The
plaintiff is a duly registered company trading under the name
Borrowdale Motor Sales. As the trade name suggests, it, the
plaintiff, trades in motor vehicles.
On
6 June 2006, the plaintiff entered into an agreement with the
defendant, in terms of which the plaintiff agreed to purchase a
vehicle owned by the defendant, to wit, a ...
The
plaintiff is a duly registered company trading under the name
Borrowdale Motor Sales. As the trade name suggests, it, the
plaintiff, trades in motor vehicles.
On
6 June 2006, the plaintiff entered into an agreement with the
defendant, in terms of which the plaintiff agreed to purchase a
vehicle owned by the defendant, to wit, a Ford Taurus registration
number 720-532L. A copy of the agreement, which is attached as
Annexure A to the summons, reveals that the purchase price of the
vehicle was $700,000= (revalued) payable as to a deposit of $300,000=
and the balance payable in two installments of $200,000= each within
a further period of five months.
In
its declaration, the plaintiff avers that it paid the deposit of
$300,000 and a further sum of $200,000 being the first instalment.
The plaintiff further avers that on tendering the remaining
instalment to the defendant, he, instead,
made
a verbal offer to buy back the vehicle from the plaintiff and that as
a result a verbal agreement was concluded for the defendant to buy
back the vehicle for the price of $3 million. The plaintiff avers,
further, that the defendant breached the verbal agreement by paying a
total amount of $570,000 instead of the agreed sum.
The
plaintiff has therefore claimed for an order cancelling the verbal
agreement with the defendant, and, further to that, for an order that
it pay back the sum of $770,000 to the defendant being a
reimbursement of the $570,000.00 paid under the verbal agreement by
the defendant and the sum of $200,000 being the balance of the
purchase price of the vehicle in terms of the written agreement
concluded by the parties on 6 June 2006.
The
defendant, in his plea, denied that the plaintiff was entitled to the
relief being sought, and, instead, averred that the plaintiff had not
performed its obligations in terms of the written agreement and has
averred that the plaintiff breached the written agreement by failing
to pay any of the installments due under the written agreement. Due
to such breach, the defendant avers that the parties agreed to
terminate the agreement on condition that the defendant would pay
back to the plaintiff the sum of $570,000 and the latter would return
the vehicle to the defendant.
The
defendant further avers that he duly paid the agreed amount to the
plaintiff but that the plaintiff refuses to return the vehicle. The
defendant therefore has filed a counter-claim in which he prays for
the return of the vehicle and payment of damages for unjustified
enrichment in the sum of $800,000 for use of the vehicle and for the
value lost on the use of the $570,000.
The
plaintiff purchased the vehicle from the defendant and paid a deposit
of $300,000 upon signature of the agreement. Subsequently, additional
other sums, which the plaintiff puts at $200,000, were paid. The
defendant puts the amount at $100,000 which amount he states is the
first breach by the plaintiff of the terms of the written agreement.
The
plaintiff has produced vouchers which bear the signature of the
defendant and states that the defendant did receive the amount of
$200,000. The defendant denies that he signed the vouchers although
admitting the signature to be his.
The
plaintiff then claims the existence of a verbal agreement in terms of
which the defendant would repurchase the vehicle at a stipulated
price. The plaintiff claims that the defendant breached the agreement
and therefore prays for its cancellation and payment to the defendant
of monies not paid under the first agreement and a refund to the
defendant of monies paid under the second agreement.
Most
of the facts are common cause. The dispute relates to the payment of
the instalments by the plaintiff due on the written agreement.
It
is common cause that the parties entered into a verbal agreement in
respect to the vehicle, and the question for determination is what
the terms of that verbal agreement were. Each of the parties has a
version which differs from the version rendered by the other.
At
the commencement of the trial the parties agreed to some of the
issues agreed to at the pre-trial conference and captured in a joint
pre-trial conference minute filed by them. The only issues left for
determination at the trial were the following therefore:
(a)
What were the material terms of the verbal agreement between the
parties?
