THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Not Reportable
Case No: 266/2015

In the matter between:

ABSA BANK LTD                                                                                         APPELLANT

and

KNYSNA AUTO SERVICES CC                                                               RESPONDENT

Neutral citation:
Absa Bank Ltd v Knysna Auto Services CC (266/15) [2016] ZASCA
93 (1 June 2016)

Coram:
Majiedt, Seriti, Swain, Zondi and Mathopo JJA

Heard:

18 May 2016

Delivered:

1 June 2016

Summary:  Contract ─ floor plan agreement (FPA) ─ Sale and financing of motor
vehicles ─ reservation of ownership until receipt of payment ─ payment not received –
rei-vindicatio ─ estoppel ─ possessor not acting reasonably in construing representation
by owner that seller entitled to pass ownership – any representation ambiguous –
possessor obliged to enquire from owner as to true position – possessor obliged to
return vehicle.

___________________________________________________________________

ORDER

On appeal from: Western Cape Division of the High Court, Cape Town (Masuku AJ
sitting as court of first instance):

1. The appeal is upheld with costs.
2. The order of the court a quo is set aside and replaced with the following:
„1. Respondent is ordered to forthwith return to Applicant a 2011 Volkswagen
Polo 1.4 Comfortline sedan with engine number CLP034196 and chassis number
AAVZZZ6RZBU030970.
2. Respondent is ordered to forthwith return/or supply to Applicant the original
NATIS documentation, together with duly signed Notification of Change of
Ownership Forms (NCO(5)) of the Polo.
3. That, in the event of Respondent failing and/or refusing to return/or supply to
Applicant forthwith the aforesaid vehicle and documents, the Sheriff be and is
hereby authorised and requested to enter into and upon Respondent‟s premises,
or wherever same may be found, to attach the vehicle and documents referred to
in 1 and 2 above, and to return the vehicle and documents to Applicant as a
matter of urgency.
4. That in the event of Respondent failing and/or refusing to forthwith sign and
return to Applicant the Notification of Change of Ownership Forms (NCO(5)), the
sheriff be and is hereby authorised and requested to sign such documents.
5. The respondent is ordered to pay the costs of this application.‟

JUDGMENT

Mathopo JA (Majiedt, Seriti, Swain and Zondi JJA concurring):

[1] On 16 July 2014 the appellant (Absa Bank) on an urgent basis obtained a rule
nisi calling upon the respondent (Knysna Auto Services CC) to show cause why a Polo

motor vehicle should not be declared to be the property of the bank and why the
respondent should not be ordered to return the motor vehicle to the bank. The Western
Cape Division, Cape Town (Masuku AJ) held that although the bank was the owner of
the motor vehicle it was estopped from vindicating it. On 30 January 2015, the court a
quo discharged the rule nisi with costs and thereafter granted leave to appeal to this
court.

[2] The facts giving rise to this appeal can briefly be summarized as follows. On 21
August 2013 Absa Bank concluded a written floor plan agreement (FPA) with an entity
called Business Zone 2157 (the Corporation). In terms of the FPA the Corporation
acknowledged and agreed that the bank would at all times remain owner of any motor
vehicle which was subject to its terms. It would only cease being the owner and title
holder once it had received payment for a vehicle sold by the Corporation and had
notified the Corporation accordingly in writing.1

[3] The respondent is a vehicle dealership that trades in second-hand motor vehicles
in Cape Town. Before the respondent started trading in second hand vehicles, it traded
in new vehicles from 2006 to 2009. During that period it operated through a floor plan
agreement with Wesbank Ltd. It is not in dispute that the respondent was well-
acquainted with floor plan agreements, even though it had no dealings with the
appellant. The respondent, represented by Mr Van Vuuren and the Corporation
represented by Mr Smit, regularly bought and sold vehicles from and to each other and
had a good business relationship.

