Absa Technology Finance Solutions (Pty) Ltd v Michael's Bid a House CC and Another

• Jurisdiction: South Africa
• Judge: Lewis JA, Theron JA, Petse JA, Plasket AJA and Swain AJA
• Judgment Date: 15 March 2013
• Citation: 2013 (3) SA 426 (SCA)
• Docket Number: 212/2012 [2013] ZASCA 10
• Hearing Date: 26 February 2013
• Counsel: AR Gautschi SC (with JJ Durandt) for the appellant. No appearance for the respondents.
• Court: Supreme Court of Appeal

Lewis JA (Theron JA, Petse JA, Plasket AJA and Swain AJA concurring): G

[1] The question to be decided in this matter is whether a lease of movable property was governed by the provisions of the National Credit Act 34 of 2005. The high court held that the agreement in question was a lease because the representative of the lessee believed that ownership of H the machine hired would somehow pass to the lessee on termination of the lease, and that the provisions of the Act regulating notice to the defaulting lessee were thus operative. In effect it held that the particular lease was not a lease. This may sound like a fragment of Alice in Wonderland. If that is so, it is because the Act itself could have been written by Lewis Carroll, so peculiar are some of its provisions. I

[2] These are, in summary, the facts giving rise to the litigation. The second respondent, Michael Rose, was an estate agent who conducted business through the first respondent, Michael's Bid a House CC (the CC). He wished to acquire a sophisticated colour printing machine for the CC and also to print pamphlets and other material for other estate J

Lewis JA (Theron JA, Petse JA, Plasket AJA and Swain AJA concurring)

A agents in the area in which the business operated — Randfontein, Gauteng. He discussed his requirements with one Mr Vosloo of Westrand Office Equipment (Westrand), who suggested two ways of financing the transaction since the CC could not afford to purchase the machine required. Rose chose the second option: he would pay a B monthly amount of some R2878 which would, in the words of Vosloo, 'finance this machine with full maintenance and service and toner supplied for the full 36 month contract'. Vosloo added, in the written quotation, that Westrand could arrange 'finance' through Sapor Rentals (Pty) Ltd (Sapor).

C [3] On 3 July 2008 Rose, on behalf of the CC, signed a 'master rental agreement' with Sapor, undertaking to pay the sum of R2878 per month for a period of three years. Rose signed as surety for the obligations of the CC. The contract commenced on the date of signature and the machine was delivered to the CC and installed.

D [4] The CC paid the first amount of R2878 to Sapor on 9 July 2008. The day before that, however, Sapor ceded its rights under the rental agreement to Absa Technology Finance Solutions (Pty) Ltd (Absa Technology). On 28 July 2008 Rose received a copy of the agreement that he had signed from Sapor. On the same day he wrote to Sapor E expressing his dissatisfaction with the printer and with the failure to supply toner. He claimed that he had been misled into entering into the rental agreement and that he was cancelling it. He made the second and last payment on 8 August 2008.

[5] Absa Technology instituted action for payment of arrear and future F rentals against the CC, and against Rose as surety, in November 2008 in the South Gauteng High Court. It claimed the sum of R111 533 (astronomical in the circumstances), interest at a rate of 6% per annum above the prime rate, a tempore morae, and costs on the attorney and client scale. It also claimed return of the printing machine.

[6] Rose and the CC raised a number of defences in their plea, some of G which were traversed in evidence. They did not plead rectification, or that the rental agreement was simulated, or that the contract had been induced by fraud. They did plead that Sapor was in breach of the contract because of Westrand's failure to deliver toner for the machine or to maintain it, but did not show that Sapor was Westrand's agent in this respect. Unfortunately for the CC and Rose, Westrand was liquidated. H Their remedy against it, if any, was thus of no use.

[7] The South Gauteng High Court (Beasley AJ) correctly found, in my view, that any prior discussions between Rose and Westrand were inadmissible in the face of the written agreement. The parol evidence I rule was in fact reinforced by a clause in the rental agreement recording that no representations, undertakings or warranties not contained in the agreement were binding on the hirer, Sapor. The CC acknowledged that it was referred to Sapor by Westrand, the supplier, which had bought the machine at its request.

[8] But the high court held that the agreement in issue was not a true J lease, and, implicitly, that despite its written provisions to the contrary,

Lewis JA (Theron JA, Petse JA, Plasket AJA and Swain AJA concurring)

the real agreement between the parties was in effect a sale on credit and A thus a credit agreement for the purposes of the Act. Thus Absa Technology, as the lessor, was required to give notice and to proceed against the first respondent as lessee, and the second respondent as surety, under ss 129 and 130 of the Act before attempting to enforce the agreement. I shall deal in due course with other arguments that would B bring the contract within the meaning of a credit agreement.

[9] Before turning to the issue for decision, it should be noted that the high court made a legal finding (that Absa Technology had to give notice and proceed under the Act), but did not give judgment on the merits. The order read (in part): C

'1.

Judgment is postponed sine die.

2.

The plaintiff may not set the matter down until:

2.1

it has complied with the provisions of Section 129(1)(a) of the National Credit Act . . . . In particular it must draw the default to the notice of the Defendants by delivering a notice D which complies with the provisions of s 129(1)(a) . . .

2.2

the provisions of s 130 have been complied with.

3.

The plaintiff is to pay the costs of the action.'

The high court gave leave to appeal against its decision to this court.

[10] As a rule this court will not entertain an appeal against part of an order E even if it is dispositive of a point of law. The authorities in this regard are discussed in Health Professions Council of South Africa v Emergency Medical Supplies and Training CC t/a EMS. [1] The lis between the parties would not be disposed of until Absa Technology proceeds in terms of ss 129 and 130 of the Act, and there might be yet a further F appeal on other aspects. But counsel for Absa Technology argued that in effect there is nothing further that the high court can adjudicate upon: if the appeal is heard and is successful, that is the end of the matter. If the appeal is dismissed then once Absa Technology has complied with ss 129 and 130, judgment will be entered against the respondents. Absa Technology argued also that the principle is subject to the exception that G where the balance of convenience requires it the order should be appealed in order to avoid prejudice to the appellant: National Director of Public Prosecutions v King. [2]

[11] In this matter the finding of the high court that lease agreements of H the kind in issue are subject to the Act does affect many financial institutions, including Absa Technology. It is not a finding that is case-specific, but affects a class of contracts in respect of which the applicability of the Act requires clarification. Moreover, if this court declined to hear the appeal before Absa Technology complied with ss 129 and 130 of the Act, and then on appeal, after judgment had been I

Lewis JA (Theron JA, Petse JA, Plasket AJA and Swain AJA concurring)

A given, decided that such compliance was not necessary, time and costs would be wasted. In the circumstances I consider that the appeal should be entertained.

[12] Having rejected the defence on the merits — that Sapor was in B breach of the agreement, entitling the CC to cancel it — the high court had only to determine whether the rental...