Brink v Humphries & Jewell (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Mpati Ap, Farlam JA, Navsa JA, Cloete JA and Jafta AJA
• Judgment Date: 30 November 2004
• Citation: 2005 (2) SA 419 (SCA)
• Docket Number: 516/03
• Hearing Date: 09 November 2004
• Counsel: H F Oosthuizen for the appellant. P J du Plessis for the respondent.
• Court: Supreme Court of Appeal

Cloete JA:

[1] A number of reported cases have dealt with problems which arise when a credit application form has A embodied a personal suretyship by the individual who signed the form on behalf of the applicant. That is what happened in the present matter. The respondent, as the plaintiff, sued the company to whom it had granted credit (Guzto Log Homes (Pty) Ltd) as the first defendant, and the appellant, who had B signed the form on behalf of the company, as the second defendant qua surety. The respondent relied on the caveat subscriptor rule, which is, of course that a person who signs a document is taken to have assented to what appears above his signature. [1] The appellant pleaded justifiable mistake (justus error). The trial Court (Motata J) gave judgment in favour of the respondent and refused leave to C appeal. The appeal is accordingly with the leave of this Court.

[2] The applicable principles of law are well established and require little discussion. The basis of the caveat subscriptor rule relied upon by the respondent is the doctrine of quasi-mutual assent. The locus classicus on the point is D the following passage in George v Fairmead (Pty) Ltd: [2]

'When can an error be said to be justus for the purpose of entitling a man to repudiate his apparent assent to a contractual term? As I read the decisions, our Courts, in applying the test, have taken into account the fact that there is another party involved and have considered his position. They have, in effect, said: E Has the first party - the one who is trying to resile - been to blame in the sense that by his conduct he has led the other party, as a reasonable man, to believe that he was binding himself? . . . If his mistake is due to a misrepresentation, whether innocent or fraudulent, by the other party, then, of course, it is the second party who is to blame and the first party is not bound.'

As the latter part of the passage just quoted makes clear, an F innocent misrepresentation by the other party suffices: [3] The law recognises that it would be unconscionable for a person to enforce the terms of a document where he misled the signatory, whether intentionally or not. Where such a misrepresentation is material, the signatory can [4] rescind the contract because of the misrepresentation, provided he can show that he would not have entered into the contract if he had known the truth. Where the G misrepresentation results in a fundamental mistake, the 'contract' is void ab initio. [5] In this way, the law gives effect to the sound principle that a person, in signing a document, is taken to be bound by the ordinary meaning and effect of the words which appear over his/her signature, while, at the same time, protecting such a person if he/she is H

Cloete JA

under a justifiable misapprehension, caused by the other party who requires such A signature, [6] as to the effect of the document.

[3] In deciding whether a misrepresentation was made, all the relevant circumstances must be taken into account and each case will depend on its own facts. For present purposes, all that need be said in this regard is that the furnishing of a document misleading in its B terms can, without more, constitute such a misrepresentation. [7]

[4] The form signed by the appellant in the present matter is a one-page document. It is desirable to reproduce the front side of the form and not merely to describe it. A copy is accordingly appended to this judgment. The suretyship obligation is to be found in clause 3 at C the bottom of the page. The reverse of the form has seventeen clauses headed 'Terms and Conditions of Sale' and a section for the respondent's credit department to complete.

[5] The company of which the appellant was a director had a loose arrangement with the respondent whereby, although it was a D cash customer, it would be allowed to take delivery of goods up to approximately R10 000 before paying for them. A problem arose whilst the appellant, who was a necessary signatory to the company's cheques, was on holiday and the company wished to exceed this limit. The company's project manager, Mr Trollip, testified that a director of E the respondent, Mr Humphries, was prepared to allow the company to do so on that occasion but required the company to complete an application for future credit when the appellant returned, because debts owing to the respondent by approved creditors were guaranteed by a third party. Humphries denied that he would have made such a request, his reason being that the respondent had to pay for each F creditor subject to the guarantee and a cash customer was obviously preferable for this reason. It is not necessary to resolve the conflict. The fact remains that the respondent must have provided the company's project manager with its standard credit application form. He completed the form and submitted it to the appellant for signature, and the appellant did sign it. It is common cause that the G respondent did not inform Trollip or the appellant that the form imposed a suretyship obligation on the individual who signed it.

[6] The first question is whether the appellant has proved that he was misled. The appellant's evidence-in-chief was as follows:

'Now who completed this form? - Mr Trollip. H

But you signed it, what happened in that regard? - He completed it and he came to me and I saw that there is the said credit application form and, being an application form, and I saw it is for the debtor for Guzto Log Homes, I signed the document. I did not fill in any dates, it was filled in. I just signed the document.

So what you say, what you saw is, you saw the top heading, is that I correct, the credit application form? - Yes.

Cloete JA

Did you see the company name Guzto Log Homes (Pty) Ltd? - Yes. A

So you accepted therefore that the application was on behalf of Guzto Log Homes? - True. That was the applicant. Then you also said that you saw your signature underneath for the debtor? - Yes.

And who was the debtor? - Guzto Log Homes.

Did you read through the rest of the document? - No.

Did you read through the second page, the terms and conditions of sale? - No. B

Did you expect any suretyship agreement or any clause that relates to a suretyship agreement in this document? - No.

Why not? - It has been years that I have been filling in application forms, specifically for banks and bonds. You fill in application form, it always without exception they come back to you, they tell you we need A, B, C, D and one of them to be a surety. It was then prepared and make an appointment with you, you sign the surety C form.

And that is also besides the bank, the position with Thesen and Company? - Yes.

They did not include any suretyship agreement? - Yes. D

But they granted the, did the credit, without a suretyship agreement? - Yes.

. . .

If we can return to this specific credit application form, did you expect any surety or clause of suretyship in this agreement? - No.

And what document did you think had you signed for? - A credit application form.

On behalf of who? On whose behalf? - On behalf of Guzto Log Homes.

Were you ever requested by Humphries and Jewell to enter into any suretyship agreement? - No. E

When did you first find out that they, that Humphries and Jewell, alleged that you stood surety on behalf of Guzto Log Homes? - I found a summons at this address that I have given here on this credit application form.

So, there was no letter of demand at all? - No.

So, in your experience as a businessman, applications for credit that does not include sureties? - No. F

A clause for suretyship? - No.

Just finally, was it ever your intention to enter into a suretyship agreement? - No.

And, in your opinion, did you enter into a suretyship agreement? - No.

What is your opinion, what did you sign here in this document in this document? - Application for credit, as I did with numerous G banks and institutions, they will look at it and come back to you and tell you if they need any further documentation.'

The following passages appear in cross-examination:

'Would you not agree that the paragraph at the bottom is most conspicuous, one of the first things you recognise on this document, H since it is different print and it is in bold and it is in capital letters? - Well, to be quite honest, the first thing I saw was credit application form. . . .

It was never brought, you never thought of it to read the conspicuous part...