Cooper and Others NNO v Syfrets Trust Ltd

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Nienaber JA, Olivier JA, Schutz JA, Farlam AJA, Mpati AJA
• Judgment Date: 11 September 2000
• Citation: 2001 (1) SA 122 (SCA)
• Hearing Date: 24 August 2000
• Docket Number: 226/98
• Counsel: W H G van der Linde SC (with him H Barolsky) for the appellants. M D Kuper SC (with him J M E Medalie) for the respondent.

Nienaber JA: F

[1] The respondent, a public company, by its own admission held itself out as an expert in the field of financial advice and estate planning. The first appellant, a qualified accountant, was a potential investor both in a personal and in a representative capacity. I shall refer to him as the plaintiff and to the respondent as the defendant. He approached the defendant, known to him by reputation as G 'a solid investment company', for advice on two 'secure' investments which he was keen to make. He was referred to a Mr Van der Merwe. This was in September 1990. Van der Merwe was employed by the defendant at the time as an executive investment manager in its Johannesburg office. The plaintiff stated that he was looking for a H 'long-term safe investment'. Van der Merwe recommended an investment in 'Masterbond'. The exact nature of Masterbond was not explained to the plaintiff nor was it explored in evidence but it appears to have been the designation for a cluster of associated companies and close corporations soliciting money from the public which was invested in a spread of speculative property development schemes controlled and I operated by the group. Van der Merwe spoke of Masterbond in such glowing terms that the plaintiff was persuaded to place his two investments with it. He handed two cheques to Van der Merwe, both dated 3 September 1990 and both made out to 'Masterbond Trust' (an abbreviation for Masterbond Participation J

Nienaber JA

Bond Trust Managers (Pty) Ltd). One was a personal cheque for R500 000. The other, a cheque for A R100 000, was signed in his capacity as a co-trustee with his wife of the D Cooper Children's Trust ('the Children's Trust'). Van der Merwe appears to have placed the investments with Masterbond through the agency of a certain Lofty van Staden. On 14 September 1990 Masterbond Trust issued a letter 'to whom it may concern' confirming that the plaintiff had invested 'an amount of R500 000 with B Masterbond Trust' and in November 1990 the plaintiff was furnished with two certificates issued by Masterbond Trust. The one certified the issue of 500 'secure debentures of R1 000 each' to the plaintiff and the other the issue of 100 such debentures to the Children's Trust, each bearing interest at a fixed rate of 20,5% and each stating that C 'Leuwin Developments CC hereby acknowledges that it is indebted to and will on the date on which the principal moneys hereby secured become payable' pay to the plaintiff (and to the Children's Trust) the capital sum reflected therein. In each instance the investment was for one year maturing on 3 September 1991. Each certificate was issued by Masterbond Trust, described in the document as 'the trustee'. D Ex facie the document the capital was repayable by a close corporation which was not a party to it and the interest by a company (not Masterbond Trust) which was not identified in it. As it happens the interest was regularly paid by Masterbond Trust. During August 1991 Masterbond Trust enquired whether the investments were to be extended E or repaid and asked in each instance for the return of the 'secured debenture certificate' as this would become 'null and void' on its maturity date.

[2] There is a major dispute between the parties as to whether the plaintiff thereupon telephoned Van der Merwe for his recommendations about maintaining the investments in Masterbond. I F return to this issue later in the judgment. What is not in dispute is that the plaintiff approached Masterbond himself and that, on 3 September 1991, without the intercession of the defendant, he completed a fresh 'application to make a short-term bond investment' with Masterbond Trust on interest terms less favourable than before. The G investment period on this occasion was 18 months and the investment was due to mature on 3 March 1993.

[3] Shortly thereafter, during October 1991, before Masterbond Trust had placed the investment and while the money was still held by it under general security, a provisional order of liquidation was H issued in respect of Masterbond Participation Bond Trust Managers (Pty) Ltd. On 12 August 1992 it was placed under final curatorship. Some payments were and may indeed still be made by the curators to the plaintiff but in the net result, so the plaintiff alleges, both he and the Children's Trust have suffered substantial losses. I

[4] During August 1994 the plaintiff instituted two actions against the defendant in the Witwatersrand Local Division, claiming damages (as ultimately calculated) in his personal capacity of R724 300,82 and in his representative capacity, together with his wife as co-trustee of the J

Nienaber JA

Children's Trust, of R144 642,14. With the consent of all concerned the two actions were consolidated and it A was agreed that the outcome of the second action should follow the result of the first.

[5] The trial eventually commenced before Melamet AJ after an adjournment to which reference will be made in para [10] below. The plaintiff was the only witness. The defendant closed its case without B leading any evidence. The plaintiff's evidence that he consulted Van der Merwe in August 1991 about a renewal of his investments was disbelieved. Mainly for that reason the trial Court absolved the defendant from the instance with costs.

[6] The plaintiff with leave granted to him on petition thereupon appealed to the Full Court of the Transvaal Provincial C Division. Two judgments were delivered. In terms of the majority judgment (delivered by Eloff JP with whom Flemming DJP concurred) the appeal was dismissed with costs; in terms of the minority judgment (delivered by Stegmann J) it should have succeeded. The plaintiff once again sought leave to appeal and once again such leave was granted, this time to this Court. D

[7] The plaintiff presented his case on the pleadings as one of breach of contract alternatively delict, but in argument counsel for the plaintiff confined himself to the contractual claim and I shall do likewise. E

[8] The agreement as initially pleaded was said to have been entered into orally on 3 September 1990. In terms thereof:

'4.1

the defendant would advise the plaintiff on the long-term investment of R500 000 (''the capital sum'') and recommend a secure investment for the capital sum; F

4.2

the defendant would recommend an investment that would not bear extraordinary and/or unusual risk of loss of the capital sum;

4.3

the aforesaid service would be rendered expertly and without negligence;

4.4

the defendant would take those steps reasonably necessary to render the expert advice in regard to the investment;'.

Paragraph 7 reads: G

'7. In purported compliance with its contractual obligations Van der Merwe on behalf of the defendant advised the plaintiff...