CIV\APN\295\90
IN THE HIGH COURT OF LESOTHO
In matter between:
LESOTHO BANK Applicant
and
MR. ROOSTER'S CRISPHY CHICKEN
(LESOTHO) (PTY) LTD 1st Respondent
THABANG JOSEPH MOTSHOHI 2nd Respondent
ROOSTER LESOTHO (PROPRIETARY)
LIMITED 3rd Respondent
DEPUTY SHERIFF OF THE HIGH
COURT MASERU 4th Respondent
JUDGMENT
Delivered by the Honourable Mr. Justice J.L. Kheola on the 19th day of October. 1992.
This is an application for an order in the following terms:
Dispensing with the forms and service provided for in the rules of Court and disposing of this matter at such time and place and in such manner and in accordance with such procedures as the court may deem fit on the grounds of urgency,
Authorising a rule nisi to issue calling
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upon the Respondents to show cause on date to be fixed by the court why:-
Why Respondents shall not be restrained individually and severally from attaching and or remov- . ing the goods listed in annexure "B" to Mr. Moloi's affidavit annexed hereto to any destination or person other than to the Registrar of the above honourable Court.
Respondents shall not be ordered to release to the Applicant the goods listed in annexure "B" to Mr. Moloi's affidavit annexed hereto being the property, of the Applicant.
Respondents shall not be ordered to pay the costs of this application.
Applicant shall not be granted further and or alternative relief.
That prayer 2(a) shall operate with imme-
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diate effect as interim interdict against the Respondents preventing them from attaching and or removing the Applicant's goods listed in annexure "B" to Mr. Molo-i's affidavit annexed to any destination outside Lesotho and directing them to deliver same to the Registrar of the above honourable court pending final determination of this application.
Further and or alternative relief.
On the 28th November, 1990 the attorneys of the applicant and the first respondent appeared before me and by agreement prayer 2(a) was granted with the modification that the goods in question shall not be removed from the place of storage without the authorisation of the Registrar, applicant's attorneys and first respondent's attorneys. After several extensions the matter was finally argued together with a counter-application by the first respondent.
In its founding affidavit by Mr, Maitse Stanley Moloi it is deposed that the applicant is the owner of certain cooking equipment more fully set
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out in Annexure "B" to the founding affidavit by virtue of a cession of an instalment sale agreement between the second respondent and Nedfin Bank Ltd. The copy of the instalment sale agreement is Annexure "C" and a copy of the cession is Annexure "D".
In terms of paragraph 2 of the instalment sale agreement the ownership of the goods described in Annexure."B" would remain vested in the applicant until full payment of the purchase price thereof . has been paid by the second respondent.
Mr. Moloi avers that he believes that the second respondent owes the first respondent an amount of approximately M56,420-80 in respect of rent and franchise fees for which the first respondent has already obtained a judgment. In execution of that judgement the first respondent has attached and is removing the property of the applicant listed in Annexure "B". Despite the warning by the applicant to the first respondent that the property being used by the second respondent on premises at Plot 13283-145 does not belong to him (second respondent), the first respondent is apparently ignoring the applicant's claim and is removing the
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property aforesaid.
Mr. Moloi alleges that the second respondent has not fully paid the purchase price of the goods in Annexure "B" and he is at present owing the applicant M192,640-80.
Mr Carnie Matisonn is the Director of the first respondent. He has deposed to an answering affidavit on behalf of the first respondent in which he. avers that the instalment sale agreement does not confer any rights on the applicant because Nedfin Bank were paid in full before the date of the alleged cession. The cession agreement is Annexure "D" to the founding affidavit and it is dated the 20th November, 1990 at Bloemfontein when the cedent signed and the 26th November, 1990 when the cessionary signed it at Maseru. The cheque paid by the applicant to Nedfin Bank was paid on the 4th October, 1990. Mr, Matisonn alleges that by making payment to Nedfin Bank, the applicant may have lent or advanced money to the second respondent and is probably entitled to debit the second respondent in its books, but the full amount under the instalment sale agreement has been paid and the agreement thereby discharged.
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He invited the applicant to produce copies of its ledger accounts and statements in respect of the second respondent's accounts with it which will reveal that the full amount of the payment to Nedfin Bank was debited to the second respondent's current account. This would be corroboration of the fact that it was simply payment on behalf of the second respondent by way of a loan.
