De Jongh v Philippides [2023] ZAGPJHC 1308
PROPERTY – Agreement of sale – Theft by attorney
Balance of purchase price misappropriated by attorney who absconded – Purchaser contending that payment was to attorney as agent of seller and seeking transfer – Interpretation of agreement – Attorney acted as agent of purchaser in accepting the payment – Payment to attorney secured purchase price in terms of agreement but did not discharge purchaser’s obligations in terms of the agreement to pay the balance – Seller was entitled to cancel the agreement – Application dismissed.
Facts: The De Jongh Family Trust bought an immovable property from Mr Philippides on auction and paid a deposit of R205,000 and then paid the balance of the purchase price of R4,247,447.53. This was paid to the bank account stipulated by Ms Harper of Leigh Harper Incorporated who was the attorney appointed by Mr Philippides to attend to the transfer. It transpired that the bank account stipulated by Ms Harpur was not a trust account and she misappropriated the balance prior to the registration of transfer of the property and absconded. Mr Philippides has terminated the mandate of Ms Harpur and appointed a new conveyancer. He has purported to cancel the agreement after placing the trust on terms to pay the balance stolen by Ms Harpur into the trust account of the newly-appointed conveyancers.
Application: Seeking that Mr Philippides be declared in breach of the agreement and be ordered to do the necessary to cause registration of transfer to the trust. The trust submits that in terms of the agreement Ms Harpur acted as Mr Philippides’ agent and that payment by the trust to Ms Harpur was equivalent to payment to Mr Philippides and that he was not entitled to cancel the agreement.
Discussion: That amongst the plethora of decisions dealing with the unfortunate theft of monies held in trust by attorneys, there are probably an equal number thereof where findings were made that the said attorneys, in matters of purchase and sale, acted as the agent of the purchaser as were made that the attorneys acted as the agent of the seller; that in determining whether, in a particular matter, an attorney is the agent of the purchaser or the seller (or even both), it is clear that it is necessary to interpret the agreement entered into between the parties; that the agreement provided for payment of a deposit (subclause 3.1 of the agreement) in direct contrast to the securing of the balance of the purchase price; and that if the “innocent bystander” test was to be applied, it is highly improbable that either of the parties, if asked, would have answered in the affirmative that should the purchaser elect to make payment to the attorney in cash to secure the balance of the purchase price, rather than by providing a suitable guarantee, and that attorney stole those monies, the seller would be liable therefor.
Findings: Payment of the balance by the trust to Ms Harpur secured the purchase price in terms of the agreement but did not discharge the trust’s obligations in terms of the agreement to pay the balance in terms thereof. That obligation would and could only be discharged upon transfer of the property and payment of the balance by Ms Harpur to Mr Philippides. In accepting the balance in cash from the trust, Ms Harpur acted as the agent of the trust and not the agent of Mr Philippides. Mr Philippides placed the trust on terms to pay the balance which it has failed to do. In the premises, Mr Philippides was entitled to cancel the agreement.
Order: The application is dismissed. The trust is to pay the costs of the application.
WANLESS AJ
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King Price Insurance v Mhlongo [2023] ZASCA 152
CONTRACT – Insurance – Vehicle market value
Vehicle insured under policy written off in collision – Insurer rejecting claim and insured issuing summons – Market value pleaded but no evidence led on market value – Evidence instead led on shortfall of amount owed to the financing bank – Incongruity between pleadings and evidence – No duty on insurer to plead or present evidence to prove an alternative quantum of damages – Claim not proved.
Facts: Mr Mhlongo was a policy holder with King Price where he had comprehensive cover for his Mercedes Benz E200 motor vehicle. Mr Mhlongo’s vehicle was involved in a collision in 2018 and written off. He duly lodged a claim under his policy, but King Price rejected the claim and cancelled the policy. Mr Mhlongo then issued summons out of the Regional Court (trial court), claiming contractual damages of R374,960.50 being the “fair, alternatively reasonable, alternatively market related value of the motor vehicle”. In response, King Price pleaded that Mr Mhlongo had failed to comply with his obligations under the agreement.
Appeal: The trial court found in Mr Mhlongo’s favour and awarded damages in the amount pleaded. The matter went on appeal to a full bench of the High Court, which upheld the trial court’s judgment and order. On petition to the Supreme Court of Appeal, leave to appeal was granted, although it was limited to whether the plaintiff proved the quantum of the claim.
