Sasfin Bank Limited and Another v Motors Hoogland Bethlehem CC and Others (3719/2020) [2021] ZAFSHC 271 (4 November 2021)

IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

Case number: 3719/2020

In the matter between:

SASFIN

BANK LIMITED

1st Plaintiff

SUNLYN (PTY) LTD

2nd Plaintiff

and

MOTORS

HOOGLAND BETHLEHEM CC

1st Defendant

IGNATIUS MICHAEL FERREIRA N.O.

2nd Defendant

FREDERICK FERREIRA N.O.

3rd Defendant

PIETER

YZELLE MORRISON N.O.

4th Defendant

IGNATIUS MICHAEL FERREIRA N.O.

5th Defendant

FREDERICK FERREIRA N.O.

6th Defendant

PIETER

YZELLE MORRISON N.O.

7th Defendant

HEARD ON:

16 SEPTEMBER 2021

JUDGEMENT BY: LOUBSER, J

DELIVERED ON: 4 NOVEMBER 2021

[1] This is an application for summary judgement by the First Plaintiff against the First Defendant and the Natie Ferreira Family Trust and the Thabo Ferreira Family Trust. The Natie Ferreira Family Trust is represented by the Second, Third and Fourth Defendants in their capacity as the trustees of the Trust. The Thabo Ferreira Family Trust is represented by the Fifth, Sixth and Seventh Defendants in their capacity as the trustees of the Trust

[2] The application follows upon a summons issued against the First Defendant and the Trusts on 1 October 2020 for payment of the amount of R411 998.08 plus interest, and the plea filed by the Defendants on 30 June 2021 in response thereto. In the summons, the Plaintiffs’ claim is premised on the alleged breach of a rental agreement by the First Defendant, that was concluded on 5 March 2018 by the First Defendant and a company trading as Assetfin. This company later ceded all its rights, title and interest in the rental agreement to the Second Plaintiff in terms of a main cession agreement. The Second Plaintiff then ceded all its rights, title and interest in the rental agreement to the First Plaintiff in terms of another main cession agreement concluded between the parties. The First Plaintiff features in the summons as the main plaintiff, and the Second Plaintiff as the alternative plaintiff.

[3] The two Trusts are sued together with the First Defendant’s by reason of the fact that they bound themselves as guarantors and co-principal debtors in favour of Assetfin in respect of the First Defendant’s obligations arising from the rental agreement.

[4] In terms of the rental agreement concerned, the First Defendant hired from Assetfin certain business and office equipment such as a CCTV system, a telephone management system, a battery back-up, a cordless phone, a PABX unit, an internal auto attendant and a Hikvision outdoor HD, among others. The rental for some of the equipment was for a period of 48 months, while the remainder of the equipment was rented for a period of 49 months. It is alleged in the summons that

the agreement made provision for the rights of a cedent in the event of the First Defendant failing to pay any amounts due to the cedent. In such an event, the cedent is entitled to claim immediate payment of all amounts which would have been payable in terms of the rental agreement until expiry of the rental period, whether such amounts were then due for payment or not.

[5] It is further alleged in the summons that the First Defendant has failed to effect payment of the monthly instalments and that it is in arrears of more than R65 000.00. The total amount claimed is made up of this arrears plus the future rental payments due.

[6] In their plea, the Defendants raised five defences. The first is that the rental agreement as well as the guarantees are void ab initio, secondly, that certain of the equipment were not delivered at all, or were not suitable and fit for their intended purpose, and thirdly, the alleged cession of rights in the rental agreement is denied. In the fourth place, it is denied that the First Defendant was in breach of the rental agreement because it has been absolved from any liability for the reasons mentioned above. In the fifth place, the Defendants deny that the National Credit Act 34 of 2005 is applicable, as it was alleged by the Plaintiffs in the summons.

[7] In their first defence of the rental agreement being void ab initio, the Defendants allege that the sales representative of the supplier of the goods, made certain representations to the First Defendant, which representations subsequently turned out to be false. In further support of the ab initio theory, the Defendants allege, with reference to principles of public policy, that the parties to the rental agreement failed to reach consensus in respect of the terms of the agreement. The Defendants also rely on the allegation that Assetfin and the Plaintiffs, as suppliers of the services provided, should have been registered with the relevant bodies established by certain legislation in order to be able to recover any amounts due and payable in terms of the rental agreement. The legislation referred to by the Defendants in this respect, is the Private Security Industry Regulations Act 56 of 2001 (PSIRA) and the Electronic Communications

Act 36 of 2005 (ECA).

