---

149/87

N v H

SASFIN (PROPRIETARY) LIMITED and HENDRIK JOHANNES STEFANUS BEUKES

SMALBERGER, JA:-

149/88

N v H

IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter between:-
SASFIN (PROPRIETARY) LIMITED Appellant
and
HENDRIK JOHANNES STEFANUS BEUKES Respondent

CORAM: RABIE, ACJ, JANSEN, VAN HEERDEN, SMALBERGER,
et NESTADT, JJA
HEARD: 8 MARCH 1988
DELIVERED: 19 SEPTEMBER 1988

JUDGMENT SMALBERGER, JA :-
The appellant ("Sasfin") is a company carrying on business as a financier; the respondent ("Beukes") is a specialist anaesthetist. On 13 February 1985 the parties entered into a discounting agreement. In terms of this agreement Beukes was obliged to offer for sale to Sasfin any book debts he wished to sell. The purchase of such

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book debts by Sasfin was to be governed by the provisions
of the discounting agreement. On the same date Beukes executed
a deed of cession in favour of Sasfin, Sassoons Textiles (Africa)
(Pty) Limited ("Sassoons") and Simpex (Pty) Ltd ("Simpex").
In terms thereof Beukes ceded to "the creditors" (Sasfin,
Sassoons and Simpex), jointly and severally,

"all claims, rights of actions and receivables which are now and which may at any time hereafter become due to me/us by all persons (hereinafter referred to as 'my/our debtors') without exception, from any cause of indebtedness whatsoever ('the claims') as continuing covering security for the due and proper performance of all obligations which I/we may have in the past owed or incurred or may at the present or in the future owe or incur to all or any of the creditors from whatsoever cause and whenever arising ....",

on the terms and conditions contained in the deed of cession. In entering into both the discounting agreement and the deed of cession Beukes was represented by one Smit of Computerised Management Applications (Pty) Limited.

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3 It is common cause that from time to time Sasfin purchased certain book debts offered for sale by Beukes. Eventually a dispute arose between the parties. Sasfin claimed that Beukes had breached certain warranties contained in the discounting agreement, and purported to cancel the agreement. Sasfin further alleged that as at the date of the purported cancellation Beukes was indebted to it in the sum of R108 575-80. Accordingly Sasfin claimed to be entitled to enforce its rights against Beukes under the deed of cession.
Beukes disputed any alleged breach on his part, and Sasfin's right to cancel. He contended, in turn, that Sasfin had breached certain of the terms of the discounting agreement. The dispute between the parties resulted in Sasfin (as applicant) instituting proceedings by way of notice of motion against Beukes (as respondent) in the Witwatersrand Local Division, in which Sasfin claimed an order in the following terms:-

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"1.1 Declaring that the cession executed by

the Respondent in favour of the Applicant
on 13 February 1985 is of full force and
effect;
1.2 Interdicting and restraining the Respondent
from collecting either from his patients
and from any Medical Aid Society/ies or
from any person, any of the debts ceded
by him to the Applicant.

1.3 Directing that the Respondent furnish

an account to the Applicant of all amounts collected by him since 13 November 1985, and pay to the Applicant all the amounts so collected.
1.4 Directing that the Respondent is obliged
to give the Applicant access to all his
books, records and documents in terms
of the deed of cession for the purpose of allowing the Applicant to exercise its rights in terms of the deed of cession.

2. Alternatively to 1 above granting the

Applicant an interim interdict, interdicting and restraining the Respondent from collect= ing either from his patients and from any Medical Aid Society/ies or from any person any of the debts ceded by him to the Applicant, pending proceedings to be instituted against the Respondent for the relief set out in 1.1 to 1.4. Such proceedings to be instituted within 30

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days from the date of this order.

3.	Directing that the Respondent pay the costs of this application.
4.	Granting to the Applicant further or alternative relief."

The matter came before VAN NIEKERK, J. At the hearing Sasfin indicated that it was only persisting in its claim for interim relief in terms of paragraph 2 of the order sought. The court a quo dismissed Sasfin's application, with costs, on the ground that the deed of cession was contrary to public policy and therefore invalid and unenforceable. However, it granted Sasfin leave to appeal to this Court. The judgment of the court a quo is reported in 1988(1) SA 626 (W).
The appeal turns primarily on the validity of the deed of cession and its enforceability, whether in full or in part. This involves a consideration of whether there are provisions in the deed of cession which

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6 offend against public policy and, if so, whether they are severable from the remainder of the deed of cession. If the deed of cession is found to contain provisions which are contrary to public policy, and which are not severable, the further question arises whether, if such provisions were inserted solely for the benefit of Sasfin, Sasfin is none the less entitled to enforce the deed of cession shorn of its illegal provisions, if it so elects. This issue was not pertinently raised or argued during the hearing of the appeal, but counsel for the parties were subsequently requested to furnish additional written heads of argument in respect thereof. This they have done, and we are indebted to them for their assistance.