1 2.10 The Dealer acknowledges and agrees that the Bank will at all times remain the owner, title-holder
and financier of the financed Goods, and that the Bank will only stop being the owner and title-holder of
the financed Goods once the Bank has received payment for the financed Goods and have notified the
Dealer accordingly in writing.
2.11 The Dealer undertakes not to do anything or to take any steps, which will give the impression that
the Dealer is the owner of the financed Goods.
2.12. The Dealer shall not represent to any third party that it is the owner of any of the financed Goods for
as long as any amount remains unpaid in respect of such financed Goods. In particular the Dealer
undertakes to conduct all transactions in respect of the sale, lease, rental or other finance agreement of
the financed Goods to its clients in such a way that the client understands and is correctly informed by the
Dealer, through the negotiations and the required documentation, that the Bank is the owner, title-holder
and financier of the financed Goods, and that the financed Goods are subject to the Bank‟s right of
ownership.

[4] In January 2014, the respondent purchased a Toyota Fortuner vehicle (the
Fortuner) from the Corporation. The agreed purchase price had initially been R265 000.
The Fortuner was delivered to the respondent on 17 January 2014, and after inspecting
it, the respondent, noted certain defects, which according to Mr van Vuuren required
repair. As a result of these defects the purchase price was reduced to R260 000, which
amount was ultimately paid to the Corporation. Despite the agreement that the
Corporation would deliver the original National Traffic Information System (NATIS)
documents in respect of that vehicle, it failed to do so.

[5] Four months later, on 28 May 2014, and after making several attempts to obtain
the NATIS documents, Van Vuuren returned the Fortuner to the Corporation and asked
to be reimbursed the purchase price. Instead of refunding the respondent Smit
suggested that the Fortuner be exchanged for two motor vehicles. These vehicles were
subject to the terms of the Absa FPA with the Corporation, being a Polo (valued at R100
000) and a Toyota Hilux (valued at R170 000). The shortfall of R10 000, was paid by the
respondent to the Corporation. Contrary to the FPA this exchange transaction was
concluded without the knowledge and consent of the bank.

[6] On 20 May 2014 the bank realised that these vehicles, of which it was the owner,
were not at the premises of the Corporation. The bank then demanded an explanation
regarding their whereabouts, as well as payment for them in terms of the FPA. The
Corporation responded by saying that:
„We have a crisis on hand. We unfortunately do not have a cheque book since Friday. We still
had two left but when we went to collect from ABSA, they said it would take 2 or 3 days to order.
We will send the settlement as soon as we received our cheque book.‟
Dissatisfied with this response, the bank then cancelled all agreements with the
Corporation and demanded possession of the vehicles. The Corporation failed to
provide the appellant with the vehicles, or details as to their whereabouts. The appellant
then launched an investigation through NATIS searches and discovered that the two
motor vehicles had been registered in the name of the respondent. The respondent

refused to return the motor vehicles to the appellant, contending that it had acquired
ownership of them.

[7] On 14 July 2014, the appellant accordingly lodged an urgent application before
the court a quo for the return of these vehicles. The respondent opposed the application
and raised two main defences: first that the FPA was a simulated transaction and
secondly, that the appellant was estopped from asserting ownership. Only the latter
defence remains for determination, the respondent having abandoned the first. The
interim order was therefore only granted in respect of the Polo motor vehicle. As pointed
out above, on the return date the court a quo discharged the rule nisi with costs
concluding that:
„It follows that the common law rei-vindicatio remedy must not be used to effect arbitrary
deprivation of property belonging to third party purchases of vehicles.‟
The court further reasoned that the respondent became owner of the motor vehicle on
registration by the licensing authority and that unless the registration certificate was
impugned or set aside the respondent‟s ownership could not be challenged.

[8] In this conclusion, the court a quo erred and the only issue in this appeal is
whether the appellant is estopped from vindicating the Polo motor vehicle in the
respondent‟s possession, of which it is the owner.