The statements of the second respondent's current account - Loan where annexed to the applicant's replying affidavit and they do not show any entry regarding the loan for the payment of the instalment sale agreement as loan to the second respondent.
On the 31st October, 1990 and under case CIV\APN\268\90 the first applicant launched an application against the present second and third respondents, for ejectment from the premises described above and for judgment in the amount of M56,420-00 all being in respect of arrear rental; and for attachment of the movables in the aforesaid premises. It was clear to the first respondent that the Nedfin agreement had been discharged by payment, since the second respondent's attorney,
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Mr. P.P. Mofolo, had so advised in writing in terms of Annexure "R3". The second and third respondents were ejected on the 2nd November, 1990.
On the 15th November, 1990, for the first time, the first respondent was notified of the present applicant's alleged claim to ownership of the goods in question. By then the goods bad already been attached by the deputy sheriff as landlord's hypothec for rent.
In the replying affidavit Mr. Moloi alleges that the applicant is the owner of the aforesaid equipment because it was ceded to the applicant upon payment of Nedfin Bank on 4th October, 1990 and confirmed in writing on the 20th November, 1990 through Annexure "D".
The first issue that I propose to deal with is the validity or invalidity of the cession between the applicant and Nedfin Bank Limited. In the founding affidavit of the applicant no mention is made of the fact that on the 4th October, 1990 when payment was made to Nedfin Bank to settle the instalment sale agreement between Nedfin Bank and the second respondent, it was because an oral
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cession agreement had been entered into and that it was to be confirmed in writing at a later stage.
In paragraph 3 of the founding affidavit Mr. Moloi says:
"The applicant is the owner of certain cooking equipment more fully set out in annexure "B" hereto by virtue of the cession of the instalment sale agreement between the 2nd respondent and Nedfin Bank Limited. A copy of the instalment sale agreement aforesaid is attached and marked "C". A copy of the cession agreement aforesaid is attached and marked "D".
It is very inconceivable that in the preparation of the founding affidavit the applicant forgot the oral cession which caused it to pay a very substantial amount of money. The applicant only remembered what he calls a confirmation of the cession in writing. I tend to think that the written cession is an afterthought because there is no reason why the oral cession was not mentioned, in the founding affidavit.
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Mr. Raubenheimer, counsel for the applicant, referred to Christie: The Lew of Contract in South Africa, at page 459 where the learned author states:
"In general no formalities are acquired , for a cession, which may validly be orally or tacitly even if the rights ceded form part of a written contract."
I think it is the applicant who is behaving in an unusual way by ignoring the oral cession in its founding papers and only mentioning it in the replying affidavit.
Mr. Edeling, counsel for the first respondent, submitted that the applicant must have paid Nedfin Bank as a surety of the second
respondent. He has referred to a letter from Nedfin Bank dated the 6th December, 1990 addressed to the first respondent in which it is stated by the Assistant Branch Manager that the instalment sale agreement has been settled in their books by the guarantor, namely Lesotho Bank on the 4th October, 1990, He states that all the relevant documents were subsequently ceded to Lesotho Bank. Of course, a letter is not evidence
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like an affidavit. However in the instant case the letter seems to confirm the inference which we have drawn from the proved facts that the oral cession referred to only in the replying affidavit was never agreed upon.
I am satisfied that the oral cession agreement of the goods aforesaid was never entered into and seems to be an afterthought. On the 4th October, 1990 when the applicant paid the full purchase price of the goods aforesaid the second respondent became the new owner of the said goods. The applicant settled the debt as a surety or as a lender but it is not clear why it did not debit the second respondent's current account with that amount of money.
If I am right that the second respondent became the owner of the goods aforesaid on the 4th October, 1990; it is clear that the goods could be subject to the landlord's hypothec for rent and they were properly attached on the 2nd November, 1990.
