Standard Bank of South Africa Ltd v Coetsee

• Jurisdiction: South Africa
• Judge: Jansen JA, Miller JA, Joubert JA, Viljoen JA and Botha AJA
• Judgment Date: 03 December 1980
• Hearing Date: 17 March 1980
• Court: Appellate Division

Jansen, JA.:

I have had the advantage of reading the judgment of VILJOEN JA (which fully sets out the facts and the pleadings) and that of MILLER JA. D I am in agreement with VILJOEN JA that the appeal should fail, but as my conclusion is based on a different approach it is necessary to set this out briefly.

I find it unnecessary to express any opinion on the question of an implied representation that Borcherds and Bromer would be able to meet the second note, save to say that I have some doubt whether the principles governing implied terms in contract are applicable without qualification. In my E view the respondent (Coetsee) must succeed on the representations by Hart concerning the first note. In this regard I am in respectful disagreement with MILLER JA.

Hart falsely represented to Coetsee that the first note for R150 000 was guaranteed by the Bank (appellant). It does not really seem to matter whether it is said that he falsely represented that he had authority to F give the guarantee or whether he falsely represented that the endorsement by him on the note was valid. I am in full agreement with VILJOEN JA that Hart knowingly made the false representation with the intention to induce Coetsee to enter into the contract with Borcherds and that Coetsee was so induced.

Hart was thorougly familiar with Borcherds' and Bromer's financial affairs G and knew that they were both of straw. It was with his approval that Borcherds sought to buy the additional AIM shares. It was thought that by obtaining full control of AIM a "reverse-takeover" could be engineered so as to save Bromer. This would undoubtedly have served to benefit Hart personally and the Bank. At that stage Hart was deeply embroiled in the H affairs of Borcherds and Bromer and had committed the Bank in a number of respects. If Bromer crashed Hart's dishonest role vis-à-vis the Bank would be exposed. That he was anxious that the deal be closed is obvious. Borcherds knew that Coetsee wanted bank guaranteed cheques and he must have realised that the only hope of persuading Coetsee to sell was to tender at least one guaranteed note. The inference that Hart also realised this is irresistible, as also that he for that reason, so as to induce Coetsee to enter into the contract, placed the endorsement on the note. From the evidence it is clear, I think, that whatever other factors influenced Coetsee to conclude the sale, the substratum of his

whole approach was the guarantee relating to the first note. Had there been no guarantee the contract would not have been concluded at all, or at least not in the form it took.

A Hart knew that he was influencing Coetsee to enter into a contract whereby he was parting with his valuable shares for notes issued by a man and a company of straw. He must have foreseen the strong possibility of one or both of the notes being dishonoured, with resultant loss to B Coetsee. Hart may have thought that by manipulation of accounts and funds he would manage to enable Borcherds and Bromer to meet the notes at due date (as in fact happened in respect of the first note) but he must have been aware of the substantial risk of something going wrong. If he had reconciled himself to this risk and Coetsee's possible loss, he had dolus eventualis in respect of that loss; if he had over-optimistically dismissed that risk as of no consequence in the belief that he would at C all times be able to retrieve the situation, he was in any event negligent in respect of that loss. Hart, in my view, intentionally (dolus eventualis) caused Coetsee's loss, alternatively, he did so negligently.

It is a moot question whether a legal theory of causation should contain its own built-in limitation of liability in respect of damage that is thought to be too remote (cf A D J van Rensburg Normatiewe D Voorsienbaarheid as Aanspreeklikheidsbegrensingsmaatstaf in die Privaatreg) or whether, eg, the sine qua non doctrine should be applied to determine causality and the question of liability be answered on the basis of other considerations such as fault, foreseeability or reasonableness (as a matter of policy: cf Dhlamini en 'n Ander v Protea Assurance Co Ltd 1974 (4) SA 906 (A) at 915B; Administrateur, Natal v Trust Bank van Afrika E Bpk 1979 (3) SA 824 (A) at 833A - 834E). I do not propose to examine these problems, as it seems unnecessary in the circumstances of this case to do so.