[9] The respondent contended that the appellant should be estopped from asserting
its ownership against the respondent or estopped from denying the Corporation‟s right
to dispose of the vehicles to the respondent. It was argued that by permitting Smit to
furnish the respondent with letters from the bank (namely KA5 and KA6, purportedly
signed by a bank official Mr Faizal Banoo) and authorising Smit to sign the RVL form
(being an application for registration and licensing of a motor vehicle), Smit acted, as
the appellant‟s agent and misrepresented to the respondent that the Corporation was
entitled to exchange the vehicles. This was contrary to the FPA which specifically
barred the Corporation from making representations to any third party that it was owner
of the vehicles, for as long as the bank had not been paid. Moreover, the FPA bound

the Corporation to conduct all transactions in respect of the vehicles in such a manner
that the client understood and was informed by the Corporation that the bank is owner.

[10] The contention advanced on behalf of the respondent was that since all the
documents emanated from the appellant, it was estopped from alleging that Smit or the
Corporation, were not entitled to sell the motor vehicles. By making all the documents
available to the respondent, the appellant should have reasonably contemplated that
any prospective buyer might act on the representation to his detriment. The appellant
had been negligent in not taking reasonable steps to guard against that possibility. Smit
or the Corporation must be taken to say that the appellant by making the documents
KA5, KA6 and the NATIS documents available to the respondent relinquished its rights
to retain ownership of the motor vehicles. The appellant accordingly represented to the
respondent that the Corporation was the owner of the vehicles and had the right to
dispose of them.

[11] The respondent also argued that by displaying the vehicles in the showroom of
the Corporation, together with other vehicles displayed by it for sale, the Corporation
had dealt with the motor vehicles with the bank‟s consent. The bank had by its conduct
created the impression to an innocent purchaser in the position of the respondent, that
the Corporation had dominium in the vehicles or the jus dispondendi was vested in the
Corporation. In the respondent‟s affidavit which was deposed to by Van Vuuren, it
resisted the bank‟s claim for the return of the motor vehicle on several grounds. The
affidavit included the following statements:
„24 I did, however, insist on being satisfied that the Corporation was entitled to sell the vehicles.
Smit agreed to show me the NATIS documents and he did so. Along with the NATIS
documentation, I was provided with a letter in respect of each vehicle, dated 28 May 2014,
addressed by Mr Faizal Banoo (a manager of Applicant, employed in the Applicant‟s Credit
Control Floorplans section, in turn a part of Absa Vehicle and Asset Finance) to the licensing
department and headed “confirmation of re-registration”.‟
In para 26 the respondent further stated that the NATIS documents were shown to him
on 28 May 2014 by Smit. These documents indicated that the vehicles had previously
been registered in Absa‟s name (as title holder and owner). According to the

respondent, the vehicles were re-registered in the name of the Corporation and
thereafter in the name of the respondent. The effect of this argument is this: once the
vehicles were registered in the name of the respondent, the respondent became the
owner and title holder by virtue of the NATIS registration documents. As pointed out
above this argument incorrectly found favour with the court a quo, which erroneously
held that unless the registration was impugned or set aside, ownership vests in the
respondent.

[12] The appellant argued that: The registration documents KA5 and KA6 were
headed „without prejudice to our rights‟ and should have drawn the respondent‟s
attention to the fact that the Corporation was not the owner of the vehicles. Accordingly
the Corporation did not have the right to deal with the vehicles, without the express
consent of the appellant. A minimum enquiry by the respondent would have revealed
that these letters were electronically generated through the Geolock system/Fast
system, which could be accessed by any dealer familiar with the Absa floor plan
agreement. To safeguard its interest, the bank marked the letters with the words
„without prejudice to our rights‟ to enable the dealer to register the vehicle as stock and
then into the purchaser‟s name. The dealer is then offered a period of forty-eight hours
within which it has to pay the appellant.

[13] The appellant submitted that the Corporation abused this system and through
fraudulent means represented to the respondent that it was the owner and entitled to
dispose of the motor vehicles. In terms of the agreement (FPA) the Corporation failed to
pay the money outstanding with the result that ownership of the motor vehicles
remained vested in the appellant.

