Bank of Lisbon and South Africa Ltd v De Ornelas and Another

• Jurisdiction: South Africa
• Citation: 1988 (3) SA 580 (A)

Bank of Lisbon and South Africa Ltd v De Ornelas and Another
1988 (3) SA 580 (A)

1988 (3) SA p580

Citation	1988 (3) SA 580 (A)
Court	Appellate Division
Judge	Rabie ACJ, Jansen JA, Joubert JA, Hefer JA and Grosskopf JA
Heard	March 9, 1987
Judgment	March 30, 1988

Flynote : Sleutelwoorde

Contract — Remedies on breach — Defences — Exceptio doli generalis — H Court holding that exceptio a defunct anachronism which has never formed part of Roman-Dutch law — Court refusing to apply exceptio and deciding matter on construction of contracts in question — Interpretation of — Deeds of suretyship and mortgage bonds entered into between respondents, as joint managing directors of I company, and appellant, as security for overdraft facilities — Company discharging principal indebtedness to appellant and requesting return of securities held by latter — Appellant refusing to do so, contending that it held securities pending outcome of action for damages it intended instituting against company — Damages allegedly flowing from J contract between company and appellant for

1988 (3) SA p581

A forward purchase of dollars which contract company had unlawfully repudiated — Respondents alleging that appellant's conduct amounting to dolus generalis — Respondents' application to Court a quo for return of securities upheld — Court on appeal, having ruled that exceptio (as well as replicatio) doli generalis not applicable in our law, holding that issue was simply whether appellant had contractual right entitling B it to retain securities derived from deed of suretyship and mortgage bonds — Court examining wording of latter and holding that they were intended to cover any transactions which might arise out of customer — banker relationship between company and appellant — Contract C for forward purchase of dollars qualifying as such transaction — Appellant therefore entitled to retain securities pending outcome of action for damages — Appeal upheld.

Headnote : Kopnota

The exceptio doli generalis has never formed part of Roman-Dutch law, and, despite the fact that in a number of judgments this Court accepted D the exceptio as part of our law, the time has now arrived, once and for all, to bury the exceptio as a superfluous, defunct anachronism. This conclusion holds equally for the replicatio doli generalis. (Jansen JA dissenting.)

The respondents, the joint managing directors of a fishing company, had approached the appellant for overdraft facilities which were duly granted and secured by deeds of suretyship and mortgage bonds passed by the respondents over their respective dwellings. Subsequently, this E overdraft limit was increased on two occasions on the additional security of a third mortgage bond and of a negotiable certificate of deposit furnished by first respondent. During 1985 the company discharged its entire indebtedness under the overdraft to the appellant and closed its account. It demanded from the appellant the return of the negotiable certificate of deposit and cancellation of the deeds of suretyship and mortgage bonds. The appellant's attitude, however, was F that it would not return or cancel the securities it held pending the outcome of an action for damages it intended instituting against the company. It claimed that it had concluded a contract with the company for the forward purchase of dollars, that the company had unlawfully repudiated the contract, which was then cancelled by the appellant, who suffered damages as a result thereof. The respondents then brought an application in a Provincial Division for an order against appellant that G the securities in question be cancelled and/or returned, as they contended that the company had discharged its principal indebtedness to the appellant and that the appellant's conduct in retaining these amounted to dolus generalis. The appellant resisted the application, arguing that it was contractually entitled to retain the securities until the company had discharged its entire indebtedness to the H appellant, which also flowed from a breach of the contract for the forward purchase of dollars. The Court a quo upheld the application. On appeal, the Court, having come to the above conclusion as regards the exceptio doli generalis, stated that the simple issue was therefore whether or not the appellant had a contractual right derived from the deeds of suretyship and the mortgage bonds to retain the securities, and that the solution to this issue was to be sought in the construction of the provisions of the deeds of suretyship and mortgage bonds themselves. I The Court examined the wording of the latter, which contained phrases such as 'payment of every sum of... money... owing from whatsoever cause or causes arising, and for the due performance of every other obligation, howsoever arising', and that the suretyship would 'establish a continuing covering liability... for whatever amount(s) and whatever other obligation(s) will be owing by the debtor to the bank', and held that they were intended to cover any transaction which might arise out of the customer/banker relationship between the company and the appellant and that the contract for the forward purchase of dollars J qualified as such a transaction. Appeal upheld.

1988 (3) SA p582

A The decision in the Cape Provincial Division in De Ornelas and Another v Bank of Lisbon and South Africa Ltd reversed.

