THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:  546/09

In the matter between:

KHOOSIAL SINGH                                                                                 Appellant

v

BMW FINANCIAL SERVICES (SA) (PTY) LTD                        First Respondent
SMG AUTO DURBAN (SA) (PTY) LTD                               Second Respondent

Neutral citation:
Singh v BMW Financial Services (546/2009) [2010] ZASCA
121 (30 September 2010).

Coram:
Mpati P, Cloete, Cachalia, Mhlantla JJA, Bertelsmann AJA
Heard:
13 September 2010
Delivered:
30 September 2010

Summary:  Sale Agreement providing for motor vehicle to have a ‘year of
registration 2006’ – whether an essential term of the contract – Where an order
for restitution requires a seller to repay to the buyer the instalment payments
made under a sale agreement, mora interest is only payable on those
instalments paid pursuant to a legal obligation.

________________________________________________________________

ORDER
________________________________________________________________

On appeal from:  KwaZulu-Natal High Court, Pietermaritzburg (Niles-Dunér,
K. Pillay JJ and Lopes AJ sitting as full court).

The following order is made:

1.
The appeal is upheld with costs.
2.
The order of the full court is set aside, and the following order is
substituted:
‘2.1
Save for the costs orders in paras 3, 4, 5 and 6, the order of the
court below is set aside.
2.2
The agreement between the applicant and the first respondent is
declared to be cancelled;
2.3
The applicant is directed to return to the first respondent the BMW
vehicle currently in his possession bearing registration letters and
numbers ND 595 676, by delivering it to the second respondent,
against payment in terms of paragraph 2.4.
2.4
The first respondent is directed to:
2.4.1 repay to the applicant the sum of R236 653.81, being the
initial payment the applicant made to it in terms of the
agreement together with interest at the rate of 15,5 per cent
per annum from 3 May 2007 to date of payment;
2.4.2 repay to the applicant the 16 instalments totalling
R127 552.11 paid to it before 3 May 2007 in terms of the
agreement together with interest at the rate of 15,5 per cent
per annum from 3 May 2007 to date of payment;

2.4.3 repay to the applicant all instalments paid by the applicant to
it in terms of the agreement after 3 May 2007, together with
interest at 15,5 per cent per annum from the date of this
judgment to the date of payment;
2.5
The first and second respondents are ordered jointly and severally
to pay the costs of the appeal.’

________________________________________________________________

JUDGMENT
________________________________________________________________

CACHALIA JA (Mpati P, Cloete, Mhlantla JJA, Bertelsmann AJA concurring):

[1] This appeal concerns a claim for restitution of monies paid and goods
delivered under an instalment sale agreement. The dispute arose when the
appellant, Mr Khoosial Singh, decided to buy a new BMW X5 4.41 automatic
motor vehicle, which he had seen on display at the premises of the second
respondent, a dealership trading as SMG Auto Durban (Pty) Ltd (‘SMG’) in
December 2005. He agreed with a sales-representative at SMG that the vehicle
would be ‘first registered’ in 2006, and was led to believe that the process of
registering the vehicle would happen in January 2006. When the vehicle was
delivered to Mr Singh, it transpired that it had previously been registered – more
than once – in 2005. Thus began the quarrel between the parties.

[2] The purchase price of the vehicle was agreed to be R609 850. Mr Singh
paid a deposit of R236 653.81, leaving a balance of some R373 000. To finance
the balance Mr Singh entered into an instalment sale agreement with the first
respondent, BMW Financial Services (Pty) Ltd (‘BMW’), which has its place of
business in Midrand, Gauteng. The document embodying the agreement was
completed by the sales representative at SMG and Mr Singh signed it on

22 December 2005. The agreement specified, as agreements of this nature
invariably do, that the finance house would retain ownership of the vehicle until
Mr Singh had met his obligations, which included settling the principal debt and
finance charges.

[3] The cover page of the three-page agreement included a description of the
make of the vehicle, details of the purchase price, its chassis and engine
numbers, registration (licence) number, and a reference to the ‘year of first
registration 2006’ ie the requirement that it be ‘first registered’ in 2006.

[4] Clause 2.2 of the agreement provided that SMG, which acted as the agent
for BMW Finance ‘for the purposes of delivery’, would deliver the vehicle to
Mr Singh within 30 days of the agreement being signed. On 31 December 2005,
nine days after the agreement was signed, the vehicle was delivered with
temporary licence plates to permit its usage for 21 days pending its registration.