[14] Quite clearly the Corporation and the respondent knew that without the
registration letters and NATIS documents they would not be able to effect registration of
the vehicles. It was argued that the version of the respondent is improbable, because as
a dealer with experience since 2004, the respondent must have known and accepted
that it was business practice amongst motor dealers, especially where floor plan

agreements were involved, that the reservation of ownership remains with the appellant
until payment has been made to it in full. During argument counsel for the appellant
submitted that the conduct of the respondent in respect of the two motor vehicles,
constituted an exchange in contravention of clause 8.1 of the FPA which provides:
„The Dealer may under no circumstances whatsoever exchange any of the Goods with other
goods without obtaining the prior written consent of the Bank. If consent has been obtained from
the Bank such exchange would amount to a new transaction in terms of this agreement. All
amounts owing to the Bank in respect of the Goods so exchanged will immediately become due
and payable.‟ (My emphasis.)

[15] A reading of the clause indicates clearly that the exchange transaction between
the Corporation and the respondent fell foul of the FPA. It was not in dispute that, no
such consent was obtained from the bank prior to the conclusion of the exchange
transaction agreement between the respondent and the Corporation.

[16] The legal principles to be applied are clear and were stated by Holmes JA in
Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976 (1) SA 441
(A) at 452A-G where he held:
„Our law jealousy protects the right of ownership and the correlative right of the owner in regard
to his property, unless, of course, the possessor has some enforceable right against the owner.
Consistent with this, it has been authoritatively laid down by this Court that an owner is
estopped from asserting his rights to his property only─
(a) Where the person who acquired his property did so because, by the culpa of the owner, he
was misled into the belief that the person, from whom he acquired it, was the owner of was
entitled to dispose of it; or
(b) . . .
. . .
As to (a), supra, it may be stated that the owner will be frustrated by estoppel upon proof of the
following requirements─
(i) There must be a representation by the owner, by conduct or otherwise, that the person who
disposed of his property was the owner of it or was entitled to dispose of it. A helpful decision in
this regard is Electrolux (Pty) Ltd v Khota and Another 1961 (4) SA 244 (W), with its reference at
247 to the entrusting of possession of property with the indicia of dominium or jus disponendi.

(ii) The representation must have been made negligently in the circumstances.
(iii) The representation must have been relied upon by the person raising the estoppel.
(iv) Such person‟s reliance upon the representation must be the cause of his acting to his
detriment.‟

[17] Furthermore in Electrolux Pty Ltd v Khota and Another 1961 (4) SA 244 (W)
247B-C, Trollip J said the following:
„To give rise to the representation of dominium or jus disponendi, the owner‟s conduct must be
not only the entrusting of possession to the possessor but also the entrusting of it with the
indicia of the dominium or jus disponendi. Such indicia may be the documents of title and/or
authority to dispose of the articles, as for example, the share certificate with a blank transfer
form annexed . . . or such indicia may be the actual manner or circumstances in which the
owner allows the possessor to possess the articles, as for example, the owner/wholesaler
allowing the retailer to exhibit the articles in question for sale with his other stock in trade. . . In
all such cases the owner
“provides all the scenic apparatus by which his agent or debtor may pose as entirely
unaccountable to himself, and in concealment pulls the strings by which the puppet is made to
assume the appearance of independent activity. This amounts to a representation, by silence
and inaction . . . as well as by conduct, that the person so armed with the external indications of
independence is in fact unrelated and unaccountable to the representor, as agent, debtor, or
otherwise.”
Trollip J said further (at 247H─ 248A):
„It follows that to create the effective representation the dealer or trader must, in addition, deal
with the goods with the owner‟s consent or connivance in such manner as to proclaim that the
dominium or jus disponendi is vested in him; as for example, by displaying, with the owner‟s
consent or connivance, the articles for sale with his own goods. It is that additional circumstance
that provides the necessary “scenic apparatus” for begetting the effective representation.‟