Case Information

Appeal from a decision in the Cape Provincial Division (Rose-Innes J). The facts appear from the judgment of Joubert JA.

B A Chaskalson SC (with him E M Wentzel) for the appellant (the main heads of argument having been drawn by E M Wentzel and V Fevrier and supplementary heads by Chaskalson SC and R Nugent): The respondents' application was based squarely on the exceptio doli generalis or, to be more accurate, the replicatio doli. Compare Rashid v Durban City Council 1975 (3) SA 920 (D) at 925E; Paddock Motors (Pty) Ltd v Igesund 1975 (3) SA 294 (D) at 297C - E; Paddock Motors (Pty) Ltd v Igesund 1976 (3) SA 16 (A) C at 27F. We will continue to refer to the 'exceptio doli '. The question arises as to whether the exceptio doli still exists in the modern law as a distinct and separate legal defence or weapon. If it does, can it, as an equitable remedy, be applicable when dealing with a deed of suretyship which, by statute, must be reduced to writing and a mortgage bond which, to be valid and effective, must be reduced to writing, be prepared by a conveyancer and be registered in a Deeds D Office? If the exceptio doli does still exist, what are the limits, scope and extent of its operation and does it apply to the facts of this case? Do the facts show that the conduct of the appellant falls within the scope of the operation of the exceptio doli ?

Does the exceptio doli still exist in the modern law ? The existence of E the exceptio doli as an independent defence has been doubted and, in certain cases the Court has assumed, without deciding, that it exists. Professor J C de Wet 'Estoppel by representation' in die Suid-Afrikaanse Reg at 83 - 9; North Vaal Mineral Co Ltd v Lovasz 1961 (3) SA 604 (T) at 607F - G; Paddock Motors (Pty) Ltd v Igesund 1976 (3) SA 16 (A) at F 27G - H; OK Bazaars (1929) Ltd v Universal Stores Ltd 1973 (2) SA 281 (C) at 293G - H; Aris Enterprises (Finance) (Pty) Ltd v Waterberg Koelkamers (Pty) Ltd 1977 (2) SA 436 (T) at 437F - 438C; Aris Enterprises (Finance) (Pty) Ltd v Waterberg Koelkamers (Pty) Ltd 1977 (2) SA 425 (A) at 431G - 432 (top); Novick v Comair Holdings Ltd 1979 (2) SA 116 (W) at G 156A - 157B; 1980 (43) THRHR 255 at 263 (n 84); Otto v Heymans 1971 (4) SA 148 (T). The exceptio doli is contrary to the objective approach in contract and becomes an 'unruly instrument of equity'. 1980 (43) THRHR 255 - summary on 255. It will tend to promote litigation in that the exceptio doli tends to be an open-ended means of challenging the plain meaning of the words used by the contracting parties. It produces uncertainty and offends the sanctity of contracts. The final decision as H to whether a party is bound or not lies in the discretion of the Court. Techni-pak Sales (Pty) Ltd v Hall 1968 (3) SA 231 (W) at 238 per Colman J. There are well-defined and recognised defences which are available to a litigant, for example estoppel, misrepresentation, fraud, duress and rectification, which, if applicable, may be raised by the litigant. The I exceptio doli could be the means whereby a litigant can avoid the consequences of established legal principles such as, for example, the parol evidence rule. Our law does not recognise courts of equity with jurisdiction to 'oversee' contractual transactions between parties who freely and voluntarily contract with each other on certain terms, nor do J our courts have jurisdiction to ameliorate the lot of a

1988 (3) SA p583

A contracting party. Yet, the application of the exceptio doli can have this very consequence. 1979 (42) THRHR 31 at 41 - 42. In the circumstances the exceptio doli generalis is not part of our law. It appears open to the Appellate Division to make such a finding. Novick's case (supra at 156E - F); 1980 THRHR 255 at 263.

If the exceptio doli is part of our law, does it have any application B to the facts of this case? Section 6 of the General Law Amendment Act 50 of 1956, as amended, retrospectively to 22 June 1956 by s 34 of Act 80 of 1964, was enacted to achieve certainty as to the true terms of a contract of suretyship agreed upon and thus avoid or minimise the possibility of perjury or fraud and unnecessary litigation. It was conceived in the public interest. This is also the object of similar legislation requiring contracts of sale of land to be in writing. C Oceanair (Natal) (Pty) Ltd v Sher 1980 (1) SA 317 (D) at 322B - E, 325G - 326D. The general equitable defence cannot prevail in...