Absa Technology v Michael’s Bid a House (212/2012)  ZASCA 10
27 March 2013
Posted by: Herman van Dyk
The Supreme Court of Appeal
(SCA) heard the matter between Absa Technology Finance Solutions Limited and
Michael’s Bid a House CC on 26 February 2013. The judgment was handed down by
Lewis JA on 15 March 2013.
Michael Rose ("Second
Respondent”) was an estate agent who conducted business through Michael’s Bid a
House CC ("First Respondent”). He wished to acquire a sophisticated colour
printing machine for the CC and also to print pamphlets and other material for
other estate agents in the area in which the business operated.
A Mr Vosloo of Westrand
Office Equipment ("West Rand”) suggested that the colour printing machine be
financed through Sapor Rentals (Pty) Ltd ("Sapor”) over a 36 month period and
the a rental agreement was signed. Michael Rose signed as surety for the
obligations of the CC.
The contract commenced on
the date of signature and the machine was delivered to the CC and installed.
Sapor ceded its rights
under the rental agreement to Absa Technology Finance Solutions (Pty) Ltd
The CC paid the first
amount of R2 787 to Sapor on 9 July 2008 but Rose wrote to Sapor expressing his
dissatisfaction with the printer and with the failure to supply toner. He
claimed that he had been misled into entering into the rental agreement and
that he was cancelling it. He made the second and last payment on 8 August
Absa Technology instituted
action for payment of arrear and future rentals against the CC, and against
Rose as surety, in November 2008 in the South Gauteng High Court. It claimed
the sum of R111 533 interest at a rate of six per cent per annum above the
prime rate, a tempore morae, and costs on the attorney and client scale. It
also claimed return of the printing machine.
The high court held that
that any prior discussions between Rose and Westrand were inadmissible in the
face of the written agreement. The parol evidence rule was reinforced by a
clause in the rental agreement recording that no representations, undertakings
or warranties not contained in the agreement were binding on the hirer, Sapor.
However, the high court
held that the agreement in issue was not a true lease, and, implicitly, that
despite its written provisions to the contrary, the real agreement between the
parties was in effect a sale on credit and thus a credit agreement.
Absa Technology was
therefore required to give notice and to proceed against the first respondent
as lessee, and the second respondent as surety, under ss 129 and 130 of the
National Credit Act ("Act”) before attempting to enforce the agreement.
The question to be decided is
whether a lease of movable property was governed by the provisions of the
National Credit Act 34 of 2005.
The SCA also had to
consider whether parol evidence was admissible to alter the terms of the
of facts and judgment
Section 8 of the Act
determines which contracts constitute credit agreements.
The principal argument for
the respondents in so far as the agreement in dispute in this matter was
concerned was that the ‘rental agreement’ between the parties was a lease.
Rental agreements generally
are leases, but a lease as defined in the Act is the very antithesis of a lease.
A true lease, one that
obliges the lessee to return the thing hired at the end of the contract, is
thus not covered by the definition of a credit agreement and the relationship
between the lessor and the lessee is not, if one has regard only to this
definition, governed by the provisions of the Act.
It was held that the terms
of the agreement are absolutely clear. Absa Technology remained the owner of
the goods. The requirement embodied in the definition of a lease under the Act
that ownership of the goods must pass in terms of the agreement to the
lessee at the end of the lease was not met.
The respondents did not
plead rectification, or that the rental agreement was simulated, or that the
contract had been induced by fraud.
Westrand was subsequently
sequestrated, so any remedy against it was of no use to the respondents.
The high court had admitted
extrinsic evidence that contradicted the terms of the agreement.
The SCA cited the correct
approach of the admissibility of parol evidence was stated in KPMG Chartered
Accountants SA v Securefin Ltd where
it was confirmed that where a document was intended to provide a
complete memorial of a jural act, extrinsic evidence may not contradict, add to
or modify its meaning.
It was held that the high
court should not have had regard to the evidence that was led as to the parties’
understanding of the rental agreement. The written rental agreement signed by
Rose on behalf of the CC and on behalf of Sapor is a lease as it is understood
at common law, but not a lease for the purposes of s 8(4) of the Act.
Accordingly, it was held
rental agreement is thus not governed by the Act and Absa Technology is not required
to give notice, or comply with, the provisions of ss 129 and 130 of the Act
before instituting action.
Click here for the full judgment.