THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
CASE NO 50/2005

In the matter between

NATIONAL SORGHUM BREWERIES LTD

Appellant

and

CORPCAPITAL BANK LTD

Respondent

______________________________________________________________

CORUM:
MPATI DP, NUGENT, JAFTA JJA and

COMBRINCK, MAYA AJJA

HEARD:
21 NOVEMBER 2005

DELIVERED:
23 FEBRUARY 2006

Neutral citation: This judgment may be referred to as National Sorghum
Breweries Ltd v Corpcapital Bank Ltd [2006] SCA 1 (RSA)
______________________________________________________________

Summary : Contract - interpretation - non-variation clauses found not applicable
to subsequent cession agreements.
______________________________________________________________

______________________________________________________________

JUDGMENT
______________________________________________________________
JAFTA JA

[1] As a general rule a creditor is free to cede its rights in whatever form it
chooses. It does not need its debtor’s consent nor is it necessary for it to give
notice to the debtor. But this power can be restricted by means of a contract to
which the creditor is a party. In that case the creditor would be required to
comply with the terms of the restriction when ceding its rights. The issue in this
appeal is whether the creditors’ powers to cede rights were restricted by non-
variation clauses contained in contracts they had concluded with third parties.
[2] The respondent, Corpcapital Bank, instituted an action against the
appellant (which I will refer to as the defendant) in the Johannesburg High Court
for the recovery of damages arising from the alleged breach of various
lease agreements. Corpcapital Bank was formerly known as Fulcrum Science
and Technology Bank Ltd, and was at times referred to simply as Fulcrum Bank,
but for convenience I will refer to it throughout this judgment as Corpcapital
Bank.
[3] Corpcapital Bank instituted the action in its capacity as the cessionary of
the rights in various lease agreements (referred to in the evidence as ‘full
maintenance rental agreements’) that were concluded between the defendant and
a company called Afinta Financial Services (Pty) Ltd (Afinta Financial
Services). In terms of those agreements the latter company leased vehicles to the

defendant. The defendant challenged Corpcapital Bank’s right to sue,
contending that the rights of Afinta Financial Services had not been validly
ceded. The court a quo (Cachalia J) was asked to determine that issue separately
from the other issues. It dismissed the defence with costs and the defendant
appeals against that order with the leave of the court a quo.
[4] The facts are briefly these. Afinta Financial Services carried on a vehicle
leasing business and leased vehicles to various customers, including the
defendant. In February 1999 Afinta Financial Services and Corpcapital Bank
Ltd became parties to a joint venture that was to continue the leasing business.
The joint venture was to be conducted through the medium of a company called
Afinta Finance Ltd (Afinta Finance) that was owned by the joint venturers.
[5] The joint venturers agreed that at the outset Afinta Financial Services
would transfer certain of its existing lease agreements to Afinta Finance and that
it would thereafter direct all new business to Afinta Finance. The business was
to be financed by loans to be made to Afinta Finance by Corpcapital Bank that
were to be secured by a cession to Corpcapital Bank of the debtors of Afinta
Finance.
[6] To that end the various parties signed two standard-form agreements
referred to as ‘Master Cession Agreements’ on 26 February 1999. One purported
to be a cession from Afinta Financial Services to Afinta Finance. The document
however reflected a cession in securitatem debiti when the intention was to
effect an out and out cession. The other cession between Afinta Finance and

Corpcapital Bank correctly reflected a cession in securitatem debiti as intended
by the parties. Both agreements were substantially the same and provided for the
cession from the cedent to the cessionary of
‘the [lease agreements] listed on a document completed and signed by the Cedent in the form
of the Schedule annexed hereto as Annexure “A”’.
Each agreement contained a non-variation clause in the following terms:
‘1.
no variation, alteration, consensual cancellation, addition to or novation of this cession
and no waiver by [the cessionary] of any of its rights hereunder shall be of any force or effect
unless reduced to writing and signed by [the cessionary’s] authorised representative and [the
cedent or the cedent’s] duly authorised representative.’
[7] The lease agreements that were to be transferred at the outset had to meet
the credit criteria of Corpcapital Bank. For purposes of identifying such
agreements a firm of auditors was appointed to conduct a due diligence
investigation, which was completed only in June 1999.  By then Afinta Financial
Services and Afinta Finance were no longer satisfied that the master cession
they had signed on 26 February 1999 was an appropriate instrument for
achieving their purpose, probably because they realised that the master cession
had been a cession in securitatem debiti and not an out and out cession. As a
result a new agreement (which they referred to as a ‘sale’ agreement) was
concluded by Afinta Financial Services and Afinta Finance on 14 July 1999.
[8] The sale agreement provided in Clause 1 as follows:
‘[Afinta Finance] hereby purchases from [Afinta Financial Services] all right, title and interest
in and to the Vehicle Finance debts set out in column “F” of annexure A hereto (“debts’) and

