Siman & Co (Pty) Ltd v Barclays National Bank Ltd

• Jurisdiction: South Africa
• Judge: Wessels JA, Corbett JA, Miller JA, Trollip AJA and Nicholas AJA
• Judgment Date: 30 May 1983
• Citation: 1984 (2) SA 888 (A)
• Hearing Date: 09 November 1982
• Court: Appellate Division

Trollip AJA:

During the afternoon of Friday, 19 September 1975, the appellant (called herein "the Siman Coy" or simply "the company") attempted to procure immediate forward cover through the respondent bank ("Barclays") for its foreign currency commitments incurred for overseas purchases. The company is an E importer and distributor of sound equipment and electrical appliances. Its principal place of business is in Cape Town. The reason for attempting to procure the forward cover was that the company had just heard that our unit of currency, the Rand, would probably be devalued over that week-end. One of its F directors, Solly Siman, and an official, Solomon Melnick, made the request telephonically to the manager, Muir, of the Long Street branch of Barclays in Cape Town ("the Long Street Branch" or "the Bank"). The latter had been the company's bank for some 15 years. The request was unsuccessful. Muir informed them that it was then too late for the cover to be procured that afternoon; it could only be procured on the following G Monday. The Rand was in fact devalued during that week-end. In consequence the Siman Coy, in subsequently liquidating those foreign commitments, had to pay much more in Rands than it would have cost it to procure the cover on that Friday. The excess was alleged to be at least R90 000.

H The Siman Coy sued Barclays in the Cape Provincial Division for that amount as damages. It alleged in effect that it had been misled by Muir's statement that it was then too late to procure the required cover that afternoon, that such statement was false because the cover was still procurable, that Muir had made the statement negligently, and that the misstatement had caused it the loss or damage of R90 000.

In its plea Barclays admitted that Muir had made the statement but denied that it was false. It averred that it was true when it was made.

Trollip AJA

The other allegations of the Siman Coy relating to negligence, causation of the loss, and the quantum of the alleged loss were denied. In the alternative Barclays alleged contributory negligence on the part of the Siman Coy and sought an apportionment of any damages proved.

A The trial Court (VAN DEN HEEVER J) ultimately gave judgment in favour of Barclays with costs. The Siman Coy has appealed to this Court against that decision.

First, some explanation about the procedure of obtaining forward cover in 1975. (Since 1979 the procedure has somewhat changed - it has become "more sophisticated" as was said by the witness Turner of the foreign exchange department of B Barclays' Head Office in Johannesburg.) The expression "forward cover", or more precisely "forward exchange cover", relates to the liquidation of an overseas debt payable in the future in some foreign currency. Due to possible future adverse fluctuations in the foreign exchange rate of that currency, the debtor may prefer to insure against any such fluctuations by C fixing the amount of his liability in Rands now instead of at the date of payment. This he can do by procuring forward exchange cover for it, ie by purchasing the required foreign currency at the present rate of exchange, plus bank charges, and having it available when the debt falls due for payment in D the future.

That the obtaining of forward cover is regarded as a transaction in foreign exchange was confirmed by Muir, whose evidence on banking practice was accepted by the Court a quo. Consequently, such cover can only be procured from the South African Reserve Bank ("the SARB") on application to it by or through one of its "authorised dealers". No member of the E public can apply direct to the SARB for such cover. An application had, in the first instance, to be made to and approved by an authorised dealer. In 1975 the procedure was governed by regulations and by the written directives or rulings issued thereunder by the SARB to its authorised dealers (referred to herein as "the rulings"). The authorised dealers were the banks listed in para (A) of the rulings. They included F Barclays and the First National City Bank of New York (SA) Ltd ("the City Bank"). According to para (E) an authorised dealer may not engage in exchange transactions with a customer of another authorised dealer; if an applicant for exchange conducts no account with the authorised dealer to whom the application is made, the applicant must be referred to his own G banker. Paragraph (B) enjoins authorised dealers to apply the rulings "strictly and impartially". Hence in 1975 a customer of a branch of a bank could ordinarily only procure forward cover through that branch. That was confirmed by the evidence of Muir and Turner.