Before considering these issues and the legal principles governing them, it is necessary to mention certain preliminary matters. The proceedings in the court a quo were instituted by Sasfin only. Sassoons and Simpex did not join, nor were they joined, in the proceedings. They have, however, indicated through their attorneys that

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7 abide the decision of this Court, and the parties are agreed that nothing turns on their non-joinder. Furthermore, we were advised by counsel, and this has since been confirmed in certain correspondence placed before us, that Beukes has furnished a bank guarantee to Sasfin to cover any amount which might be found to be due by him to Sasfin, pursuant to an action which Sasfin has instituted against Beukes arising out of his alleged indebtedness under the discounting agreement, and that no claim will be made against Beukes based on the deed of cession. As Sasfin no longer seeks to enforce the deed of cession, the question of its validity has became largely academic. It remains, however, relevant to the question of costs, and this Court is therefore required to pronounce on its validity, and on any other issues that fall to be considered.

Our common law does not recognize agreements that are contrary to public policy (Magna Alloys and Research SA (Pty) Ltd v Ellis 1984(4) SA 874 (A) at 891 G). This

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8 immediately raises the question what is meant by public policy, and when can it be said that an agreement is contrary to public policy. Public policy is an expression of "vague import" (per INNES, CJ, in Law Union and Rock Insurance Co Ltd v Carmichael's Executor 1917 AD 593 at 598), and what the requirements of public policy are must needs often be a difficult and contentious matter. Wessels' Law of Contract in South Africa : 2nd Edition, Vol 1, para 480 states that "(a)n act which is contrary to the interests of the community is said to be an act contrary to public policy". Wessels goes on to state that such acts may also be regarded as contrary to the common law, and in some cases contrary to the moral sense of the community. The learned author "Aquilius" in one of a series of articles on "Immorality and Illegality in Contract" in 1941, 1942 and 1943 SALJ defines a contract against public policy as "one stipulating performance which is not per se illegal or immoral but which the Courts, on grounds of expedience, will not enforce, because performance

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9 will detrimentally affect the interest of the community" (1941 SALJ 346). Wille in his Principles of South African Law 7th Edition, at 324 speaks of an agreement being contrary to public policy "if it is opposed to the interests of the State, or of justice, or of the public". The interests of the community or the public are therefore of paramount importance in relation to the concept of public policy. Agreements which are clearly inimical to the interests of the community, whether they are contrary to law or morality, or run counter to social or economic expedience, will accordingly, on the grounds of public policy, not be enforced. (cf. Cheshire, Fifoot and Furmston's Law of Contract : llth Edition, at 343.)
Writers generally seem to classify illegal or unenforceable contracts (apart from those contrary to statute) into contracts that are contra bonos mores and those contrary to public policy (see e g De Wet en Yeats : Kontraktereg en Handelsreg : 4th Edition, at 80; Wille op cit at 321; Lawsa: Vol 5, para 151). Some, like Wessels op cit, include an

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additional classification, viz., those contrary to the common law. These classifications are interchangeable, for as "Aquilius" in 1941 SALJ at 344 puts the matter, "in a sense ... all illegalities may be said to be immoral and all immorality and illegality contrary to public policy". That the principles underlying contracts contrary to public policy and contra bonos mores may overlap also appears from the judgment of this Court in Ismail v Ismail 1983(1) SA 1006 (A) at 1025 G. These classifications may not be of importance in principle, for where a court refuses to enforce a contract it ultimately so decides on the basis of public policy (see Kuhn v Karp 1948(4) SA 825 (T) at 839). None the less it is convenient to deal with unenforceable contracts, as most writers do, under various heads (see e g Christie : The Law of Contract in South Africa, at 335 et seq).

In the Magna Alloy's case (supra) RABIE, CJ, stated at 891 H:

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"Omdat opvattings oor wat in die openbare belang is, of wat die openbare belang vereis, nie altyd dieselfde is nie en van tyd tot tyd kan verander, kan daar ook geen numerns clausus wees van soorte ooreenkomste wat as strydig met die openbare belang beskou kan word nie."

While mindful of the admonition of CAVE, J in In re Mirams (1891) 1 QB 594 at 595 that "judges are more to be trusted as interpreters of the law than as expounders of what is called public policy", it must nevertheless be left to the courts to determine, in any given case, (apart from matters dealt with by statute), whether a contract is contrary to public policy. This is in keeping with what was said by INNES, CJ, in Eastwood v Shepstone 1902 TS 294 at 302, viz.:

"Now this Court has the power to treat as void and to refuse in any way to recognise contracts and transactions which are against public policy or contrary to good morals. It is a power not to be hastily or rashly exercised; but when once it is clear that any arrangement is against public policy, the Court

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would be wanting in its duty if it hesitated to declare such an arrangement void. What we have to look to is the tendency of the proposed transaction, not its actually proved result."

