Raqa v Hofman (A38/2009) [2009] ZAWCHC 90; 2010 (1) SA 302 (WCC) (29 May 2009)

REPORTABLE

Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA Western Cape High Court: Cape Town

CASE NO A38/20O9

In the matter between:

P K RAQA Appellant

and

Z J HOFMAN Respondent

Coram: Saldanha J et Binns-Ward AJ

JUDGMENT

delivered on 29 May 2009

BINNS-WARD AJ:

1] This appeal raises an interesting question as to the limits of the reach of the principles set out in Smit v Saipem 1974 (4) SA 918 (A), which recognise the right in given circumstances of a person other than the owner to claim compensation under the Aquilian

action for damage to property.

2] The appeal is brought against a judgment in Mitchells Plain magistrates' court in terms of which the appellant, as first defendant, was held jointly and severally liable with the second defendant to pay compensation to the respondent in respect of the costs of repairing damage to a motor vehicle. The vehicle had been damaged as a consequence of the negligent driving of the second defendant, who was acting in the course and scope of his duties as a taxi driver in the respondent's employ.

3] During argument it was conceded by the appellant's attorney, Mr Nacerodien, that it was necessary for us to decide only one issue, namely whether the magistrate had been correct in holding that the respondent had locus standi to sue in damages under the Aquilian action. This concession was wisely made, as in my judgment the other grounds of appeal were so lacking in merit as not to require discussion.

4] The relevant facts were essentially not in dispute at the trial. The respondent's friend, Mr Ngceza, wished to purchase a motor vehicle. He was unable to pay the purchase price in cash and he did not qualify for credit from a financial institution. Because of his friend's inability to raise finance, the respondent agreed to formally enter into an instalment sale transaction with a financial institution, as credit receiver, on the understanding between himself and Mr Ngceza that the latter would take delivery of the car and would pay the instalments and insurance premiums that on the face of it would have been the respondent's responsibility under the deed of contract in the instalment sale transaction.

5] Both parties understood that in the event of a default in any of the payments due under the instalment sale contract the credit grantor would look to the respondent, who in turn would look to Mr Ngceza. Indeed the respondent testified that if Ngceza failed to purge any default in servicing the instalments he would be entitled to take possession of the vehicle. At least a tacit understanding to that effect would be in accordance with the inherent probabilities because it may be accepted that in such a situation the respondent would be called upon by the credit grantor to surrender possession of the car to it, as usually occurs when there is an unremedied default by the purchaser under an instalment agreement. There was no evidence on the point but it would also be inherently probable that had the respondent returned the vehicle to the credit-grantor in circumstances where the resale of the vehicle generated more than the outstanding balance of the finance debt, the free proceeds would have been passed on by the respondent to Mr Ngceza. Anything otherwise would be inconsistent with the purely intermediary role the respondent described himself as fulfilling.

6] I think that Mr Greig, who appeared on behalf of the respondent in the appeal, was correct in characterising the respondent's right ever to become the possessor of the vehicle as no more than a contingent one in the overall context of the aforementioned contractual arrangements. It was contingent on the failure by Mr Ngceza to comply with the obligations he had undertaken to pay the instalments. The respondent's vested contractual right against Mr Ngceza on the other hand was founded on the obligation undertaken by Ngceza to make the repayments on the vehicle in terms of the instalment agreement that the respondent had signed. Certainly that was the position that prevailed at the time of the collision in which the vehicle was damaged and, as far as we are able to tell, at all times thereafter.

There was no suggestion in the evidence that the contingency which would trigger the respondent's contingent right to take possession of the vehicle from Ngceza had eventuated.

7] To sum up, despite his formal conclusion of what might in common parlance be called a hire-purchase contract with the credit grantor, the respondent had no intention of ever acquiring the vehicle as his own property, or of using it in any way for his own benefit. In fact the respondent readily conceded that he had not at any time been in physical possession of the vehicle. The instalment sale contract was clearly only a means whereby the respondent, acting as an intermediary, facilitated the purchase of the vehicle by Mr Ngceza. Whether or not the credit grantor was aware of the respondent's intermediary role is not apparent on the evidence, but on the view I take of the case nothing turns on that. The fact that the vehicle was registered and insured in the respondent's name was purely incidental to the financing of Mr Ngceza's purchase of the vehicle through the device of an instalment sale transaction subscribed to by the respondent. These incidences did not legally or factually connote eitherownership or possession by the respondent.1 On the contrary it is clear that, apart from any other consideration, the respondent at no time had the requisite intention to become the owner or possessor of the vehicle.

