McCann v Goodall Group Operations (Pty) Ltd

• Jurisdiction: South Africa

McCann v Goodall Group Operations (Pty) Ltd
1995 (2) SA 718 (C)

1995 (2) SA p718

Citation	1995 (2) SA 718 (C)
Case No	394/94
Court	Cape Provincial Division
Judge	Fagan DJP, Van Zyl J and Conradie J
Heard	August 1, 1994
Judgment	November 2, 1994

Flynote : Sleutelwoorde B

Negligence — Liability for — Negligent misrepresentation giving rise to delictual liability — Omission constituting — Non-disclosure as.

Headnote : Kopnota

A negligent misrepresentation may give rise to delictual liability and to a claim for damages, provided the prerequisites for such liability are complied with. (At 726B.)

C A negligent misrepresentation may be constituted by an omission, provided the defendant breaches a legal duty, established by policy considerations, to act positively in order to prevent the plaintiff's suffering loss. (At 726B/C-C.)

A negligent misrepresentation by way of an omission may occur in the form of a non-disclosure where there is a legal duty on the defendant to disclose some or other material fact to the plaintiff and he fails to do so. (At 726C.) D

Silence or inaction as such cannot constitute a misrepresentation of any kind unless there is a duty to speak or act as aforesaid. (At 726D.)

Examples of a duty of this nature include the following: (i) A duty to disclose a material fact arises when the fact in question falls within the exclusive knowledge of the defendant and the plaintiff relies on the frank disclosure thereof in accordance with the legal convictions of the E community. (ii) Such duty likewise arises if the defendant has knowledge of certain unusual characteristics relating to or circumstances surrounding the transaction in question and policy considerations require that the plaintiff be apprised thereof. (iii) Similarly there is a duty to make a full disclosure if a previous statement or representation of the defendant constitutes an incomplete or vague disclosure which requires to be supplemented or elucidated. These examples cannot be regarded as a F numerus clausus of the occurrence of a duty to disclose. There may be any number of similar factual situations which could give rise to such duty. (At 726D-G.)

Case Information

Appeal to a Full Bench, with leave of the Appellate Division, against a decision in the Cape Provincial Division (Berman J). The facts appear from the judgment of Van Zyl J.

M A Crowe for the appellant. G

A K Blommaert for the respondent.

Cur adv vult.

Postea (November 2).

Judgment

H Van Zyl J:

This is an appeal, with leave of the Appellate Division, against the judgment of Berman J, delivered on 17 March 1993, in terms of which the claim of the respondent (plaintiff in the Court a quo) was granted on the basis of a negligent misrepresentation by the appellant (defendant in the Court a quo). I shall refer to the parties as in the Court below.

I At the time the action was instituted, the plaintiff relied on a fraudulent misrepresentation allegedly made by the defendant to the plaintiff in the course of the sale, by the plaintiff to the defendant, of 13 motor vehicles. The nature of the alleged misrepresentation was that the defendant had falsely conveyed to the plaintiff, by way of oral communication, that he was a registered wholesale trader and hence was not J liable to pay general

1995 (2) SA p719

Van Zyl J

A sales tax. As a result of this misrepresentation, the plaintiff averred, it did not charge the defendant the general sales tax required by law in respect of the sale of the said vehicles. The plaintiff was thereafter held liable by the Receiver of Inland Revenue for payment of the required general sales tax, together with certain penalties and interest, in the amount of R21 184,46. This amount was accordingly claimed by the B plaintiff as damages arising from the alleged misrepresentation.

The plaintiff's particulars of claim were somewhat clumsily amended to make provision for a tacit negligent misrepresentation as an alternative cause of action. To my mind the alternative is couched in vague and embarrassing terms, but, since this is not an exception, it is not C necessary to consider the formulation of such alternative.

The defendant admitted, in his plea, that he had not been a registered wholesale trader at the relevant time, but denied that he had made any misrepresentation in this regard. He averred that he had not been aware that general sales tax was payable in respect of vehicles sold by the plaintiff to him for purposes of immediate resale and attributed the D plaintiff's alleged damages to its own failure to comply with the relevant provisions of the Sales Tax Act 103 of 1978.

