Standard Chartered Bank of Canada v Nedperm Bank Ltd

• Jurisdiction: South Africa
• Judge: Corbett CJ, Van Heerden JA, Kumleben JA, Van den Heever JA and Harms JA
• Judgment Date: 30 September 1994
• Docket Number: 320/93
• Court: Appellate Division

Corbett CJ:

The appellant, Standard Chartered Bank of Canada, was incorporated under Canadian law with its head office in Toronto. It has various branches in Canada, one of them being located in Vancouver. It is a member of the Standard Chartered Bank group, the holding company of the C group being Standard Chartered Bank of London, a company incorporated by Royal Charter. The holding company has various subsidiaries around the world, some of them being wholly-owned and others partly-owned. The Standard Chartered Bank of Canada is a wholly-owned subsidiary. For convenience I shall refer to the appellant as 'Stanchart'; to the London D office of the holding company as 'Stanchart (London)'; to the head office of the Canadian bank as 'Stanchart (Toronto)'; and to the Vancouver branch as 'Stanchart (Vancouver)'.

The respondent is Nedperm Bank Ltd. Formerly and during the period with which this case is concerned it was known as Nedbank Ltd. It is a bank duly incorporated under the law of South Africa and it has its principal E place of business in Main Street, Johannesburg. It operates through various branches in South Africa, one of them being in Braamfontein, Johannesburg. I shall refer to the respondent as 'Nedbank'.

Another main actor in this case is Triomf Fertilizer (Richards Bay) (Pty) Ltd ('Triomf RB'). It was at the material times a wholly-owned subsidiary of Triomf Fertilizer Ltd, a public company quoted on the Johannesburg F Stock Exchange, which also had its head office in Braamfontein. The Triomf companies produced a phosphate-based fertilizer which was marketed in South Africa and overseas. In 1985 they enjoyed a 24 percent share of the South African market. Production took place at factory premises at Richards Bay, owned and operated by Triomf RB. In order to manufacture its G product Triomf RB required sulphur, which it imported from various overseas countries, including Canada.

This appeal arises from an action instituted by Stanchart against Nedbank in the Witwatersrand Local Division in which Stanchart claimed damages and other ancilliary relief for a misstatement alleged to have been made H negligently by Nedbank. The action, which was heard by Roux J, failed and was dismissed with costs. With the leave of this Court, Stanchart now appeals.

The facts

I The facts of the matter are, to a large extent, not in dispute and may be summarised as follows.

One of the suppliers of sulphur to Triomf RB was a Canadian corporation known as Cansulex Ltd ('Cansulex'). Cansulex had been formed by a consortium of leading international oil companies, who did not wish to be seen trading with South Africa, as the vehicle for conducting such a J trade. In exporting sulphur to Triomf RB in South

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A Africa Cansulex had since about 1982 made use of banking facilities provided by Stanchart (Vancouver). In order to understand how such facilities were granted and maintained it is necessary to know something about the organisation of the Stanchart group.

The Canadian subsidiary, Stanchart, and its various branches operated as B if they were divisions of the holding company. One of the directors of Stanchart was appointed by Stanchart (London) and control was exercised through him. There were various levels of authority. The managing director of Stanchart, appointed by Stanchart (London), was authorised to approve transactions up to a certain sum and he could delegate his discretion up to certain levels to the Canadian branches of the bank. Any transaction C which exceeded his authority would have to be referred to Stanchart (London) for approval.

Where a customer of the bank wished to be accorded a credit facility up to a certain prescribed level on a continuing basis (known as a 'line of credit'), the branch concerned would formulate the requirement on a form D (known as 'form 6048') which would contain the details relating to the customer, his financial position and the nature of the facility requested. The form 6048 would have to be accompanied by the latest audited financial statements of the customer and a bank report on the customer. If the bank manager concerned was satisfied that the application for the credit facility was in order and should be granted, he would do so, provided that E the level of the facility fell within his discretion. If it did not, then he would submit it to higher authority, ie Stanchart (Toronto), with a favourable recommendation. Stanchart (Toronto) could then approve the line of credit if it was satisfied to do so and the application was within its level of authority. If Stanchart (Toronto) was satisfied with the F application, but it exceeded its level of authority, it would pass it on to Stanchart (London) with an appropriate recommendation. Approval would then depend on the decision of the London office.

