Sasfin (Pty) Ltd v Beukes

• Jurisdiction: South Africa
• Judge: Rabie ACJ, Jansen JA, Van Heerden JA, Smalberger JA, Nestadt JA
• Judgment Date: 19 September 1988
• Hearing Date: 08 March 1988
• Court: Appellate Division

Smalberger JA:

The appellant ('Sasfin') is a company carrying on a business as a financier; the respondent ('Beukes') is a J specialist anaesthetist. On 13 February 1985 the parties entered into a discounting

Smalberger JA

A agreement. In terms of this agreement Beukes was obliged to offer for sale to Sasfin any book debts he wished to sell. The purchase of such book debts by Sasfin was to be governed by the provisions of the discounting agreement. On the same date Beukes executed a deed of cession in favour of Sasfin, Sassoons Textiles (Africa) (Pty) B Ltd ('Sassoons') and Simpex (Pty) Ltd ('Simpex'). In terms thereof Beukes ceded to 'the creditors' (Sasfin, Sassoons and Simpex), jointly and severally

'all claims, rights of actions and receivables which are now and which may at any time hereafter become due to me/us by all persons (hereinafter referred to as "my/our debtors") without exception, from C any cause of indebtedness whatsoever ("the claims") as continuing covering security for the due and proper performance of all obligations which I/we may have in the past owed or incurred or may at the present or in the future owe or incur to all or any of the creditors from whatsoever cause and whenever arising...',

D on the terms and conditions contained in the deed of cession. In entering into both the discounting agreement and the deed of cession Beukes was represented by one Smit of Computerised Management Applications (Pty) Ltd.

It is common cause that from time to time Sasfin purchased certain book debts offered for sale by Beukes. Eventually a dispute arose between the parties. Sasfin claimed that Beukes had breached E certain warranties contained in the discounting agreement, and purported to cancel the agreement. Sasfin further alleged that as at the date of the purported cancellation Beukes was indebted to it in the sum of R108 575,80. Accordingly Sasfin claimed to be entitled to enforce its rights against Beukes under the deed of cession. Beukes disputed any F alleged breach on his part, and Sasfin's right to cancel. He contended, in turn, that Sasfin had breached certain of the terms of the discounting agreement. The dispute between the parties resulted in Sasfin (as applicant) instituting proceedings by way of notice of motion against Beukes (as respondent) in the Witwatersrand Local Division, in G which Sasfin claimed an order in the following terms:

'1.1

Declaring that the cession executed by the respondent in favour of the applicant on 13 February 1985 is of full force and effect.

1.2

Interdicting and restraining the respondent from collecting either from his patients and from any medical aid society/ies or from any person, any of the debts ceded by him to the applicant.

1.3

H Directing that the respondent furnish an account to the applicant of all amounts collected by him since 13 November 1985, and pay to the applicant all the amounts so collected.

1.4

Directing that the respondent is obliged to give the applicant access to all his books, records and documents in terms of the I deed of cession for the purpose of allowing the applicant to exercise its rights in terms of the deed of cession.

2.

Alternatively to 1 above, granting the applicant an interim interdict, interdicting and restraining the respondent from collecting either from his patients and from any medical aid society/ies or from any person any of the debts ceded by him to J the applicant, pending

Smalberger JA

A proceedings to be instituted against the respondent for the relief set out in 1.1 to 1.4; such proceedings to be instituted within 30 days from the date of this order.

3.

Directing that the respondent pay the costs of this application.

4.

Granting to the applicant further or alternative relief.'

B The matter came before Van Niekerk J. At the hearing Sasfin indicated that it was only persisting in its claim for interim relief in terms of para 2 of the order sought. The Court a quo dismissed Sasfin's application, with costs, on the ground that the deed of cession was contrary to public policy and therefore invalid and unenforceable. C However, it granted Sasfin leave to appeal to this Court. The judgment of the Court a quo is reported in 1988 (1) SA 626 (W).

The appeal turns primarily on the validity of the deed of cession and its enforceability, whether in full or in part. This involves a consideration of whether there are provisions in the deed of cession which offend against public policy and, if so, whether they are severable from the remainder of the deed of cession. If the deed D of cession is found to contain provisions which are contrary to public policy, and which are not severable, the further question arises whether, if such provisions were inserted solely for the benefit of Sasfin, Sasfin is none the less entitled to enforce the deed of cession shorn of its illegal provisions, if it so elects. This issue was not pertinently raised or argued during the hearing of the appeal, E but counsel for the parties were subsequently requested to furnish additional written heads of argument in respect thereof. This they have done, and we are indebted to them for their assistance.

