Ess Kay Electronics Pte Ltd and Another v First National Bank of Southern Africa Ltd

• Jurisdiction: South Africa
• Judge: Van Heerden ACJ, F H Grosskopf JA, Howie JA, Streicher JA and Mthiyane AJA
• Judgment Date: 28 November 2000
• Citation: 2001 (1) SA 1214 (SCA)
• Docket Number: 581/98
• Hearing Date: 07 November 2000
• Counsel: W H G van der Linde SC (with him J Both) for the appellants. P F Louw for the respondent.
• Court: Supreme Court of Appeal

Howie JA:

[1] Each of the two appellants instituted a damages claim in a joint J

Howie JA

action in the High Court at Johannesburg, seeking to hold the respondent vicariously liable for fraudulent misrepresentation to A which one of its employees was a party. Their claims failed and with the trial Court's leave they appeal. For convenience I shall refer to the parties by their trial designations. (The trial Court's judgment is reported in 1998 (4) SA 1102 (W).) B

[2] The plaintiffs are Singapore companies trading in electronic equipment and the defendant is a South African commercial bank. The evidence on the plaintiffs' behalf was given by Mr K Primalani, a director of first plaintiff, Mr E Ishmael, a South African business associate of Mr Primalani's, and Mr K P Wildig, the employee for whose wrongful conduct defendant was allegedly vicariously liable. C

[3] Primalani testified that in April 1996 a South African business contact telephoned him, intimating that someone by the name of Mynhardt was interested in buying goods for import into South Africa. In time, a D man professing to be Mynhardt and to be acting on behalf of a Swaziland business called Southern Fashions telephoned Primalani and eventually placed orders with both plaintiffs. Terms were discussed and finalised. The purchase price payable to first plaintiff was US $130 000 and that payable to second plaintiff, US $120 000. Payment was to be effected by a banker's draft in favour of each plaintiff. The goods were to be E shipped to Durban and would be released only when the plaintiffs' South African agent received the drafts in exchange for the bill of lading. These arrangements having been made, Primalani invoiced the plaintiffs, organised the shipment and took out insurance for the goods while in transit. After the ship left Singapore he received the bill of F lading and sent it, with the invoices and insurance documentation, by courier to Ishmael in South Africa. As the bill of lading entitled anyone possessing it to release of the goods, Primalani instructed Ishmael to be certain not to hand over the documents without first faxing him a copy of the drafts so that he could satisfy himself that they were in order. If so satisfied, he would authorise Ishmael to G release the bill of lading and to send him the drafts by courier.

[4] In due course Primalani received from Ishmael two faxes purporting to be copies of bank drafts. They bore the date 3 May 1996 and were drawn on Barclays Bank plc, 75 Wall Street, New York. He checked that the names of the payees and the amounts payable were H correct and noted that the drawer was First National Bank of Southern Africa Ltd. He testified that when he had done business with South African purchasers in the past, first plaintiff's bankers in Singapore had told him that the defendant was one of a number of South African banks with which it would be safe to deal. Relying on that earlier I assurance and also on the contents of the faxes, he was satisfied that the drafts received by Ishmael were in order and that the plaintiff would be paid in terms of them. He therefore telephoned Ishmael and told him to exchange the bill of lading for the drafts. When the drafts later reached Singapore they were deposited at the plaintiffs' respective banks but subsequently dishonoured. J

Howie JA

Primalani telephoned Mynhardt who said he had obtained the goods and sold them all. He could A not explain the non-payment of the drafts and promised to investigate. In a later call Mynhardt professed that he could not himself pay as he had exhausted his resources in paying for the drafts. In the result the plaintiffs were unable to exact payment from Mynhardt and turned their attention to the defendant. They were met with the response that the B drafts were forgeries and that the defendant denied all liability. Hence the present litigation.

[5] The thrust of the plaintiffs' case is that Wildig, acting in the course of his employment with the defendant, forged the drafts knowing that they would be presented to the plaintiffs as payment for the goods C in question and that upon the drafts being dishonoured the plaintiffs would suffer damages by reason of non-payment. By causing the drafts to be presented to the plaintiffs Wildig falsely represented that the drafts were regular, had been issued by the defendant and...