No court should therefore shrink from the duty of declaring
a contract contrary to public policy when the occasion so demands.
The power to declare contracts contrary to public policy should,
however, be exercised sparingly and only in the clearest of
cases, lest uncertainty as to the validity of contracts result
from an arbitrary and indiscriminate use of the power. One
must be careful not to conclude that a contract is contrary
to public policy merely because its terms (or some of them)
offend one's individual sense of propriety and fairness.
In the words of Lord Atkin in Fender v St John-Mildmay (1938)
AC 1 at 12, "the doctrine should only be invoked in clear cases
in which the harm to the public is substantially incontestable,
and does not depend upon the idiosyncratic inferences of a
few judicial minds" (see also Olsen v Standaloft 1983(2) SA

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668 (ZSC) at 673 G). Williston on Contracts : 3rd Edition, para 1630, expresses the position thus: "Although the power of courts to invalidate bargains of parties on grounds of public policy is unquestioned and is clearly necessary, the impropriety of the transaction should be convincingly established in order to justify the exercise of the power". In grappling with this often difficult problem it must be borne in mind that public policy generally favours the utmost freedom of contract, and requires that commercial transactions should not be unduly trammelled by restrictions on that freedom. "(P)ublic policy demands in general full freedom of contract; the right of men freely to bind themselves in respect of all legitimate subject matters" (per INNES, CJ, in Law Union and Rock Insurance Co Ltd v Carmichael's Executor (supra) at p 598) - and see the much quoted aphorism of Sir George Jessel MR in Printing and Numerical ReRistration Co v Sampson (1875) LR 19 Eq 462 at 465 referred to in, inter alia, Wells v South African Alumenite Company 1927 AD 69 at 73. A further relevant, and not unim=

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14 portant, consideration is that "public policy should properly take into account the doing of simple justice between man and man" - per STRAFFORD, CJ, in Jajbhay v Cassim 1939 AD 537 at 544. It is in the light of these principles that the validity of the deed of cession must be considered.
The deed of cession contains in a single document both an agreement to cede and a cession. In terms of the agreement to cede, Beukes' "claims, rights of action and receivables" were to be ceded in securitatem debiti. Such a cession is in the nature of a pledge. A pledge is accessory to the original obligation, and whenever that is discharged the pledge is ipso iure extinguished. (Wille's Law of Mortgage and Pledge in South Africa: 3rd Edition, at 165/6; Standard Bank of SA Ltd v Neethling NO 1958(2) SA 25 (C) at 30 C - D.) It follows from the accessory nature of a pledge that the rights of a cessionary under a cession in securitatem debiti only extend for as long as the debt which it was intended to secure remains unpaid, and no claim may

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15 be made in respect of the cession if there is no indebtedness (Wille (supra) at 151; Freeman Cohen's Consolidated Ltd v General Mining and Finance Corporation Ltd 1906 TS 585 at 591.)
The deed of cession is a lengthy document consisting of twenty five typed pages. I do not propose to set out its provisions in full - to do so would unnecessarily burden this judgment. It is heavily biased in favour of Sasfin - that much will become apparent when I deal with the clauses which are claimed to be contrary to public policy. It was obviously tailored, from Sasfin's point of view, to cover every conceivable legal loophole, and to provide for all possible contingencies. It is certainly not lacking in ingenuity. Its purpose was not merely to provide security for Beukes' indebtedness to Sasfin- it sought to ensure maximum protection of Sasfin's rights while at the same time subjecting Beukes to the most stringent burdens and restrictions.

It will facilitate the further reading of this judgment if I set out in full at this stage the various clauses in the

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deed of cession which Beukes claims are contrary to public
policy. While there may be other provisions in the deed
of cession which are contrary to public policy, I shall confine
myself to those relied upon by Beukes. They are the following

(the underlining is mine, and is intended to facilitate later

reference to the various clauses):-

"3.4 (T)he creditors shall be entitled, at any
time or times hereafter, without notice
to me/us and without first obtaining any
order of court, to:
3.4.1 give notice of this cession to all

or any of my/our debtors and to take
such steps as the creditors may deem
fit to recover all or any of the claims
hereby ceded; and/or
3.4.2 cause all or any of the claims hereby

ceded to be sold by public auction or private treaty or in any other manner for such price and on such terms and to such purchasers as the creditors in their sole and absolute

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discretion may deem fit; and/or