[8] This, then, is an overview of the defences raised by the Defendants in their plea. It needs

mentioning that in the affidavit resisting summary judgement, the Defendants raised a further aspect, namely the lack of personal

knowledge of the person having deposed to the affidavit in support of the application.

9] Now Rule 32 of the Uniform Rules of Court regulates applications for summary judgement, and clearly states what is expected from a defendant when he wishes to avoid the application being granted. Rule 32(3)(b) provides that a defendant may satisfy the court by affidavit that he has a bona fide defence to the action, and such affidavit shall disclose fully the nature and the grounds of the defence and the material facts relied upon therefor.

[10] The Supreme Court of Appeal explained the summary judgement procedure succinctly in Majola v Nitro Securitisation 1 (Pty) Ltd[1] as follows: “It is a procedure that is intended to prevent sham defences from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights.” In Maharaj v Barclays National Bank Ltd[2] the Supreme Court of Appeal stated that in such applications, all that the court enquires into is: (a) whether the defendant has 'fully' disclosed the nature and grounds of his defence and the material facts upon which it is founded, and (b) whether on the facts so disclosed the defendant appears to have, as to either the whole or part of the claim, a defence which is both bona fide and good in law. If satisfied on these matters the Court must refuse summary judgment. The word ‘fully' connotes that, while the defendant need not deal exhaustively with the facts and the evidence relied upon to substantiate them, he must at least disclose his defence and the material facts upon which it is based with sufficient particularity and completeness to enable the Court to decide whether the affidavit discloses a bona fide defence.

[11] In more recent times, the Supreme Court of Appeal has referred to these principles with approval in Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture[3]. While the court suggested that perhaps the time had come to stop describing summary judgement as a “drastic” measure, it did not purport to derogate from the explanation of the proper application of Rule 32 as set out in the Maharaj-case. (See in this respect the observations made by Binns-Ward, J in Absa Bank v Le Roux[4])

[12] In addition, Rule 32(2)(b) provides that the plaintiff shall, in his application in support of summary judgement, explain briefly why the defence as pleaded does not raise any issue for trial. If the defence is averred in a manner which appeared in all the circumstances to be needlessly bald, vague or sketchy, that will constitute material for the court to consider in relation to the requirement of bona fides.[5]

[13] Lastly, it needs to be mentioned that if the defendant fails to satisfy the court by fully disclosing the nature and grounds of his defence and the material facts relied upon therefor, the court still has a discretion as to whether to grant summary judgement or not.[6]

[14] With these principles in mind, the Court must now consider the defences raised by the Defendants and decide whether any one of them has constituted a bona fide defence on the basis that the nature and the grounds for such defence and the material facts relied upon therefore, have been fully disclosed. Since Mr. Moorhouse, appearing for the Defendants, has mainly focused his argument on the contention that the First Defendant was induced to entering into the rental agreement by fraudulent and/or negligent material misrepresentations, and that the First Defendant was not given an adequate opportunity to peruse and comprehend the nature and effect of the terms thereof, the court will first consider this defence. The defence boils down to the contention that consensus was not reached between the parties, and that the rental agreement is void ab initio and not binding on the First Defendant.

[15] In considering this defence, the Court will at the same time consider the defence raised by the two Trusts to the effect that they had no intention of entering into the guarantee agreements. They contend that, as a result, the guarantee agreements are not valid or enforceable.

[16] In the Plea filed by the Defendants, no less than 6 pages are dedicated to the defence that the rental agreement is void and not binding on the First Defendant. In these 6 pages it is alleged, inter alia, that it was represented to the First Defendant that he would become the owner of the goods after payment of the last instalment, that the equipment would be fit for the purpose for which it was purchased, that the First Defendant was not given an adequate opportunity to comprehend and peruse the nature and effect of the terms of the rental agreement before signing it, that not all the equipment was delivered and that those delivered was in fact defective, and that Assetfin was aware of the misrepresentations and failed its duty to inform the First Defendant accordingly.

[17] In the affidavit opposing summary judgement, the above allegations are repeated. It is emphasized in the affidavit that the written agreement was framed as a rental agreement which did not permit ownership of the equipment to pass to the First Defendant. It is submitted in the affidavit that the First Plaintiff consequently has no valid claim against the First Defendants and that this defence constitutes a bona fide defence that is good in law.