[5] Early in January 2006, SMG realized that the vehicle had previously been
registered in 2005. It notified Mr Singh of this fact and undertook to rectify the
‘licensing error’ with the licensing office by reversing the prior registration. By
21 February 2006, despite Mr Singh having had several discussions with SMG
concerning the problem, it remained unsolved. Mr Singh decided to investigate
the matter himself and contacted the Pinetown Registering Authority to this end.
He discovered that the vehicle had been registered on three previous occasions
in 2005, on one occasion in SMG’s name.

[6] Mr Singh then consulted his attorney who, on 2 March 2006, wrote to
SMG demanding delivery of a vehicle, which accorded with the description of the
vehicle he had purchased – in particular one that was registered for the first time
in 2006. On 17 March 2006, after SMG had not responded to the letter,
Mr Singh’s attorney wrote another letter informing SMG that his client would not
renew the temporary permit, which had already been renewed several times and

was to expire on 20 March 2006. The letter went on to tender return of the
vehicle that had been delivered to Mr Singh and demanded that it be replaced.
Again, SMG did not respond. Two further letters to SMG on 1 and 3 April 2006
also failed to elicit a response.

[7] On 5 April 2006 Mr Singh queried the registration status of the vehicle with
the Motor Licensing Bureau of Windsor Park, Durban. He established that he had
been registered as the owner as of 4 April 2006 and that the vehicle’s current
licence number and two previous licence numbers bore no resemblance to the
licence number that appeared on the agreement. Importantly, a confirmation
certificate issued by the Bureau reflected the ‘date of liability for first licensing’ as
21 October 2005 and the vehicle’s status as ‘used’ even though he had
purchased it as ‘new’.

[8] On 21 April 2006 SMG informed Mr Singh that ‘the correct licensing had
now been received from the licensing department’. This was a reference to a new
Certificate of Registration that SMG had obtained from another licencing body,
the Umhlanga Rocks Registering Authority. The certificate reflected Mr Singh as
the owner, the ‘date of liability for first licensing (not year model)’ and the ‘date
liable for registration’ as 4 April 2006, and the status of the vehicle as ‘new’,
which contradicted the documentation that Mr Singh had acquired indicating that
the vehicle was used. The name of the title holder was given as ‘BMW Finanz
(Pty) Ltd Umhlanga Rock’ (sic) and the vehicle’s previous three licence numbers,
which I referred to in the previous paragraph, were also displayed on the
certificate.

[9] In summary Mr Singh was unhappy that:

(a)
the vehicle was ‘first registered’ in 2005 in the name of SMG and other
persons unknown to him before being  registered in his name in 2006;

(b)
his investigations had revealed that the vehicle’s status was ‘used’
whereas the certificate that SMG had obtained from the Umhlanga Rocks
Registering Authority stated that the vehicle was ‘new’; and that
(c)
the registration (licence) number on the agreement differed from any of
the vehicle’s previous licence numbers.

[10] He now believed that the vehicle that had been delivered to him was not
the one he had contracted for. So he instituted proceedings in the Durban High
Court against BMW and SMG on 11 May 2006 in which he sought an order for
specific performance, namely delivery of a new BMW X5 4.41 automatic motor
vehicle, first registered in the year 2006, and bearing the same registration
number as reflected in the sale agreement. On 13 June 2006, to protect itself
against any possible wrongdoing on the part of its agent SMG, BMW served a
third party notice on SMG claiming a contribution and indemnification from it.
SMG did not oppose this application. On 27 June 2006 BMW filed its answering
affidavit. Its answer to Mr Singh’s claim for specific performance was that he had
contracted for a ‘used’ vehicle registered in 2006 and this is what he had
received. To support its stance that the vehicle was a used one it attached an
invoice from SMG dated 9 January 2006 indicating as much. And it also denied
that it was the title holder of the vehicle because the registration certificate
identified the title holder incorrectly as being ‘BMW Finanz (Pty) Ltd Umhlanga
Rock’ (sic) instead of ‘BMW Financial Services (Pty) Ltd’, which has its place of
business in Midrand, Gauteng. In his replying affidavit, which is dated 25 July
2006, Mr Singh expressed astonishment that it was now being alleged that he
had not bought a new vehicle.