3.4.3
3.4.4

The creditors shall apply the nett proceeds of any such recovery or sale in terms of
3.4.1 or 3.4.2 as the case may be,
after deducting therefrom all costs and expenses incurred in or about the realisation of the claims and exercise by the creditors of its/their rights, including where applicable the commission referred to in 7, in reduction or discharge, as the case may be, of my/our indebtedness to the creditors, without prejudice to the creditors' rights to recover from me/us any balance which may remain owing to the creditors after the exercise of such rights. All of the aforegoing is without prejudice to all other rights that the creditors may have at law and all other securities which may be held by the creditors and provided further however that should the creditors at any time collect/recover in aggregate an amount which, after taking into account all the costs and expenses incurred by the creditors in connection with the realisation and/or recovery or

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attempted recovery of the claims Hereby ceded and the exercise by the creditors of their rights, exceeds the full amount of my/our indebtedness for the time being, whether actual or contingent or prospective, the creditors shall be entitled but not obliged to refund such excess to me/us without affecting the force and continuity of this cession as security for any indebtedness subsequently arising in favour of the creditors.
3.6 (T)he creditors shall be at liberty, without in any way limiting or affecting the creditors' rights against me/us or diminishing or otherwise affecting my/our obligations to the creditors hereunder, to do any act or omit to do any act or cause any act to be done or omitted to be done, whether pursuant to the provisions of any contract concluded with me/us or otherwise, as the creditors in its/their sole discretion may deem fit, and without reference to or approval by me/us notwithstanding that

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in doing or omitting to do any such act, the creditors may have acted negligently (whether grossly or otherwise) or in a manner calculated to cause, or in fact causing, prejudice to me/us ...

3.8 (T)he creditors shall be under no

obligation to me/us to bring any proceedings against any of my/our debtors or take any other steps against my/our debtors and
shall be at liberty to withdraw any proceedings instituted by the creditors against my/our debtors and be entitled generally to act or to refrain from acting against any of my/our debtors as the creditors may in their sole and absolute discretion decide or consider fit, and the creditors shall not be liable to me/us in any way whatsoever for any loss/es that I/we may suffer or incur in consequence of anything done or omitted to be done by the creditors

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3.14 (T)his cession shall be a continuing covering cession and shall remain of full force and effect at all times notwithstanding-

3.14.1 any intermediate discharge or settlement

of or fluctuation in my/our obligations to the creditors; and/or

3.14.2 my/our legal disability, and accordingly

shall be and remain of full force
and effect until such time as the

creditors will in their sole and absolute

discretion have agreed in writing
to cancel this cession. In the event
of any one or more of the creditors
agreeing to cancel this cession, such
cancellation shall not limit or affect
this cession to any of the other/s
of the creditors who have not so agreed.
Accordingly, this cession shall be
and continue to be of full force and
effect until terminated by all of
the creditors pursuant to the provisions
of this clause.

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3.24. 3.24.1 (T)he amount owing to the creditors by me/us at any time, the fact that it is due and payable, the rate of interest payable thereon, (and) the date from which interest is reckoned, .... shall be deemed to be determined and proved by a certificate under the signature of any of the directors of any of the creditors. It shall not be necessary to prove the appointment of the person signing any such certificate.

3.24.2 Such certificate shall -

3.24.2.1	be binding upon me/us and
3.24.2.2	be conclusive proof of the

amount due, owing and payable by me/us to the creditors and of the facts stated therein; and

3.24.2.3 be deemed to be a liquid
document for the purpose
of obtaining provisional
sentence and/or any other
judgment or order against
me/us; and

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3.24.2.4 constitute sufficient
particularity for the purposes
of pleading and trial in

any action instituted by you against me/us; and

3.24.2.5 constitute sufficient proof
to enable the creditors

to

3.24.2.5.1 discharge any onus which

may be cast upon it/them in law in any action; and

3.24.2.5.2 obtain any judement

or order;

The creditors shall, accordingly, not be obliged to tender any additional evidence over and above and/or in addition to such certificate at any hearing in any action or proceedings for a judgment or order.

5.2 (U)ntil such time as all or any of my/our debtors will have been notified of the cession, all sums of money which I/we will collect from my/our debtors or such debtor/s as the case may be, shall be collected and received by me/us as agent/s on the

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creditors' behalf, provided that the creditors shall be entitled at any time to terminate

my/our mandate to collect all or any such

sums of money and that with effect from the termination of such mandate, I/we will cease to collect or accept any payments on account of the debts in respect of which my/our mandate will have been terminated.

7. In the event of the creditors at any time

exercising any of its/their rights in terms of clause 3.4.1 of this cession, I/we hereby agree and undertake to pay to the creditors on demand a commission of 5% (five per centum) of the gross value of all the claims hereby ceded then outstanding."