8] In my view the respondent described his position accurately enough as being the guarantor for the payment for the vehicle by Mr Ngceza, saying 7 only stand in for him [i.e. Ngceza] as security', and later, in answer to questions put to him in cross-examination:

'Q. So in fact you are not the owner of that car, isn't it so?

A. Since it's from the bank, I stand in for the person [i.e. Ngceza] at the bank, so the bank say it's mine.

Q. The bank says it yours, but it isn't yours, isn't it, it's his [i.e. Ngceza's] car?

A That's correct.'

The 'guarantee' that the respondent provided was his contingent undertaking of the obligations of a purchaser of the vehicle towards

the credit-grantor, underpinned by his credit-worthiness. It is difficult to find an entirely accurate label for the undertaking

because of the innominate character of his contract with Ngceza.2

9] It was pleaded on the respondent's behalf in the court below that he was the owner, 'alternatively the bona fide possessor of the said vehicle and bore all the risk in relation to any damage caused thereto'. As will be apparent from the facts described earlier, the evidence did not bear out the allegations of ownership or bona fide possession. It also became clear that Mr Ngceza, as possessor, was in fact, in terms of his agreement with the respondent, the bearer of risk in relation to the vehicle while it was in his possession.3 4Evidence demonstrating the true situation was elicited by Mr Nacerodien for the appellant in his cross-examination of the respondent and Mr Ngceza. On the basis thereof he contended before the magistrate that the respondent lacked standing to institute the action.

10] The issue of locus standi was dealt with in the magistrate's judgment as follows:

'The plaintiff has a sufficient interest in the matter to claim the relief he seeks.

The plaintiff has testified that he signed the instalment sale agreement and it was admitted as Annexure D". The document marked exhibit "A" which is an extract from the e-natis system indicates that the plaintiff is the owner of the vehicle. The registration documents was submitted indicating that the plaintiff is the owner of the vehicle. These documents were discovered and submitted to proof (sic) ownership. No evidence was adduced by the defence to disprove ownership.

Where property is damaged the person normally entitled to sue is the owner. In Smit v Saipem....it was held that hire purchasers was entitled to sue by virtue of his possession of the damaged property.

..Although not in possession of the vehicle the plaintiff clearly has an interest in the matter as he is a risk bearer.

I cannot imagine that a contract between the plaintiff and the finance company would not have a provision that all risk of loss or damage vested in the plaintiff. The plaintiff therefore would most certainly carry the risk of loss.

The plaintiff has a vested interest in the matter and has thus the locus standi as required by law.

It is evident that the magistrate thought it unnecessary to characterise the nature of the respondent's 'interest' in the context of all the evidence, or to analyse whether it was sufficient to give him standing in a claim formulated under the actio legis Aquiliae. She appears to have regarded the respondent to have been a standard case example of a hire-purchaser: the evidence showed clearly that that was not the case.

11] In Smit v Saipem the plaintiff sued for compensation consequent upon damage caused by the defendant to certain immovable property consisting of three erven. In his particulars of claim the plaintiff alleged that he was 'in civil possession' of the properties by virtue of three separate deeds of sale which provided that possession and occupation was given to the plaintiff-purchaser on date of signature, from which date all risk of damage to the properties passed to the purchaser.

12] The defendant in Smit v Saipem pleaded to the claim as follows:

'In the event of the above Honourable Court finding that the plaintiff was at all material times to this action in civil possession of the said erven, having acquired same by virtue of the deeds of sale referred to in ... plaintiff's declaration upon the terms set out... [therein], all of which is denied, then the defendant states that, as the plaintiff was not the owner of the said erven at all material times to this action, it, the defendant, is not in law liable to the plaintiff in respect of the matters referred to in . the plaintiff's declaration as a result thereof or any damages.'

Wherefore the defendant prays that the plaintiff's claim be dismissed with costs.'

13] The plaintiff in Smit v Saipem noted an exception to the defence pleaded in the terms set out above. The relevant grounds of the exception were framed as follows:

'(a) In the event of the above Honourable Court finding that plaintiff was at all material times to this action in civil possession of the said erven, having acquired same by virtue of the deeds of sale referred to in ... the plaintiff's declaration upon the terms set out ...[therein], then :

(b) the fact that plaintiff was or is not as yet the owner of the said erven does not constitute or disclose a defence in respect of the matters referred to in ..plaintiff's declaration and the

damages flowing as a result thereof.'