[11] On 18 January 2007 SMG filed its answering affidavit. Regarding the
vehicle’s multiple registrations, it explained that the vehicle had initially been
erroneously registered in the name of another customer, a Mr Merrick, on
21 October 2005 with the licence number ND 164772. When the error was
detected the vehicle was re-registered in its name on 27 October 2005 under a

different licence number. The vehicle remained part of SMG’s stock. Thereafter
one of SMG’s directors arranged for the new registration number to be allocated
to another vehicle. This meant that the vehicle had to be re-registered yet again –
this time under another licence number. It had thus been registered three times.
SMG states that its salesman who sold the vehicle to Mr Singh was unaware of
this history. In summary SMG’s defence, in contrast to the stance adopted by
BMW, was that the vehicle was new and registered in 2006 (having been
erroneously registered previously). However, when the matter came to be argued
in the high court, BMW accepted SMG’s facts and also did not persist with its
denial that it was not the title holder of the vehicle.

[12] SMG does not, however, explain how its invoice to BMW dated 9 January
2006 came to describe the vehicle as ‘used’. Nor does it explain the origin of the
licence number on the agreement, which differs from all the vehicle’s other
licence numbers.

[13] A year after Mr Singh had instituted proceedings the matter had not yet
been heard, and it was no longer possible for the respondents to comply with an
order for specific performance. So, Mr Singh amended his notice of motion. He
now sought a declaration that the agreement was of no force and effect. He
tendered return of the vehicle in his possession and claimed repayment of the
monies he had paid thus far.

[14] The high court (Rowan AJ) granted the relief claimed. The learned judge
found that having been registered on three previous occasions in 2005 the
vehicle was thereafter not capable of being ‘first registered’ in April 2006. He also
held that, because the registration requirement was an essential term of the sale
agreement, Mr Singh had not received the vehicle for which he had contracted.
And it followed, the judge said, that as specific performance was no longer
possible, the appellant was entitled to cancel the contract and assert his right to
claim restitution. However, the full court, sitting in Pietermaritzburg, (Niles-

Dunér J, K. Pillay J and Lopes AJ concurring) reversed that order. Mr Singh now
comes on further appeal with special leave of this court.

[15] The full court approached the matter differently to the high court. First, it
considered that Mr Singh had entered into two contracts: the sale agreement with
BMW for the purchase of the vehicle, and the oral agreement with SMG in terms
of which the latter undertook to register the vehicle on his behalf. And since, in its
view, the contracts were severable, if there was a breach of the oral agreement
this had no bearing on the sale agreement. Accordingly, so it held, there was no
legal basis for Mr Singh to resile from the sale and to claim restitution. Secondly,
it said that even if it was a term of the contract between Mr Singh and BMW that
the vehicle was to be ‘first registered’ in 2006, the certificate was procured in
April of that year. So, it held that the obligation had been fulfilled. Thirdly, the
date of registration, said the full court, had no bearing on the vehicle’s intrinsic
characteristics or qualities, but only on its value. It thus concluded that if the date
of first registration was an essential element of the contract Mr Singh received
what he had contracted for. Finally, it held that even if he did not get what he
contracted for his claim was limited to one for damages against SMG for beach
(of the second contract) – a claim, said the court, he had not and could not make
in these proceedings. The full court accordingly set aside the decision of the high
court and dismissed the claim. It will be convenient to deal with the issues in the
same sequence as the full court did.

[16] I turn to consider the first question, whether the requirement that the
vehicle was to be ‘first registered’ in 2006 was a term of the sale agreement, or a
separate severable oral agreement or arrangement between Mr Singh and SMG.
In finding that there were two agreements the full court reasoned that even
though the description of the vehicle in the sale agreement included a reference
to the year of registration, once the vehicle had been delivered to Mr Singh on
31 December 2005, BMW’s obligation under the sale agreement came to an end.
All that remained were the registration formalities to be undertaken by SMG

afterwards. Moreover, said the full court, because the sale agreement contained
a non-variation clause, there was no room to import a term relating to the
registration of the vehicle into it.

[17] I am unable to agree with the full court in this respect. It was an express
term of the sale agreement that the vehicle which SMG was to deliver to
Mr Singh would be ‘first registered’ in 2006. That much is clear on the face of the
contract itself. As the seller’s agent ‘for purposes of delivery’ SMG was thus
required to deliver a motor vehicle, which bore the registration details provided
for in the sale agreement or was capable of being registered so that it would. I
accept that the delivery of the vehicle and the registration certificate did not have
to take place simultaneously. But this does not mean that SMG had a separate
agreement with Mr Singh concerning the delivery of the certificate. SMG
remained the seller’s agent and was obligated to deliver to the buyer the vehicle
and certificate of registration as contemplated by the sale agreement. There was,
therefore, only one agreement – the sale agreement between Mr Singh and
BMW.

