Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Holmes JA, Wessels JA, Jansen JA, Rabie JA and Kotzé AJA
• Judgment Date: 11 November 1975
• Citation: 1976 (1) SA 441 (A)
• Court: Appellate Division

Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd
1976 (1) SA 441 (A)

1976 (1) SA p441

Citation	1976 (1) SA 441 (A)
Court	Appellate Division
Judge	Holmes JA, Wessels JA, Jansen JA, Rabie JA and Kotzé AJA
Heard	September 22, 1975; September 23, 1975
Judgment	November 11, 1975

Flynote : Sleutelwoorde

Estoppal — By negligent misrepresentation — B Applicability of — Principles of applicable in cases of ownership of movables — Applicable in cases where a party claims ownership of shares — What such party must prove — Stock Exchange — Shares — Transfer of by person acting 'on behalf of the transferor' in terms of sec. 3 (1) (a) of Act 69 of 1965, as amended C — Words in section to be confined to person authorised to execute instrument of transfer — Beneficial owner of shares — Such shares stolen — Beneficial owner entitled to bring action against person in possession of shares for delivery thereof.

Headnote : Kopnota

When a beneficial owner of shares finds that they have been D stolen or that the share certificate registered in the name of his nominee has been stolen, the beneficial owner is entitled to bring an action against the person in possession of the shares or share certificate for delivery of the shares or share certificate.

An owner of movables is estopped from asserting his rights to his property only (a) where the person who acquired his property did so because, by the culpa of the owner, he was misled into the belief that the person, from whom he acquired it, was the owner or was entitled to dispose of it; or (b) E (possibly) where, despite the absence of culpa, the owner is precluded from asserting his rights by compelling considerations of fairness within the broad concept of the exceptio doli. There seems to be no reason for not applying these principles where a plaintiff seeks a declaration that it is the 'owner' of shares. If an owner claims shares under (a) above, he will be frustrated by estoppal upon proof of the following requirements:

(i)

There must be a representation by the owner, by conduct or F otherwise, that the person who disposed of his property was the owner of it or was entitled to dispose of it.

(ii)

The representation must have been made negligently in the circumstances.

(iii)

The representation must have been relied upon by the G person raising the estoppal.

(iv)

Such person's reliance upon the representation must be the cause of his detriment.

The words 'on behalf of the transferor' in section 3 (1) (a) of the Securities on by a Transfer Act, 69 of 1965, as amended, must be confined to execution by a person authorised to do so, H for it could not have been the intention of the Legislature to confer validity on unauthorised acts.

A mining and investment company (respondent), the beneficial owner of certain shares, had had such shares registered in the name of its broker's nominee company, administered mainly by one P who had stolen the shares (or the share certificate) and sold the shares to respondent. The beneficial owner then brought an action to assert its rights of ownership over the shares against the purchaser (appellant) which was in possession of the relative certificates. The purchaser pleaded that the beneficial owner had been deprived of such rights by P's action and by estoppal, in that the beneficial owner had negligently represented that the nominee company had authority to transfer its shares. The

1976 (1) SA p442

trial Court held that purchaser had failed to establish that the beneficial owner had made any such representation and had ordered the purchaser to transfer the relevant share certificate to the beneficial owner. In an appeal,

Held, that, as a matter of law, there was a difference between (1) a broker's client having his shares registered in the name A of his broker's nominee company and (2) the giving of scrip to the broker together with an unqualified power of attorney giving the broker the right, the power to make the client's scrip negotiable at any time. The latter conferred a mandate. The former conferred no mandate, either on the nominee company or the broker to transfer shares.

Held, therefore, that the purchaser had failed to establish either the representation averred in its plea or that the B beneficial owner had been negligent in any way: indeed it had failed to establish any of the four requirements of the defence of estoppel.

The decision in the Witwatersrand Local Division in Gelria Mining & Investment Co. (Pty) Ltd. v. Oakland Nominees (Pty.) Ltd. confirmed.

Case Information

Appeal from a decision in the Witwatersrand Local Division C (GALGUT, J.). Facts not material to this report have been omitted.

