French v Sterling Finance Corporation (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Beyers JA, van Blerk JA, Ogilvie Thompson JA, Holmes JA and Smit AJA
• Judgment Date: 18 September 1961
• Citation: 1961 (4) SA 732 (A)
• Hearing Date: 12 September 1961
• Court: Appellate Division

Holmes, J.A.:

This is an appeal from a decision of BROKENSHA, A.J., sitting in the Durban and Coast Local Division in which judgment was entered in favour of the plaintiff company (now respondent) against the defendant (now appellant) for £6,141 0s. 10d. with interest on

Holmes JA

£4,160 10s. at 10 per cent per annum from 1st November, 1960, to date of payment, and for £2,041 9s. 3d. with interest on £1,325 2s. 6d. at 10 per cent per annum from 1st November, 1960, to date of payment, with costs.

A The respondent's claim arises under a guarantee given by the appellant in respect of the existing and future indebtedness to the respondent of Windsor Motors (Pty.) Ltd, and/or Windsor Motors (Natal) (Pty.) Ltd.

The declaration, as finally amended, claimed (a) the balance, with interest, of an indebtedness in existence at the date of the guarantee B in respect of contract W/34 between the respondent and Windsor Motors (Pty.) Ltd., and (b) the amount, with interest, due in respect of contract W/41 entered into subsequent to the guarantee.

The plea was that contracts W/34 and W/41 had been terminated. It was contended that there had been a novation of the principal debts and that C therefore the appellant was released from his obligations under the guarantee.

The replication denied the pleaded termination, and averred in the alternative that in any event termination was no defence in view of a certain term in the guarantee. The gist of the term was that 'if by virtue of any act or Law or otherwise howsoever' any of the contracts D between the respondent and either of the Windsor Companies were terminated and the company released, the guarantor would continue to be liable as if the termination and release had not taken place.

The Court a quo assumed, without deciding, in favour of a novation, and upheld the alternative contention in the replication. Hence the judgment in favour of the respondent.

E On appeal to this Court Mr. Shaw, for the appellant, argued in favour of the novation and attacked the validity of the alternative contention in the replication.

With that prelude it is now necessary to deal more fully with the facts and the arguments.

F Windsor Motors (Pty.) Ltd., carrying on business in the Transvaal and the Orange Free State, held the franchise in respect of a certain make of vehicle chassis imported from Germany. Windsor Motors (Natal) (Pty.) Ltd. was a subsidiary company carrying on business in Natal. I shall refer to the latter as the Natal company, and to the former as the G holding company. In June, 1954, the appellant, representing the holding company and the Natal company, approached the respondent for finance. This was needed while each chassis was in the hands of the body-builders and thereafter while the vehicle was on the show-room floor pending its sale. The parties reached what was termed a 'floor-plan agreement'. In pursuance thereof, a written contract was entered into between the H holding company and the respondent on 20th September, 1954. In terms thereof the respondent (a) undertook to buy certain four vehicles (presumably in chassis state) from the South African suppliers; and (b) sold them to the holding company under a hire-purchase agreement. The contract was known as W/34 but for convenience I shall use that designation in relation to the hire-purchase agreement. The final instalment thereunder was to be paid on 22nd December, 1954, but as things turned

Holmes JA

out the holding company fell sadly in arrear. On 1st November, 1954, the appellant signed the guarantee already referred to as a continuing surety and co-principal debtor in respect of the existing or future A indebtedness of the holding company and/or the Natal company to the respondent. About January, 1955, when more than £10,000 was still owing under the...