Sasfin (Pty) Ltd v Beukes

• Jurisdiction: South Africa
• Judgment Date: 19 September 1988
• Citation: 1989 (1) SA 1 (A)

Sasfin (Pty) Ltd v Beukes
1989 (1) SA 1 (A)

1989 (1) SA p1

Citation	1989 (1) SA 1 (A)
Court	Appellate Division
Judge	Rabie ACJ, Jansen JA, Van Heerden JA, Smalberger JA, Nestadt JA
Heard	March 8, 1988
Judgment	September 19, 1988

Flynote : Sleutelwoorde B

Contract — Legality — Contracts contrary to public policy — Agreements clearly inimical to interests of the community, whether contrary to law or morality or social or economic expedience, not enforceable on grounds of public policy — Court should not shrink from duty of declaring such a contract contrary to public policy — But such power should be C exercised sparingly and only in clearest cases — Should be borne in mind that public policy generally favours the utmost freedom of contract — Deed of cession by doctor to finance company whereby latter placed in immediate and effective control of all doctor's earnings, would have been entitled to recover all doctor's book debts and retain all amounts D so recovered irrespective of whether doctor indebted to it in a lesser amount or at all, and whereby doctor powerless to bring such situation to an end — Such cession in securitatem debiti clearly unconscionable and incompatible with public interest — Thus contrary to public policy — Most of the clauses held to be contrary to public policy went to E the principal purpose of the contract and were not subsidiary or collateral — Accordingly not severable from rest of contract, notwithstanding clause in cession providing that each clause was severable one from the other and if any found to be unenforceable the remaining clauses would continue to be of full force and effect — Court accordingly dismissing appeal against decision refusing an interdict F restraining doctor from recovering debts due to him.

Headnote : Kopnota

Our common law does not recognise agreements that are contrary to public policy. As to the question of what is meant by public policy and when can it be said that an agreement is contrary to public policy, the interests of the community or the public are of paramount G importance. Agreements which are clearly inimical to the interests

1989 (1) SA p2

A of the community, whether they 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.

No court should shrink from the duty of declaring a contract contrary to public policy when the occasion so demands. The power to declare contracts contrary to public policy should, however, be exercised sparingly and only in the clearest of cases, lest uncertainty as to the validity of contracts result from an arbitrary and indiscriminate use B of the power. One must be careful not to conclude that a contract is contrary to public policy merely because its terms (or some of them) offend one's individual sense of propriety and fairness. In grappling with this often difficult problem it must be borne in mind that public policy generally favours the utmost freedom of contract, and requires that commercial transactions should not be unduly trammelled by restrictions on that freedom. A further relevant, and not unimportant, consideration is that 'public policy should properly take into C account the doing of simple justice between man and man'.

The Court, accordingly (per Smalberger JA, Jansen JA and Nestadt JA concurring), held that a deed of cession executed by the respondent (a doctor) in favour of, inter alia, the appellant (a finance company) was contrary to public policy and therefore unenforceable. The cession, which was a cession in securitatem debiti, contained provisions D the effect of which was, on a proper interpretation thereof, to put the appellant, from the time the deed of cession was executed, and at all times thereafter, in immediate and effective control of all respondent's earnings as a doctor, to entitle the appellant, on notice of cession to the respondent's debtors, to recover all his book debts and to retain all amounts so recovered, irrespective of whether the respondent was indebted to it in a lesser amount or at all (the respondent by the aforegoing provisions could be effectively deprived of his income E and means of support for himself and his family), and furthermore to put the respondent in the position of being powerless to bring the situation to an end by reason of a provision that 'this cession shall be and continue to be of full force and effect until terminated by all the creditors'. The Court held that an agreement having such an effect was clearly unconscionable and incompatible with the public interest and was therefore contrary to public policy. As to the question of whether F the offending provisions were severable from the rest of the cession, the Court found that a clause in the deed of cession that 'each phrase... and clause in this cession is severable the one from the other,... and if in terms of any judgment... any... clause is found to be... unenforceable for any reason the remaining... clauses... shall nevertheless be and continue to be of full force and effect', had to be seen as no more than an expression of intention by the parties that their agreement should be regarded as severable to the extent G that severance was appropriate and permissible. The Court further held that the offending provisions, or most of them, were fundamental to the nature and scope of the security which the appellant required and that they contained provisions which were material, important and essential to the appellant's ends; they went to the principal purpose of the contract, and were not merely subsidiary or collateral thereto. The offending provisions were therefore held not to be severable from the remainder of the deed of cession and that accordingly the whole deed H of cession was void ab inititio. The Court concluded that the appellant's appeal against a Local Division's refusal of an interdict pendente lite restraining the respondent from collecting either from his patients or any other person any of the debts ceded by him to the appellant had to be dismissed. [*] In a

1989 (1) SA p3

A minority judgment, Van Heerden JA, Rabie ACJ concurring, held that only some of the provisions of the deed of cession found by the majority of the Court to be contrary to public policy were in fact contrary to public policy, that these provisions were indeed severable from the remainder of the cession, but that the balance of convenience favoured the refusal of the interdict pending the institution of proceedings by the appellant.

