Marigold Ice Cream Co (Pty) Ltd v National Co-Operative Dairies Ltd

• Jurisdiction: South Africa
• Judgment Date: 11 October 1996
• Citation: 1997 (2) SA 671 (W)

Marigold Ice Cream Co (Pty) Ltd v National Co-Operative Dairies Ltd
1997 (2) SA 671 (W)

1997 (2) SA p671

Citation	1997 (2) SA 671 (W)
Case No	8525/94
Court	Witwatersrand Local Division
Judge	Wunsh J
Heard	September 25, 1996; September 27, 1996
Judgment	October 11, 1996
Counsel	C H J Badenhorst (with him LJ Van Tonder) for the plaintiff; J N S Du Plesis (with him P Pauw) for the defendant

Flynote : Sleutelwoorde E

Cession — Cession in securitatem debiti — Of book debts — Interpretation of — Standard printed form used for cession entitled 'Cession of Book Debts' — Operative part of cession stating plaintiff ceding to bank (cessionary) all right, F title and interest 'to all book debts and other debts, and claims of whatsoever nature, present and future, due and to become due . . . and all rights of action arising thereunder' — Intention of both cedent and cessionary to effect and take cession of book debts — Such evidenced by heading of forms, text of director's resolution and internal reports by employees of bank, all of which reaffirmed G by subsequent conduct of affected parties — Parties not intending cession to include claim for damages against third parties.

Cession — Amendment of pleadings after litis contestatio — Defendant filing special plea contending plaintiff not having locus standi as result of cession — Plaintiff having filed notice of amendment to effect that it and bank (cessionary) subsequently entered into agreement stating that plaintiff's H damages claim against defendant never intended to be part of cession and that bank re-ceded any right, title and interest it might have had in claims against defendant — Subject to special considerations such as prescription and prejudice, Courts allowing substitution of cessionary before litis contestatio — I Reference to litis contestatio not to fix time before which substitution of correct plaintiff having to be effected but time after which res litigiosae cannot be alienated without consent of Court — Even after litis contestatio cession by plaintiff effectively transferring right to cessionary if Court allowing cessionary to be substituted for cedent as plaintiff — Cedent's incorrect procedure in suing in its own name when right of action vesting in cessionary remedied by substituting cessionary as J

1997 (2) SA p672

correct plaintiff — No difference in principle where plaintiff remaining same and A cessionary, by revesting right of action in plaintiff, stepping out of picture — Amendment granted without opposition — Special plea dismissed.

Headnote : Kopnota

The plaintiff had issued summons against the defendant for damages as a result of B breach of a contract. The pleadings had been closed and the action was due to be heard on 23 October 1995 when the defendant, after the discovery of documents, had ascertained that the plaintiff had ceded debts owing to it to the Standard Bank of South Africa Ltd ('the bank') during August 1991. The defendant consequently C amended its plea to challenge the plaintiff's right to sue and the trial was postponed. The standard printed form used for the cession was entitled 'Cession of Book Debts' and in its operative part the plaintiff had stated that it had ceded to the bank all right, title and interest 'to all book debts and other debts, and claims of whatsoever nature, present and future, due and to become due to me/us and to all rights of action arising D thereunder, as a continuing covering security. . . '. The plaintiff filed a notice, dated 5 November 1995, of proposed amendments to its particulars of claim and its replication. The effect of these amendments was that the plaintiff acknowledged the cession and recited that on 3 November 1995 it and the bank had entered into an agreement ('the Vereeniging agreement') to the effect that the parties had not intended the cession to include any claims for damages against third parties, that it was E accordingly never intended that the plaintiff's damages claim against the defendant would be ceded to the bank and that the parties agreed that the cession always had, and should be given, the meaning that it excluded the claim against the defendant. It was further alleged that on a proper interpretation of the cession the claims against the F defendant had been excluded from it and that ex abundanti cautela the Vereeniging agreement had included that the bank re-ceded to the plaintiff any right, title and interest which it might have had in the claims against the defendant, with effect from the date on which they arose. The defendant initially objected to the amendment but on 23 March 1996 it withdrew its objection and the amendment was effected without G opposition. The amendment consequently took effect from the date on which the summons was first issued. The defendant had also challenged the authority of any official of the bank to have signed the Vereeniging agreement and subsequently launched an application in terms of Rule 33(4) of the Uniform Rules of Court to determine separately the plaintiff's locus standi. At the hearing the Court was confined to the special plea and the effect thereon of the amendments to the plaintiff's pleadings. H

