondent took an infamous decision by making allegations of fraud against the applicants and other companies. All three applications contain the same prayers in their notice of motions.

[7] There was a written maintenance service agreement, entered into between the applicants and the respondent respectively. The maintenance service agreement appears on page 50 of the applicants-founding affidavit marked as "MA2" in case number D9955/23.

[8] The terms and conditions of the contract are stipulated in paragraph 4 of the maintenance service agreement. The main terms of the contract was that the applicants were obliged to service and effect repairs to certain motor vehicles of the Department of Health, which were basically managed by the respondent, which were subsequently delivered to the applicant. In turn, the applicants would submit an invoice to the respondent for professional services rendered.

[9] The maintenance service agreement was signed on/about 21 June 2021. The first letter of termination was addressed to Ms Aneesa Naicker dated 22 of July 2022. The letter of termination dated 4 August 2022 was addressed to Brain Jacobs of Tasheels Auto and a further letter of termination was addressed to Mr Naidoo of Tasheels Auto. A further letter of termination was address to Auto Star Trading dated 3 August 2023.

[10] Such purported termination of the maintenance service agreement prompted the applicants to lodge an urgent application to this court for relief.

[11] In essence, what the applicants sought in the notice of motion was as follows:

2.1 "The Respondent's purported cancellation of the maintenance service contract

between the Applicant and Respondent on the 04th of September 2023, is unlawful;

2.2 The Respondent's purported cancellation of the maintenance service contract between the Applicants and Respondent on the 04th of September 2023, is invalid and is hereby set aside.

3 Alternatively, to paragraph 2 supra, that pending the determination of this application and/or an action to set aside the aforesaid purported cancellation by the Respondent, the operation of the Respondent's purported cancellation of the maintenance service contract between the Applicant and Respondent on the 04th of September 2023, be hereby suspended.

4 That the Applicant be directed to institute the action contemplated in paragraph 3 supra within thirty (30) days of the date of the grant of this order.

5 "That the Respondent be directed to pay the costs of the application."[1]

[12] All three applications were heard by this court on 29 July 2024. Having heard arguments from both counsel judgment was reserved.

[13] The main bone of contention which resulted in the termination of the maintenance service agreement was premised on certain payments which were made during the period of 2018/2019 to Amanda, who was previously employed by Transit Solutions, and secondly to Ashish who was also previously employed by Mercedes Benz. The aforesaid payments were allegedly made by a third party. Certain payments were made by Roodesh Ramparsad who was married to Revanie Ramparsad, who is the Director of Tasheels Auto Repair Centre. Such payments were made via E-wallet. The aforesaid payments were made before both Amanda and Ashish were employed by the respondent.

[14] Certain investigations ensued with regards to the payments. Disciplinary action was taken by the respondent, which led to the dismissal of Amanda and Ashish. However, after such disciplinary action, Ashish was exonerated of all charges at the CCMA. Amanda confirmed receipt of cash, but reiterated that she did not know Roodesh personally. However, despite all the satisfactory answers given by Amanda, the respondent went on to terminate the RT46 agreement between Tasheels Auto and the respondent. The respondent suspected that such payments were fraudulent in their nature. Despite the explanation and representations made to Mr Wilson who was representing the respondent, they were in vain. The respondent ultimately dismissed Amanda, who never challenged her dismissal. However, Ashish challenged his dismissal and was reinstated as per the decision of the CCMA. Subsequently the respondent reinstated him.

Case number D9140/2023

[15] In this matter Revanie Ramparsad, the sole director of Auto Star Trading (PTY) LTD brought an application against the respondent.

[16] The purpose of such comprehensive applications are solely based on the abrupt termination of a RT46 sale agreement, that was entered into by and between Auto Star Trading (PTY) LTD and the respondent on or about 22 October 2021.

[17] First letters of termination were served upon Auto Star Trading (PTY) LTD on 4 August 2022 by the respondent. Auto Star Trading (PTY) LTD sought legal advice and thus lodged the application for the setting aside of this cancellation of the agreement by the respondent.

[18] Investigations were conducted by the respondent which led to the dismissal of Amanda and Ashish, however Ashish challenged his unfair dismissal at CCMA and who was subsequently reinstated by the respondent.

Case number 09141/2023

[19] This application was brought by Revanie Ramparsad, the director of TASHEELS AUTO REPAIRS (PTY) LTD. Revanie who is married to Rof)desh Ramparsad in community of property. The nature of the application is also based on the unexpected or abrupt termination of the TR46 agreement based on suspicion of fraud against Applicant in case number D9141/23. The basis of such termination of the contract was that certain payments were made via E-wallet to Amanda and Ashish respectively.