The references in clause 3.4 to "the claims hereby ceded" are in fact references to Beukes' book debts, which reflect the amounts due to him by his patients for medical services rendered to them. These book debts constitute his source of income as a specialist anaesthetist. It was contended,

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24 on behalf of Beukes, that, when read together, clauses 3.4 and 3.14 entitle Sasfin, for as long as it pleases, to collect and keep all Beukes' income, irrespective of the absence of any principal indebtedness. This was disputed by Sasfin's counsel. He claimed that Sasfin was only entitled to collect Beukes' book debts provided Beukes was indebted to it, and was obliged to account for, and pay over to Beukes, any excess amount collected (subject to the severance of the words "entitled but not" where they appear towards the end of clause 3.4). The interpretation placed by Beukes on clauses 3.4 and 3.14 as they stand (i e leaving aside the question of severance) is, in my view, the correct one.
It was not suggested on the papers that Beukes' indebtedness to Sasfin arose in any way other than under the discounting agreement. As that agreement and the deed of cession were signed at one and the same time it follows that there could have been no principal debt in existence when the deed of cession was executed. If the deed of cession

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contemplated a cession in anticipando no transfer of rights
to Sasfin could have taken place until the cession became
operative, i e until the indebtedness it was sought to secure
arose. Contrary to the common law position, however, on a
proper interpretation of clauses 3.4 and 3.14 Sasfin was entitled,
from the moment the deed of cession was executed, to recover
all or any of Beukes' book debts, despite the fact that no
amount was owed by Beukes to it then, nor might be owed in

the future. This in my view follows from:-

1) The words "at any time or times hereafter" in the opening sentence of clause 3.4. In their context the words can only mean "with immediate effect and at any time in the future". They are not dependent upon the existence of any indebtedness by Beukes to Sasfin. They are superfluous unless they are given the wide meaning they bear. Mr Trengove, for Sasfin, was alive to the wide import of the words andargued that they could be severed in order to overcome the threat to the validity of thedeed of cession that their existence posed.

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2) Clause 3.14 which provides in terms that
the deed of cession "shall remain of full
force and effect at all times notwithstanding
any intermediate discharge or settlement

of ... my obligations to the creditors ...", i e be operative irrespective of the existence of any principal indebtedness. From this it may be inferred that the parties never intended the cession of rights to Sasfin to be dependent upon the existence of such indebtedness, and that this was their intention from the outset.

3) The reference in the last sentence of clause
3.4 to "prospective" indebtedness. The
word "prospective" pertains to some time
in the future and contrasts with "actual" indebtedness. In the context of the sentence as a whole the use of the word "prospective" contemplates a situation where amounts have been collected or recovered irrespective of the existence of any actual indebtedness. The reference to "entitled but not obliged" to refund any excess is further indicative of Sasfin's right to retain amounts collected even though nothing is owing to it and reinforces the conclusion that the right

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to collect does not depend upon the existence of any indebtedness.

Mr Trengove, in support of the argument that the deed of cession only authorised Sasfin to collect Beukes' book debts while he was indebted to Sasfin, referred to the stipulation in clause 3.4 that Sasfin "shall apply the nett proceeds" of any recovery or sale of the book debts "in reduction or discharge, as the case may be, of my/our indebtedness to the creditors". It was contended that this clearly implied the existence of an actual indebtedness. This, it was said, was fortified by the fact that the concluding portion of clause 3.4 catered only for a surplus of the amouht collected over "the full amount of my/our indebtedness for the time being". These provisions do not, in my view, necessarily exclude the existence of a nil indebtedness, and do not provide a cogent answer to the arguments supporting the contrary view.

The effect of what I conceive to be the proper interpretation of clause 3.4 and 3.14 was to put Sasfin,

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from the time the deed of cession was executed, and at all times thereafter, in immediate and effective control of all Beukes' earnings as a specialist anaesthetist. On notice of cession to Beukes' debtors Sasfin would have been entitled to recover all Beukes' book debts. In addition, Sasfin would have been entitled to retain all amounts so recovered, irrespective of whether Beukes was indebted to it in a lesser amount, or at all. This follows from the provisions in clause 3.4 that Sasfin would be "entitled but not obliged" to refund any amount to Beukes in excess of Beukes' actual indebtedness to Sasfin. As a result Beukes could effectively be deprived of his income and means of support for himself and his family. He would, to that extent, virtually be relegated to the position of a slave, working for the benefit of Sasfin (or, for that matter, any of the other creditors). What is more, this situation could, in terms of clause 3.14, have continued indefinitely at the pleasure of Sasfin (or the other creditors).

