Society of Lloyd's v Romahn and Two Other Cases

• Jurisdiction: South Africa
• Judge: Van Zyl J
• Judgment Date: 03 March 2006
• Citation: 2006 (4) SA 23 (C)
• Docket Number: 5105/03, 5107/03, 5108/03 and 8588/04
• Hearing Date: 16 May 2005
• Counsel: A Thompson SC (with J E Joyner) for the plaintiff. M Seligson SC (with E Fagan) for the defendants.
• Court: Cape Provincial Division

Society of Lloyd's v Romahn and Two Other Cases
2006 (4) SA 23 (C)

2006 (4) SA p23

Citation	2006 (4) SA 23 (C)
Case No	5105/03, 5107/03, 5108/03 and 8588/04
Court	Cape Provincial Division
Judge	Van Zyl J
Heard	May 16, 2005
Judgment	March 3, 2006
Counsel	A Thompson SC (with J E Joyner) for the plaintiff.; M Seligson SC (with E Fagan) for the defendants.

Flynote : Sleutelwoorde B

Contract — Legality — Contracts contrary to public policy — Specific instances — 'Conclusive proof' provision — Semble: Finding in reported case that provision in terms of which amount owing deemed to be determined C and proved by certificate signed by director of any of creditors contrary to public policy, possibly being overdue for reconsideration, or at least qualification.

International law — Conflict of laws — Via media approach — Court having regard to both lex fori and lex causae before determining characterisation — Plaintiff seeking D provisional sentence on basis of judgments of English Court — Defendants raising plea of prescription in South African law — Parties having agreed that underlying contract would be governed by English law — Whether issue of prescription to be determined by English or South African law — Under English law, prescription constituting E procedural matter and thus governed by lex fori, namely South African law — Under South African law, prescription substantive and thus governed by lex causae — Claim thus remaining perpetually unenforceable — Via media approach adopted in determining whether lex fori or lex causae applicable — Where prescription procedural in lex causae and substantive in lex fori, justice, fairness, reasonableness and policy considerations dictating that matter revert F to lex causae — Lex causae law with which contract most closely connected — In casu, lex causae English law — In terms of English law plaintiff's claim not having prescribed — Plaintiff entitled to provisional sentence.

International law — Contract — Proper law of contract — Determination of where no express or G tacit choice of law made by parties — Court declining to follow 1924 Appellate Division case — Proper law (lex causae) of contract being legal system with which contract having closest and most real connection.

Headnote : Kopnota

The plaintiff sought provisional sentence against the defendants on the basis of judgments obtained against them in an H English Court. The defendants were investors who had chosen to become underwriting members of the plaintiff, commonly referred to as 'names'. The plaintiff alleged, inter alia, that the defendants had submitted to the jurisdiction of the English Court by way of a 'general undertaking' given by each of them to the plaintiff and that the English law therefore governed its claims. The defendants alleged, on the other hand, that the plaintiff's claims I were governed by South African law and raised three defences, in South African law, to the plaintiff's claims: (1) that the plaintiff's claims had prescribed; (2) that the recognition and enforcement of the English judgments would be contra bonos mores, in that the defendants had been precluded from raising the plaintiff's fraud as a defence in the English courts; and (3) that the recognition and enforcement J

2006 (4) SA p24

of the English judgments would be contra bonos mores, in that the plaintiff had been permitted to rely on a A 'conclusive proof' provision regarding calculation of the amounts allegedly owing by the defendants. The defendants did not dispute the quanta of the plaintiff's claims, but merely alleged that they would have liked to have known how the figures had been calculated. B

Held, that, as to (1): If English law applied, as contended for by the plaintiff, the plaintiff's claims on the English judgments would not have prescribed. On the other hand, if South African law applied, as contended for by the defendants, the plaintiff's claims would have prescribed, unless the judgments could be regarded as 'judgment debts', in which case they would not have prescribed. (Paragraph [25] at 34D.) C

Held, further, that in English law prescription barred the institution of an action and was therefore a matter of procedural law, whereas, in South African law (s 10(1) of the Prescription Act 68 of 1969), prescription extinguished the action and was therefore a matter of substantive law. According to the English authorities, matters of procedure were governed by the lex fori and matters of substance by the lex causae. (Paragraphs [30] - [31] at 35F - 36A.) D

Held, further, that where the statute of the lex causae was procedural and that of the lex fori substantive, as in the present case, strict logic suggested that neither applied, so that the claim remained perpetually unenforceable. It was therefore for the Court to decide how to fill the 'gap' arising from the absence of any rule or principle governing the particular situation. (Paragraphs [32] and [77] at 36D/E and 51D.) E