[20] Revanie sought legal advice from her legal representatives and challenged the purported cancellation of the agreement. It became clear that the applications were similar in nature and it was prudent for the court to deal with them together.

Issue to be decided

[21] The issue that is to be decided by this court is whether the termination or cancellation of the maintenance service agreements, based on the alleged ground of fraud, was valid.

The law

[22] In Esorfranki Pipelines (Pty) Ltd and Another v Mopani District Municipality and Others,[2] Van Zyl AJA referred with approval to Lord Denning's dicta in Lazarus Estates Ltd v Beasley,[3] when he said:

'No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever; ...'

[23] In the case of ABSA BANK LTD v MOORE AND ANOTHER[4] the Constitutional Court stated:

' And Brusson cannot avoid being bound by relying on its own fraud to invalidate the loan agreement. Still less can a third party - the Bank - disregard the loan agreement because of Brusson's fraud. The maxim is not a flame-thrower, withering all within reach. Fraud unravels all directly within its compass, but only between victim and perpetrator, at the instance of the victim, whether fraud unravels a contract depends on it's victim not the fraudster or third parties.'

[24] The court in the case of Bonifacio and Another v Lombard Insurance Company Ltd held that following what was confirmed in Landmark, the only basis upon which liability on the guarantee could be avoided, would be if there was fraud on the part of the beneficiary. That would require proof that DBT had presented a written demand, which it knew misrepresented the true facts when it submitted the demand drawing on the guarantee. As has been said, fraud, if established, 'unravels everything'. No court will give effect to a fraud.[5]

[25] In the case of Marothodi Metsi (Pty) Ltd v Uthukela District Municipality[6] the court echoed the principle that motion proceedings are generally not designed to permit a court to easily make findings of fraud. Which is the same view that was held in the case of Commissioner for the South African Revenue Services v Sassin and others, when the court said the following:

"Our courts have consistently held that it would be unwise to decide a disputed issue of whether fraud was committed on motion proceedings without the benefits inherent in the hearing of oral evidence, including a discovery of documents, cross-examination of witnesses, and so forth."

Analysis

[26] Counsel for the respondent Advocate Rodel SC argued that the respondent validly cancelled the contract. He referred the court to clause 19.3 of the RT46 agreement which states that "the bank shall be entitled to immediately terminate the agreement and services, without prejudice to any other rights it may have in terms of this agreement or law, If fraudulent activity is suspected or committed by the service Provider and is proven in the sole determination of the bank... " This is what exactly led to the termination of all agreements by the respondent.

[27] The submissions by the applicants' counsel, Advocate Khan are that the respondent has failed to prove any fraud at all, in fact to be precise, the court was tasked to have judicial oversight on whether the respondent has proved all the elements of fraud or not. This is the main issue that the court is tasked with. Respondent's counsel was also in ad item with Advocate Khan about the judicial oversight given to the court to determine whether the respondent has managed to prove fraud or not. However, the main argument by the Advocate Rode/, was in reference to para 19.3 of the agreement which refers to suspicion of any fraud. He further argued that the respondent was entitled to exercise its discretion to cancel the agreement on

suspicion of fraud.

[28] The facts that are common cause are that certain payments were made to Amanda and Ashish. Such payments were made by Rhoodesh. At the time of the payments both Amanda and Ashish were not in the employ of the respondent. Amanda was employed by Transit Solutions and Ashish was employed by Mecerdes Benz.

[29] Both employees were subsequently employed by the respondent. Subsequently investigations ensued wherein it was discovered that Amanda and Ashish were paid certain payments by Rhoodesh. Both employees underwent disciplinary action. Amanda was dismissed and never challenged her dismissal. But Ashish who was also dismissed challenged his dismissal at the CCMA and was subsequently reinstated by the respondent. Subsequently, the respondent issued letters of termination of the agreements to the applicants. The applicants challenged such termination in court on an urgent basis.

[30] The urgent application was opposed and was adjourned on 21 September 2023 before Steyn J. The court order was as follows:

'IT IS ORDERD

1. The application is adjourned sine die;

2. The costs of the appearance on 21 September 2023 are reserved;

3. The applicant shall deliver its supplementary affidavit seeking urgent

4. interdictory relief by no late than 29 September 2023;

5. The Respondent shall deliver its answering affidavit, if any, to the supplementary affidavit detailed in paragraph 3 above, by no later than 6 October 2023;

6. The Respondent reserves its right to challenge the urgency of this application.'

[31] It is further common cause that the terms and conditions of the contract was the maintenance of the vehicles, wherein the applicant was obliged to repair the vehicles provided to them by the respondent, and in return, the respondent was obligated to remunerate the applicants for professional services rendered. The vehicles were collected or brought from the Department of Health, which became under the control of the respondent.