[18] As for the guarantee agreements, it is alleged in the Plea that the 2nd to 7th Defendants were not made aware of the terms of the agreements and therefore had no intention of entering into agreements with such terms. It is alleged that they were induced into signing the guarantee agreements in the same manner and through the same misrepresentations as stated in respect of the rental agreement. The guarantee agreement related to and was incorporated in the rental agreement, which agreement is void, it is pleaded.

[19] These allegations are repeated in the application opposing summary judgement, and it is further alleged that an adequate opportunity to peruse and comprehend the nature and effect of the contents of the agreements was not afforded. The First Defendant alleges in the affidavit that he was not made aware by Assetfin or its agents that he was signing the agreement on behalf of the Trusts, and that he was not made aware of the nature and the effect of the terms of the agreement.

[20] Having regard to what is stated in the Plea and in the affidavit opposing summary judgement, it is clear to this Court that the Defendants have fully disclosed the nature and the grounds for their defence. Whether they have fully disclosed the material facts upon which they rely in disclosing the nature and grounds for their defence, however, remains doubtful. They do not say how and by whom the misrepresentations were made, for instance. They also do not say where and in what circumstances the misrepresentations were made. This Court is also in the dark as to which of the equipment was never delivered, and in which respects the equipment that was actually delivered, was defective. The Defendants also do not tell how it came about that the guarantee agreements were signed in circumstances where they were unaware of what was signed. They also do not provide

any material facts on which they rely in contending that the cedent was aware of the misrepresentation that were made. These are only but a few of the instances where the material facts are lacking.

[21] It remains to be decided whether the Defendants have disclosed a bona fide defence as far as this defence is concerned. Mr. Govender, the litigation manager of the First Plaintiff, states in his affidavit in support of summary judgement that the Defendants raised no issues for trial in their Plea. He points out that the First Defendant has signed an unqualified delivery note when the equipment in question was delivered, and that the First Defendant has made use

of the equipment for a period of some two years without any complaints. As for the alleged misrepresentation, Mr. Govender contents that the alleged misrepresentation were not material to the conclusion of the rental agreements. Nowhere in his affidavit, however, does Mr. Govender deny the allegations that the cedent was aware of the misrepresentations made and that it failed its duty to inform the Defendants accordingly. But, he cannot be expected to know anything of the knowledge that Assetfin had, simply because he was not present when the deal was concluded.

[22] Mr. Aucamp appearing for the First Plaintiff, pointed out that misrepresentation and fraud unravels all directly within its compass, but only between victim and perpetrator, at the instance of the victim. In this respect he relied inter alia on Absa Bank Ltd v Moore and Another.[7] He argued that the Defendants expressly alleged that the perpetrator had acted on behalf of Assetfin and not on `behalf of any of the Plaintiffs to these proceedings, For that reason, the alleged misrepresentations are irrelevant and do not serve as a basis for the rental agreement to be set aside, he contended. Mr. Aucamp further pointed out that, even if it were to be found eventually that the fraud was committed as alleged, it does not mean that the agreements are void ab initio. In such a scenario the agreement have to be set aside at the election of the Defendants and the guarantors respectively, or they may elect to keep the rental agreement in place and claim damages. In this respect he referred the Court to the decision of the Appellate Division in Feinstein v Niggli and Another.[8]

[23] Mr. Aucamp further emphasized that, in terms of the rental agreement, Assetfin was not the supplier of the goods in question. To that end the rental agreement expressly provides that Assetfin is purchasing the goods from the supplier at the special instance and request of the First Defendant.

[24] Now it is clear that Assetfin and the Plaintiffs featured in the rental agreement, or in the rent-to-own agreement as the Defendant allege, only as financing institutions, while they were not directly involved in the supply and the installation of the equipment. This is evident from the agreement itself, where it is stated that Assetfin is purchasing the goods from the supplier at the instance of the First Defendant. All that Assetfin provided, was the finances for the transaction. How the First Defendant can ever rely on the contention that the supplier of the goods was an agent of Assetfin, and that Assetfin had been aware of the alleged misrepresentations, is not clear. The First Defendant has simply failed to provide this Court with the material facts on which this contention is based. This contention therefore consists of only a bald statement, without any material facts in support thereof. As we have seen earlier herein, a bald, vague or sketchy defence may be considered as material for the court to consider in relation to the requirement of bona fides.

