Northern Metropolitan Local Council v Company Unique Finance (Pty) Ltd and Others

• Jurisdiction: South Africa
• Citation: 2012 (5) SA 323 (SCA)

Northern Metropolitan Local Council v Company Unique Finance (Pty) Ltd and Others
2012 (5) SA 323 (SCA)

2012 (5) SA p323

Citation	2012 (5) SA 323 (SCA)
Case No	36/11; [2012] ZASCA 66
Court	Supreme Court of Appeal
Judge	Mpati P, Cloete JA, Snyders JA, Bosielo JA and Ndita AJA
Heard	February 21, 2012
Judgment	May 21, 2012
Counsel	AE Franklin SC (with DL Wood) for the appellant.; GD Harpur SC (with A Coutsoudis) for the first and second respondents.; No appearance for the third respondent.

Flynote : Sleutelwoorde B

Estoppel — Estoppel by representation — Agency by estoppel — Ostensible authority — Whether council estopped from denying authority of one of its many employees — Authority of employee to tell world that his subordinate C had authority to bind council — Employees in question both low-ranking — No evidence of trappings of authority — Impression of seniority gained by plaintiff not one created by employees' appointments — No liability attaching to council.

Headnote : Kopnota

The court was called upon to decide whether the appellant (the council) would D be estopped from denying the authority of one D, an employee, to have entered into a series of contracts with the first respondent company. When the council refused to honour the contracts on the ground of D's lack of authority, the company sued for damages, which were granted by the court a quo on the basis that the council had clothed them with ostensible authority which it was estopped from denying. E

The company contended that the following things were instrumental in creating this representation: (a) a 'resolution' signed by one V — D's superior — supposedly authorising D to conclude the agreement on the council's behalf; and (b) certain impressions gained during a series of face-to-face meetings with D and V at their council offices. These things, according to F the company, had created a so-called 'façade of regularity' on which its representatives had relied when they concluded the contracts in question. It was common cause that both D and V were in fact relatively low-ranking employees of the council who lacked actual authority to conclude the contracts.

Held: The real issue was whether the council — not D or V — had made a representation, by words or conduct, that had induced the company to G

2012 (5) SA p324

A conclude the contracts. What mattered was D and V's seniority in the overall structure of the council and what ordinarily went with the senior positions they would have held. In casu any impression the company's representatives gained about the seniority of D and V could not be laid at the door of the council, which had appointed them to lowly positions. The lack of evidence of the trappings of authority of D and V's positions was B fatal to the façade-of-regularity argument: the company had failed to show that, by appointing D and V to their positions, the council had clothed them with the ostensible authority to conclude the contracts. A further problem for the company was that its acceptance of the resolution as authorising D to contract had been unreasonable: the document did not purport to be an extract of a meeting of the council, and the discrepancies it contained would C have served to alert a reasonable outsider to the fact that things were not in order. Accordingly, the company's claim against the council based on agency by estoppel fell to be dismissed. (Paragraphs [40] and [44] – [45] at 339B – D and 340E – 341E.)

Cases Considered

Annotations:

Case law D

Southern Africa

Company Unique Finance (Pty) Ltd and Another v Johannesburg Northern Metropolitan Local Council and Another 2011 (1) SA 440 (GSJ): reversed on appeal

Glofinco v Absa Bank Ltd t/a United Bank 2002 (6) SA 470 (SCA): dicta in paras [13] and [20] applied E

In re SS Winton 1938 CPD 247: referred to

NBS Bank Ltd v Cape Produce Co (Pty) Ltd and Others 2002 (1) SA 396 (SCA) ([2002] 2 All SA 262): applied

South African Broadcasting Corporation v Coop and Others 2006 (2) SA 217 (SCA): dictum in paras [74] – [75] applied.

England F

Hely-Hutchinson v Brayhead Ltd and Another [1968] 1 QB 549 (CA) ([1967] 3 All ER 98): dictum at 553A – G applied.

Case Information

G Appeal against a decision in the South Gauteng High Court, Johannesburg (Blieden J).

AE Franklin SC (with DL Wood) for the appellant.

GD Harpur SC (with A Coutsoudis) for the first and second respondents.

H No appearance for the third respondent.

Cur adv vult.

Postea (May 21).

Order I

1.

The appeal succeeds with costs.

2.