(b)
Whether the defendant breached the verbal agreement by failing to pay
the deposit timeously?
(c)
Whether the defendant is entitled to the return of the motor vehicle?
(d)
Whether the defendant has suffered any damages and whether the
plaintiff is liable to the defendant in the amount claimed or any
other sum at all?
There
were no issues to be decided on the written agreement, but, in the
presentation of their evidence, it would seem as if the parties were
focused on issues mainly to do with the written agreement.
The
defendant, in its counter claim, alleges breach of the agreement by
the plaintiff and denies the existence of a verbal agreement
involving a buy back of the vehicle. The plaintiff, in turn, claims
ownership of the vehicle based on the written agreement.
If
the plaintiff premises its claim on the written agreement, the
dispute, it appears to me, cannot be resolved without an examination,
at the outset, of what the terms of the written agreement were and
what rights the parties retained in the vehicle pursuant thereto.
It
is clear, therefore, that the terms of the written agreement then are
an issue for determination as to whether the defendant is entitled to
a return of the vehicle or if ownership, by virtue of the agreement,
vested in the plaintiff.
I
propose to deal with the matter by examining each of the issues in
turn based on the evidence adduced by the parties.
What
were the terms of the written agreement?
The
pertinent terms of the contract are contained in clause 2 of the
written agreement. The clause is in the following terms;
“2.
The parties have agreed on the following terms:
(i)
The first agreed deposit payable on signing of this agreement shall
be $300,000,000= (old currency) (Three Hundred Million Dollars) shall
be paid in cash i.e.
(a)
$192,000,000= directly to Legacy Financial Services, No.13 Van Praagh
Avenue, Milton Park, Harare to clear a debt incurred with them by Mr
Ndenda; and
(b)
A cheque in favour of Old Mutual Properties for $50,000,000=. The
balance of $58,000,000= shall be paid in cash to Mr Ndenda on the day
of signature of this agreement.
(ii)
The balance of $400,000,000= shall be paid at a rate of $200,000,000=
(two hundred million dollars) after the first two weeks and the last
payment from the third week of the second payment or at such time as
shall be agreed by the parties and in a manner determinable and
agreed and documented by the parties.
(iii)
The parties to this agreement agree that ownership of the said
vehicle shall pass on to the buyer on signing of this agreement of
sale.”
The
first two sub-clauses do not, in my view, require any examination as
they are clear. They deal with the terms of the payment and it is
obvious from the evidence of the parties that each of the parties
understood the times within which the purchase price had to be paid
by the plaintiff.
It
is the clause providing for the passing of ownership that is at the
root of the dispute.
Each
of the parties is claiming the right of retention of the vehicle on
the basis that it is the owner. Any rights that the plaintiff claims
to ownership of the same can only have been acquired by virtue of the
agreement of sale, and, specifically, clause 2(iii). The defendant,
on the other hand, would claim that he owned the vehicle and that
ownership of the same was not transferred to the plaintiff by virtue
of the written agreement.
According
to the plaintiff, the agreement in respect of the sale by the
defendant of the vehicle to the plaintiff was a credit sale, and, as
a result, bearing in mind the provisions of clause 2(iii), ownership
passed when the agreement was signed and delivery made to the
plaintiff.
In
written submissions filed on its behalf, the plaintiff poses a
further question as to whether, in the event that ownership passed on
6 June 2006, it would revert to the defendant assuming that the
defendant has proved breach of the written agreement on the part of
the plaintiff.
The
defendant's view is however that the agreement was not a credit
sale and that ownership did not pass to the plaintiff on delivery of
the vehicle. It is accepted by the defendant that the agreement was
not one for hire purchase. The stance by the defendant is that what
was concluded was not a credit sale but a sale by installment and
that, as such, ownership in the vehicle did not pass to the plaintiff
until the full purchase price would have been paid. In his evidence,
the defendant's stance was that ownership in the vehicle never
passed to the plaintiff.
