THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case No: 405/2021

In the matter between:

IMBUKO WINES (PTY) LTD

APPELLANT
and
REFERENCE AUDIO CC

RESPONDENT
Neutral citation: Imbuko Wines (Pty) Ltd v Reference Audio CC (405/2021) [2022]
ZASCA 110 (15 July 2022)
Bench:
DAMBUZA, MAKGOKA, NICHOLLS and CARELSE JJA and MUSI AJA
Heard:
19 MAY 2022
Delivered:
15 July 2022.
Summary: Cession – whether oral cession established – whether debtor aware of the
cession.

___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from: Gauteng Division of the High Court, Johannesburg (Windell, Keightly
and Siwendu JJ sitting as a court of appeal):
The appeal is upheld with costs.
The order of the full court is set aside and replaced with the following:
‘The appeal is dismissed with costs’.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
Makgoka JA (Dambuza, Nicholls and Carelse JJA and Musi AJA concurring):
[1] Pursuant to a trial, the Gauteng Division of the High Court, Johannesburg (the
high court), ordered the respondent, Reference Audio CC (Reference Audio) to pay
R602 866.22 to the appellant, Imbuko Wines (Pty) Ltd (Imbuko). Reference Audio
appealed against that order to the full court, which, by majority, upheld the appeal.
This is an appeal by Imbuko against the order of the full court, with the special leave
of this Court.

[2] The dispute between the parties concerned an alleged cession between
Imbuko (as a cessionary) and a third party, Dipole CC (Dipole) (as a cedent). Dipole
and Reference Audio, represented respectively by their sole members – Dr Lahl Batho
Santa Singh (Dr Singh) and Mr Michael Hoffman (Mr Hoffman) – had concluded an
oral agreement during 2012 in terms of which over a period of time, Dipole supplied
certain audio equipment (the goods) to Reference Audio. In terms of the agreement,
Reference Audio was obliged to pay Dipole within 30 days of receipt of the statement
of account from Dipole in respect of each consignment of the goods. The relevant
period for Imbuko’s claim against Reference Audio is January to April 2013.

[3] In its combined summons, Imbuko alleged that during December 2012, Dipole
had ceded to Imbuko its right to claim payment from Reference Audio for the goods

supplied. Imbuko attached to its particulars of claim, nine tax invoices it had sent to
Reference Audio during the period between January and April 2013. The invoices, on
Imbuko’s letter-head, tabulated the goods sold and delivered by Dipole to Reference
Audio, and certain payments, allegedly made by Reference Audio to Imbuko in
response to some of the invoices. Also attached to the particulars of claim, was a
statement of account by Imbuko to Reference Audio, dated 11 December 2013, setting
out transactions for the period 9 January 2013 to 21 May 2013, between Dipole and
Reference Audio. In essence, this was a summary of the sales invoices, the credit
notes and payments Reference Audio had allegedly made to Imbuko. These invoices
and the statement of account reflected Imbuko as the creditor and Reference Audio
as the debtor. The balance reflected on the statement of account was R602 866.22,
which is what Imbuko claimed from Reference Audio.

[4] In its plea, Reference Audio denied the existence of the cession or any
knowledge of it. It admitted that it had made two payments to Imbuko, but denied any
indebtedness to Dipole, and averred that it had discharged its payment obligations to
Dipole for goods supplied. Apart from this, Reference Audio’s plea largely constituted
a denial of Imbuko’s averments. In a pre-trial minute, the parties agreed that the onus
to prove the cession was on Imbuko, while Reference Audio bore the onus to prove
the payments it allegedly made to Dipole.

[5] During the trial, Mr Sudhir Manmohan Singh (Mr Singh), a director of Imbuko
and its sole witness, gave the following factual background. Before the alleged cession
occurred, there was an already existing business relationship between Imbuko,
Reference Audio and Dipole. Imbuko sourced the goods from a supplier in the United
States of America (USA). Dipole was initially the sole distributor of the goods. Later,
Reference Audio replaced Dipole in this role. Dipole acquired the goods from Imbuko
and was liable for whatever price Imbuko charged it. Dipole, in turn, supplied the goods
to Reference Audio, as the sole supplier. Reference Audio thus became Dipole’s
debtor. Dipole’s profit from that arrangement was the difference between what it paid
to Imbuko for acquiring the goods, and the price at which it sold them to Reference
Audio.

