Stellenbosch Farmers' Winery Ltd v Vlachos t/a the Liquor Den

• Jurisdiction: South Africa

Stellenbosch Farmers' Winery Ltd v Vlachos t/a the Liquor Den
2001 (3) SA 597 (SCA)

2001 (3) SA p597

Citation	2001 (3) SA 597 (SCA)
Case No	117/99
Court	Supreme Court of Appeal
Judge	Nienaber JA, Marais JA, Olivier JA, Melunsky AJA and Nugent AJA
Heard	March 8, 2001
Judgment	March 27, 2001
Counsel	M Basslian for the appellant.; T van der Walt for the respondent.

Flynote : Sleutelwoorde G

Estoppel — By representation — Causation — Onus — Party relying on estoppel to establish representation by other party and reliance thereon by first party which was cause of his or her detriment — Such proof would include proof that such reliance not actuated by some external influence or factor other than other party's misrepresentation — Respondent, after selling business to third party, H failing to inform appellant that business had changed hands — Appellant continuing to supply goods to business on credit — Appellant, suspecting that business had changed hands, telephoning business — New owner impersonating respondent and assuring appellant that business had not changed hands — Appellant thereafter continuing to supply goods to I business on credit — In so doing, appellant relying and acting to its detriment on faith of new owner's deceit rather than on respondent's default — Appellant's reliance on estoppel failing.

Headnote : Kopnota

The respondent had owned and operated a bottle store under the name 'The Liquor Den'. During the period 1990 - 1996 the appellant had sold and J

2001 (3) SA p598

delivered on credit various beverages to the respondent. However, during January 1996 the respondent sold the business to a A close corporation (BPCC), represented by one S. The respondent neglected to notify the plaintiff that the business had been taken over by BPCC, which was running the business from the same premises and under the same name. The business continued to order and the appellant continued to supply it with goods on credit. The appellant's representative was led to believe that S was managing the business on B the respondent's behalf. For a variety of reasons, such as changes to the premises, the change in personnel and changes in the pattern of purchases and payments, the appellant's credit controller, V, suspected that the business might have changed hands. V telephoned the business, intending to speak to the respondent, but spoke to S who falsely identified himself as the respondent. S reassured V that no C change in ownership had taken place. Although the respondent had sold the business to BPCC with a reservation of ownership until the full purchase price had been paid, the implication in S's representation to V that the respondent remained in charge of the business and was contractually liable for its debts was not true. The appellant continued supplying goods to BPCC on the same grounds as before. Eventually, however, the appellant stopped supplying goods to D the business, by which time the debt owing to the appellant amounted to R205 485. In the mean time S had stripped the premises and disappeared without trace, leaving the debts owed to both the appellant and the respondent unpaid. The appellant, as plaintiff, thereupon instituted action against the respondent, as defendant, for payment of the debt. The respondent pleaded that the debt was not his but BPCC's. The appellant replicated that the respondent was E 'estopped from denying that the liquor and other beverages were delivered to him or that he did not order and/or receive the goods' in that the respondent, by failing to inform the appellant of the sale of the business and by allowing BPCC to take possession of the business and to trade under the name and liquor licence of the respondent 'held out to the (appellant) that he was still the owner of the F business and/or still in possession and/or control and/or running the business and the (appellant) continued to believe the same resulting in the (appellant) continuing to supply goods to the business known as Liquor Den. But for this belief, the (appellant) would not have continued to supply goods to the business known as Liquor Den on the basis that it did and would have entered into an agreement with the new owner and/or possessor and/or controller and/or operator of the said G business on such terms and conditions and with such security as to protect its interests.' The trial Court found that the repondent had been under a duty to the appellant to disclose the fact that he was no longer responsible for the debts of the business but that the appellant had been induced by S's deception (of V) rather than by the respondent's silence to continue to do business with 'The Liquor Den' on the same basis as before. Concluding that there was not a H sufficient causal link between the respondent's failure to disclose the sale of the business and the appellant's acting to its detriment by extending credit to the business after the sale, the appellant's claim was dismissed with costs. In an appeal,

