Trust Bank of Africa Ltd v Frysch

• Jurisdiction: South Africa
• Judge: Holmes JA, Jansen JA, Corbett JA, Kotzé JA and Joubert AJA
• Judgment Date: 23 May 1977
• Hearing Date: 25 February 1977
• Court: Appellate Division

Holmes, J.A.:

In the Cape Provincial Division the appellant issued summons against the respondent for R2 796,77, with interest, founding on a deed of suretyship. For convenience I shall refer to the appellant as "the Bank", and to the respondent as "Frysch". Judgment was given in favour of Frysch; and the Bank has appealed.

The deed of suretyship, signed by Frysch, guaranteed to the D Bank the fulfilment of the obligations of Bonus Rose (Pty.) Ltd., under its hire-purchase agreement with the National Cash Register Company, the Bank suing as cessionary of that company's rights thereunder.

The basic contention on behalf of Frysch, which was upheld by the Court a quo, is a legal one, namely that there cannot be a valid suretyship in respect of a non-existent debt; or in E respect of a future debt unless the deed of suretyship indicates that this is intended. On the view which I take of the case, the question of the validity of that legal proposition does not arise in this appeal. I say this for the following reason. Foundational to that proposition is the contention on behalf of Frysch that, when he signed the deed of F suretyship on 29 May 1970, Bonus Rose (Pty.) Ltd. was not indebted to the Bank because its hire-purchase agreement with N.C.R. had not then been ceded by the latter to the Bank. The answer to this, as will more fully appear later, is that in my view the cession took place on 26 March 1970; and accordingly that, when Frysch signed the deed of suretyship on 29 May 1970, Bonus Rose (Pty.) Ltd. was already indebted to the Bank. That G being so, the legal proposition raised on behalf of Frysch as to the invalidity of suretyship in respect of non-existent or future debts, is academic and does not arise for decision. Hence it is not necessary to express any opinion about it. I therefore proceed to deal with the decisive point, namely, the date of the cession.

The factual background

1.

H The National Cash Register Company (which I shall call "N.C.R.") carries on the business in Cape Town of selling certain machines.

2.

N.C.R. had a standing contract with the Bank in regard to the discounting of its hire-purchase agreements. According to the evidence, the Bank discounts hundreds, if not thousands, of N.C.R.'s hire-purchase agreements annually. This standard contract was entered into in 1965. The preamble refers to the Bank's discretion to discount all of N.C.R.'s hire-purchase agreements. Clause 1 of the contract reads:

Holmes JA

"The trader shall hand over and deliver such agreement or agreements to the Bank and shall thereby transfer and convey to and on behalf of the Bank all the right, title and interest which he may have or thereafter acquire by virtue of and in respect of such agreement or agreements."

(My italics.) (I pause here to observe that there is a A necessary implication that the Bank accepts the cession, otherwise there could not be the transfer, referred to in the clause, of N.C.R.'s title to and interest in the hire-purchase agreement.)

3.

As will more fully appear under the heading of "The ratio of this Court", infra, the foregoing agreement provides for only one handing over and delivering of the hire-purchase agreement. That would be when N.C.R. sends it to the Bank and the latter B received it. "Thereby ", says clause 1, N.C.R. transfer and conveys to the Bank its title to and interest in the hire-purchase agreement. Obviously that does not ipso facto result in a discounting, for the Bank has a discretion; see para. 2, supra. When the Bank, after considering the matter, decides to discount the agreement, the parties agree as to the C amount payable by the Bank, as indicated in the second preamble to the agreement. In the result, the cession must be subject to an implied resolutive condition that it will fall away if the agreement is not discounted.

4.

On 26 March 1970 Bonus Rose (Pty.) Ltd., (of which Frysch D was managing director) bought certain cash register machines from N.C.R. under a hire-purchase agreement. The latter provided, inter alia, that the buyer should pay interest at 12 per cent per annum on any instalment not paid on due date. The last clause in this agreement reads:

"18. All references to the seller in this agreement shall be E deemed to include any cessionary of the seller."

5.

On the same day, namely, 26 March 1970, N.C.R. "handed over and delivered" the hire-purchase agreement to the Bank. This date is averred by the Bank in para. 6 of its amended declaration, and is consistent with the probabilities and with an entry in the Bank's books (at p. 256 of the record) to which reference will be made later.

6.