[6] Dipole experienced difficulties in rendering effective and regular invoices to
Reference Audio. As a result, the latter could not make regular and prompt payments
to Dipole. This caused frustration for both entities. Mr Singh further testified that as a
result of this, during December 2012, Dr Singh, the sole member of Dipole, and his
uncle, decided to cede to Imbuko Dipole’s claims against Reference Audio. Mr Singh
described his discussion with Dr Singh as follows:
‘In 2012 December I met with [Dr Singh] at Johannesburg. He picked me up from the airport
and told me the problems he is having with invoicing the goods to Reference Audio. His son
was not able to maintain it. His son was irritated by the time of running [around] for money …
His son was quite irritated [by] running and collecting money that was never available to paying
on, for terms of the invoices he supplied them and goods, and in turn he said to me, “you take
over the invoice thing and we will be the warehouse and that we will arrange for Mike to pick
the goods from there and you invoice the goods”. The sale was always done by Dipole. We
were just to take over the invoicing side.’

[7] Mr Singh also testified that on 21 February 2013, Mr Hoffmann, on behalf of
Reference Audio, wrote to him, and expressed frustration about not receiving invoices
from Dipole, which, according to Mr Hoffmann, had been an issue since August 2012.
Mr Hoffmann requested him to ‘treat [the problem about invoices] as a priority’. On
3 April 2013, Mr Hoffmann, on behalf of Reference Audio, requested him, on behalf of
Imbuko, to ‘credit Dipole with the last couple of orders taken and invoice through
Imbuko’ as he needed the invoices for VAT purposes.

[8] Finally, Mr Singh testified about the transactions reflected in the invoices and
the statement of account. He confirmed each of the sales, the amount thereof, and the
payments reflected in those documents. With regard to the payments, there were nine
of them, all of which appeared in the statement of account. They were reflected as
being payments received by Imbuko from Reference Audio. Mr Singh testified that
those were interim payments received from Reference Audio in response to some of
Imbuko’s invoices.

[9] On behalf of Reference Audio, Mr Hoffmann testified that two of those
payments, made on 9 and 11 January 2013, respectively, were made to Dipole, and
not to Imbuko. The remaining seven payments were indeed made to Imbuko.

However, the last one, for R20 000 on 21 May 2013, Mr Hoffmann explained, was paid
to Imbuko in error by his wife, as the payment was meant for Dipole. As to the reason
why the admitted payments were made to Imbuko, Mr Hoffmann explained that this
occurred at a time when Reference Audio needed to import goods from USA, but it
could not get invoices from Dipole, as there was no one from Dipole to place the order.
It was thus arranged between himself and Mr Singh, on behalf of Imbuko, that the
latter would create the invoices, upon receipt of which Reference Audio would make
payment to Imbuko. Imbuko and Dipole would later sort out the payment between
themselves.

[10] This arrangement, Mr Hoffmann testified, was made purely to avoid making
payments to Dipole without the corresponding invoices, which could have adverse tax
implications. Imbuko was ready and willing to provide such invoices, hence the
payments to it. As a result, he placed the order through Imbuko, which then raised an
invoice against Reference Audio, which the latter paid. Thereafter the two entities
never had any further dealings with each other. He denied that the payments were
made by Reference Audio pursuant to a cession.

[11] Asked why he did not, on behalf of Reference Audio, object to the invoices from
Imbuko between January to April 2013, Mr Hoffmann testified that at that stage, his
relationship with Mr Singh had deteriorated to the point that he no longer wished to do
any business with Imbuko. As a result, he simply discarded the invoices.

[12] According to Mr Hoffmann, Reference Audio had paid all monies it owed to
Dipole for the relevant period, and at the time summons was issued, Reference Audio
owed only about R38 000 to Dipole. To buttress his assertion that Dipole never ceded
its right to claim against Reference Audio to Imbuko, Mr Hoffmann pointed to the on-
going business relationship between the Dipole and Reference Audio, in terms of
which Reference Audio continued to make purchases from Dipole, and paid to Dipole
directly. In this regard, Reference Audio relied on the testimony of Mr Wesley Beyers
(Mr Beyers) of Dipole, who testified that there was no agreement of cession between
Dipole and Imbuko.

[13] The high court (Matojane J) concluded that Imbuko had discharged its onus to
establish the cession, on a balance of probabilities. In respect of the payments by
Reference Audio to Dipole, the high court found that Reference Audio had failed to
prove any. The high court also made adverse credibility findings against Mr Hoffmann.
It accordingly granted judgment in favour of Imbuko. As mentioned already, on appeal,
the majority of the full court arrived at a different conclusion. On the existence of the
cession, the majority (Siwendu J with Windell J concurring) concluded that the
evidence did not sufficiently establish a cession, but at best, a tripartite arrangement.
In this regard, the majority found that the failure to call Dr Singh to confirm the cession
was fatal to Imbuko’s case. It also found that the cession (if established) was not
brought to the knowledge of Reference Audio. Consequently, the majority reversed
the order of the high court. The minority (Keightley J) would have dismissed the
appeal.