Discussion: The only evidence adduced by Mr Mhlongo to establish the quantum of the damages he claimed to have suffered was a written settlement quotation, supposedly from Standard Bank which had financed the purchase of the vehicle, stating that the settlement amount due to the bank under the vehicle finance agreement was R374,960.50. But Mr Mhlongo claimed as damages the market-related value of his vehicle and yet presented no evidence at all on the market value of the vehicle. The full bench found that, correctly interpreted, the agreement between the parties obliged King Price to pay the settlement amount, and hence Mr Mhlongo was entitled to claim that amount by way of contractual damages. It found that the onus lay on King Price to plead and prove an alternative basis for the calculation of damages, and it had failed to do so.
Findings: What was fundamentally at issue was not the correct interpretation of the agreement, but rather the case as pleaded by Mr Mhlongo. He pleaded his damages based on the market-related value of the vehicle. He did not plead damages based on the settlement amount. It is for a plaintiff to prove its damages. Having appropriately elected to frame his damages as the market-related value of the vehicle, Mr Mhlongo bore the onus of proving the damages so pleaded. King Price elected to defend the action on the basis that Mr Mhlongo had not discharged his onus. King Price was entitled to defend the action in this manner. As such, there was no duty on King Price to plead or present evidence to prove an alternative quantum of damages. Unfortunately for Mr Mhlongo, there was a fatal incongruity between the case he pleaded and the case he presented to the trial court. In the absence of evidence to establish the market-related value of his vehicle, it could not properly be found that he had proved his claim.
Order: The appeal is upheld and the order of the High Court replaced with an order upholding the appeal and substituting the order of the Regional Court with one granting absolution from the instance.
KEIGHTLEY AJA (GORVEN JA, MABINDLA-BOQWANA JA, WEINER JA and BINNS-WARD AJA concurring)
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FFS Finance ta Ford Credit v Lamola [2023] ZAGPPHC 1891
CONTRACT – Instalment sales agreement – Punitive costs clause
Two cases where plaintiffs seeking default judgment following arrears on vehicle finance – Pacta sunt servanda and discretion of court – National Credit Act 34 of 2005 and Consumer Protection Act 68 of 2008 – Agreements provided to court excessively one-sided with respect to punitive costs – Whether contrary to public policy and whether granting of punitive costs order would further overburden consumers who are clearly not coping with their current debts – Defendants ordered to pay plaintiff’s taxed party and party costs in each case.
Facts: Ford Credit and Mr Lamola concluded a written instalment sale agreement wherein he undertook to purchase a 2017 Ford Fiesta 1.0 Ecoboost Ambiente SDR. The agreement provided for cancellation and repossession on default of payments and for Ford Credit to institute legal proceedings against Mr Lamola and claim costs on an attorney and client scale. BMW Financial Services and Mr Smith concluded an instalment sale agreement for the purchase of a BMW 435i Grand Coupe M Sport. Both buyers fell into arrears with their payments.
Applications: Both plaintiffs sought default judgment in different applications and because of the same concerns, it was prudent for the court to deal with both matters in the same judgment. The court is concerned with the punitive costs orders sought against the respective defendants. The court is called to determine whether parties in their instalment sale agreement can strip the court of its discretion to make an appropriate costs order. Is the court bound by the parties’ agreement to order punitive costs against the consumer, despite the matter not being defended?
Discussion: Whether a court faced with an application for a default judgment should simply rubberstamp the costs “agreed” to by the parties in their commercial agreement; whether it is constitutionally permissible to rubberstamp a clause in a commercial agreement that provides for punitive costs where the party against whom costs are sought did not defend the claim against them; the submission that in terms of pacta sunt servanda the contract must be strictly enforceable on the parties with as minimal judicial interference as possible; and whether the granting of punitive costs orders would further overburd consumers who are clearly not coping with their current debts, in contravention of the aims of both the National Credit Act 34 of 2005 and Consumer Protection Act 68 of 2008.
Findings: The proforma commercial contracts are carefully designed and drafted for the benefit of service providers and sellers of goods. In industries where there is a possibility of non-compliance by consumers of commercial contracts due to the structure of the economy, “forcing” consumers to contract themselves to punitive legal costs in the event of a breach of these contracts demonstrates unequal bargaining power. The instalment sale agreements that were provided to the court in these two applications are excessively one-sided with respect to the punitive costs issue. They do not make provisions for punitive costs to be awarded against the plaintiffs should they breach these contracts. Notwithstanding the fact that courts have a discretion to make costs orders and are not bound by what parties include in their contracts, the fact that these punitive costs orders are granted by some judges is a matter of concern. In this context, the court has no doubt that punitive costs clauses in commercial agreements are against public policy, potentially unlawful, and should not be granted.
Order: In the first application, the termination of the agreement is confirmed and the Ford vehicle must be returned to the plaintiff. The defendant is ordered to pay the plaintiff’s taxed party and party costs. In the second application, the defendant must pay an amount of R250,013.97 and is ordered to pay the plaintiff’s taxed party and party costs.
MARUMOAGAE AJ
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