The
defendant did not, in pleading to the summons and declaration filed
and served upon him by the plaintiff, allege or aver that the
agreement was an instalment sale governed by the provisions of the
Act.
In
the written submissions, the defendant accepts that ownership had
passed to the plaintiff but that the agreement was cancelled due to
breach on the part of the plaintiff.
This
is one of those matters where the pleadings do not bring out clearly
and concisely the facts upon which the cause of action is based.
It
would have been appropriate for the plaintiff to have pleaded that
ownership had passed in terms of the agreement of sale and the
defendant would then have responded appropriately. The question of
whether or not ownership had passed is central to the resolution of
the dispute and should have been one of the issues extracted for
trial. Unhappily it was not. However, with the defendant having
accepted that ownership did pass, it then becomes necessary to
determine if the agreement that was concluded was an instalment
agreement as contended by the defendant.
In
the written submission made on his behalf, it appears that a
concession is made that ownership did pass but that the agreement,
being an agreement of sale by installment, then, in the event of
breach, the defendant would be entitled to the return of the vehicle.
The
defendant has submitted that the court should tell the parties the
nature of the agreement that they entered into. I take that to mean
that the court is being asked to interpret the agreement placed
before it. It cannot mean that the court should, in such exercise,
rewrite the contract for the parties.
The
defendant seeks reliance on a passage from WILLIE and MILLIN's
Mercantile Law of South Africa 16ed…, which is as follows;
“If
credit is given for part of the purchase price on condition that the
balance
is paid in cash, the sale is one for cash and delivery does not pass
the ownership. It is otherwise if the sale is on credit for there the
ownership of the goods passes to the buyer on delivery to him though
he has not paid the price.”
The
passages quoted by counsel for the defendant refers to the cases
decided in South Africa but I have not been referred to any
authorities in this jurisdiction dealing with installment sales other
than those governed by the Hire Purchase Act in our jurisdiction. At
page 164 of their book, WILLIE and MILLIN's Mercantile Law of South
Africa 16ed, the learned authors state:
“Installment
sale agreements are defined as agreements of sale where ownership
passes on delivery and the price is to be paid in instalments, two or
more of which are payable after delivery, and the buyer is prohibited
from alienating or encumbering the goods sold until the purchase
price has been paid in full, or, the full purchase price becomes
payable if the buyer alienates or encumbers the goods sold, or the
seller is entitled to return of the goods if the buyer fails to
comply with any one or more of the provisions of the contract:
section 1.”
A
closer reading of that passage leads me to conclude that the learned
authors were discussing a section of the South African Hire-Purchase
Act.
That
passage cannot have the meaning ascribed to it by counsel for the
defendant that any agreement within this jurisdiction where payment
has been provided for in instalments is an installment sale as
provided for by the Hire Purchase Act of South Africa.
As
I have mentioned earlier on, our own Hire Purchase Act [Chapter
14:09]
makes reference to instalment sale agreements. These are defined, in
section 3 of the Hire Purchase Act, as follows;
“Instalment
sale agreement means any contract of sale under which -
(a)
The ownership in the goods sold passes either before or upon
delivery; and
(b)
The purchase price is to be paid in installments of which one or more
are payable after delivery; and
(c)
The seller is entitled to the return of the goods sold if the
purchaser fails to comply with any of the provisions thereof;
and
includes any other contract which has, or contracts which together
have the same import, whatever form such contract or contracts may
take.”
A
perusal of the Hire Purchase Act reveals that it is meant to apply to
specified agreements whose provisions are regulated by the Act. A
feature of these agreements is that there should be reservation about
the passing of ownership to the buyer. Whereas in an agreement for
Hire-Purchase the purchaser obtains ownership after payment in full
of the purchase price, in an instalment sale agreement, the Hire
Purchase Act provides that ownership passes to the purchaser on
delivery whether or not an installment has been paid. In the event of
breach on the part of the purchaser the seller is entitled to return
of the goods that are the subject matter of the sale.