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Beukes was powerless to bring it to an end, as clause 3.14
specifically provides that "this cession shall be and continue to be of full force and effect until terminated by all the creditors". Neither an absence of indebtedness, nor reasonable notice to terminate by Beukes in those circumstances would, according to the wording of clause 3.14, have sufficed to bring the deed of cession to an end. An agreement having this effect is clearly unconscionable and incompatible with the public interest, and therefore contrary to public policy. (Eastwood v Shepstone (supra); Biyela v Harris 1921 NPD 83; Raubenheimer and Others v Paterson and Sons 1950(3) SA 45 (S R): King v Michael Faraday and Partners, Limited (1939) 2 K B 753.)
It was conceded on behalf of Sasfin that if the above interpretation of clauses 3.4 and 3.14 is the correct one the clauses, as they stand, are contrary to public policy. Furthermore, the words "should the creditors at any time collect/recover in aggregate an amount which .... exceeds the full amount of my/our indebtedness .... the creditors

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shall be entitled but not obliged to refund such excess" in clause 3.4, given theír literal interpretation, are in my view sufficiently wide to allow Sasfin, on termination of the deed of cession by the creditors, to retain all monies collected by it in excess of Beukes' indebtedness to it. They therefore amount to a pactum commissorium, and as such render the clause invalid and unenforceable (see Sun Life Assurance Co of Canada v Kuranda 1924 AD 20 at 24). In addition, clause 3.4.2, which provides for parate executie, goes to such lengths that it offends against the public interest and is contrary to public policy. A clause for parate executie, which authorises execution without an order of court, is valid (Osry v Hirsch, Loubser and Co Ltd 1922 C P D 531), provided it does not prejudice, or is not likely to prejudice, the rights of the debtor unduly. This I conceive to be the principle underlying the passage in the judgment of KOTZé, JP in Osry's case at 547, where he stated: "It is, however, open to the debtor to seek the protection of the Court if,

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upon any just ground, he can show that, in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him in his rights". Clause 3.4.2 is couched in very wide terms. It gives Sasfin carte blanche in regard to the sale of Beukes' book debts. It is open to abuse, and the likelihood of undue prejudice to Beukes exists if its terms are enforced. As stated in Eastwood v Shepstone (supra), it is the tendency of the proposed transaction, not its actually proved result, which determines whether it is contrary to public policy.
The provisions of clause 3.8 read in conjunction with clause 5.2 entitle Sasfin at any time to terminate Beukes' mandate (in terms of clause 5.2) to collect book debts from his debtors. At the same time Sasfin is under no obligation to take any steps against such debtors to recover amounts due by them to Beukes. Sasfin could, if it so wished, merely sit back and do nothing, allowing claims to prescribe in the process. And Beukes would be deprived

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of all rights of recourse against Sasfin, having regard not only to the provisions of clause 3.8, but also to those of clause 3.6. This manifestly constitutes exploitation of Beukes to a degree which, in the public interest, cannot be countenanced. The provisions of these clauses are therefore also contrary to public policy.
In terms of clause 3.24.1, the amount owing by Beukes to Sasfin at any time, the fact that it is due and payable and the rate of interest thereon "shall be deemed to be determined and proved by a certificate under the signature of any of the directors of any of the creditors". The effect of the provisions of clause 3.24.2 is that such certificate cannot effectively be challenged on any ground save fraud. It constitutes the sole memorial of Beukes' indebtedness, and is conclusive proof of such indebtedness and the amount thereof. These clauses purport to oust the Court's jurisdiction to enquire into the validity or accuracy of the certificate, to determine the weight to be attached thereto

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or to entertain any challenge directed at it other than on

the ground of fraud. As such they run counter to public policy (cf Schierhout v Minister of Justice 1925 AD 417 at 424). Although perhaps not per se contrary to public policy, the provisions of clause 3.24.3.1 are indicative of the extreme lengths to which the deed of cession goes in curtailing the rights of Beukes. Clause 3.24.3.1 provides, inter alia, "I/we hereby irrevocably appoint and authorise any of the directors of any of the creditors who signs any certificate issued in terms of 3.24.1 also to be my/our agent in rem suam for the purpose of signing and issuing such certificate. In signing and issuing such certificate the signatory shall be deemed to act also as my/our agent for the purposes thereof." Not content with the far-reaching consequences of the certificate as spelt out in clause 3.24.2, the deed of cession goes as far as to deem it that of Beukes' agent!
I now turn to clause 7. I have already held that the rights under clause 3.4.1 can be exercised even

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if no indebtedness exists. The wording of clause 7 is so wide that every time Sasfin sends a letter of demand, or takes any step envisaged by clause 3.4.1, it can claim a 5% commission on the gross value of all outstanding ceded claims -notwithstanding the fact that no amount is owing to Sasfin. The iniquity of the situation is immediately apparent. It is grossly exploitive of Beukes and must inevitably offend against the mores of the public to such an extent that it should be struck down on the grounds of public policy.
I come finally to clause 3.6. The gravamen of the complaint against this clause is that its provisions exempt Sasfin from liabilíty for a deliberate act or a wilful default. It is trite law that a party to a contract may validly exempt himself from liability for negligence, even gross negligence. Whether he may do so for a deliberate act or a wilful default is open to doubt (see Christie op cit at 190). I shall assume, without deciding, that he cannot. It was argued that as clause 3.6 specifically excluded