The rulings also say that forward cover may be provided subject H to certain conditions, one of which reads:

"That the facilities are granted only on the production of documentary evidence that they are required to cover a firm and ascertained exchange commitment... arising from an approved commercial transaction..."

According to Muir the above rulings were usually observed in practice, at any rate at the Long Street branch.

In that regard evidence on relevant banking practice was also given by Kacev, a director of the Siman Coy, working at its Johannesburg

Trollip AJA

branch. Where his evidence conflicted with that of Muir the Court a quo rightly preferred the latter's. The same approach must also apply to Turner's testimony. For Kacev's knowledge and experience in such matters was limited. He had worked in A the City Bank in Johannesburg for only eight months and that was in 1972. And he admitted that he was not fully familiar with SARB rulings relating to obtaining forward cover.

Now according to Muir, if forward cover was especially required on a particular day, such as the Friday in question, the application by the customer had to be received by the branch of B Barclays before 3 pm so that, if it was a firm and ascertained exchange commitment, it could then be relayed by telex, telephone, or otherwise to reach the foreign exchange department of the Head Office of Barclays in Johannesburg by 3 pm. The relevant "internal instruction" of Barclays, operating in 1975, read:

C "Cover requests should be in the hands of Foreign Exchange Department by 3.00 pm on ordinary days; and 12 noon on Wednesdays at the very latest."

At head office all the applications from the branches for forward cover and other foreign exchange received during the day would be collated - "a massive operation" said Muir. Head Office would then transmit such applications to the SARB.

D It was common cause that the SARB was open to transact foreign exchange business until 3.30 pm and foreign currency could be purchased by authorised dealers at forward rates until that time.

The Siman Coy had been a customer of the Long Street branch for many years. It was the only bank it dealt with. In addition to doing its ordinary banking business the bank had procured E forward cover for the company on at least four previous occasions. From time to time it had also afforded the company substantial credit facilities.

According to a schedule annexed to the pleadings, the company, as at Friday, 19 September 1975, had about 20 foreign currency commitments payable on future dates. Most were in American F dollars, some Italian lire, and one in Deutschmarks. Seven of those commitments were covered by letters of credit (LCs) issued by the Long Street branch. Five were covered by foreign bills for collection (FBCs). The Long Street branch had records of these LCs and FBCs and the transactions they covered. It was common cause that these were firm and ascertained exchange G commitments arising from approved commercial transactions. They therefore qualified for forward cover on the Friday in question. That could have been confirmed by the Long Street branch that afternoon by reference to its records. The Siman Coy maintained that the other commitments also qualified at the time for such cover, but Barclays disputed that. But be that as H it may, by reason of the rulings of the SARB referred to above and the facts just mentioned, it follows that any forward cover required that afternoon by the Siman Coy for those foreign commitments would only have been ordinarily procurable through the Long Street branch.

On Friday, 19 September 1975, as a result of Kacev having heard in Johannesburg that a devaluation of the Rand was imminent, Woolf Simanowitz, then managing director of the Siman Coy and stationed at Johannesburg, telephoned his brother, Solly Siman ("Siman"), in

Trollip AJA

Cape Town at about 1.50 pm. He instructed him to obtain immediate forward cover for all the company's outstanding foreign commitments from its bank, the Long Street branch. Siman invoked the aid of Solomon Melnick, the controller of the A company's finances, to assist him in getting the cover.

At 2.05 pm Melnick telephoned Muir to enquire about whether and what forward cover could be obtained. Muir thought that according to the rulings only those foreign commitments that had been "firmed", ie established, within the last seven days could be covered. But he first wanted to verify that from the B rulings. He would return the call when he had done so. (That will be termed "the first conversation".)

Muir ascertained that the abovementioned restrictive seven-day ruling had been recently withdrawn.

He telephoned Melnick and gave him that information. It was common cause on the pleadings that this conversation commenced about 2.25 pm ("the second conversation"). Muir also informed C Melnick that the Siman Coy could therefore obtain forward cover for all its foreign commitments so long as they were duly evidenced. As to the rest of this conversation there was a material conflict between the versions of Melnick and Siman on the one hand and of Muir on the other. According to the former D two...