If I am wrong that the second respondent was the owner of the said goods on the 2nd November,
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1990, I think the applicant still has to fail because as a third party and allegedly the owner of the property aforesaid it failed to inform the first respondent ( a landlord) that it (applicant) was the owner of the goods in question. In Bloemf-ontein Municipality v. Jacksons, Ltd. 1929 A.D. 266 at p. 271 Curlewis, J.A. said:
"By a series of decisions in the Courts of South Africa the law as to the liability of the goods of a third person for
attachment under a landlord's lien or tacit hypothec for arrear rent has been firmly established, and it may be stated thus: When goods belonging to a third person are brought on to leased premises with the knowledge and consent, express or implied, of the owner of the goods, and with the intention that they shall remain there indefinitely for the use of the tenant, and the. owner, being in a position to give notice of his ownership to the landlord, fails to do so, and the landlord is unaware that the goods do not belong to the tenant, the owner will thereby be taken to have consented to the
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goods being subject to the landlord's tacit hypothec, and liable to attachment."
In the instant case there is nothing to show that at the time the goods were installed the first respondent knew that they belonged to Nedfin Bank and not to the second respondent or later to the applicant. It was only on the 15th November, 1990 that a certain Miss Metsing of the applicant informed the first respondent that the goods in question belong to the applicant. She, however, refused to substantiate the applicant's claim with any documents.
To ensure that a lessor does not form a mistaken belief as to ownership an owner of property on hired premises should inform the lessor of the true position.
A notice from a third party owner which reaches the lessor after the lessee has fallen into arrears with his rent does not protect the third party from having his goods attached. Such a notice will however, protect him against having his property attached for future rent.' (See Cooper:
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The South African Law of Landlord and Tenant, pp. 164-165).
In the present case the second respondent was already in arrears with his rent and the notice could not help the applicant even if it were the third party owner of the goods.
For the reasons stated above the Rule Nisi is discharged with costs including the storage charges of the goods in question.
In the counter-application the first respondent sought an order in the following terms:-
Ordering the Applicant to pay the First Respondent the sum of M66,560-25 together with interest at the rate of 11% from 1 December 1990 to date of payment.
(B) (Alternatively to (A):
Ordering the Applicant to sign a guarantee, as will be prepared by the First Respondent's attorneys, in respect of the obligations of Third Respondent to First Respondent in
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respect of rental.
Ordering the Applicant to pay to First Respondent the sum of M55,560-25 together with interest at the rate of 11% from 1 December 1990 to date of payment.
Ordering the Applicant to pay the costs of this counter-application.
Granting further or alternative relief.
The parties in the counter-claim are referred to as in the main application. The applicant was the banker of the second and third
respondents. The first respondent was the owner of a certain franchise rights relating to the "Mr. Rooster" trademarks
and system and was in control of the premises being plot 13283-145 Cathedral area, Maseru. The second respondent was desirous of
establishing a Mr. Rooster outlet at the above premises, which he could only do if the first respondent granted him a franchise
agreement for the use of the system, and a lease for the premises. The lease would be in the franchise in the
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name of the second respondent.
The first respondent says that it would only be prepared to grant the required franchise and lease, on condition that the second respondent's bankers (the applicant) would guarantee payment of the rent. The applicant was involved in the negotiations because of the guarantee for payment of the rent it had to pay. On the 14th July, 1989 Mr. Matisonn and Mr. Mafike had a telephone conversation in which they agreed on the wording of the guarantee. On the same day. Mr. Matisonn transmitted by fax to Mr. Mafike the wording agreed upon (See Annexure R2). Applicant responded by telex on the same day, in terms of Annexure R3, which reads:
"We are in total agreement with the draft guarantee contained in your fax letter dated 14\7\89 - you may now proceed on the basis that this guarantee will be provided."
The first respondent says that acting on the strength of the above agreement and the said written undertaking by the applicant, and the written assurance that the first respondent may proceed on
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the basis that the guarantee would be provided, the first respondent granted the third respondent a lease in respect of the premises in question on the 1st September, 1989.
The third respondent never paid the rent except for three months i.e. September, October and November, 1989 (See Annexure "B").
The first respondent denies that it ever received those three cheques. The first respondent alleges that it would not have granted
the lease if the applicant had not undertaken the guarantee the rentals due for the premises. As a result of the said undertaking
by the applicant, the first respondent was . thereby induced to act to its potential prejudice in entering into the lease agreement. The applicant knew of the importance which the first respondent placed on the guarantee, and by giving the written undertaking the applicant knew and intended that the first respondent would act thereon as aforesaid.