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liability for negligent conduct, it necessarily followed that the words "calculated" in the phrase "in a manner calculated to cause ... prejudice" must be given the meaning of "intended".
It can bear such a meaning, but the strong preponderance of authority favours it being given its ordinary objective connotation of "likely" (see e g American Chewing Products Corporation v American Chicle Company 1948(2) SA 736 (A) at 740/1; R v Heyne and Others 1956(3) SA 604 (A) at 622). Used in that sense the clause is not open to objection.
It follows that a number of provisions in the deed of cession are contrary to public policy. Both in the court a quo (see 1988(1) SA 626 at 634) and on appeal it was conceded that certain passages were unacceptable, and would have to be struck from the deed of cession. This brings me to the question of severability. If those provisions in the deed of cession which have been found to be contrary to public policy cannot be severed from the remaining provisions, it is common cause that the deed of cession is invalid and

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unenforceable (subject to the applicability of the principle enunciated by my brother, VAN HEERDEN, in a minority judgment in Du Plooy v Sasol Bedryf (Edms) Bpk 1988(1) SA 438 (A) at 456 H, to which I shall revert later).
The "fundamental and governing principle" with regard to severability is "to have regard to the probable intention of the parties as it appears in, or can be inferred from, the terms of the contract as a whole" (per BOTHA, J, in Vogel NO v Volkersz 1977(1) SA 537 (T) at 548 F; see also Collen v Rietfontein Engineering Works 1948(1) SA 413 (A) at 435). Where the probable intention of the parties has to be inferred our courts have devised certain guidelines to assist in arriving at such intention (see e g Kriel v Hochstetter House (Edms) Bpk 1988(1) SA 220 (T) at 227 A - B).
In the present instance the parties have expressly stated their intention with regard to severability in clause 3.18 of the deed of cession, which provides that:

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"each phrase, sentence, paragraph and clause in this cession is severable the one from the other, notwithstanding the manner in which they may be linked together or grouped grammatically and if in terms of any judgment or order any phrase, sentence, paragraph or clause is found to be defective or unenforceable for any reason the remaining phrases, sentences, paragraphs and clauses, as the case may be, shall nevertheless be and continue to be of full force and effect ."

The question arises what meaning or effect should be given to clause 3.18? Must it be interpreted literally, and full effect given to its wide and seemingly unambiguous terms? I think not. In my view the parties could not have intended that no matter how much of their agreement fell away, and no matter what the resultant effect thereof was, it would suffice if some vestige of an agreement remained. Yet this would follow from giving clause 3.18 its literal meaning. Sasfin and Beukes could not have

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contemplated severance resulting in an agreement significantly different from that which they originally contemplated. They could not have intended that the deed of cession could be judicially snipped and pruned (or be subjected to major surgery!) to the extent that its ultimate form and import differed meaningfully from that which it was originally intended to have. Clause 3.18 should therefore be seen as no mpre than an expression of intention by the parties that their agreement should be regarded as severable to the extent that severance is appropriate and permissible.
In any event, it is in my view not open to parties to a contract to say to a court "take our agreement, such as it is, excise from it all that is bad, and retain what is good, and provide us with a contract which is legal and enforceable, even though it may not be what we originally had in mind". This is the effect of clause 3.18, on a literal interpretation thereof. Such an approach would offend the fundamental rule that the court may not make a contract for

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39 the parties (Laws v Rutherfurd 1924 AD 261 et 264).
Furthermore, provisions in a contract similar to clause 3.18, if not restricted in their meaning, could lead to an abuse of the process of the court. Parties could simply insert whatever they wish, good or bad, into a contract, and, by resorting to a provision such as clause 3.18, leave it to the court to separate the chaff from the wheat. Not only could this lead to slovenliness in the drafting of agreements, but it could also provide fruitful ground for the exploitation of the unwary, the unenlightened and the disadvantaged. A clause having that effect might per se be contrary to public policy.
For clause 3.18 itself to be valid it must therefore be construed on the basis that the parties intended no more than that their agreement was severable, and that provisions in the deed of cession could be excised', provided always that what remained substantially reflected their original intention; in other words, the deed of cession

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is severable up to the point the parties probably intended, but not beyond.
As it stands the main purpose of the deed of cession was not merely to ensure a bare cession of Beukes' book debts to Sasfin to secure a principal obligation. The agreement to cede and cession were not dependent upon the existence of a principal obligation, and were subject to terms and conditions designed to ensure the maximum benefits and the widest possible protection for Sasfin, including its right to commission. Most, if not all, of the clauses which offend against public policy are fundamental to the nature and scope of the security which Sasfin obviously required. They contain provisions which are material, important and essential to achieve Sasfin's ends; they go to the principal purpose of the contract, and are not merely subsidiary or collateral thereto. If those clauses were severed one would be left with a truncated deed of cession containing little more than a bare cession. No doubt Beukes would have contracted without