In my view, the false representation by Hart was a conditio sine qua non F of the loss suffered by Coetsee. Hart had fault in relation to that loss - either by way of dolus or culpa (negligence); considered objectively, the loss was foreseeable as a strong possibility if not a probability. Bearing in mind the dominant role of Hart in planning the transaction and in inducing Coetsee to sell by making the false endorsement, I consider that there are no considerations of policy absolving Hart, and thus the Bank, of liability.

G I agree that the proper order to be made is that suggested by VILJOEN JA.

Judgment

Miller, JA.:

I have had the advantage of reading the judgment of VILJOEN JA, which contains a detailed exposition of the facts of the case, including H the historical background to the transaction which gave rise to the claims preferred by the respondent (the plaintiff), and the pleadings. With respect, I am, however, unable to agree that the appeal fails. In my judgment it succeeds, for the reasons which follow.

The plaintiff, having abandoned (rightly, I have no doubt) his allegation that he was induced by the furnishing of the false "Code 'A' " report to enter into the contract for the sale of the shares, relied upon the alternative cause of action set out in the particulars of claim and reproduced in the judgment of VILJOEN JA. In essence he relied on representations alleged to have been made by Hart to the effect (i) that

Miller JA

the appellant bank. (I shall refer to appellant as "the bank"), after a thorough examination of the affairs of Bromer and Borcherds, had

"such a high regard for their financial stability, reliability and integrity"

A that it was prepared to guarantee payment of R150 000 and (ii) that Bromer and Borcherds were able to pay not only the first instalment of R150 000 in respect of the purchase price of the shares but would also be able to pay the balance (R170 000) of such purchase price, which balance was payable seven months after payment of the first instalment. Although B the plaintiff at one stage in his evidence suggested that Hart had expressly represented that the bank would guarantee payment of the second instalment of R170 000, that was by no means the case made in the pleadings nor was any express representation to that effect relied on in the Court a quo or in this Court. On the contrary, the plaintiff's case was and is that the representations relied upon were not express C representations, but flowed by implication from the implied representation that Hart was authorized by the bank to bind it as guarantor or surety for payment of the first instalment of R150 000. (Originally, the agreement was that the first payment was to be made by a bank-guaranteed cheque, but plaintiff later consented to the substitution therefor of a promissory D note for R150 000, payable on 30 August 1975, and payment of which was to be guaranteed by the bank.)

I accept for purposes of this judgment that, by signing the promissory note ostensibly on behalf of the bank as surety and co-principal debtor, Hart impliedly represented that he was authorized by the bank so to bind it. But that is a very far cry indeed from the further implications said to have flowed from such implied representation. I agree, of course, with VILJOEN JA that an actionable misrepresentation may be found by E implication from the conduct of the representor. If the implication is justified, the effect of such a misrepresentation is equivalent to that of an express representation. But when not an express but an implied or a F tacit representation (cf Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 532) is said to have been made, then, in common with cases in which the Court is asked to find in a contract an unexpressed but implied or tacit term, there must be clarity concerning "the exact content" of the representation. As MILLIN J observed in Rapp and Maister v Aronovsky 1943 WLD 68 at 75, generally, before a G term can be implied, it must be "capable of clear and exact formulation". (See also per TROLLIP JA in Desai and Others v Greyridge Investments (Pty) Ltd 1974 (1) SA 509 (A) at 552.)

Regarding the promissory note for R170 000, it is said in the particulars of claim that the implied representation made by Hart was that Bromer and Borcherds were persons upon whom plaintiff could rely for payment of that H amount. This may be a clear formulation of the terms of the alleged "representation" relied on but, in answer to a request for further particulars, plaintiff explained that the inference which he drew from Hart's representation that the bank had authorized him on its behalf to guarantee the first payment of R150 000, was that the implication thereof, although not a necessary one, was "as mees waarskynlike implikasie" and indication to plaintiff ("aan die eiser aangedui") that Bromer and Borcherds "heelwaarskynlik ook die saldo van die koopprys sou kon betaal". The question fairly arises whether the implied representation relied upon was that Bromer and Borcherds, on due date of the

Miller JA

second promissory note, would be able, and could as a matter of fact be relied upon, to pay the amount of R170 000, or whether the A "representation" was that they would probably ("heelwaarskynlik") be in a position to pay that amount. Leaving aside the question whether the alleged implied "representations" were representations of fact or merely expressions of...