Paragraphs (a), (b) and (c) of the order of the court below are set aside and replaced with the following:

'The plaintiffs' claims against the first defendant are dismissed with costs, including the costs of two counsel in both this court J and the court below.'

2012 (5) SA p325

Judgment

Mpati P (Cloete JA, Snyders JA, Bosielo JA and Ndita AJA A concurring):

[1] The third respondent, Mr Johannes du Plessis (Du Plessis), was at all times relevant to the issues in this matter employed by the appellant as a superintendent in its security services department. On 30 October 1998 B he signed an agreement, purportedly on behalf of the appellant, in terms of which the appellant would rent from the first respondent — which formerly traded as Compufin Finance — a Sharp photocopying machine at a monthly rental of R12 009,90 over a period of 60 months. [1] (For convenience I shall refer to the first respondent as 'Compufin'.) C Two further rental agreements were signed by Du Plessis, purportedly on behalf of the appellant, in terms of which the latter would rent, from Compufin, radio phones and radio stations, respectively, at a rental of R77 520 per month in respect of each agreement over a period of 60 months. [2] The equipment was delivered to the appellant's security services section, but on 19 March 1999, and in circumstances which D shall become apparent later in this judgment, the appellant's strategic executive: corporate services, Mr Rudolph Bosman (Bosman), wrote a letter to Compufin advising that the appellant 'was unaware of [the three agreements]'; [3] that it had at no stage authorised the relevant transactions; and that they were accordingly null and void. Bosman also E demanded payment of the total amount of R232 560, which appeared to him to represent three payments of R77 520 each made by the appellant 'via bank debit orders on 15 February 1999, 22 February 1999 and 15 March 1999 respectively . . .'.

[2] Compufin and the second respondent, First National Bank Ltd, to F which Compufin had ceded all its rights, title and interest in the third agreement, subsequently issued summons against the appellant and Du Plessis, as first and second defendants respectively, claiming payment from the appellant of the sums of R971 703,96 and R6 272 032,80 to Compufin in respect of the first and second agreements, [4] and G R6 272 032,80 to the second respondent in respect of the third agreement as damages for breach of contract. In the alternative and in the event that Du Plessis did not have the requisite authority to sign the agreements on behalf of the appellant, Compufin claimed from the appellant and Du Plessis, jointly and severally, payment of the sum of R6 861 816,29 as delictual damages suffered by it as a result of H Du Plessis falsely representing that he had such authority. Du Plessis' false representation, so it was alleged in the particulars of claim, was intended to, and did in fact induce Compufin 'to pay the price of the

2012 (5) SA p326

Mpati P (Cloete JA, Snyders JA, Bosielo JA and Ndita AJA concurring)

A equipment to the supplier thereof so as to supply the equipment to the [appellant's] employees and officials'.

[3] In its plea the appellant denied liability and specifically denied that Du Plessis was authorised by it to sign the rental agreements. To this the B respondents replicated and pleaded, in the alternative, that the appellant had represented that Du Plessis had authority and that it was therefore estopped from denying his authority. On the other hand, Du Plessis denied in his plea that he did not have the necessary authority to conclude the first and second agreements and pleaded that he did have the authority to do so. It appears from the judgment of the court a quo [*] C (Blieden J), however, that after all the evidence was led and after each of the parties had closed their cases, it was conceded on behalf of the respondents that Du Plessis lacked actual authority to conclude the rental agreements. At the stage of argument before Blieden J, therefore, and indeed in this court, the only issue to be decided was whether the appellant had created the impression that Du Plessis was authorised to D conclude the agreements on its behalf, thus clothing him with ostensible authority.

[4] Having found that Compufin's witnesses had 'made it clear that as far as they were concerned they were not relying on any representation E made by Du Plessis, but on a proper and acceptable resolution confirming Du Plessis's authority to sign the three contracts on behalf of the [appellant]', Blieden J concluded that Compufin 'cannot succeed in a [delictual] claim for damages against Du Plessis . . .'. He accordingly dismissed Compufin's claim against Du Plessis with costs, but granted the contractual claims against the appellant (albeit in slightly lesser F amounts) with interest and costs on the scale as between attorney and client (as provided for in the contracts), including costs of two counsel. It is the order made in favour of the respondents against the appellant that is the subject of this appeal, which is before us with leave of the court below.

G [5] It would be convenient, at this stage, to set out some facts, which appear to be common cause or...