[18] As to whether the term was in any event fulfilled, as the full court found it
had been, by the delivery of the certificate of registration in April 2006 purporting
to show that the vehicle was registered on 4 April 2006, I also respectfully
disagree. Apart from the fact that I have serious reservations regarding the
circumstances of how SMG procured this certificate, and the three-month delay
in doing so, which was not explained, the certificate does not accord with the
common cause facts: The printed certificate has a standard line, which provides
for a ‘date liable for registration’. The date that was filled in, in the space
provided, was 4 April 2006. There is no explanation in the affidavits what the
‘date liable for registration’ refers to, but whatever it means, it does not indicate
that it is the date of ‘first registration’. That much is clear as the certificate allows
for the registration date of both new and used vehicles to be filled in this space.
Furthermore, the certificate provides for the vehicle’s last three licence numbers

to be filled in. This indicates that a vehicle could have had previous licence
numbers and, therefore, a prior registration history. The certificate reveals that
the vehicle in question indeed had three previous licence numbers, none of
which is the number appearing on the sale agreement.

[19] Mr Marnewick, who appeared for both respondents, submitted, though
somewhat faintly, that the errors in the registration had been explained and that
the date 4 April 2006 reflected what the parties had agreed. It may be that the
initial registration in the name of Mr Merrick was done in error. But the vehicle
was thereafter registered twice in 2005 – ‘deliberately and intentionally’, as
Rowan AJ correctly found in the high court. The certificate does not reflect the
true facts. In the circumstances it clearly does not comply with the requirement
that the vehicle was to be ‘first registered’ in 2006.

[20] There are two other troubling aspects arising from the certificate. The
status of the vehicle is described as ‘new’. But the respondents do not provide
any explanation why the receipt from SMG to BMW on 9 January 2006 indicates
that the vehicle was ‘used’. Indeed in its answering affidavit BMW relied on the
very receipt to support its assertion that Mr Singh bought the vehicle as ‘used’.
BMW also initially disavowed the certificate asserting that it was not the title
holder of the vehicle described therein. For present purposes, because of the
rule that in application proceedings the facts averred by the respondents must be
accepted, I accept that the vehicle was purchased as new. But this does not
detract from the fact that BMW made false assertions, on oath, without verifying
the true facts. Its conduct in this regard was reprehensible.

[21] Once it is found, as I have, that the ‘year of first registration 2006’ was an
essential term of the contract it follows that delivery of the vehicle, which did not
meet this requirement, was not in accordance with the terms of the sale
agreement. BMW’s failure therefore meant that it was in breach of the contract.

[22] This brings me to the third issue, whether the breach related to the
intrinsic qualities of the vehicle or, put another way, went to the root of the
contract. If not, as the full court found, Mr Singh was only entitled to claim
damages to compensate him for the shortcomings. This would be the situation
where the breach did not affect the substance of what the buyer expected to
receive.

[23] Again, I must respectfully join issue with the approach of the full court. The
view I take of the contract and of the common cause facts is that Mr Singh
wanted to purchase and was promised a particular vehicle, which was new, and
which had to be registered for the first time in 2006 – probably to secure some
financial advantage in the event he decided to sell the vehicle. It may be that
some would consider the requirement of ‘first registration’ to be trifling. But this is
immaterial. If this term was important to the parties, as it was in this case, BMW
was obliged to comply. It failed to and this entitles Mr Singh to resile from the
contract and to claim restitution.

[24] After the dispute arose Mr Singh continued to perform his obligations
under the contract by meeting his instalment payments as and when they
became due under the agreement. When the matter was argued before us on
13 September 2010 we were informed that only one instalment remained. He
also tendered return of the vehicle on 17 March 2006. We were told that it
remains unused and is parked in his garage.

[25] I turn to consider what the appropriate order should be. The parties
agreed that in the event that the appeal succeeded the costs orders of the court
of first instance should be reinstated. They also concurred that BMW must repay
all the monies that Mr Singh has paid in terms of the agreement against the
return by him of the vehicle that was delivered to him. They, however, disagreed
on what mora interest should be paid.

[26] Ms Julyan, who appeared for Mr Singh, submitted that he is entitled to
repayment of the sum of R236 653.81 being the initial payment made in terms of
the agreement on 22 December 2005 together with interest thereon at the rate of
15,5 per cent calculated from this date to the date of payment; and also to
repayment of all instalments paid by Mr Singh, at the same rate of interest,
calculated from the date of such payment to the date of repayment. Ms Julyan
cites no authority to support her contention. Mr Singh initially sought an order for
specific performance and cancelled the agreement only on 3 May 2007. He is,
therefore, not entitled to mora interest before this date. So, in respect of the initial
payment of R236 653.81 and the 16 instalment payments made until then,
totalling R127 552.11, mora interest is payable only from 3 May 2007. The total
of the two amounts in respect of which mora interest is payable as from 3 May
2007 is therefore R364 205.92.