[14] As was the case before the high court and the full court, there are two issues
for determination in this Court. First, the existence of a cession between Dipole and
Imbuko. Second, whether Reference Audio had discharged its obligation to Dipole by
paying what it owed.

[15] With regard to the agreement of cession, Mr Singh’s testimony about his
conversation with Dr Singh in December 2012, could not be gainsaid. The only issue
was whether the conversation constituted cession of Dipole’s right to claim payment
from Reference Audio, to Imbuko. To consider this question, the following broad
principles about cession should be borne in mind. Cession is a bilateral juristic act
whereby a right is transferred by mere agreement between a cedent and a
cessionary.1 Whether the act of cession has been finalised is an issue of fact to be
determined on proof of the intention of the parties,2 which is to be established on a
balance of probabilities.3 Although it entails a triangle of parties, ie the cedent,
cessionary and debtor, the cession takes place without the concurrence of the debtor.4

1 LTA Engineering Co Ltd v Seacat Investments (Pty) Ltd 1974 (1) SA 747 (A) at 762A.
2 Portion 1 of 46 Wadeville (Pty) Ltd v Unity Cutlery (Pty) Ltd and Others 1984 (1) SA 61 (A); Hippo
Quarries (Tvl) (Pty) Ltd v Eardley 1992 (1) SA 867 (A) at 873; Roman Catholic Church (Klerksdorp
Diocese) v Southern Life Association Ltd 1992 (2) SA 807 (A) at 816.
3 Jeffery v Pollak & Freemantle 1938 AD 1 at 25; Johnson v Incorporated General Insurances Ltd 1983
(1) SA 318 (A) at 331; Gaffoor and Another v Vangates Investments (Pty) Ltd 2012 (4) SA 281 (SCA).
4 2 Lawsa 2 ed para 6.

[16] Mr Singh’s evidence should be considered in the context of the relationship
between the parties at that stage, especially that between Dipole and Reference
Audio. As mentioned already, both were frustrated with each other – Reference Audio
was not receiving invoices for goods purchased, and Dipole was not receiving regular
payments. Viewed in this light, it is clear that a cession would have been beneficial to
both Dipole and Reference Audio. The interposition of Imbuko as the party to issue
the invoices, and to whom payment was to be made, alleviated the problem which
Dipole and Reference Audio had, vis-à-vis each other.

[17] To my mind, the high court correctly accepted that Imbuko had established a
valid cession on a balance of probabilities. The decision by the majority of the full court
to non-suit Imbuko because Dr Singh was not called to confirm the cession on behalf
of Dipole, cannot be supported, especially given that the threshold to establish cession
is not stringent. An act of cession may be entered into orally or tacitly or by conduct.5
The conduct of Dipole and Imbuko after December 2012 points to a new arrangement
in respect of invoices to Reference Audio.

[18] It is common cause that during the relevant period, January to April 2013,
Reference Audio purchased goods from Dipole. But there is no suggestion that Dipole
ever raised invoices against, or demanded payment from, Reference Audio, for those
goods. The only entity which claimed the moneys due by raising invoices in respect of
the goods sold, was Imbuko as per agreement between itself and Dipole. This
ineluctably points to a cession. In the light of these objective facts, the evidence of Mr
Weyers that there was no cession cannot be correct. Besides, he was not part of the
discussion between Mr Singh and Dr Singh in December 2012. He could therefore
not, like Mr Hoffmann, gainsay that discussion. He provided no meaningful basis for
his assertions. The high court was therefore correct to conclude that Imbuko had
established cession on the balance of probabilities.

[19] Lastly, on this issue, the fact that there was an on-going relationship between
Dipole and Reference Audio after the relevant period, does not detract from the validity

5 Grobbelaar and Others v Shoprite Checkers Ltd [2011] ZASCA 11 para 18.

of the cession for the period in respect of which invoices were raised by Imbuko against
Reference Audio. As Keightly J correctly pointed out in her minority judgment, it was
never Imbuko’s case that the cession was indefinite.