R. S. Welsh, Q.C. (with him N. Philips, Q.C., and M. S. Stegmann), for the appellant: Before the Securities Transfer Act, 69 of 1965, and the new Stock Exchange rule 133 came into operation, a sale of shares on the Stock Exchange used to be completed and performed by the delivery, by the selling broker D to the purchasing broker, of share certificates endorsed in blank or accompanied by transfer forms signed in blank. Such delivery was good delivery for the purposes of a Stock Exchange transaction. There is a long series of cases, going back to 1897, in which the Courts held that if scrip which was endorsed in blank by the registered holder of the shares or was accompanied by transfer forms signed in blank by such holder, E was entrusted by the person entitled thereto to a broker or other agent (even to a clerk) without actual authority to sell the shares (e.g. for safe custody or in pledge), and if the broker or other agent dishonestly sold the shares to a bona fide purchaser for value and delivered the scrip (so endorsed or accompanied by such transfer forms) to the purchaser, the F purchaser got a good title to the scrip and to the shares. African Mining and Financial Association Ltd. v. Oppenheimer, (1897) 4 O.R. at pp. 317 - 318, 320 - 322; African Mining and Financial Association Ltd. v. De Catelin and Muller N.O. (1897) 4 O.R. at pp. 347 - 350, 353; Van Blommestein v. Holliday, (1904) 21 S.C. at pp. 17 - 20; United South African Association Ltd. v. Cohn, 1904 T.S. at pp. 738 - 742; Fuller G v. Glyn, Mills, Currie and Co., (1914) 2 K. B. at pp. 175 - 177; West v. Pollak and Freemantle, 193 6 W. L. D. 37; 1937 T.P.D. 64; West v. De Villiers, 1938 CPD at pp. 103 - 105. The principle underlying these cases (and all cases where estoppel is raised as a defence to an action for the vindication of corporeal movable property) is that the defendant must show that the plaintiff entrusted the possession H of the property to the person with whom the defendant dealt under circumstances which might fairly and reasonably induce the defendant to believe that that person was the owner of the property or had authority from the owner to dispose of the property. Adams v. Mocke, (1906) 23 S.C. at pp. 787, 788; Electrolux (Pty.) Ltd. v. Khota, 1961 (4) SA at pp. 246 - 248; Van Blommestein v. Holliday, supra; United South African Association Ltd. v. Cohn, supra; West v. De Villiers, supra. As to the effect of estoppel see West v. Pollak and Freemantle, 1937 T.P.D. at p. 68. Sec. 3 (3) of the Securities Transfer Act was drafted on the assumption that the cases cited

1976 (1) SA p443

supra were good law. This affords an additional reason why this Court should apply the stare decisis rule in respect of them. Cullinan v. Noordkaaplandse Aartappelkernmoerkwekers Koöperasie Bpk., 1972 (1) SA at pp. 767 - 768; Craies, Statute Law, 7th ed., p. 519. The Court below held that the principles laid down A in Grosvenor Motors (Potchefstroom) Ltd. v. Douglas, 1956 (3) SA 420, and in Johaadien v. Stanley Porter (Paarl) (Pty.) Ltd., 1970 (1) SA 394, applied. In both these cases the owner of corporeal movable property sought to vindicate it in the hands of an innocent third party who had acquired it from a person to whom the owner had entrusted it. There is, however, B ample authority for the proposition that when a plea of estoppel of this kind is raised, it is relevant to have regard to the nature of the property and to the nature of the trade or business of the person to whom the owner has entrusted the property. Morum Brothers Ltd. v. Nepgen, 1916 CPD at p. 404. It is precisely for this reason that the Courts have drawn a distinction between cases where the owner of ordinary movable C property, such as a book or a horse or a motor car or a refrigerator, entrusts possession thereof to someone else, and cases where the holder of a share certificate endorsed in blank or accompanied by a transfer form signed in blank entrusts possession of it to someone else, and especially to a stockbroker who, in the ordinary course of business, is employed to sell and to transfer the securities of his D customers as well as to hold them in safe custody. African Mining and Financial Association v. Oppenheimer, supra at pp. 322 - 323; United South African Association Ltd. v. Cohn, supra at pp. 738 - 739; Van Blommestein v. Holliday, supra at pp. 18 - 20; West v. De Villiers, supra at pp. 104 - 105; Electrolux (Pty.) Ltd. v. Khota, supra; London Joint Stock Bank v. Simmons, 1892 A.C. at p. 213; Mercantile Bank of India Ltd. E v. Central Bank of India Ltd., 1938 A.C. at pp. 302 - 303. In the Johaadien case itself, STEYN, C.J., disclaimed any intention of saying that estoppel in the case of rei vindicatio must necessarily and in all circumstances be founded solely upon culpa: Johaadien v. Stanley Porter (Paarl) (Pty.) Ltd., supra at pp. 402 in fin.-403, 409. If, for instance, A entrusts F his attorney or his stockbroker B with his share certificates, together with a power of attorney empowering B to dispose of them and to transfer them, and B exercises that power fraudulently and for his own purposes by...