The High Court in Pretoria has rejected a purchaser’s defence that the lockdown made it impossible for him to adhere to his vehicle finance agreement, finding that his inability to pay was due to a downturn in the economy and not three months of hard lockdown.
In arriving at her decision, Judge Nicolene Janse van Nieuwenhuizen addressed the common law doctrine of “supervening impossibility”.
In terms of this doctrine, each party’s obligation to perform in terms of an agreement, and their respective rights to receive performance under that agreement, will be extinguished if the performance by a party of its obligation becomes objectively impossible as a result of unforeseeable and unavoidable events, which are not the fault of any party to that agreement.
FFS Finance South Africa, trading as Ford Credit, applied to the High Court for an order confirming the cancellation of an instalment sale agreement and directing the defendant, “QV”, to return a Ford Ranger.
The agreement commenced on 1 August 2018, and the monthly instalment was R6 961.49.
QV admitted he was in breach of his obligations in terms of the agreement but pleaded that performance in terms of the agreement was impossible.
QV submitted that he kept up to date with his payments until the promulgation of the lockdown regulations on 26 March 2020.
The lockdown had a devastating effect on his business: he immediately stopped receiving payments from clients. He was unable to afford legal assistance, and he was unable to retrieve the funds owing to him or to generate sufficient new business to meet the payments due to FFS and fell further behind.
He found full-time employment in July 2021, enabling him to re-commence the monthly repayments. He paid R7 500 that month and R8 000 a month from August 2021 to February 2022.
According to FFS’s certificate of balance, QV was in arrears of R28 647.66 on 21 April 2021. A default notice was delivered on 30 April 2021 and summons was issued on 9 June 2021.
QV retained possession of the vehicle
Judge Janse van Nieuwenhuizen said the doctrine of supervening impossibility of performance was discussed in detail in the 2021 case of Freestone Property Investments (Pty) Ltd v Remake Consultants and Another, which also concerned the effect of the lockdown regulations on a contractual relationship between the parties.
Freestone Property Investments (FPI) was a lessor of commercial premises in a shopping centre and Remake was the lessee of two stores in the shopping centre. Remake fell behind with its monthly rental payments, which resulted in FPI terminating the agreement. FPI issued summons and brought a summary judgment application for Remake’s ejectment and payment of arrear rental.
Remake alleged that for the period March to June 2020 and during the hard lockdown, the parties could not comply with their respective obligations in terms of the lease agreement. Due to the supervening impossibility, FPI was excused from tendering occupation and Remake from paying rent.
The South Gauteng High Court agreed with Remake’s submissions and granted leave to defend the action insofar as rent for the period March to June 2020 was concerned.
Judge Janse van Nieuwenhuizen said it was noteworthy that both parties to the lease agreement were unable to perform due to the hard lockdown, and the court found that the parties were excused from performance for the period March to June 2020 only.
She said the facts in the case before her differed “substantially” from those in the FPI matter.
FFS fulfilled its obligations in terms of the agreement by placing QV in possession of the vehicle. Although QV did not comply with his obligations by paying the monthly instalment, he retained possession of the vehicle.
Downturn in the economy
Judge Janse van Nieuwenhuizen said the facts of this matter were more in line with those in the 1903 case of Johannesburg Consolidated Investment Co v Mendelsohn & Bruce Ltd, where the Transvaal High Court found:
“The consequence of holding that the defendants in this case are entitled to a remission in rent appears to me to be far-reaching. It would involve this, that on the happening of any event amounting to vis major [irresistible natural occurrence], which caused a temporary diminution of the population of a town, every tradesman who could show he had sustained temporary loss or a considerable diminution of profit might be entitled to a remission of rent.
“Suppose, for instance, that in consequence of the outbreak of an epidemic disease a large proportion of the inhabitants fled, with the result that owing to the absence of their usual customers, the tradesmen temporarily were carrying on business at a loss, and closed their shops, it would be an unpleasant surprise to the lessors to find that the whole of the loss is to fall upon them, and that they occupy in effect the position of insurers of their lessees’ custom.”
Judge Janse van Nieuwenhuizen said QV’s inability to pay the monthly instalments appeared to be due to a downturn in the economy and not due to the three months of hard lockdown.
“It seems unlikely that customers will summarily cease paying for goods and services rendered prior to the hard lockdown, simply because their movement is limited for a period of three months.”
She confirmed the cancellation of the agreement and ordered QV to return the Ford Ranger to FFS.