B The decision in the Witwatersrand Local Division in Sasfin (Pty) Ltd v Beukes; Suid-Afrikaanse Vervoerdienste v Sasfin (Pty) Ltd 1988 (1) SA 626 confirmed.

Case Information

Appeal from a decision in the Witwatersrand Local Division (Van Niekerk J). The facts appear from the judgments of Van Heerden JA and Smalberger JA.

C W H Trengove SC (with him N N Lazarus SC ) for the appellant referred to the following authorities: Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A) at 895; Jonker v Yzelle 1948 (2) SA 942 (T); Smit v Van Tonder 1957 (1) SA 421 (T) at 425; Baines Motors v Piek 1955 (1) SA 534 (A) at 540; Vogel NO v Volkerz 1977 (1) SA 537 (T) at 548C - G, 549; Vernon and Others v Schoeman and Another 1978 (2) SA 305 (D) at D 309D - E; Smith v Rand Bank Bpk 1979 (4) SA 228 (N) at 233D - F; Kuhn v Karp 1948 (4) SA 825 (T) at 838 - 40; Consolidated Finance Co Ltd v Reuvid 1912 TPD 1019 at 1024; Paiges v Van Ryn Gold Mines Estates Ltd 1920 AD 600 at 614 - 15; Mabaso and Others v Nel's Melkery (Pty) Ltd 1979 (4) SA 358 (W) at 361 - 2; Stern and Ruskin NNO v Appleson 1951 (3) SA 800 (W) at 810 - 11, 811 - 12; UDC Bank Ltd v Seacat Leasing & Finance Co (Pty) Ltd 1979 (4) SA 682 (T); Matthews v Matthews 1936 TPD E 124; Voloshen v High Speed Laundry & Cleaning Services (Pty) Ltd 1938 CPD 341; Stansfield v Kuhn 1940 NPD 238; Miller v Spamer 1948 (3) SA 772 (C); Steenkamp v Fourie 1948 (4) SA 536 (T); Starr v Ramnath 1954 (2) SA 249 (N); Sandell v Jacobs 1970 (4) SA 630 (SWA) at 633; First Industrial Excavation Land Development Engineering and Cleaning Corp of SA Ltd F v Duncker & Valdislavich (Pty) Ltd 1967 (1) SA 317 (T); SA Hyde (Pty) Ltd v Newmann NO 1970 (4) SA 55 (O); Webster v Mitchell 1948 (1) SA 1186 (W) at 1189; Gool v Minister of Justice 1955 (2) SA 682 (C) at 688; Beecham Group Ltd v B-M Group (Pty) Ltd 1977 (1) SA 50 (T) at 155B - E; Bank of Lisbon & South Africa Ltd v The Master and Others 1987 (1) SA 276 (A) G ; Steyn Die Uitleg van Wette 5th ed at 97; Insolvency Act 24 of 1936 s 24(1); Workmen's Compensation Act 30 of 1941 s 102; Workmen's Wages Protection Act 40 of 1956 s 3(1); Public Service Act 54 of 1957 s 23; Statutory Pensions Protection Act 21 of 1962 s 2(1); Sale of Land on Instalments Act 72 of 1971 s 8(1); Credit Agreements Act 75 of 1980 s 9(1); Veriava and Others v President, South African Medical and Dental Council, and Others 1985 (2) SA 293 (T) at H 306D et seq ; Standard Bank Ltd v Estate Van Rhyn 1925 AD 266; Sutter v Scheepers 1932 AD 165 at 173 - 4; Schierhout v Minister of Justice 1926 AD 99 at 109; Pottie v Kotze 1954 (3) SA 719 (A) at 726 - 7; Warren v Pirie (Pty) Ltd 1959 (1) SA 419 (E); Barclays National Bank Ltd v Brownlee 1981 (3) SA 579 (D) I ; Waugh v Morris (1873) LR 8 QB 202; Reynolds v Kinsey 1959 (4) SA 50 (FC); Claassen v African Batignolles Constructions (Pty) Ltd 1954 (1) SA 552 (O); Mahomed Abdullah v Levy 1916 CPD 302; Trust Bank van Afrika Bpk v Eksteen 1964 (3) SA 402 (A); Christie The Law of Contract in South Africa at 461; Verkouteren v Rubesa 1917 TPD 274 at 275; Spies v Hansford and Hansford Ltd 1940 TPD 1 at 8 - 9; Blaikie & Co Ltd J v Lancashire 1951 (4)

1989 (1) SA p4

A SA 571 (N) at 576; Cohen v Sherman & Co 1941 TPD 134; Lochrenberg v Sululu 1960 (2) SA 502...