A credit line, once granted, normally endured for a year and if required for longer had to be renewed annually. Renewal involved the same procedure as an application for a new facility. G

This case is principally concerned with events which occurred in the second half of 1985. At that stage the credit facilities duly authorised and granted to Cansulex in respect of its dealings with Triomf RB (and another purchaser of sulphur in South Africa) were regulated by a written agreement between Stanchart and Cansulex dated 22 October 1984 ('the H facility agreement'). Here I should mention that Cansulex shipped consignments of sulphur from Vancouver to Triomf RB at Richards Bay in terms of bills of lading and drew on Triomf RB for the purchase price. In terms of the facility agreement Stanchart undertook to discount bills drawn on Triomf RB in respect of such sulphur exports with recourse to I Cansulex. The agreement further provided, inter alia, that after the discounting of a bill and when authenticated advice had been received from the collecting bank that the bill had been accepted by the drawee (Triomf RB) and provided that no notice of dishonour of a prior bill had been received, recourse to Cansulex was to be 'released'. In the event of the dishonour of any bill by the drawee, no further releases of recourse to J bills currently outstanding and discounted under the facility for that

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A particular drawee were to be provided, despite any subsequent acceptance, until the entire matter had been resolved to the satisfaction of the bank. The discounting of bills under this facility was to be secured by a letter of hypothecation.

The agreement placed an overall limit of US $5 000 000 on the facility and further provided that 'individual exposure' to a drawee at any one time be B limited in the case of Triomf RB to US $2 000 000, with usances of up to 180 days as from the date of bill of lading. The facility was to be subject to 'periodic review not less than annually' and was to be available 'at the sole discretion of the bank'.

In terms of this facility agreement, therefore, the essential modus C operandi was for Cansulex, having shipped a consignment of sulphur to Triomf RB from Vancouver and having drawn on Triomf RB for the purchase price and other amounts due, to tender the unaccepted bill of exchange to Stanchart (Toronto) for discounting and, presumably, at the same time to provide a letter of hypothecation in respect of the documents of title. D Pending acceptance of the bill by Triomf RB, Stanchart would have a right of recourse against Cansulex, but once Triomf RB had accepted the bill and provided that no notice of dishonour of a prior bill had been received, the right of recourse was waived. This appears to have been in line with previous credit facilities granted to Cansulex in respect of its South African trade.

E As the arrangements reflected in this agreement brought Stanchart into a direct legal relationship with Triomf RB, once the latter had accepted the bill of exchange discounted and held by Stanchart, this line of credit could only be established and maintained if and so long as Stanchart was satisfied with the financial position of Triomf RB as well as that of Cansulex. Accordingly, with the original establishment of the line of F credit a 6048 application was made in respect of both companies; and same procedure applied to annual renewals.

A review of the line of credit to Cansulex in respect of its transactions with Triomf (and other parties in South Africa) was due at 31 July 1985. In the succeeding months Stanchart (Vancouver), and more particularly the G then branch manager, Mr N M Peters, were under considerable pressure from Toronto and London to submit the usual application based on form 6048 for the renewal of this facility. One factor which evidently held up the process was the lack of up-to-date financial statements in regard to Triomf RB and the Triomf group as a whole. This was due to the fact that H the Triomf group had changed the end of its financial year from 31 December to 30 June, with the result that until the financial statements for the 18 months ended 30 June 1985 were published, the latest financial information on the group was contained in the set of accounts for the year ended 31 December 1983. In addition, there seems to have been some delay in the production of the 30 June 1985 statements as they only became I available eventually sometime in December 1985.

By November 1985 the submission of the review (or renewal) application had become extremely urgent and Stanchart (Vancouver) had reached the point where the officials concerned thought that the review might have to be undertaken without the latest financial statements. The bank, however, J needed a bank report on Triomf RB for purposes of the review

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A process. In evidence at the trial Mr Peters explained the difference between a 'full general' bank report and a 'special' bank report concerning a company...