[20] That brings me to the question whether Reference Audio had knowledge of the
cession. This has no bearing on the validity of the cession, as notice to the debtor is
not a prerequisite for the validity thereof. It is ‘but a precaution to pre-empt the debtor
from dealing with the cedent to the detriment of the cessionary’.6  As explained in Lynn
& Main Incorporated v Brits Community Sandworks CC [2008] ZASCA 100; [2009] 1
All SA 116 (SCA); 2009 (1) SA 308 (SCA) para 12, a cession of rights is ineffective as
against a debtor until such time as he or she has knowledge of it and that payment by
him or her to the cedent, without knowledge of the cession, renders the debtor immune
to a claim by the cessionary.

[21] I therefore consider the issue solely because Reference Audio claimed that,
unaware of the cession, it made payments to Dipole. Actual knowledge may be proved
in a number of different ways. It may be inferred from the facts proven: the facts and
circumstances may be such that the only reasonable inference to be drawn is that the
person whose conduct is in issue had actual knowledge of a matter – in this case, of
the existence of the cession.7

[22] The high court had to consider this issue on the basis of the objective facts and
the testimonies of Mr Singh and Mr Hoffman. I preface this discussion with the
observation that Mr Hoffmann was a particularly poor witness. He was garrulous,
argumentative, obtuse and evasive. He failed to provide straight-forward answers to
simple questions. The high court’s adverse credibility finding against him was therefore
justified. On the other hand, Mr Singh was lucid and candid in his testimony.

[23] To consider whether, on a balance of probabilities, Reference Audio knew of
the cession, it is necessary to refer to the terms of the cession, and determine whether
the parties conducted themselves consistently with them. According to Mr Singh, the

6 Lawsa fn 4 above.
7 Stannic v Samib Underwriting Managers (Pty) Ltd [2003] ZASCA 61; [2003] 3 All SA 257 (SCA) para 17.

terms of the cession were as follows. When Reference Audio ordered goods from
Dipole, Reference Audio would make a list of such goods and furnish it to Imbuko. The
latter would confirm with Dipole that the list was correct and that the goods had been
collected from Dipole’s warehouse. Imbuko would then raise an invoice against
Reference Audio, and credit Dipole with the same amount of the invoice. Reference
Audio would pay the invoice amount to Imbuko, upon which Imbuko would pay to
Dipole its profit margin. The same process would be followed where Reference Audio
returned goods except that Imbuko would make a credit note in Reference Audio’s
favour.

[24] I now consider whether the parties conducted themselves along these terms
after the date of cession, ie December 2012. Mr Singh confirmed that: (a) each of the
tax invoices raised by Imbuko against Reference Audio for goods purchased and
collected by Reference Audio for the period January – April 2013; (b) the tax invoices
and the credit notes rendered to Reference Audio, were a result of the process agreed
with Reference Audio and pursuant to the cession; (c) the amounts reflected in the tax
invoices and the credit notes were furnished to him by Mr Hoffmann pursuant to the
cession; and (d) each of the payments reflected on Imbuko’s statement dated
11 December 2013, had been made by Reference Audio to Imbuko, through the
electronic funds transfer (EFT) method.

[25] It is instructive that Imbuko sent the invoices to Reference Audio from January
2013, immediately after the cession came into existence in December 2012. Despite
Mr Singh pertinently testifying that the information used to compile the invoices was
provided to him by Mr Hoffmann, this was not disputed during cross-examination. As
mentioned already, in those invoices, Imbuko clearly identified itself as a creditor and
Reference Audio as a debtor, and demanded payment from Reference Audio. If Mr
Hoffman indeed wanted nothing to do with Mr Singh and Imbuko at that stage, this
was more the reason to repudiate the invoices, not to disregard them. But in any event,
the assertion that he did not accept that the money was due to Imbuko, can simply not
be true because, in addition to the ‘disputed’ payment of R20 000 on 21 May 2013,
Reference Audio made another payment on 16 April 2013.

[26] As mentioned already, a total of nine invoices were sent to Reference Audio
between January and April 2013 reflecting Reference Audio as the debtor of Imbuko
in respect of goods purchased from Dipole. Not once did Reference Audio dispute the
contents, as would have been expected from a person who bore no knowledge of what
was being asserted in the invoices. As trenchantly observed in McWilliams v First
Consolidated Holdings (Pty) Ltd 1982 (2) SA 1 (A) at 10E-F:
‘…[I]n general, when according to ordinary commercial practice and human expectation firm
repudiation of … an assertion would be the norm if it was not accepted as correct, such party’s
silence and inaction, unless satisfactorily explained, may be taken to constitute an admission
by him of the truth of the assertion, or at least will be an important factor telling against him in
the assessment of the probabilities and in the final determination of the dispute.’