all of its claims and rights of action against the debtors set out in column “D” of annexure A
hereto (“debtors”) including the cession and transfer of all rights in and to the debts’.
It also incorporated, by reference to another agreement that the parties had
concluded, a non-variation clause in the following terms:
‘1.
No amendment or consensual cancellation of this agreement or any provision or term
thereof or of any agreement or other document issued or executed pursuant to or in terms of
this agreement and no settlement of any disputes arising under this agreement and no
extension of time, waiver or relaxation or suspension of any of the provisions or terms of this
agreement or other document issued pursuant to or in terms of this agreement shall be binding
unless recorded in a written document signed by the parties.’
[9] Attached to the sale agreement as annexure A was a list of about eighty
lease agreements that had been concluded between Afinta Financial Services
and its customers, included amongst which were eleven lease agreements with
the defendant.
[10] Subsequent to the conclusion of the sale agreement some of debts that had
been ‘sold’ were found to be irrecoverable and by agreement between Afinta
Financial Services and Afinta Finance a list was prepared of other lease
agreements that were to be ceded in their stead.  Later a further list was
compiled under similar circumstances. Those lists between them reflected seven
further lease agreements with the defendant.  Neither of the lists was signed by
either Afinta Financial Services or Afinta Finance.
[11] Earlier I pointed out that a ‘master cession’ was signed by Afinta Finance
and Corpcapital Bank on 26 February 1999 in contemplation of the cession of

debts from the former to the latter as security for loans that were to be advanced
by Corpcapital Bank. Because the rights that were to be transferred by Afinta
Financial Services to Afinta Finance at the outset – and thereafter ceded to
Corpcapital Bank – had yet to be identified the master cession naturally did not
reflect any ceded debts at the time  the document was signed. But once the
relevant lease agreements had been identified, and Afinta Financial Services had
purported to transfer them to Afinta Finance, various schedules were prepared
purporting to record a cession of the rights in those agreements to Corpcapital
Bank pursuant to the master cession. In February 2000 those schedules were
consolidated into a single schedule. It is not disputed that the consolidated
schedule was signed on behalf of Afinta Finance, but it was not signed by or on
behalf of Corpcapital Bank. Amongst the lease agreements reflected on the
schedule were the eighteen lease agreements with the defendant to which I
referred earlier and those lease agreements are the subject of the action with
which this appeal is concerned. It is alleged that the defendant breached the
agreements, with resultant damage, which Corpcapital Bank seeks to recover as
cessionary.
[12] The argument advanced on defendant’s behalf, both in this court and the
court below was that there was no valid cession of debts from Afinta Financial
Services to Afinta Finance in respect of the seven lease agreements that were not
reflected in the original annexure to the ‘sale’ agreement because, so it was
contended, the purported addition of those lease agreements constituted a

variation of the ‘sale’ agreement that did not comply with the formalities of the
non-variation clause in the sale agreement. Moreover, it was argued on behalf of
the defendant that there was no valid cession by Afinta Finance to Corpcapital
Bank of the rights arising from any of the eighteen lease agreements because the
later addition of the schedule constituted a variation of the master cession that
similarly did not comply with the required formalities.
[13] The court a quo found that the purported cession to Afinta Finance of the
seven lease agreements, and the purported cession to Corpcapital of all eighteen
lease agreements, constituted amendments of the ‘sale’ agreement and the
master cession respectively. It went on to find, however, relying on a remark to
that effect in Aussenkehr Farms (Pty) Ltd v Trio Transport 2002 (4) SA 483
(SCA) 494A1, which the learned judge considered to be binding upon him, that
the non-variations clauses in each case could not be relied upon by a third party
(the defendant) where ‘the parties to the agreement (the cedent and the
cessionary) were not relying on the provisions of their contract requiring written
variations or amendments’. In the circumstances, the learned judge concluded, it
was ‘not open to the defendant to attack the consensus achieved by Afinta
Finance and Afinta Financial Services, (and similarly the consensus achieved
between Afinta Finance and Corpcapital Bank) and, as a third party, to insist
upon formalities between them’.