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41 the offending clauses, as they served only to additionally burden, and not to benefit, him. But would Sasfin have been prepared to forego its substantially protected rights and contract on that basis? This is a matter pecuiiarly within Sasfin's own knowledge. Yet, significantly, nowhere does it appear on the papers what Sasfin's attitude would have been in this regard. It seems to me that on the probabilities one may readily infer that without Lhe rights and protection afforded by the offending clauses in che deed of cession, Sasfin would not have entered into either it, or the discounting agreement. (By saying this I am not suggesting that the invalidity of the deed of cession would bring down the discounting agreement - objectively determined the latter is not dependent for its validity upon the former.) More particularly is this so when one has regard to the cumulative effect of the invalid clauses. I am fortified in this view by the fact that Sasfin sought to enforce the deed of cession as a whole, notwithstanding that Beukes had contended earlier

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that certain clauses thereof were contrary to public policy, and that it was therefore invalid and unenforceable. This is indicative of how important the deed of cession, in its entirety, was to Sasfin. I accordingly conclude that the offending provisions of the deed of cession are not severable.
I turn now to consider the principle enunciated by my brother, VAN HEERDEN, in Du Plooy v Sasol Bedryf (Edms) Bpk, (supra) (which, for convenience, I shall refer to as the "Sasol principle") and its applicability in the present matter. The principle was stated in the following terms (at 456 H):

"Indien 'n kontrak dus slegs uit die oogpunt van een party ondeelbaar is en dit 'n nietige bepaling bevat, het die party in wie se guns die bepaling beding is die keuse om die kontrak te vernietig of dit in stand te hou. Die kontrak is met ander woorde nie nietig nie, maar vernietigbaar ter keuse van die betrokke party."

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43 The true rationale for the Sasol principle is not immediately apparent. It presumably has nothing to do with severability in its accepted juristic sense - while a provision in an agreement may exist for the benefit of only one party, severability juristically involves both parties. If it does, then it is in conflict with the ex hypothesi fact that the offending provisions which Sasfin now seeks to disregard are not severable. The principle results in an illogicality, in that it permits a party to enforce an agreement which in form and substance would have been unacceptable to that party when the parties concerned first sought to enter into a binding agreement. It also offends against the well-established principle, to which I have previously alluded, that a court will not make a new contract for the parties. This, in effect, is what the application of the Sasol principle amounts to - the court sanctions and enforces an agreement which the parties did not contemplate when they first contracted.

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While I have certain misgivings about whether the Sasol principle is legally sound, it is not necessary for me to express a firm opinion thereon. The principle presumably has its origin in the decisions in Vogel NO v Volkersz (supra) and, by anology, Van Jaarsveld v Coetzee 1973(3) SA 241 (A). In Vogel's case the court was dealing with a clause in a contract for the sale of immovable property which was void for incompleteness; in Van Jaarsveld's case the court was concerned with a valid agreement for the sale of land containing a condition inserted solely for the benefit of the purchaser, which condition was incapable of fulfilment. In each instance the court concerned upheld the agreement; in Vogel's case (as I understand it) by basically applying the principle of severability and, in Van Jaarsveld's case, on the ground that the purchaser was entitled to waive the condition inserted for her benefit. Both cases, factually and legally, are a far cry from the present. Assuming that the Sasol principle holds good in certain circumstances (more

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particularly, when one is dealing with agreements which are unenforceable rather than illegal per se) it cannot, in my view, be of application in the present.instance.
I have held that the deed of cession is invalid and unenforceable because certain material, non-severable terms thereof are contrary to public policy, and therefore illegal. It is a well-recognised principle of our law that a contract which contains illegal terms (as opposed to terms which are void for vagueness or incompleteness) is devoid of legal effect unless the offending terms are severable (Christie op cit at 381; and see the remarks of SMITH, J, in Bal v Van Staden 1903 T S 70 at 82, and CORBETT, J, in Markovitz and Son Trust Co (Pty) Ltd v Bassous 1966(2) P H A 65 (C). As the offending clauses in the deed of cession are not severable, this principle must needs apply and resultantly drag down the whole deed of cession; and to this principle the Sasol principle (assuming its validity) must yield. The deed of cession cannot, in those circumstances,

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The appeal is dismissed with costs, such costs to include the costs of two counsel.

J W SMALBERGER JUDGE OF APPEAL

JANSEN, JA ) NESTADT, JA ) CONCUR

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