It
is the submission of counsel for the defendant that in defending the
claim, by implication, the defendant claimed the return of the
vehicle when the plaintiff failed to pay the last instalment.
I
do not think that the submission can stand scrutiny.
The
agreement executed by the parties did not provide that in the event
of breach on the part of the plaintiff ownership in the vehicle would
revert to the seller. Instead, the plaintiff was granted unreserved
right to ownership upon the signing of the agreement. No conditions
were placed upon the passing of such ownership and it is my view that
the conditions upon which the parties intended to perform their
contract is different to the conditions or provisions governing an
installment sale agreement as stipulated in the Hire Purchase Act. In
an instalment sale, even if ownership passes, there is a reservation
on the passing of such ownership and the Hire Purchase Act provides
for the seller to be able to recover the property which is the
subject of the contract upon breach by the purchaser. I do not regard
the agreement as falling in the category or form of agreements that
are described in the Hire Purchase Act as instalment sale agreements.
The
next question is whether this agreement can be termed a credit
agreement as claimed by the plaintiff.
Neither
of the legal practitioners who appeared before me was able to point
me to an authority in this country where the court had to decide what
constitutes a credit sale. I have not been able myself to find one
within this jurisdiction.
According
to CHRISTIE,
Business
Law in Zimbabwe…, the contract for sale does not always state
whether it is for cash or credit so the law presumes that the sale is
for cash, which presumption is not rebutted by the mere fact that the
seller has made delivery without receiving immediate payment.
In
casu,
ownership was to pass to the plaintiff upon the signing of the
agreement. It was therefore not a cash sale. The agreement itself
does not, despite that ownership is to pass to the plaintiff upon
signature, state that the agreement is one for credit or that the
plaintiff has been given credit for the payment of the purchase
price. In the absence of the parties having made specific averment as
to whether or not the contract is one for credit, the court would
have to examine the contract and deduce what the intention of the
parties was.
I
was referred to a plethora of authorities from South Africa. It is
clear from the South African authorities that I have had to consider
that the courts have not always found it an easy task to decide
whether or not an agreement is one for credit or when it is that
ownership is said to have passed. It appears that the matter first
received attention from the courts in South Africa in the cases of
Daniels
v Cooper (1 E.D.C. p. 174), Sadie v Standard Bank (7 J. 87), and
Quirk's Trustees v Assignees of Liddle & Co (3 J. 322)
which are referred to in Laing
v South African Milling Co. Ltd
1921
AD 387.
I
have not been able to access the earlier authorities. It would appear
however that those cases are the ones that settled the law as regards
sales on credit in South Africa according to the dicta in Laing
v South African Milling Co. Ltd
1921
AD 387.
JUTA JA…, summarized the law thus:
“The
authorities in our law were fully considered in the cases of Daniels
v Cooper (1 E.D.C. p.174), Quirk's Trustees v Assigness of Liddle &
Co. (3.J.322.), and Sadie v Standard Bank (7 J.87), and are to this
effect; that, on a sale of movables followed by delivery the property
does not pass until the purchaser has paid the money or secured the
seller for the same, or, unless the sale is on credit. And there is
ample authority for the further proposition that in the case of a
sale where nothing is said as to ready money or credit and the goods
are delivered to and taken away by the purchaser, the property does
not pass; in other words, delivery to the purchaser and his taking
away of the goods raise no presumption of the sale being on credit.
On the contrary, the presumption is that the sale was for cash.”
Laing
v South African Milling Co. Ltd
1921
AD 387 was
followed by the case of Eriksen
Motors (Welkom) Ltd v Protea Motors, Warrenton and Another
1973
(3) SA 685 AD,
in which the court found that even though there had been delivery to
the purchaser and payment had been made by cheque despite the fact
that the seller was aware that the vehicle was being sold to another
person by the purchaser, the sale was for cash and credit had not
been given.
