Absa Bank Ltd v Bernert

• Jurisdiction: South Africa
• Judge: Nugent JA, Cachalia JA, Malan JA, Tshiqi JA and Majiedt AJA
• Judgment Date: 29 March 2010
• Citation: 2011 (3) SA 74 (SCA)
• Docket Number: 99/09
• Hearing Date: 18 February 2010
• Counsel: SW Burger for the appellant. DJL Nel (attorney) for the respondent.
• Court: Supreme Court of Appeal

Nugent JA (Cachalia JA, Malan JA, Tshiqi JA and Majiedt AJA concurring): F

[1] In the course of his evidence the respondent in this appeal, Mr Bernert, said that 'in life you take things at face value', and the court below seems to have seen things in the same way. But I have found that the evidence of Mr Merrett, of whom the trial court was rather dismissive, serves as a more useful guide when evaluating this case. G

[2] Mr Merrett is the assistant director of the Financial Investigation Bureau of the International Chamber of Commerce. The Bureau investigates suspicious banking and financial transactions, and Mr Merrett has considerable expertise in that field. The aspect of his evidence H that I have found to be useful is his explanation of what he called 'financial mist'. He said that it is common for those who engage in financial scams to use fictitious documents, purporting to emanate from major financial institutions, and loaded with financial terminology, to create a mist that blinds their targets to what is in truth occurring. That enables them to induce the gullible into believing that they have wealth I available for investment, and it also enables them to gauge the level of financial sophistication of the target.

[3] This case is about documents, particularly a document that was produced on a letterhead of the appellant, a well-known financial institution, which I will refer to as Absa Bank. Notwithstanding the J

Nugent JA

A voluminous evidence, the case really comes down to evaluating the response of Absa Bank when it discovered the existence of that document. But, while the issue is narrowly confined, I think it is important to appreciate the context within which the document came to be created.

[4] There are many curious features of this case that were left B unexplained, and there are many gaps in the narrative of what occurred. That is because much of the trial was taken up with arguments between counsel and witnesses on the meaning of documents, and little interest was shown in establishing all the facts.

[5] Before turning to the evidence in more detail I think that a brief C description of the principal characters in the story that unfolded, and a short synopsis of how this case came about, will assist to explain what is in issue in this appeal.

[6] Early in his life Mr Bernert received two years' training as an apprentice motor mechanic. He then joined his father's business restoring motor vehicles. In the course of this business he came across an interesting D design for a motor vehicle. He acquired the rights to the design and, after making various modifications, he began building the vehicles, which he called the 'El Macho'. The events that led to this case arose from his attempts to find finance to build a production plant.

E [7] I have no reason to think that Mr Bernert is anything but honest, or that he was complicit in anything untoward that might have occurred. But what emerges plainly from his evidence is that Mr Bernert was a novice in the financial world. His evidence demonstrates that he had little knowledge of the nature and structure of corporations, or of F financial transactions in general, and of financial documents in particular. I think it is clear that the meaning that he attached to the various transactions to which he was exposed was largely repetition of what he had been told they meant.

[8] Mr Bernert was the sole member of Rotrax International CC, which G was the vehicle through which he hoped to develop his business. In his search for finance to construct his production plant Mr Bernert met three people through contact with the armaments industry.

[9] First, there was Mr Fanjek. Mr Fanjek has lived in this country from 1967. He described himself as a businessman, but the nature of his H business was not explored. The role that Mr Fanjek purported to play was that of Mr Bernert's agent for raising investment finance. In response to a submission that Mr Fanjek was a liar, the court below said that 'careful scrutiny of the relevant parts of [his] evidence shows that they were common cause or can be inferred from the uncontested facts'. I It is true that at times the evidence of Mr Fanjek coincided with incontrovertible facts. But, except where his evidence is corroborated in that way, I do not believe a word that Mr Fanjek said. There was hardly a question to which he gave a direct answer, and for the most part his evidence was nonsensical verbiage.

[10] Then there was Mr Dinawi, a citizen of Syria, whom Mr Bernert J met at an armaments exhibition in Abu Dhabi. Mr Dinawi held himself

Nugent JA

out to be the 'business manager' of Sheikh Fawaz Bin Abdullah Al-Khalifa. A He did not give evidence at the trial.