Held, further, that although the Court was bound by Standard Bank of South Africa Ltd v Efroiken and Newman 1924 AD 171 at 185 in identifying the law which governed a contract, if it considered the matter anew, the Supreme Court of Appeal might well be persuaded to follow the approach of the English Court in John Lavington Bonython and Others v Commonwealth of Australia 1951 AC F 201 at 219, in which the Court identified the law with which the contract had its closest and most real connection as governing the contract. The Court associated itself with the latter approach. (Paragraphs [46], [48] and [82] at 41G, 42B - C, 52E and 52F/G.)

Held, further, that in the present case it was essential that a via media approach be adopted. That meant that regard should be had to both the lex fori and the lex G causae in considering whether the South African prescription regime or the English limitation regime should apply to the plaintiff's claims against the defendants. English law was the lex causae in that it was the legal system with which the underlying transactions between the parties had their closest connection. It followed that the rule of English law relegating matters H of procedure to the lex fori had to be critically examined and appraised before simply applying it to the facts of the present case. (Paragraph [84] at 53B - D.)

Held, further, that when the defendants agreed that their rights and obligations would be governed by English law and therefore that matters of procedure would be governed by the lex fori, they could not have contemplated that, in South African law, prescription extinguished the plaintiff's claims and did not merely I bar enforcement of them. In those circumstances, the rule of English law relegating matters of procedure to the lex fori ought to have been qualified to the extent that, if a matter were procedural in the lex causae and substantive in the lex fori, justice, fairness, reasonableness and policy considerations dictated that it should revert to the lex causae. (Paragraphs [85] and [86] at 53E - H.) J

2006 (4) SA p25

Held, further, that the matter accordingly had to be dealt with in terms of relevant statute of the English law and, in terms of A that statute, the pleas of prescription had to fail. (Paragraph [89] at 54F - G.)

Held, further, as to (2), that it was not correct that the defendants had been precluded from raising the plaintiff's fraud before the English Court. Although they had not been permitted, in terms of their respective agreements with the plaintiff, to raise it as B a defence, they had been permitted to do so by way of a separately-instituted counterclaim, which they had done and in which they had been unsuccessful. There was thus nothing untoward, unjust, unfair or unreasonable in including such a provision in the plaintiff's agreements with names and the recognition and enforcement of the judgments could not be regarded as contra bonos mores. (Paragraphs [106], [108] and [110] at 58H - 59B, 59F C and 59I.)

Held, further, as to (3), that the defendants' failure to understand how the amounts had been calculated raised no dispute or issue at all. The defendants could therefore not be heard to contend that the clause in question was contra bonos mores. (Paragraphs [121] and [122] at 62F - H.)

Held, accordingly, that all of the defences raised had to fail and provisional sentence had to be granted as sought. (Paragraph D [128] at 64E.)

Semble: The English judgments were 'judgment debts' for purposes of s 11(a)(ii) of the Prescription Act. (Paragraph [94] at 55G - H.)

Semble: The finding in Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 9E that a provision in a contract in terms of which the amount owing would be deemed to be determined and proved by a certificate signed by a director of any of the creditors was contrary E to public policy, might be overdue for reconsideration or, at least, qualification. (Paragraphs [112] and [125] at 60E and 63F - H.)

Cases Considered

Annotations

Reported cases F

Southern African cases

De Beer NO v North-Central Local Council and South-Central Local Council and Others (Umhlatuzana Civiv Association Intervening) 2002 (1) SA 429 (CC) (2001 (11) BCLR 1109): referred to G

E A Gani (Pty) Ltd v Francis 1984 (1) SA 462 (T): referred to

Ex parte Minister of Justice: In re Nedbank Ltd v Abstein Distributors (Pty) Ltd and Others and Donelly v Barclays National Bank Ltd 1995 (3) SA 1 (A): referred to

Guggenheim v Rosenbaum (2) 1961 (4) SA 21 (W) H : referred to

Improvair (Cape) (Pty) Ltd v Establissements NEU 1983 (2) SA 138 (C): referred to

Joffe v Salmon 1904 TS 317: referred to

Jones v Krok 1995 (1) SA 677 (A): dictum at 685B - E applied

Joosab v Tayob 1910 TPD 486: referred to

Kilroe-Daley v Barclays National Bank Ltd 1984 (4) SA 609 (A): referred to

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