The Bank's committee, to which the hire-purchase agreement F was thereafter referred, stipulated that Frysch should sign a deed of suretyship in the Bank's favour for the due performance by the purchaser (Bonus Rose (Pty.) Ltd.) of its obligations under the hire-purchase agreement. Frysch had agreed in principle, when his company bought the cash registers from N.C.R., that he would sign as surety; but he was not called upon by N.C.R. to do so. In consequence of the Bank's G subsequent request, Frysch signed its roneoed form of suretyship on 29 May 1970, with ad hoc particulars written in. He signed it in the belief that N.C.R. had ceded or discounted the hire-purchase agreement, and that therefore his obligation was now to the Bank. This deed of suretyship, which was annexed to the summons, was the basis of this H litigation. It reads in part as follows:

"Deed of Suretyship

I/We...... Jeffrey Frysch...............................................

of....... Ituri High Place Tamboerskloof................................

and.....................................................................

of......................................................................

do hereby bind myself/ourselves in my/our personal capacity/ies jointly and severally as surety/ties and co-principal debtor/s to The Trust Bank of Africa Ltd. (hereinafter called the Bank) its order or assigns for the due and proper payment and fulfilment of all his obligations by Bonus Rose (Pty.) Ltd. (hereinafter called the buyer) in terms of a

Holmes JA

certain hire-purchase agreement entered into upon by the said buyer and The N.C.R. Co. SA (Pty.) Ltd. on.......... of which the Bank is now the holder............"

(My italics.)

7.

This signed deed of suretyship was delivered by Frysch to A the Bank, which discounted the hire-purchase agreement on 5 June 1970. This is the date given by the Bank's witness, Du Toit, at p. 71 of the record.

8.

Bonus Rose (Pty.) Ltd., although it had been informed of the discounting, eventually defaulted in its payments to the Bank under the ceded hire-purchase agreement, and the Bank sued B Frysch, as surety, for R2 796,88, with interest at 12 per cent per annum.

The pleadings

By way of preface I would mention that ordinarily, when A discounts B's hire-purchase agreement against cession of rights thereunder, the cession and the discounting would take place on C the same day. In the present case, however, the position is governed by clause 1 of the general agreement between the Bank and N.C.R. which, as already indicated, provides, doubtless for the Bank's convenience, that when a hire-purchase agreement is "handed over and delivered" to the Bank, thereby cession takes place. Thereafter the Bank decides whether and on what terms it will discount. Thus the date of cession and the date of D discounting will not necessarily be the same.

Throughout the pleadings on both sides there is a blurring of the foregoing different concepts, namely, (i) the date of the cession of the hire-purchase agreement to the Bank in terms of clause 1 of its 1965 contract with N.C.R. (see sub-paras. 2 and E 3 of the factual background, supra); and (ii) the date when the Bank thereafter decided to and did discount the hire-purchase agreement.

Turning to the pleadings:

(a)

The Bank's summons averred that "during or about July 1971" N.C.R.'s right, title or interest in and to the hire-purchase agreement was ceded to the Bank. (This date was wrong.)

(b)

F The relevant paragraphs of the original declaration were in the following terms:

"3.

In terms of a written deed of suretyship dated 29 May 1970 (a copy of which is annexed to plaintiff's summons herein and G marked 'B'), defendant duly bound himself as surety and co-principal debtor for the due performance of all its obligations by the buyer, Bonus Rose (Pty.) Ltd., in terms of a hire-purchase agreement entered into between the latter and National Cash Register Co. (S.A.) (Pty). Ltd. (a copy of which is annexed to plaintiff's summons herein and marked 'A').

4.

H On or about 15 June 1970, the said National Cash Register Co. (S.A.) (Pty.) Ltd. duly ceded all its rights, title and interest in and to the said hire-purchase contract to plaintiff."

(That date was incorrect.)

"5.

The said hire-purchase contract was duly cancelled on the basis of the non-performance since 1 July 1971, by the buyer, Bonus Rose (Pty.) Ltd. of its obligations in terms thereof and in the result the said buyer and defendant are jointly and severally liable to pay to plaintiff the amount of R2796,88

Holmes JA

which is made up as follows:"

(c)

Frysch requested further particulars as to the cession referred to in para. 4, supra, and as to its "effective date". The Bank replied as follows:

A "The said cession was effected by means of a 'general agreement' attached hereto... in terms of which cession of the contract occurred when it was delivered to the plaintiff (My italics.) The effective date of the cession is 5 June 1970."

(The latter, however, was the date of the discounting.)

(d)

B Frysch filed the following...