14] Jansen JA formulated the question before the court as being whether the plaintiff, as lawful possessor ('regmatige houer') of the properties in his own interest, enjoyed a right of recovery against the defendant who had damaged the properties - and in

particular in respect of the consequent diminution in value of the properties.5 The learned judge of appeal proceeded with an extensive and illuminating historical review of the development of the law in thisconnection. He took as his point of departure a passage in De Groot's (Grotius) Inleiding6 at 3.37 and van der Keessel's explanation thereof in his Praelectiones7 at 3.37.5 (Prof. H.L. Gonin's translation8) as follows:

'Die strekking daarvan is, dat of die saak nou verlore gegaan het, of verwyder is of beskadig, nie alleen die eienaars wat die blote of die nuttige eiendomsreg het, 'n aksie kan instel nie, maar almal wat belang daarby het,

soos bv. 'n bruiklener, skuldeiser of besitter, vir sover hulle belang strek.'9

15] For present purposes the qualification added by Jansen JA to the aforementioned statement by van der Keessel is of critical

significance. The learned judge said 'In gevalle van saakbeskadiging ken de Groot dus n skadevergoedingsaksie teen die dader toe aan onder andere persone met bloot persoonlike

regte ten opsigte van die saak "voor zoo veel hy door hem is verkort" of, soos deurvan der Keessel gestel, "virsoverhulle

belang strek". Vermoedelik aanvaar de Groot egter dat diegeneaan wie hy n verhaalsreg toeken, in elke geval ook houer van die saak is.'10 (my underlining, inserted for emphasis).

16] Jansen JA found it convenient, notwithstanding the peculiar facts of the case before the court, to address the question with regard to the analogous position of a purchaser under a hire-purchase contract. In this regard (excluding what might otherwise be the position were any of the parties insolvent), the learned judge observed that having regard to the purchaser's financial obligation to the seller in respect of payment of the purchase price, which remained unaffected by the fate of the res vendita after delivery, the seller's economic interest in the true sense was not in the goods, despite its ownership thereof, but rather in the payment of the purchase price by the buyer. Seen in that way the claim for the purchase price, and not the res vendita itself, was the hire-purchase seller's 'real asset' (Afr. 'werklike bate').Referring to Professor Boberg's contribution on 'Delict in the 1972 Annual

Surrey11, Jansen JA remarked that it was therefore not surprising that it was considered desirable that a hire-purchaser should be afforded a right to claim compensation, based on the diminution of value of the goods, from a person who wrongfully damaged the res vendita. The question, the judge said, was whether our law was sufficiently 'supple'12 to provide the hire purchaser with the remedy in delict that was, in the context of the (then) recently manifested phenomenon of the large scale conclusion of hire-purchase contracts (nowadays, technically labelled 'instalment agreements'13), regarded by commentators like Boberg as desirable.

17] It is unnecessary for present purposes to rehearse the historical analysis undertaken by Jansen JA to arrive at the affirmative answer he gave to the questions identified in the passages of the judgment mentioned above. It is sufficient to state that the learned judge concluded that although our law had adhered to the principle that a purchaser had no right to a claimunder the actio legis Aquiliae before it had taken delivery of the res vendita,14 there were nevertheless examples in our jurisprudence which established recognition of the right of a possessor, who was not the

owner, to a remedy premised on that possessor's negative interest in the property - in this regard, the judgments in Melville v Hooper 3 SC 261 (a claim by a caretaker of livestock, who was responsible to the owner for their good condition), and Spolander v Ward 1940 CPD 24 (a claim by a borrower of goods for use, who was responsible to the hire-purchaser thereof for their safe return), were cited.15 Significantly, the learned judge of appeal considered it appropriate16 to expressly distinguish the position of the claimants in the cited cases from that of an insurer. The distinction was explained on two bases; firstly, the discrete character and effect of the contract of insurance, and secondly - and of particular significance to the current case - on the ground that an insurer is not the possessor (Afr. 'houer') of the insured goods.

