Densam (Pty) Ltd v Cywilnat (Pty) Ltd

• Jurisdiction: South Africa
• Judgment Date: 28 September 1990
• Citation: 1991 (1) SA 100 (A)

Densam (Pty) Ltd v Cywilnat (Pty) Ltd
1991 (1) SA 100 (A)

1991 (1) SA p100

Citation	1991 (1) SA 100 (A)
Court	Appellate Division
Judge	Botha JA, Eksteen JA, F H Grosskopf JA, Friedman AJA and Nienaber AJA
Heard	August 23, 1990
Judgment	September 28, 1990

Flynote : Sleutelwoorde G

Cession — Validity of — Appellant's claim against its debtors ceded to H bank as security for moneys lent by bank to appellant on overdraft — Cession effected in favour of bank, 'its order or assigns' — Respondent purchasing bank's claim against appellant — Bank ceding to respondent its claim against appellant and its rights against appellant flowing from cession of debtors — Such cession effected without appellant's knowledge or consent — Respondent's application to interdict appellant I from collecting moneys owed by debtors granted — On appeal, appellant arguing that bank's claim against it not cedable without its consent because banker's duty to maintain secrecy concerning client's affairs importing element of delectus personae into contract between customer and banker — Court holding that, generally speaking, it was reasonable and J proper for bank to further its own interests in

1991 (1) SA p101

A regard to collecting overdraft by ceding its claim to third party — On facts of present case, Court finding that bank wished to dispose of its claim against appellant for its own benefit — Question whether claim not cedable because contract involved delectus personae to be answered with reference to nature of debtor's obligation vis-à-vis cedent, being B the counterpart to the cedent's right, the subject-matter of the transfer comprising the cession — Principle applicable that, unless contract so personal in character that it can make reasonable or substantial difference to other party whether cedent or cessionary entitled to enforce performance of obligation, right of action may C freely be ceded — Applying such principle, Court finding that it could make no difference to appellant whether bank or respondent exercised right to enforce payment — Bank's claim against appellant thus cedable — Appellant's argument that, since cession of its claims against its debtors had been in securitatem debiti, appellant retained reversionary interest in rights ceded, which interest not cedable without its consent D — Court holding that cession in favour of bank, 'its order or assigns' indicating that transfer of bank's rights to third party by means of cession contemplated — Appellant had expressly consented in advance to cession of bank's rights — Appeal thus dismissed.

Headnote : Kopnota

E The appellant had been indebted to a bank for moneys lent to it on overdraft. As security for the loan, the appellant had ceded to the bank its (the appellant's) claims against all its debtors. Such cession was incorporated in a document headed 'cession of debtors'. In terms of the 'cession of debtors' the cession by the appellant had been in favour of the bank, 'its order or assigns'. The respondent purchased the bank's claim against the appellant for a sum of R70000. The bank had then ceded to the respondent its claim against the appellant, and also its rights against the appellant flowing from the appellant's 'cession of debtors' in favour of the bank. The cession to the respondent had been effected without the appellant's knowledge or consent. The respondent, relying on its rights flowing from the 'cession of debtors', brought an application in a Local Division for an order, inter alia, interdicting the appellant from collecting any moneys owed to it by its debtors; directing it to hand to the respondent all moneys and cheques upon receipt thereof from its debtors; and directing it to hand to the respondent a schedule of its debtors. The application was opposed on the grounds, inter alia, that the bank's claim against the appellant was not capable of cession. The rule nisi which had been issued was confirmed, its terms to operate until the respondent's claim against the appellant had been satisfied. In an appeal, the appellant contended, inter alia, that (a) the bank's claim against it was not cedable; (b) the security held by the bank in the form of the cession by the appellant to the bank of the appellant's claims against its debtors was not cedable; and (c) when the respondent had taken cession of the bank's claim against the appellant, it had done so as an agent acting on behalf of other persons and was not entitled to enforce the claim in its own name.