Held, that the defendant's objections to the authority of the bank's representatives were removed from reality and were without substance: having regard to the background of the cession, the requirements of the relevant organs in the bank for security for the plaintiff's facilities and to the bank's own documentation, it could not I have repudiated and had not sought to repudiate the branch manager's signature of the Vereeniging agreement. The signature had been subsequently ratified by the deputy chief executive of the bank and, even if there had been some lacuna in the bank's chain of authority, this was sufficient to fill it. (At 676C–E.)

Held, further, that common sense and the practical administration of justice dictated a rejection of the special plea. (At 676H.)

Held, further, that the obvious intention of both the cedent and the cessionary in the present case was to effect and take a cession of book debts. This was J

1997 (2) SA p673

evidenced by the heading of the forms, the text of the director's resolution, drafted by A the bank and signed by the plaintiff's directors, and the internal reports by employees of the bank, all of which were reaffirmed by the subsequent conduct of the affected parties. (At 677D–E.)

Held, further, that, to the extent that subsequent conduct occurred after the institution of action or even litis contestatio, the defendant had agreed to the pleadings being amended. (At 677E.) B

Held, further, that the evidence of the background to and circumstances of the cession and of the conduct of the plaintiff and the bank in relation to it would have been sufficient to dispose of the defendant's special defence and that the Vereeniging agreement and the recession effected by it had placed the plaintiff's case beyond attack on the issue of locus standi. (At 677F–G.) C

Held, further, as to the objection that a plaintiff who had no cause of action at the time of the institution of proceedings could not cure the position by an amendment, that the answer had to be that there were circumstances, where the defendant would not be prejudiced, in which the efficient administration of justice required or at least should permit that. It might have been open to the defendant to have resisted the use of an D amendment to cure the defect in the plaintiff's cause of action, but the amendment having been effected, whether despite objection by it or with its consent, that argument had fallen away. (At 677G/H–I.)

Held, further, that, subject to special considerations such as prescription and prejudice which could not be remedied by appropriate relief, in the form of an order for costs or a postponement or otherwise, the Courts did and should allow a substitution of the E cessionary before litis contestatio. The reference to litis contestatio was to fix not the time before which the substitution of the correct plaintiff had to be effected but the time after which res litigiosae could not be alienated without the consent of the Court. Even after litis contestatio a cession by the plaintiff would effectively transfer the right in question to the cessionary if the Court allowed the cessionary to be substituted for F the cedent as the plaintiff and thereby gave its seal of approval to the transfer. (At 678D–F.)

Held, further, that whatever approach the Court should or would adopt to an application for its consent to a substitution after litis contestatio was irrelevant to the present discussion, because the amendment substituting the 'cessionary' ie the plaintiff which reacquired the right which ex hypothesi it had ceded to the bank, had been allowed. (At 678F/G–G.) G

Held, further, that the cedent's incorrect procedure in suing in its own name when the right of action vested in the cessionary was remedied by substituting the cessionary as the correct plaintiff and that there could be no difference in principle where the plaintiff remained the same and the cessionary of first instance, by revesting the right of action in the plaintiff, stepped out of the picture. (At 678H/I–I/J.) H

Held, accordingly, that the special plea was dismissed. (At 681D.)

Cases Considered

Annotations

Reported cases

The following decided cases were cited in the judgment of the Court:

Barclays Bank International Ltd v African Diamond Exporters (Pty) Ltd (1) 1976 (1) SA 93 (W) I

Barclays Bank International Ltd v African Diamond Exporters (Pty) Ltd (2) 1976 (1) SA 100 (W)

Bavuma v SA Eagle Insurance Co Ltd 1984 (2) SA 786 (SE)

Coopers & Lybrand and Others v Bryant 1995 (3) SA 761 (A)

Credcor Bank Ltd v Merewent Service Station (Pty) Ltd 1978 (1) SA 578 (D)

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