18] The subsequent judgment of the Appellate Division in Refrigerated Transport (Edms) Bpk v Mainline Carriers (Edms) Bpk 1983 (3) SA 121 (A) also proceeded on the basis of an acceptance by the court that the extension of the Aquilian remedy to a claimant who was not the owner of the property in question was premised on the presence of the dual attributes of possession of, and risk-bearing responsibility by, the claimant in respect of the property in question.

19] Why then does it appear to have been fundamental to Jansen JA's approach, in upholding the exception to the defendant's plea in Smit v Saipem, that the plaintiff was the possessor of the property in question as well as the bearer of the risk of any damage to, or loss thereof? It seems to me that the answer lies in the fact that absent either ownership or risk bearing possession, with their connotation of a direct interest in the patrimonial value of the affected property, any delictual claim related to the loss of or damage to the property would have to be premised on a derivative interest, which in the vast majority of instances would be founded on a contractual relationship with the owner or possessor, and would properly be one for compensationfor a loss of or diminution in the value of the derivative interest, rather than for a loss of or diminution in value of the property as property. The damages in such a claim would often be for pure economic loss, and in any event might be affected by issues of remoteness.17 It is not necessary to investigate the possible availability of such a claim in this case because the claim was not formulated on that basis. In Smit v Saipem it was material to the decision to recognise standing ex lege Aquiliae that the damage, and associated diminution in the value of the property, affected the claimant directly (Afr. 'regstreeks'18)

20] In the current case the claim was pleaded as a classical Aquilian action predicated on allegations of physical damage to property and the attendant patrimonial consequences. In accordance with that approach, it was quantified with reference to the consequent

diminution in the value of the property; of which the cost of economic repair just happened to afford the most appropriate measure.

There was however no congruence between the pleaded claim and the respondent's contingent interest in the property. Indeed, as Mr Grieg contended (albeit inan endeavour to support a different proposition), the position of the respondent vis a vis the vehicle was, apart from the absence of any ownership interest therein, materially analogous to that of the seller in a hire purchase transaction with Mr Ngceza, by extension of reasoning, being essentially akin to the hire purchaser. As soon as that much is recognised, it follows, using Jansen JA's reasoning in Smit v Saipem,19 that the respondent's real interest or asset ('werklike bate') was his monetary claim against Ngceza, and not the motor vehicle as an item of property. The damage to motor vehicle had no effect on the existence or the value of the respondent's monetary claim. It might have affected the value of what he considered to be his security for the claim, but in law the only manner in which the vehicle could have stood as effective security in the circumstances would have been by way of a pledge, which of course would have given him possession. Absent possession the respondent had no cognisable proprietary interest in the vehicle.

21] In the circumstances, apart from the fact that he was not the owner or possessor ('houer') of the property, the risk of damage to the vehicle formally undertaken by the respondent in terms of the instalment sale contract subscribed to by him in the circumstances

described earlier had in fact always laid with Ngceza. As a result of the instalment sale contract and the coterminous and inextricably

related agreement between himself and Mr Ngceza, the respondent had a contingent financial exposure to the credit-grantor under the instalment sale transaction and a concomitant contingent financial claim against Ngceza. The respondent's position was entirely

distinguishable from that of the borrower for use, creditor with possession, or possessor in the passage from the Praelectiones quoted in paragraph [14], above. He did not fall within the class of claimant to whom, in accordance with the principles stated in Smit v Saipem, a classical Aquilian action would be available.

22] Insofar as the respondent's evident economic interest in the payment by Ngceza of the purchase price is concerned, no allegations of any loss in that regard were pleaded; and indeed the evidence showed none was sustained. In the premises I consider that the contention that the evidence showed that respondent lacked locus standi was well-founded.

23] I would therefore uphold the appeal with costs; and set aside the order of the court a quo, replacing it with an order dismissing the claim with costs.

A.G. BINNS-WARD

ACTING

JUDGE OF THE IGH COURT

I agree and it is so ordered.

V.

SALDANHA

Judge of the High Court

1 Cf. Akojee v Sibanyoni 1976 (3) SA 440 (W) at 442D.

2 Mr Grieg described the respondent's role, not inappositely, in colloquial language as having 'fronted' for Ngceza.

3 In fairness to the witnesses I should mention that these discrepancies did not reflect adversely on the impression of the respondent's

evidence, or indeed that of Mr Ngceza, in the witness box as palpably frank and honest. I suspect that the inaccuracy in the

pleading of the claim was in large measure due to its probably having been brought in the respondent's name by the insurer of

vehicle under the doctrine of subrogation.