Held (per Nienaber JA; Olivier JA, Melunsky AJA and Nugent AJA concurring), that the onus rested on the I plaintiff to establish a misrepresentation by the respondent and reliance thereon by the appellant, which reliance was 'the cause of his acting to his detriment'. Such proof would include proof that the reliance was not actuated by some external influence or factor other than the respondent's misrepresentation. (Paragraph [4] of Nienaber JA's judgment at 605I/J - 606B.) J

2001 (3) SA p599

Held, further, as to the misrepresentation itself, that the Court a quo had rightly held that the respondent, knowing A that the appellant had been routinely extending credit to 'The Liquor Den' on the strength of his own credit rating, had been under a duty to disclose to the appellant that he had sold the business and that he was no longer in control thereof. (Paragraph [5] of Nienaber JA's judgment at 606B - C.)

Held, further, that the matter had accordingly to be approached, as had the Court a quo, on the footing that the B respondent, by his silence, had been responsible for the impression that he had remained in control of 'The Liquor Den' and that all purchases by the business on credit had been made as if the business had never been sold. It followed that, if matters had carried on more or less evenly as before and the appellant had continued to grant credit to 'The Liquor Den' after BPCC had effectively taken charge of C the business, the appellant would have been entitled to hold the respondent liable for the full amount owing if BPCC were afterwards unable to foot the bill. (Paragraphs [8] and [9] of Nienaber JA's judgment at 606I/J - 607A and 607A/B - B/C.)

Held, further, that the crucial question was whether it was the respondent's initial misrepresentation or S's later fraud which induced the appellant to act to its detriment by extending credit to D BPCC in a manner and to an extent it would not otherwise have done and which, in the event, it was unable to recoup from the business. (Paragraph [10] of Nienaber JA's judgment at 607H/I - I/J.)

Held, further, that up to the moment of the telephone conversation between V and S the respondent would rightly have been held liable for purchases made by 'The Liquor Den' because the appellant had clearly still been acting on the faith of the E respondent's own misrepresentation in not informing the appellant of the change of responsibility for the account. But even though the respondent may in principle have been liable for debts incurred prior to that conversation, it was of no relevance in this case because, if payments subsequently made by 'The Liquor Den' to the appellant were appropriated to the earlier debts, as in law they had to be, nothing remained owing in respect of purchases made prior to F 14 February 1996. The payments made far exceeded the sum of the purchases made before that date. (Paragraph [14] of Nienaber JA's judgment at 610A/B - C/D.)

Held, further, as to whether the respondent could be held liable for orders placed and executed after the first telephone call between V and S had taken place, that that telephone call was the watershed for the following reasons: (1) because of the manner in which G the business was conducted after January 1996 the plaintiff had become apprehensive that it might have changed hands which, if true, might have affected its own ability to recover payments for goods supplied by it on credit; (2) the appellant thereupon instituted its own enquiries and because of S's impersonation of the respondent these enquiries were deflected to him rather than directed to the respondent; (3) as a H result of the false reassurance by S the appellant decided, also as a matter of policy, to continue supplying goods to the business on credit; (4) if it had not been for S's reassurances given to V on the telephone some time during late January or early February 1996 the plaintiff would either have imposed its 'stop supply' procedure or it would have insisted on a fresh credit application and in that event it would either have agreed new terms or it would have insisted on payment I on delivery; (5) subsequent supplies were accordingly made on the strength of its own assessment of the situation based primarily on S's misinformation. (Paragraph [15] of Nienaber JA's judgment at 610D - H.)

Held, further, as to the suggestion that S's later misrepresentations could not serve to relieve the respondent of liabilty because the respondent's initial J

2001 (3) SA p600

misrepresentation remained concurrent and operative throughout, that, firstly, the so-called A 'facilitation theory', absent a calculated deception, had long been discredited in South Africa; secondly, the basis for holding liable someone for holding out something was the image he conjured up which prompted...