[32] According to the Oxford Dictionary, fraud is described as "wrongful or criminal deception intended to result into financial gain". In common law fraud is described as "the unlawful and intentional making of a misrepresentation that causes actual prejudice or which is potentially prejudice to another".[7]

[33] The court will now focus on clause19.3 of the agreement, which was relied upon by the respondent to terminate all agreements.

[34] It is common cause that the termination of the agreements were influenced by certain payments made to Amanda and Ashish by Rhoodesh , who was married to Revanie Rampasard who were both directors of Auto Trading and Mzansi Auto respectively. The respondent suspected that such payments were fraudulent in their nature. The last part of clause 19.3 states that such suspected fraud must be proven in their sole discretion by the bank. The question that must be asked, is whether fraud has been proved and determined by the respondent, bearing in mind that these payments were made whilst Amanda and Ashish were not in the employment of the respondent. The court should not be made to second guess proof of fraud. Whilst the interpretation of clause 19.3 is clear it is incumbent upon the respondent to supply such proof of fraud, even to a lesser degree, but at least proof must be furnished.

[35] Advocate Rodel quoted clause 19.3 and submitted that the respondent relied upon this clause to terminate all agreements. The court agrees with the principle applied in the case of Esorfraki mentioned above.

[36] Furthermore, in the case of Lazarus Estates Ltd v Beasley the court decided that fraud must distinctly pleaded and proved. However, reasonable grounds or facts must be established in order for such a contract to be terminated. In para 53 of the respondent's answering affidavit, it is stated that by Advocate Rodel that the respondent does not need to prove any fraud but any suspicion of fraud is sufficient to trigger such clause. In other words the respondent has a sole discretion to terminate such contract at any given time should there be any suspicion of fraud. The submission that the respondent has provided a reason for the termination of contract at para 5 of Roodesh Rampasard's founding affidavit which refers to an attachment marked MA1 (Page 47- 49), does not hold water or substance in proving fraud. Can clause 19.3 override the decision in Absa Bank? Mere speculation is not sufficient to cancel the agreement.

[37] I agree with the principle applied in the case mentioned in paragraph 25 supra. Where the court echoed the principle that motion proceedings are not designed to permit a court to easily make findings of fraud. In the case before me, the respondent should have proved fraud which could have justified termination of the contract.

[38] I am not persuaded by Advocate Rodel's submissions that the agreements were solely cancelled as result of suspicion of fraud without any tangible evidence.

[39] In my view, there were no tangible grounds that supported a suspicion of fraud which could have persuaded the respondent to abruptly terminate the agreements. I agree with the argument of Advocate Khan that such agreements were unlawfully cancelled by the respondent.

[40] The court is of the view that the agreements were abruptly or hastily cancelled by the respondent without having necessarily proved fraud. Most importantly, no fraud case was opened by the respondent against Amanda and Ashish, neither was there any criminal case opened against all applicants pertaining to fraud. Furthermore, Ashish is still employed by the respondent.

[41] Therefore, the court is inclined to grant the orders as prayed for by the applicants in the notice of motion.

Order

[42] I therefore grant the following orders:

1. The relief set out in notice of motion in paras 2, 3, 4 and 5 are granted.

DATE OF HEARING: 29 July 2024.

DATE OF DELIVERY: 12 NOVEMBER 2024

APPEARENCES

FOR THE APPLICANT -ADV KHAN INSTRUCTED BY K. MAHARAJ INC.

FOR THE REPONDENT - ADV RODEL

INSTRUCTED BY GLOVER KANNIEAPPAN INC.

[1] Mzansi Auto parts and repairs (PTY) LTD, Page 2-3.

[2] Esortranki Pipelines (Pty) Ltd and Another v Mopani District Municipality and Others [2014] 2 All SA 493 (SCA) para 25.

[3] Lazarus Estates Ltd v Beasley [1956] 1 QB (CA) at 712.

[4] ABSA BANK LTD v MOORE AND ANOTHER 2017 (1) SA 255 (CC) para 39.

[5] Bonifacio and Another v Lombard Insurance Company Ltd (247/2023) [2024] ZASCA 86 (4 June 2024)

[6] Marothodi Metsi (Pty) Ltd v Uthukela District Municipality 8216/2022P

[7] CR Snyman Criminal Law 7 ed (2020) at 461.