[27] In my view, from the objective factors, and the conduct of the parties, it can
safely be concluded that Reference Audio was not only aware of the cession, but
conducted itself consistently in terms thereof. It is inconceivable that Reference Audio
would have made the interim payments it did, if it did not consider the moneys to be
due to Imbuko. Reference Audio’s attempt to explain away its payment of R20 000 to
Imbuko is unconvincing. If indeed this was payment in error, one would have expected
Reference Audio to take steps to recover the money by means of the condictio indebiti.
This did not happen, at least up to the time when the trial took place and there was no
suggestion in Mr Hoffmann’s testimony that there were plans to recover this amount.
The high court’s conclusion that Reference Audio had knowledge of the cession was
therefore correct.
[28] It remains to consider whether Reference Audio discharged its onus to prove
payments to Dipole. It simply did not. Mr Hoffmann presented not an iota of evidence
to the court to prove payments by Reference Audio to Dipole. Instead, he referred to
a schedule of payments for the period 2014 to 2015. This was irrelevant, as the period
in issue was for January to April 2013.
[29] In all the circumstances, the appeal must succeed.
[30] The following order is made:
1 The appeal is upheld with costs.

2 The order of the full court is set aside and replaced with the following:
‘The appeal is dismissed with costs’.

____________________
T MAKGOKA
JUDGE OF APPEAL

APPEARANCES:
For appellant:

M R Naidoo
Instructed by:

Kushen Sahadaw Attorneys, Durban
Honey Attorneys, Bloemfontein.

For respondent:
M Joubert
Instructed by:

S Rogers Attorneys, Benoni

Phatshoane Henney, Bloemfontein.
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY

FROM:           The Registrar, Supreme Court of Appeal

DATE:             15 July 2022
STATUS:         Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment of the Supreme Court of Appeal.

Imbuko Wines (Pty) Ltd v Reference Audio CC (405/2021) [2022] ZASCA 110 (15 July 2022)
Today, the Supreme Court of Appeal, per Makgoka JA (Dambuza, Nicholls and Carelse JJA and Musi
AJA concurring), handed down a judgment upholding an appeal by the appellant, Imbuko Wines (Pty)
Ltd (Imbuko) against the order of the Gauteng Division of the High Court, Johannesburg, which, by
majority, had upheld an appeal by the respondent, Reference Audio CC (Reference Audio) against a
judgment of a single Judge of that division.
The dispute between the parties concerned an alleged cession between Imbuko (as a cessionary) and
a third party, Dipole CC (Dipole) (as a cedent). Dipole and Reference Audio, had an oral agreement in
terms of which Dipole supplied certain audio equipment (the goods) to Reference Audio.

Imbuko alleged that during December 2012, Dipole had ceded to it (Imbuko), its right to claim payment
from Reference Audio for goods supplied. A director of Imbuko testified that the sole member of Dipole
ceded the latter’s right to claim payment from Reference Audio because Dipole was experiencing
difficulties in invoicing Reference Audio, and as a result, Reference Audio did not make payment to
Dipole. From January 2013 to April 2013 Imbuko rendered invoices to Reference Audio. Reference
Audio paid some of them. But it denied the cession. Its stance was that the payments made to Imbuko
were for goods purchased directly from Imbuko, and not because of a cession. It also asserted that one
of the payments was made in error. Furthermore, Reference Audio claimed that it had settled its
accounts with Dipole, save for about R38 000.

In terms of the pre-trial agreement, Imbuko bore the onus to prove the cession and Reference Audio,
the onus to prove the payments it allegedly made to Dipole. As to whether Imbuko had established a
valid cession, the Court had regard to the totality of the evidence. It considered the fact that the parties
conducted themselves consistently with the terms of the cession as asserted by Imbuko. In particular,
the Court considered the fact that Reference Audio received invoices from Imbuko for the relevant
period (January – April 2013) without any objection, and paid some of them. It rejected Reference
Audio’s assertion that one of the payments was made in error. Accordingly, the Court concluded that
Imbuko had, on a balance of probabilities, established a valid cession. The Court also rejected
Reference Audio’s assertion that it was not aware of the cession. Given that it conducted itself
consistently with the cession, its claim could not be correct. The Court also found that Reference Audio
had not discharged its onus to prove payments it alleged it had made to Dipole.

Accordingly, the Court upheld the Imbuko’s appeal, and set aside the order of the full court and replaced
it with an order dismissing Reference Audio’s appeal, thus reinstating the initial order of the court of first
instance.

***END***