1 ‘… if the parties were not contending that a written termination was needed it was not open to the defendant to
argue invalidity of the act.’

[14] I have some doubt that contractually created rights and obligations may
vary depending upon the perspective from which they are viewed. The remark to
that effect in Aussenkehr Farms, which the learned judge relied upon, was
clearly obiter, and may also have overlooked the earlier decision of this court in
Traub v Barclays National Bank Limited 1983 (3) SA 619 (A) 631E-633A in
which the topic was more extensively considered albeit in another context. But it
is not necessary to consider that issue further in the present case because in my
view the court a quo erred in any event in relation to the construction of the
various agreements.
[15] The ‘sale’ agreement between Afinta Financial Services and Afinta
Finance regulated the transfer of the rights in the lease agreements referred to in
the annexure (annexure A). Their later agreements – concluded by their conduct
in preparing the two further lists when seen in the context in which they did so –
to transfer the rights in seven further leases did not purport to amend any of the
terms of the former transaction. They were no more than later transactions in
similar terms, which the sale agreement did not preclude them from concluding,
and which required no formalities to be valid. The defendant’s reliance on the
non-variation clause in the ‘sale’ agreement was quite misconceived because no
amendment to that agreement purported to be effected at all. It follows that the
rights relating to all eighteen vehicles leased to the defendant were properly
transferred to Afinta Finance.

[16] Similarly the master cession concluded between Afinta Finance and
Corpcapital Bank on 26 February 1999 did not purport to preclude the parties
from ceding rights in the future. Indeed, the master cession contemplated that
future cessions would be effected, and its very purpose was to regulate the terms
that would govern those cessions. What was required to effect such future
cessions on the terms agreed to in the master cession was no more than that the
relevant lease agreements should be listed in a schedule compiled and signed by
Afinta Finance, which is what occurred in relation to the eighteen lease
agreements that are now in issue. The parties did not thereby purport to vary or
alter, or even add to, the master cession. On the contrary, they purported only to
give the master cession its intended effect.
[17] It was also submitted on behalf of the defendant that Corpcapital Bank’s
pleaded case did not rely upon cessions effected by the parties subsequent to the
conclusion of each of the written agreements. That is not correct. On the
contrary, the very case that Corpcapital Bank pleaded was that the relevant
cessions were effected subsequent to the conclusion of the respective written
agreements. Indeed, it is difficult to see how its case could have been pleaded in
any other form.

[18] In the circumstances the court a quo correctly dismissed the defence,
albeit on incorrect grounds. The appeal is dismissed with costs, including costs
occasioned by the employment of two counsel.

_____________________

C N JAFTA

JUDGE OF APPEAL

CONCUR:
)
MPATI DP

)
NUGENT JA

)
COMBRINCK AJA

)
MAYA AJA
Supreme Court of Appeal of South Africa

MEDIA SUMMARY – JUDGMENT DELIVERED IN SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal

Date:
23 February 2006

Status:
Immediate

NATIONAL SORGHUM BREWERIES LTD v CORPCAPITAL BANK LTD

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

In a judgment delivered today, the Supreme Court of Appeal (the SCA) has dismissed
the appeal by National Sorghum Breweries (NSB) against the judgment of the
Johannesburg High Court.
Corpcapital Bank sued NSB in the high court for damages arising out of breach of
various lease agreements. In terms of these agreements NSB had leased 18 vehicles
from a company called Afinta Financial Services. The latter company later transferred
its rights in the agreements to another company which ceded them to the bank as
security for loans the bank had granted it.
NSB challenged the bank’s right to sue, arguing that there had not been a proper
cession of rights. The high court ruled that NSB could not raise such a defence.
Dissatisfied with the ruling NSB appealed to the SCA which held that the rights in all
affected lease agreements had been ceded to the bank. As a result the bank was
entitled to sue NSB.