Peterson and Another NNO v Absa Bank Ltd

• Jurisdiction: South Africa
• Court: North Gauteng High Court, Pretoria
• Judge: Makgoba J
• Judgment Date: 27 July 2011
• Citation: 2011 (5) SA 484 (GNP)
• Docket Number: 24067/2010
• Counsel: CE Puckrin SC (with M Dewrance) for the applicants (plaintiffs). SA Cilliers SC (with F Snyckers) for the excipient (defendant).

Makgoba J: A

[1] This case brings to mind what was foretold by Rumpff CJ some 32 years ago in the well-known case of Administrateur, Natal v Trust Bank van Afrika Bpk 1979 (3) SA 824 (A), when he said:

'The birth-pangs of such a right of action have endured so long that the B time has arrived, perhaps even with a Caesarean section, that the child should be brought into the world. It should immediately be added that it can be foretold that this child will be a problem child. With the necessary love, and especially discipline, it can however play a useful role in legal life.' [*]

C [2] The problem child referred to by the learned Chief Justice is none other than the legal principle involved in an action for a claim for 'pure economic loss based on an omission' or 'liability for an act of omission, causing pure economic loss'.

[3] 'Pure economic loss' connotes loss that does not arise directly from D damage to the plaintiff's person or property, but rather in consequence of the negligent act itself, such as a loss of profit, being put to extra expenses, or the diminution of the value of property — see Fourway Haulage SA (Pty) Ltd v SA National Roads Agency Ltd 2009 (2) SA 150 (SCA) at para 10, and the authorities cited therein.

E [4] Our problem child has grown up and advanced to a stage where an action for a claim for pure economic loss based on an omission is recognised in our law. The Supreme Court of Appeal in Fourway Haulage para 12 stated (per Brand JA) that in dealing with the claim for pure economic loss, one has to remember that negligent causation of F such loss was not regarded as prima facie wrongful. Its wrongfulness depended on the existence of a legal duty. The imposition of this legal duty was a matter of judicial determination involving criteria of public or legal policy consistent with constitutional norms. Conduct causing pure economic loss would only be regarded as wrongful, and therefore actionable, if public- or legal-policy considerations require that such G conduct, if negligent, should attract legal liability for the resulting damages. See also Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA) ([2002] 3 All SA 741) paras 12 and 22; Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority SA 2006 (1) SA 461 (SCA) ([2006] 1 All SA 6) in paras 13 – 14; H and Trustees, Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd 2006 (3) SA 138 (SCA) ([2007] 1 All SA 240) at paras 10 – 12.

[5] In these proceedings I have to decide whether the plaintiffs' application for amendment of their particulars of claim should be allowed and/or whether the defendant's exception to plaintiffs' particulars of I claim, on the basis that it lacks averments which are necessary to sustain an action, are well founded or not. In Telematrix the Supreme Court of Appeal found no fault in deciding a case such as the present on exception. Three more important judgments that spring to mind where

Makgoba J

this issue was decided on exception are Lillicrap, Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd A 1985 (1) SA 475 (A); Indac Electronics (Pty) Ltd v Volkskas Bank Ltd 1992 (1) SA 783 (A); and Minister of Law and Order v Kadir 1995 (1) SA 303 (A).

[6] The applicants are the plaintiffs in an action instituted by them against the respondent as defendant. For ease of reference, the applicants B will henceforth be referred to as 'the plaintiffs' and the respondent as 'the defendant'.

[7] The plaintiffs sue in their capacities as curators of two companies, namely Ovation Global Investment Services (Pty) Ltd (Ovation Services) and Ovation Global Investment Nominees (Pty) Ltd (Ovation C Nominees). The first and second plaintiffs are authorised to institute these proceedings in terms of the order of court granted by the Western Cape High Court pursuant to the two companies having been placed under curatorship.

[8] The plaintiffs delivered particulars of claim dated 29 April 2010 (the D original particulars) to which the defendant delivered a notice to remove cause of complaint, contending that the original particulars were excipiable. The notice to remove a cause of complaint led to the delivery of a notice of intention to amend by the plaintiffs. The defendant delivered a notice of objection to the intended amendment. It is as a result of this E objection that the plaintiffs launched the present application to amend. The objection is to the effect that the particulars of claim as sought to be amended would still be excipiable, that is, that the amendments sought to be introduced do not cure the excipiability of the original particulars.

[9] In this judgment reference to the 'particulars of claim' will be to the particulars as sought to be amended, and not the original particulars. F

[10] The parties herein are agreed that the present application for amendment should be regarded as in essence being an exception and should be treated as such. Accordingly, if the particulars of claim are excipiable, then the application for leave to amend ought to be dismissed. It is trite that an amendment ought not to be allowed where its G introduction into the pleading would render such pleading excipiable. See Cross v Ferreira 1950 (3) SA 443 (C) at 450E – F.

[11] The nature of the exception and the resulting issues in this matter can best be understood against the background of the facts pleaded in the plaintiffs' particulars of claim. I accordingly proceed to set out in detail the factual matrix of this case hereunder. H

[12] Ovation Services administered funds entrusted to it by or on behalf of investors (the principals), which funds were paid to and were obliged to be held by Ovation Nominees as trust property on behalf of and for the benefit of investors in terms of s 4 of the Financial Institutions I (Protection of Funds) Act 28 of 2001 (the Protection of Funds Act). Such property remained the property of the principals in terms of the provisions of s 4(5) of the Protection of Funds Act.

[13] By agreement between Ovation Nominees and a financial-service provider named Common Cents Portfolio Strategists (Pty) Ltd (Common Cents), Ovation Nominees would transfer cash amounts into a J

Makgoba J

A banking account designated by Common Cents and/or one Angus Cruickshank for investment of such funds in cash portfolios.

[14] Angus Cruickshank is a sole shareholder of Cornerstone Transaction Financing (Pty) Ltd, which in turn held all issued shares in Ovation Services and Common Cents. Cruickshank is not employed by either B Ovation Services, Ovation Nominees or Common Cents, but purported to act on their behalf in the fraudulent manner relevant to this case.

[15] During February 2005 to January 2006 Cruickshank caused Ovation Nominees to make available an amount of R209 529 336 into C Common Cents Portfolio to be invested on behalf of principals. During April 2005 to January 2006 from the abovementioned amount Cruickshank caused the following amounts to be paid into the following Absa Bank accounts from the account in the name of Ovation Nominees at First National Bank:

D Account 665: In the sum of R47 708 657,18, opened in the name of Ovation Global Investment Holdings, and transferred this amount into the account during the period 21 April 2005 to 5 July 2005.

Account 459: In the sum of R121 490 460,63, opened in the name of E Common Cents, and transferred this amount into this account during the period July 2005 to 5 January 2006.

[16] Furthermore, Cruickshank caused further Absa Bank accounts to be opened in the name of Ovation Global Investment Holdings (Pty) Ltd. These were accounts 707 and 933, to which funds from F account 665 were transferred. Cruickshank misappropriated the sum of R34 844 988,14 from accounts...