[18] As regards estoppel by conduct in Concor Holdings (Pty) Ltd t/a Concor
Technicrete v Potgieter 2004 (6) SA 491 (SCA) at 495A-C and 496D-E it was held that:
„Our law is that a person may be bound by a representation constituted by conduct if the
representor should reasonably have expected that the representee might be misled by his
conduct and if in addition the representee acted reasonably in construing the representation in

the sense in which the representee did so. . . Nevertheless if a representation by conduct is
plainly ambiguous, the representee would not be acting reasonably if he chose to rely on one of
the possible meanings without making further enquiries to clarify the position.‟

[19] The respondent based its argument primarily on the registration letters from the
bank and the NATIS documents. An examination of these letters indicate that they were
marked „without prejudice to our rights‟. As to how the respondent could possibly
believe that the said letters granted the Corporation authority to alienate the motor
vehicles to the exclusion of the appellant‟s right of ownership is startling. Accordingly
reliance on these documents cannot assist the respondent. These documents clearly
referred to the appellant as owner and title holder of the motor vehicle. The respondent
as an experienced motor dealer, who had dealt with floor plan agreements before, must
have known that in such transactions ownership of the goods was reserved to the
owner. In this case there is no suggestion that the appellant expressly, or by conduct,
conveyed an impression that it was relinquishing ownership of the motor vehicle.

[20] Once it became clear that the Corporation was unable to refund the respondent
the purchase price or provide the NATIS documents in respect of the sale of the
Fortuner, for a period of four months, Van Vuuren on behalf of the respondent as an
experienced motor dealer should have made enquiries regarding the Polo and Toyota
Hilux motor vehicles, which were exchanged for the Fortuner. There were warning signs
which should have alerted the respondent to make further enquires and not rely on the
representations made by the Corporation. The fact that the Corporation was unable to
repay the purchase price for the Fortuner, or supply the necessary transfer documents,
should have alerted the respondent that the appellant had not been paid by the
Corporation for this vehicle. The respondent nevertheless elected to adopt a supine
attitude and decided not to make any enquiry from the appellant regarding the
ownership of the Polo and Toyota Hilux motor vehicles. At the very least, any
representation by the conduct of the appellant that the corporation was entitled to pass
ownership of the vehicles, was plainly ambiguous. By not making any enquiries from the
appellant, the respondent did not act reasonably. The defence of estoppel was

accordingly not established by the respondent. The appellant as owner of the Polo is
accordingly entitled to its possession.

[21] I accordingly make the following order:
1. The appeal is upheld with costs.
2. The order of the court a quo is set aside and replaced with the following:
„1. Respondent is ordered to forthwith return to Applicant a 2011 Volkswagen
Polo 1.4 Comfortline sedan with engine number CLP034196 and chassis number
AAVZZZ6RZBU030970.
2. Respondent is ordered to forthwith return/or supply to Applicant the original
NATIS documentation, together with duly signed Notification of Change of
Ownership Forms (NCO(5)) of the Polo.
3. That, in the event of Respondent failing and/or refusing to return/or supply to
Applicant forthwith the aforesaid vehicle and documents, the Sheriff be and is
hereby authorised and requested to enter into and upon Respondent‟s premises,
or wherever same may be found, to attach the vehicle and documents referred to
in 1 and 2 above, and to return the vehicle and documents to Applicant as a
matter of urgency.
4. That in the event of Respondent failing and/or refusing to forthwith sign and
return to Applicant the Notification of Change of Ownership Forms (NCO(5)), the
sheriff be and is hereby authorised and requested to sign such documents.
5. The respondent is ordered to pay the costs of this application.‟

_________________
R S Mathopo
Judge of Appeal

Appearances
For Appellant:
L M Olivier SC

Instructed by:
Jay Mothobi Inc, Johannesburg
Phatshoane Henney Attorneys, Bloemfontein

For Respondent:

B C Wharton
Instructed by:
Meyer Inc, Cape Town
Horn & Van Rensburg, Bloemfontein