In
a cash sale, payment of the purchase price is made against delivery
of the merx
and where payment is made by cheque, even where it is drawn against a
Bank in a different town, it is a cash sale with payment being made
only when the cheque has been cleared. Even in these circumstances if
the cheque is not met the property does not pass.
On
the other hand, a credit sale is one where the purchaser has been
given time for payment of the purchase price, which time has been
postponed for a substantial period. Where the period for payment has
been postponed for an insubstantial period, the courts have held that
the sale was for cash and not credit and that therefore ownership had
not passed. The courts in South Africa have said that a period of ten
days would be a reasonable period to hold that a sale is for cash
where the seller has made no attempt to collect payment from the
purchaser. A period in excess of that ten days is sufficient for the
courts to find that credit had been afforded to the purchaser and
that therefore the property had passed. The rule is based on the
requirement in the Insolvency Act that an unpaid seller for cash must
claim his goods within ten days of delivery.
In
terms of our own Insolvency Act [Chapter
6:04]
a seller who has not been paid in full after delivery, where the
purchaser has gone insolvent, is allowed to reclaim his property if
he has given notice within ten days of delivery to the insolvent or
the trustee of his intent to reclaim his property.
The
principles that have been stated by the courts, therefore, are to the
effect that unless there is a specific provision to the contrary,
every sale is presumed to be for cash - even where delivery has been
made. Where the seller has not granted credit to the purchaser or has
not accepted security for payment by the purchaser, the sale is for
cash unless the seller has not given the purchaser a period which is
not in-substantial for payment of the purchase price.
As
to whether or not the seller wanted to pass ownership, the intention
of the parties can be gathered from the facts.
Where
the seller contracts for passing of the property to the buyer, where
payment in full has not been made nor secured, then it is a sale on
credit and ownership would pass upon delivery of the goods.
In
an instalment sale, even if ownership passes, there is a reservation
on the passing of such ownership and the Hire Purchase Act provides
for the seller to be able to recover the property which is the
subject of the contract upon breach by the purchaser.
In
the instant case, the contract provided for the unreserved passing of
the property to the purchaser upon the signing of the agreement by
the parties. There can be no other meaning to be ascribed to the
clause “that ownership shall pass to the plaintiff upon the signing
of the agreement.” The wording is clear and unambiguous and this
court cannot ascribe any other meaning to that clause. There was no
provision for ownership to revert to the defendant in the event of
any alleged breach on the part of the plaintiff. There was no
provision for the seller to reclaim the vehicle in the event of
breach on the part of the buyer. The features of the contract between
the plaintiff and the defendant have all the hallmarks of a credit
sale.
I
can understand the difficulties that
counsel
for the defendant
faced in trying to argue that it was a cash sale. It
was not a cash sale.
As
to whether it can be termed an instalment sale, I believe the onus
was on the defendant to place before the court facts such as would
make me conclude that what I had before me was such. That was not
done.
Instead,
what the facts show is an agreement where one of the parties sold his
property to a buyer where the buyer was afforded an opportunity to
pay the balance of the purchase over a period in excess of ten days.
The only conclusion that the court can come to in such a situation is
that the defendant wished to pass ownership to the plaintiff and I
find that indeed ownership passed.
In
so far as the first agreement is concerned, the defendant stated that
he had not been paid for the second instalment.
The
plaintiff has provided
vouchers allegedly signed by the defendant when he was paid the
$200,000 which was due under the second installment. The vouchers
bear what the defendant confirms is his signature but he claims that
the plaintiff superimposed his signature on a document which he had
not signed. The documents that were tendered in evidence were all
originals. The signature itself has not been disputed but the
plaintiff did not adduce evidence to show how his signature was
affixed to an original document.