4 It should be pointed out that the position of Ngceza as risk bearer was distinguishable from that of the respondent in Commercial Union Insurance Co of SA Ltd v Lotter [1998] ZASCA 103; 1999 (2) SA 147 (SCA). In that case Farlam AJA (as he then was) is reported (at p.155F) as having stated 'In terms of the adage res perit domino the risk of an object's being damaged normally rests with the owner. It can pass from the owner to another by virtue of some legal rule or by contract (for example in the case of sale when the sale is perfecta), but I cannot see how it can pass from a non-owner to someone else merely by virtue of a contract between them as against a third party who was not a party to the contract.' That dictum should not in my view be understood to denote that in a case like the current one, in which the credit-grantor was the owner of the vehicle and had passed the risk of damage to the respondent, that it was not competent for the respondent in turn to effectively transfer risk and possession to a third party like Ngceza. The distinguishing feature was that it was discovered that the vehicle in issue in the Lotter case had not in fact been owned by the credit grantor when the latter purported to lease it with transfer of the risk therein to the lessee. In the Lotter case, unlike the current matter, the risk of damage had never been transferred by the owner.

5 Ibid at 926H: 'Die vraag is dus of die eiser, as regmatige houer van die drie erwe in eie belang, 'n verhaalsreg het teen die verweerder as dader wat die saak onregmatiglik beskadig het - en wel ten opsigte van die gevolglike waardevermindering van die erwe.'

6'Inleydinge tot de Hollantsche rechtsgeleertheit' (pub. The Hague 1631)

7 'Praelectiones iuris hodierni adHugonis Grotii Introductionem ad iurisprudentiam Hollandicam\

8 'Van der Keessel: Praelectiones' (Translation in 5 volumes), 1961-1967.

9 Ibid. at 927E. My English translation: 'The effect of this is that if the thing is lost, or obliterated, ordamaged, not only the owners who have the mere or beneficial right of ownership may institute anaction, but also everyone who has an interest in it, such as, for example a borrower for use('bruiklener'), creditor or possessor, to the extent of their interest.'

10 My English translation: 'In cases of damage to property, De Groot therefore acknowledges the existence of an action for damages in compensation against the person responsible including to persons with only personal rights in respect of the property "to the extent that he has been negatively affected thereby" or, as van der Keessel put it "to the extent of their interest".

Presumably, however, De Groot accepted that those to whom he granted such right of action would in every case also be the possessor of the property concerned.'

11 S.v. 'Title to sue" at pp 161. -166. Boberg considered it desirable that the hire-purchaser should have an action for damages in its own name because he considered, with reference to the decision in Kommisaris van Binnelandse Inkomste v Anglo American (OFS) Housing Co Ltd 1960 (3) SA 642 (A), that 'hire-purchase buyers enjoy all the de facto rights and duties of ownership without the legal dominium...'. It was clearly implicit that when venturing this opinion, Boberg considered that the hire-purchaser would be in possession of the subject matter of the hire-purchase contract.

12 Jansen JA used the expression 'soepel'.

13 See s 1 of the National Credit Act 34 of 2005.

14 Cf. Grobbelaar v. Van Heerden, 1906 E.D.C. 229

15 The decision in Spolander v Ward would support the conclusion that on the facts of the current case Mr Ngceza had locus standi to claim under the lex Aquilia for the damage to the vehicle. Analogous considerations have allowed a colonus (Roman law: A farmer who gave a fixed portion of the farm's produce as payment (instead of money) to the landlord. Black's Law Dictionary, 8 ed) an action for compensation by way of an actio utilis ex lege Aquiliae in respect of his positive interest in crops planted by him on his landlord's land against a wrongdoer who caused them to be damaged or destroyed.

16 Possibly because of the remarks made by Hofmeyr J in Lean v van der Mescht 1972 (2) SA 100 (O) at 107 in fine that a person who contractually undertakes responsibility to compensate another for damage to the latter's property, unrelated to any fault by him in regard to such damage, is for all practical purposes in the position of an insurer.

17 Cf. Union Government v Ocean Accident & Guarantee Corporation Ltd 1956 (1) SA 577 (A), at 585-6.

18 See Smit v Saipem, supra, at 932H.

19See para. [16] and fn.14, above.