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Absa Technology v Michael’s Bid a House (212/2012) [2013] ZASCA 10

Wednesday, 27 March 2013   (0 Comments)
Posted by: Herman van Dyk
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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 ("Appellant”).

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 2008.

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.

Matters to consider

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 written agreement.

Consideration 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 that the 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.

The appeal was upheld.

Click here for the full judgment.



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