I
find that the documents are genuine and show that the defendant was
paid in full for the second instalment.
In
so far as the payment by the plaintiff of the balance of the purchase
price is concerned, it is surprising that the defendant did not at
any stage prior to the plaintiff bringing these proceedings ever call
upon the plaintiff to rectify its breach - if it was in breach.
Despite
such alleged breach, having delivered the vehicle to the plaintiff
when the agreement was executed, the defendant never demanded the
return of the vehicle until the plaintiff sued for the cancellation
of the second agreement on the basis that the defendant was in breach
thereof.
I
turn now to the terms and conditions of the verbal agreement.
According
to the plaintiff, the verbal agreement concerned the buy-back of the
vehicle by the defendant. The defendant's position however is that
because of the breach of the terms of the written agreement the
parties agreed to cancel the written agreement and for the defendant
to pay back the sum of $570,000 which was the total amount paid by
the plaintiff and interest and for the return of the vehicle to him.
I
have already found that there was no breach on the part of the
plaintiff in paying the installments under the written agreement.
It
would therefore make sense for the plaintiff to state that the
defendant offered to buy back the vehicle from the plaintiff at the
increased price of $3 million, and that, as a result, an oral
agreement was concluded whereby the defendant had to pay a deposit of
$700,000. This is the only explanation for the deposit of $570,000 in
the plaintiff's account by the defendant. According to the
plaintiff's witness the deposit of $700,000 should have been made
by the 17 July 2006. The defendant was given until 31 July to pay the
balance on the deposit and when he failed the plaintiff cancelled the
agreement between the parties.
In
my view, the probabilities of the case favour the plaintiff's
version.
It
was in the business of selling vehicles and it would have no problems
to sell back to the defendant a vehicle that had belonged to him. All
it wanted was to make a profit out of the process. The version by the
defendant that the amount deposited into the plaintiff was repayment
of the amount paid by the plaintiff under the failed agreement of
sale did not ring true.
On
the defendant's version, the amount constituted repayment of the
initial $300,000 paid by the plaintiff when the agreement was signed
and another $100,000 which was paid instead of $200,000 as had been
agreed. The additional $170,000 would then constitute interest. The
defendant was unable to say what the rate of interest agreed was. As
a result, he was not able to state with any conviction what the
amount he had deposited represented.
It
also turned up in the evidence that the plaintiff had in fact had the
vehicle repaired and serviced. The plaintiff had required the
defendant to pay for the costs of such repairs under the verbal
agreement. The defendant admitted that the vehicle was indeed
repaired and he had not reimbursed the plaintiff for the costs
thereof.
It
would be inconceivable, in my view, for the plaintiff to agree to an
arrangement where it returns the vehicle to the defendant against a
payment of $570,000. It would, at the least, demand that it be
reimbursed for the sums expended on the vehicle, which, according to
the evidence of the plaintiff's witness, were far in excess of
$570,000.
The
only verbal agreement entered into, in my view, is the one that the
plaintiff told the court and the terms of which it was able to
explain. The defendant was unable to state with certainty the terms
upon which he was to have the vehicle returned to him by the
plaintiff. He was unable to prove the existence of the verbal
contract that he alleged had been formed by the parties….,.
Overall,
I find that the version rendered by the plaintiff is to be preferred
to the evidence of the defendant and I find for the plaintiff on all
the issues. This means that the plaintiff succeeds in its claim and
the counter-claim fails.
In
the premises I make an order in the following terms:
It
is ordered as follows:
1.
The verbal agreement concluded between the plaintiff and the
defendant on 4 July 2006 be and is hereby cancelled.
2.
The plaintiff shall pay to the defendant the sum of $770,000 being
the balance due on the purchase price of the vehicle and
reimbursement of the amount deposited into the plaintiff's account
by the defendant in respect of the second agreement.
3.
The defendant's counter claim is hereby dismissed.
4.
The defendant shall pay the costs of suit.