[11] And finally there was Sheikh Fawaz himself. He volunteered at the close of his evidence that he had come to this country to testify, so as to scotch doubts that had been expressed by Absa Bank as to his existence. Sheikh Fawaz said that he was a member of the dynasty that has ruled B Bahrain for almost three centuries. The documents do not disclose precisely where the Sheikh conducts business. His personal letterhead reflects only that he receives his correspondence at a post office box in Bahrain and at a 'hotmail.com' electronic address.

[12] The court below described Sheikh Fawaz as an impressive witness, C but the record of his evidence does not bear that out. This court has warned before against being seduced by the appearance of a witness, at the expense of analysing what the witness has to say. [1] I have found the evidence of the Sheikh to be almost as unimpressive as that of Mr Fanjek. Most of his answers to questions about the transactions that D I refer to later in this judgment were incoherent, and attempts to probe them in more detail were brushed aside on the basis that those were matters that he left to his advisers.

[13] Another person who played a prominent role was Mr Els, who was E employed as an insurance broker by Absa Brokers (Pty) Ltd. Mr Els was deceased by the time of the trial, and we thus have no tested explanation for his unauthorised conduct, but it certainly seems to me that he was up to no good.

[14] And then there was Mr Coetzee, who was employed by Absa Bank as a 'business manager'. One of his functions was to solicit deposits for F the bank. Mr Coetzee was an authorised signatory for a class of bank transactions. The fact of his authority was reflected in a manual that is available to banks internationally. Mr Coetzee was dismissed in consequence of the events that gave rise to this case, but he was later reinstated. Though the explanations that he gave for his conduct are extraordinary, it is not material to this case whether or not they are true. G

[15] Now a brief synopsis of what the case is about. In his search for finance to build his plant Mr Bernert became acquainted with Mr Dinawi and Mr Fanjek, and ultimately with Sheikh Fawaz. The relationship between them developed splendidly. The Sheikh agreed to H invest millions of dollars to construct and operate manufacturing plants on five continents within the following five years. The precondition for this investment was that Mr Bernert had to obtain and produce to the Sheikh a particular document from a reputable bank. Mr Bernert duly produced the document through the good offices of Mr Fanjek and I

Nugent JA

A Mr Els and Mr Coetzee, but nothing further seems to have been done on the project. Instead Mr Bernert was invited by his new acquaintances to join them in a new project altogether, which was to establish a company that would deal in oil, precious metals and stones, and provide financial services and investments. Mr Bernert was happy to do so.

B [16] But all these plans came to an end when Absa Bank discovered the document that Mr Bernert had produced. The document was on the letterhead of Absa Bank, and was addressed to Emirates Bank International. The document had been compiled in collaboration between Mr Fanjek and Mr Els, and had been signed by Mr Coetzee. Volumes of C the evidence are taken up with argument between counsel and witnesses on the true nature of the document. One said it was this, another said it was that, and yet another said it was something else, and so it went on. The court below said that the document was 'strange and confusing', but felt that it was nonetheless a document that a bank might ordinarily issue. The fact is that it was nothing of the sort. The document, when D read as a whole, was an aggregation of nonsense, decorated with financial terminology.

[17] Once having discovered the existence of the document Absa Bank set about attempting to retrieve it. Its attorney also wrote to Emirates Bank informing it that the document had been issued irregularly and E without authority, and that no reliance should be placed on the document if it had been received.

[18] The Sheikh said that when he was informed of the letter by Emirates Bank he decided that he would have nothing more to do with the project or with Mr Bernert. Thus ended Mr Bernert's hopes of F building his manufacturing plant — and of dealing in oil and precious metal and stones, and providing financial services and investments.

[19] Mr Bernert sued Absa Bank in the High Court at Pretoria, as cessionary of a claim of Rotrax. He said that Absa Bank had acted unlawfully in causing the letter to be written to Emirates Bank. He said G that if Absa Bank had not done so, and thereby alienated the Sheikh, Rotrax would have received the millions of dollars the Sheikh had promised, it would have built the proposed manufacturing plant (at least in South Africa), and it would have manufactured and sold over 10 000 cars, which would have earned it R187 million, and he claimed H that amount in damages. The court below (Ranchod AJ) found that Absa Bank had...