In CIV\APN\268\90 the first respondent sued the second and the third respondent. Judgment was granted for arrear rent; the second and third respondents were ejected from the premises, and
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leave was granted to attach the movables in and on the premises to secure the first respondent's hypothec for arrear rent. The movables were duly judicially attached, but before they could be removed and sold, the applicant launched the main application to interdict the removal and sale thereof.
In his opposing affidavit Mr. Moloi on behalf of the applicant, avers that the applicant was never advised by the first respondent that the grant of franchise rights and lease rights were dependent upon the provision of the guarantee by the applicant for payments of rent by the third respondent.
He avers that to the best of his knowledge and belief a proper guarantee with full details of the terms thereof has never been given to the applicant by the first respondent for final approval and signature. The documents referred by Mr. Matisonn (Annexure R2) were never forwarded to the applicant for final approval and signature. He denies that a valid guarantee exists in terms of which the applicant can be required to pay M66,560-25 alleged arrear rental or any portion of that sum.
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It seems to me that the most important issue in the counter-application is the interpretation of Mr. Mafike's telex of the 14th July, 1989. He accepted the draft guarantee contained in Mr. Matisonn's fax letter of the same date. He then went on and said: "You may now proceed on the basis that this guarantee will be provided." This statement is rather ambiguous in that it is not clear whether Mr. Mafike was saying Mr. Matisonn should proceed with the preparation of the written guarantee or to the granting of the lease to the third respondent.
Be that as it may, there is one thing that is very clear. The parties intended their agreement to be in writing. In Goldblatt v. Fremantle 1920 A.D, 123 at pp 128-129 Innes, C.J. said:
"Subject to certain exceptions, mostly statutory, any contract may be verbally entered into; writing is not essential to contractual
validity. And if during negotiations mention is made of a written document, the Court will assume that the object was merely to afford facility of proof of the verbal agreement, unless it
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is clear that the parties intended that the writing should embody the contract. (Grotius 3.14.26 etc). At the same time it is always upon to parties to agree that their contract shall be a written one (see Voet 5.1.73. v. Leeuwen 4.2., sec. 2. Decker's note); and in that case there will be no binding obligation until the terms have been reduced to writing and signed. The question is in each case one of construction. In the present instance the learned Judge, after con-siderable hesitation, dealt with the matter on the basis that the parties were bound by their verbal agreement, but that it was a condition of that agreement that it should be executed in writing within a reasonable time by both of them. Such a condition he regarded as a concurrent one, which there was a reciprocal obligation to perform. The point of construction is not easy; but in my opinion the better view is that there was no contract until its terms had been confirmed by both parties in writing. For it was definitely agreed that the particulars
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arranged should be reduced to writing by Fremantle, and should be confirmed in writing by Goldblatt, The former was to formulate under his own signature what he considered to be the result of the interview, and the latter was to confirm in writing, also under his signature, the result thus submitted. That amounted, in my opinion, to an agreement that the contract should be concluded not verbally, but in writing. And a written contract involved the signature of both. Such a contract in the words of Maasdorp, J. (Richmond v. Crofton 15 S.C., at page 189), "cannot be said to have been fully executed until the consent of the parties has been expressed by their signature upon the document or documents constituting the written contract."
In the instant case the parties agreed that Mr. Matisonn would draft the guarantee and then show it to Mr. Mafike before making the final document. The latter approved the draft but for many months the first respondent never submitted the guarantee documents to the applicant for signa-
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ture. The fact that the parties agreed that there should be a draft guarantee agreement suggests that the parties intended that their agreement would be in writing and that it will bring about no binding obligation until the terms had been reduced to writing and signed.
On this ground alone this application is dismissed with costs the alternative prayers are also dismissed because they are made after a very long delay when many things have changed. The second and third respondents have stopped trading and have vacated the premises. The contract was to be in writing but the first respondent never performed its part of the contract by failing to submit a written contract for signature. It has itself to blame for not acting in time.
J.L. KHEOLA
JUDGE
19th October, 1992.
For Applicant - Mr. Reubenheimer,
For First Respondent - Mr. Edeling