As to contention (a), the appellant contended that 'the character of the contract between a banker and its customer was so personal in nature that the element described as delectus personae was present, thus rendering any claim which a banker might have against its customer not I cedable without the consent of the customer'. Such element was said to arise out of the banker's duty to maintain confidentiality and secrecy concerning his client's affairs. The respondent argued that in South African law such duty did not exist but that if it did one of the circumstances which relieved a banker of the duty of secrecy was where the interests of the bank required disclosure, such as where, in order to realise its claim, a bank sought to dispose of its client's claim. The appellant argued that the relaxation of secrecy in such context should be confined to cases where the bank itself sought directly to J enforce its

1991 (1) SA p102

A claim. As to contention (b), it was submitted for the appellant that the rights afforded to the bank in terms of the cession of book debts had been so personal in character that they could not validly have been transferred to the respondent without the appellant's consent and, further, that since the cession of book debts had been one in securitatem debiti the appellant had retained a reversionary interest in the rights ceded, which interest could not have been ceded without its consent. As to contention (c), the appellant argued that the respondent B (a company used by a firm of attorneys for taking cession of claims from clients of the firm who did not wish to institute proceedings in their own names) had acted as agent for the brothers of the controlling shareholder in the appellant when it had acquired the bank's claim against the appellant, and that the respondent was accordingly not entitled to enforce the claim in its own name.

Held, as to appellant's contention (a), assuming (without deciding) in C favour of the appellant that the bank had been obliged to maintain secrecy and confidentiality about its affairs, that, generally speaking, it was reasonable and proper for a bank to further its own interests in regard to collecting an overdraft by ceding its claim to a third party.

Held, further, that, on the evidence, the bank wished to 'get rid of' its claim against the appellant for its own benefit, and it had been decided to accept the respondent's offer to take cession of the claim because it had considered itself 'fortunate' to receive virtually the D entire amount of the claim in consideration for the cession.

Held, further, that the application of the principles laid down in Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 (CA) at 481 and 486 to the facts of the present case led to the conclusion that the bank had not been precluded from ceding its claim against the appellant to the respondent.

Held, further, that the question whether a claim (that is a right flowing from a contract) was not cedable because a contract involved a E delectus personae fell to be answered with reference, not to the nature of the cedent's obligations vis-à-vis the debtor, which remained unaffected by the cession, but to the nature of the debtor's obligations vis-à-vis the cedent, which was the counterpart of the cedent's right, the subject-matter of the transfer comprising the cession.

Held, further, applying the principle that, unless the contract is so personal in its character that it can make any reasonable or substantial difference to the other party whether the cedent or cessionary is F entitled to enforce the performance of the obligation, the right of action may freely be ceded, that it could make no difference at all to the appellant whether it was the bank or the respondent who exercised the right to enforce payment.

Held, accordingly, that the bank's claim against the appellant had been cedable.

The decision in G S George Consultants and Investments (Pty) Ltd and Others v Datasys (Pty) Ltd 1988 (3) SA 726 (W) overruled.

G Held, further, as to the appellant's contention (b), that, in the face of the wording of the cession of book debts (that cession had been in favour of the bank, 'its order or assigns'), the transfer of the bank's rights to a third party by means of a cession clearly had been contemplated and that the appellant had expressly consented to the cession of the bank's right in advance.

Held, further, as to the appellant's contention (c), that the conclusion of law sought to be drawn from the facts stated was a non sequitur : the respondent had entered into the cession with the bank as a principal, in H its own name, and there was no principle of law by which the appellant could preclude the respondent from enforcing the claim in its own name. The appeal was accordingly dismissed.

The decision of the Witwatersrand Local Division in Cywilnat (Pty) Ltd v Densam (Pty) Ltd 1989 (3) SA 59 confirmed.

Case Information

Appeal from a decision in the Witwatersrand Local Division reported at I 1989 (3) SA 59 (Goldstein J). The facts appear from the reasons for judgment.

M C Goldblatt for the appellant referred to the following authorities: As to the cedability of the bank's claim and security against the appellant, see Cullinan v Pistorius 1903 ORC 33 at 38; Eastern Rand Exploration Co Ltd v A J T Nel and...