[25] The same counts for the defence raised by the trusts that they were not made aware of the terms and conditions of the guarantees that were signed on their behalf. No material facts whatsoever are provided in relation to the circumstances under which the guarantees were signed. The allegations concerning the non-delivery of equipment and equipment that turned out to be defective, are also made in a bald and vague manner without any material facts underpinning such allegations. What this Court finds even more concerning, is the fact that there is no evidence to the effect that the Defendants have complained of the non-delivery and the defects for a period of some two years. In addition, the delivery note concerned indicates that all the equipment was received in good order.

[26] The defence that the parties to the agreement failed to reach consensus on the basis of principles of public policy, is stated in wide terms, again without the mention of any material facts underlying such defence. In any event, in raising this defence, the Defendants are faced with the caveat subscriptor-principle, providing that a signatory to a document will be held liable in terms of the document unless he can show misrepresentation, fraud, duress and mistake, for instance.

[27] As for the defences concerning the PSIRA and the ECA, it needs to be pointed out that these defences have already featured as the subject-matter of an exception filed by the Defendants in this Division. The exception was heard by Parks, AJ and dismissed with costs on 15 April 2015. The learned Acting Judge found that in terms of both these Acts, and in particular the definition of “services” in the Acts, the leasing, delivering and installation of the equipment does not amount to the rendering of a service. It was further found that the installation and leasing of a CCTV system cannot be seen as a security service rendered per se. I respectfully agree with these conclusions reached by Parks, AJ. Moreover, Assetfin or any of the Plaintiffs are not falling within the ambit of security service providers and/or electronic communication service providers. They are no more than financial service providers. In my view, the defence relating to the two Acts does not raise an issue for trial.

[28] The defence of the Defendants that the deponent to the First Plaintiff’s affidavit in support of summary judgement did not have personal knowledge of the facts of the matter, is equally unconvincing. The Supreme Court of Appeal held in Rees and Another v Investec Bank Ltd[9] that where an applicant for summary judgement is a corporation, is as the case here, the deponent to its affidavit did not need to have first-hand knowledge of every fact comprising its cause of action. The deponent could rely on documents in possession of the corporation. The position of the deponent in the present case is not different from the position of the deponent in the Rees-case.

[29] It follows that this Court is not satisfied that the Defendants have disclosed a bona fide defence to the action of the First Plaintiff. This is partly due to the fact that they have failed to sufficiently disclose the material facts om which they rely to show that they have a defence which is both bona fide and good in law.

[30] As a last observation I point out that, interestingly enough, the Defendants nowhere deny that the First Defendant is in arrears with its monthly instalments and therefore in breach of the rental agreement. Their denial of liability is premised only on the defences raised in respect of the enforceability of the agreement.

[31] In the premises, the following orders are made:

1. Summary judgement is granted against the First Defendant and the Second to Seventh Defendant in their capacity as trustees of the Natie Ferreira Family Trust and the Thabo Ferreira Family Trust in favour of the First Plaintiff in the amount of R411 998.08, jointly and severally, the one paying the others to be absolved.

2. Defendants to pay interest at the rate of 7,75% per annum on the sum of R411 998.08 tempore morae.

3. Defendants to pay the costs of suit on the scale as between attorney and client.

P. J LOUBSER, J

For the First Plaintiff:

Adv. S. Aucamp

Instructed by:

KWA Attorneys, Johannesburg

c/o Hill McHardy & Herbst Inc., Bloemfontein

For the Defendants:

Adv. A. C. Moorhouse

Instructed by:

Ayanda Tsikayi Attorneys Inc, Port Elizabeth

c/o Kramer Weihmann Attorneys, Bloemfontein

/roosthuizen

[1] 2012 (1) SA 226 (SCA) at 232 F-G

[2] 1976 (1) SA 418 (A) at 426 B-C

[3] 2009 (5) SA 1 (SCA)

[4] 2014 (1) SA 475 (WCC) at 477 I-J and 478 I-J

[5] Friedman v Standard Bank of SA Ltd 1999 (4) SA 928 (SCA) at 938 D-H; Standard Bank of SA Ltd v Roestof 2004 (2) SA 492 (W) at 499 C-E

[6] Rule 32(5); Gruhn v M. Pupkewitz & Sons (Pty) Ltd 1973 (3) SA 49 (A)

[7] 2017 (1) SA 225 (CC) at paragraph 39

[8] 1981 (2) SA 684 (A)

[9] 2014 (4) SA 220 (SCA) at paragraphs 8, 12 and 14 to 16