[27] Concerning the payments made after cancellation of the contract,
Ms Julyan submitted that Mr Singh is entitled to interest on these payments from
the date of payment to the date of repayment. This is, so the submission went,
because the payments were made ‘as a matter of commercial reality . . . under
protest’. I am not sure what this means but once the contract had been
cancelled, Mr Singh was under no legal obligation to continue making instalment
payments totalling R460 866.05. He is therefore only entitled to claim interest on
this amount from the date of this judgment to the date of repayment.

[28] There remain two other matters. The first relates to whether this court
should order the costs of senior counsel because the Taxing Masters in the high
courts of Pietermaritzburg and Durban apparently refuse to allow such costs
unless specifically ordered to. I accept that this matter involved some complexity
and it was prudent for both parties to engage the services of senior counsel. But
this court does not make orders stipulating that the costs should include the costs
of senior counsel, and the Uniform Rules of Court make no provision for such an
order.

[29] The second issue concerns the condition of the vehicle when it is
returned. Mr Marnewick submitted that an order for the return of the vehicle
presupposes that Mr Singh is able to restore possession in an undamaged and
unused condition, save for its use before the agreement was cancelled. I do not
agree that such an order is competent. Once the agreement was cancelled, and
restitution was sought, the risk of the deterioration of the vehicle’s condition
passed to BMW. It must now take possession of the vehicle in the condition that
it finds it, subject of course to Mr Singh not having used it, after the contract was
cancelled.

[30] The following order is made:

1.
The appeal is upheld with costs.
2.
The order of the full court is set aside, and the following order is
substituted:
‘2.1
Save for the costs orders in paras 3, 4, 5 and 6, the order of the
court below is set aside.
2.2
The agreement between the applicant and the first respondent is
declared to be cancelled;
2.3
The applicant is directed to return to the first respondent the BMW
vehicle currently in his possession bearing registration letters and
numbers ND 595 676, by delivering it to the second respondent,
against payment in terms of paragraph 2.4.
2.4
The first respondent is directed to:
2.4.1 repay to the applicant the sum of R236 653.81, being the
initial payment the applicant made to it in terms of the
agreement together with interest at the rate of 15,5 per cent
per annum from 3 May 2007 to date of payment;
2.4.2 repay to the applicant the 16 instalments totalling
R127 552.11 paid to it before 3 May 2007 in terms of the

agreement together with interest at the rate of 15,5 per cent
per annum from 3 May 2007 to date of payment;
2.4.3 repay to the applicant all instalments paid by the applicant to
it in terms of the agreement after 3 May 2007, together with
interest at 15,5 per cent per annum from the date of this
judgment to the date of payment;
2.5
The first and second respondents are ordered jointly and severally
to pay the costs of the appeal.’

____________
A CACHALIA
JUDGE OF APPEAL

APPEARANCES

APPELLANTS:

J A Julyan SC
Instructed by Gounder & Associates, Durban
Claude Reid Inc, Bloemfontein

RESPONDENT:

C G Marnewick SC (1st and 2nd respondents)
Instructed by John Hudson Attorneys, Durban
Lovius Block, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
30 September 2010
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.
* * *
SINGH V BMW FINANCIAL SERVICES

The Supreme Court of Appeal (SCA) today held that a term in a sale agreement that
a motor vehicle be ‘first registered in 2006’ was an essential term of the contract.
This meant that if the seller did not comply with this term it was in breach of the
contract.

The full court of the Pietermaritzburg High Court had held that the term was not an
essential term of the contract between the seller (BMW Financial Services) and the
purchaser (Mr Khoosial Singh). It reasoned that the term relating to the registration
of the motor vehicle was a term of the separate contract of services between BMW’s
agent, SMG Auto and Mr Singh, and that it could not be imported into the contract
of sale between BMW and Mr Singh.

The SCA held that there was only one contract, ie between BMW and Mr Singh, and
that the term was an express term of the contract. It held that because BMW had
failed to deliver a motor vehicle which had to be first registered in 2006, it had
breached the contract and that Mr Singh was entitled to resile from the contract and
claim restitution of the payments he had made. It ordered BMW to repay Mr Singh
the payments he had already made against the return of the motor vehicle by Mr
Singh.