Before considering these issues and the legal principles governing them, it is necessary to mention certain preliminary matters. The proceedings in the Court a quo were instituted by Sasfin only. F Sassoons and Simpex did not join, nor were they joined, in the proceedings. They have, however, indicated through their attorneys that they abide the decision of this Court, and the parties are agreed that nothing turns on their non-joinder. Furthermore, we were advised by counsel, and this has since been confirmed in certain correspondence G placed before us, that Beukes has furnished a bank guarantee to Sasfin to cover any amount which might be found to be due by him to Sasfin, pursuant to an action which Sasfin has instituted against Beukes arising out of his alleged indebtedness under the discounting agreement, and that no claim will be made against Beukes based on the deed of cession. As Sasfin no longer seeks to enforce the deed of cession, the question H of its validity has become largely academic. It remains, however, relevant to the question of costs, and this Court is therefore required to pronounce on its validity, and on any other issues that fall to be considered.

Our common law does not recognise agreements that are contrary to I public policy (Magna Alloys and Research SA (Pty) Ltd v Ellis 1984 (4) SA 874 (A) at 891G). This immediately raises the question what is meant by public policy, and when can it be said that an agreement is contrary to public policy. Public policy is an expression of 'vague import' (per Innes CJ in Law Union and Rock Insurance Co Ltd v Carmichael's Executor 1917 AD 593{dictum at 598 appl} at 598), and what the requirements of J public policy are must needs often be a difficult and contentious matter. Wessels Law of Contract

Smalberger JA

in South Africa 2nd ed vol 1 para 480 states that '(a)n act which is contrary to the interests of the community is said to be an act contrary to public policy'. Wessels goes on to state that such acts may also be regarded as contrary to the common law, and in some cases contrary to the moral sense of the community. The learned author 'Aquilius' in one of a series of articles on 'Immorality and Illegality in Contract' B in 1941, 1942 and 1943 SALJ defines a contract against public policy as A

'one stipulating performance which is not per se illegal or immoral but which the Courts, on grounds of expedience, will not enforce, because performance will detrimentally affect the interest of the community'

(1941 SALJ 346). Wille in his Principles of South African Law 7th ed C at 324 speaks of an agreement being contrary to public policy 'if it is opposed to the interests of the State, or of justice, or of the public'. The interests of the community or the public are therefore of paramount importance in relation to the concept of public policy. Agreements which are clearly inimical to the interests of the community, whether they D are contrary to law or morality, or run counter to social or economic expedience, will accordingly, on the grounds of public policy, not be enforced. (Cf Cheshire, Fifoot and Furmston's Law of Contract 11th ed at 343.)

Writers generally seem to classify illegal or unenforceable contracts (apart from those contrary to statute) into contracts that are contra bonos mores and those contrary to public policy (see eg De Wet and E Yeats Kontraktereg en Handelsreg 4th ed at 80; Wille (op cit at 321); Joubert (ed) Law of South Africa vol 5 para 151). Some, like Wessels (op cit ), include an additional classification, viz those contrary to the common law. These classifications are interchangeable, for as 'Aquilius' in 1941 SALJ at 344 puts the matter, 'in a sense... all illegalities F may be said to be immoral and all immorality and illegality contrary to public policy'. That the principles underlying contracts contrary to public policy and contra bonos mores may overlap also appears from the judgment of this Court in Ismail v Ismail 1983 (1) SA 1006 (A) at 1025G. These classifications may not be of importance in principle, for where G a court refuses to enforce a contract it ultimately so decides on the basis of public policy (see Kuhn v Karp 1948 (4) SA 825 (T) {cons} at 839). Nonetheless it is convenient to deal with unenforceable contracts, as most writers do, under various heads (see eg Christie The Law of Contract in South Africa at 335 et seq ).

In the Magna Alloy's case supra Rabie CJ stated at 891H:

'Omdat opvattings oor wat in die openbare belang is, of wat die H openbare belang vereis, nie altyd dieselfde is nie en van tyd tot tyd kan verander, kan daar ook geen numerus clausus wees van soorte ooreenkomste wat as...