The plaintiff called one Goodall, its group managing director, to testify. According to him the defendant had worked for the plaintiff as a motor-cycle salesman and thereafter as manager of its motor glass E business. Subsequently he had become a senior salesman, but resigned in order to start his own business as a hawker ('smous') of second-hand vehicles. The plaintiff supplied him with some 13 vehicles which he sold. He was not charged general sales tax on such vehicles since, as Goodall testified, it was 'assumed that he was a dealer'. It was only when the F Receiver of Revenue arrived on the scene that the plaintiff became aware of the fact that the defendant was not a registered wholesale trader with a general sales tax certificate. Goodall suggested that, had the plaintiff been aware of this fact, it would have had to charge the defendant general sales tax on the said vehicle sales.

In answer to a question whether the defendant had known that Goodall was G under the impression that he (the defendant) was a registered dealer, Goodall replied that he had assumed that the defendant was aware of this. In response to questions from the Court in this regard, he initially suggested that the defendant's failure to apprise him of the fact that he did not have a certificate had been an 'oversight' on the defendant's H part. Immediately after this evidence, however, he stated that he did not think the defendant knew that he was required to have a certificate. The plaintiff's counsel then asked a leading question, which was clearly inadmissible, namely whether the plaintiff would not have suffered the loss alleged by it had it 'not been for this representation'. The anticipated answer was positive, namely 'absolutely', despite the fact I that Goodall had not testified about any representation, let alone a misrepresentation, by the defendant.

In cross-examination Goodall reiterated that he thought that the defendant had made a 'mistake' in not informing the plaintiff that he did not have a certificate. The plaintiff, however, had not been 'misled' by the defendant in this regard, but had been 'prejudiced by his mistake'. It J had

1995 (2) SA p720

Van Zyl J

A assumed 'by implication' that the defendant did have a certificate and 'had done his paperwork'. He had, however, created the impression (he had 'implied') that he was a registered dealer and that is why the plaintiff did not charge him general sales tax.

One Thornton, a director of used cars who had been in the employ of the B plaintiff for many years before becoming one of its directors, also testified. He had been directly involved in the plaintiff's sale of 13 vehicles to the defendant and had in fact personally received payment on all the transactions from the defendant. At the time he had believed that the defendant did not have to pay general sales tax because he was a motor dealer. In this regard he expressed the opinion that the defendant was C aware of the fact that he (Thornton) thought that he (the defendant) was a registered dealer.

In cross-examination Thornton could not recall whether he had asked the defendant whether he was a registered dealer. He had simply assumed that he was. When it was put to him that there was a statutory duty on a D seller to establish the general sales tax number of the purchaser as it appears on his general sales tax certificate and that he had been remiss in not asking the defendant whether he had such certificate, he conceded that he had been careless, but stated that he had not been aware of this duty. In any event he had assumed that the defendant did have a certificate, just as he had assumed that the defendant was a licensed E dealer.

The defendant's evidence was, in brief, that he had purchased the vehicles from the plaintiff for resale to third parties, who would have to pay general sales tax. He did not realise that he, too, was obliged to pay such tax if he was not a registered dealer. He had also not, at the time F of his transactions with the plaintiff, been aware of the statutory provisions relating to a dealer's duty to have a general sales tax certificate if he should wish to be exempted from such tax. When he was made aware of this requirement, he immediately applied for a certificate, which he received some ten days later.

G Somewhat surprisingly, the defendant was never asked whether the plaintiff might have been misled into thinking that he was a registered dealer, nor was it put to him in cross-examination that he had made any form of misrepresentation in this regard or had breached any alleged duty to disclose to the plaintiff that he was not a registered dealer. It was, in H fact, never suggested to him that he was burdened with any duty of this nature at all.

In his judgment the learned Judge in the Court a quo held that the defendant, through his experience as a motor-vehicle salesman...